<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, 1997
 
                                       OR
[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
             For the transition period from           to
 
                         Commission file number 2-44197
                      ASSOCIATES FIRST CAPITAL CORPORATION
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                              <C>
                    DELAWARE                                        06-0876639
(State or other jurisdiction of incorporation or       (I.R.S. Employer Identification No.)
                 organization)
           250 EAST CARPENTER FREEWAY                               75062-2729
                 IRVING, TEXAS                                      (Zip Code)
    (Address of principal executive offices)
</TABLE>
 
               Registrant's telephone number, including area code
                                  972-652-4000
 
          Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<CAPTION>
                                                        NAME OF EACH EXCHANGE
            TITLE OF EACH CLASS                          ON WHICH REGISTERED
            -------------------                         ---------------------
<S>                                          <C>
           Class A Common Stock,                       New York Stock Exchange
         par value $0.01 per share
</TABLE>
 
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]     No [ ]
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
 
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the most recent New York Stock Exchange Composite
Transaction closing price of the Class A Common Stock ($73.375 per share), which
occurred on February 12, 1998, was $4,908,277,104. For purposes of this
computation, all officers, directors, and 5% beneficial owners of the registrant
are deemed to be affiliates. Such determination should not be deemed an
admission that such officers, directors, and beneficial owners are, in fact,
affiliates of the registrant. At February 12, 1998, 90,688,220 shares of the
Company's Class A Common Stock, par value $0.01 per share, were outstanding and
225,881,180 shares of the Company's Class B Common Stock, par value $0.01 per
share, were outstanding.
 
                      DOCUMENTS INCORPORATED BY REFERENCE*
 
<TABLE>
<CAPTION>
                  DOCUMENT                                WHERE INCORPORATED
                  --------                                ------------------
<S>                                          <C>
          Proxy Statement for 1998                Part III (Items 10, 11, 12 and 13)
       Annual Meeting of Stockholders
</TABLE>
 
---------------
 
* As stated under various Items of this Report, only certain specified portions
  of such document are incorporated by reference herein.
================================================================================
<PAGE>   2
 
                                     PART I
 
  ITEM 1. BUSINESS.
 
     Associates First Capital Corporation ("First Capital" or the "Company"), a
Delaware corporation, is a majority-owned subsidiary of Ford FSG, Inc. ("FFSG")
and a majority indirect-owned subsidiary of Ford Motor Company ("Ford").
Associates Corporation of North America ("Associates") is the principal U.S.-
based operating subsidiary of First Capital. AIC Corporation ("AIC"), with
operations in Japan, is the principal foreign-based operating subsidiary of
First Capital.
 
INITIAL PUBLIC OFFERING AND PROPOSED SPIN-OFF
 
     On May 8, 1996, the Company made an initial public offering (the
"Offering") of 67 million shares of its Class A Common Stock representing a
19.3% interest in the Company. Since the Offering, Ford has continued to own a
controlling interest in the Company's common stock. On October 8, 1997, Ford
announced plans to spin off its interest in the Company in the form of a
distribution to its stockholders (the "Spin-Off"), subject to a ruling from the
United States Internal Revenue Service that the transaction will be tax-free to
Ford and its stockholders. The ruling process is expected to be completed in the
first half of 1998. Subsequent to the Spin-Off, the Company will no longer be a
majority indirect-owned subsidiary of Ford Motor Company.
 
     Management believes that the Spin-Off will allow the Company to pursue its
growth strategy more effectively as a stand-alone entity, providing greater
funding flexibility and improving its ability to compete effectively for
acquisition candidates.
 
COMPANY OVERVIEW
 
     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 and internationally. At or for the
year ended December 31, 1997, the Company had aggregate net finance receivables
of $55.2 billion, total assets of $57.2 billion, total managed assets of $60.1
billion, net earnings of $1.0 billion and stockholders' equity of $6.3 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 operations outside the United States are conducted principally in
Japan ($2.7 billion of net finance receivables) but also include operations in
Canada, the United Kingdom, Puerto Rico, Mexico, Costa Rica, and Taiwan.
 
     The Company has geographically dispersed finance receivables. At December
31, 1997, approximately 91% of the Company's total receivables were dispersed
across the United States and the remaining 9% were in foreign countries. Of the
total receivables, 11% were in California, 6% in Florida, 6% in Texas, 5% in
Japan, 4% in Georgia, 4% in North Carolina, 4% in New York, 4% in Pennsylvania,
4% in Illinois and 4% in Ohio; no other individual state or foreign country had
4% or more.
 
     The Company divides its diverse activities into consumer finance and
commercial finance. The Company's consumer finance operations provide a variety
of consumer financing products and services, including home equity lending,
personal lending, retail sales finance and credit cards. Credit card receivables
are originated principally by a subsidiary, Associates National Bank (Delaware)
("ANB"). The Company's commercial finance operations provide retail financing,
leasing and wholesale financing for heavy-duty and medium-duty trucks and truck
trailers, construction, material handling and other industrial and
communications equipment, manufactured housing, recreational vehicle, 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 activities as part of its commercial finance
operations. Accordingly, the manufactured housing financing operations are
described under the "-- Commercial Finance" section.
 
                                        1
<PAGE>   3
 
     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.
 
     At December 31, 1997, First Capital had 2,265 offices worldwide and
employed approximately 22,600 persons. Corporate headquarters are located in
Irving, Texas.
 
     Certain prior year amounts 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 a credit card business. The Company
distributes its consumer finance products through multiple delivery systems,
which include (i) 2,148 domestic and international consumer branch offices; (ii)
domestic and international centralized consumer lending operations; and (iii)
domestic and international centralized credit card operations. Home equity loans
account for the largest portion of the Company's consumer finance portfolio, and
are distributed through the branch delivery systems and centralized lending
operations. The Company also offers personal installment and revolving loans and
purchases consumer retail sales finance contracts through its branch delivery
and centralized lending systems. In addition, the Company provides revolving
credit financing which consists of VISA(R) and MasterCard(R) bankcards and
private label credit cards. The Company, through certain domestic and
international 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
the "-- Related Insurance" section. The Company also provides emergency roadside
assistance and auto club services.
 
     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, the customer's capacity to repay (e.g., income, debt ratio, and
employment stability), credit history and available collateral for secured loans
(including home ownership). In addition, the Company makes extensive use of
credit scoring models to evaluate risk.
 
     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
                                        ---------------------------------------------------------
                                          1997        1996        1995        1994        1993
                                        ---------   ---------   ---------   ---------   ---------
<S>                                     <C>         <C>         <C>         <C>         <C>
Home Equity Lending...................  $18,796.0   $16,691.4   $14,316.3   $12,449.9   $10,848.4
Personal Lending/Sales Finance........    8,731.6     7,425.1     6,225.1     5,420.3     4,485.0
Credit Card...........................    8,211.7     6,023.8     4,984.6     4,076.5     3,278.5
Manufactured Housing(1)...............    1,669.4     1,262.7     2,049.3     1,681.1     1,300.5
                                        ---------   ---------   ---------   ---------   ---------
Total Consumer........................  $37,408.7   $31,403.0   $27,575.3   $23,627.8   $19,912.4
                                        =========   =========   =========   =========   =========
</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 through its relationships
    with manufacturers and dealers, notwithstanding the fact that the credit and
    related risks typically are those of the consumer purchaser of the housing.
    During 1997 and 1996, the Company securitized and sold approximately $800
    million and $1.3 billion, respectively, of manufactured housing retail
    finance receivables.
 
     During 1997, the finance charge yield (finance charge revenue divided by
average net receivables) on all types of consumer net finance receivables
averaged approximately 17% per annum. Variable rates were
 
                                        2
<PAGE>   4
 
charged on 26% of the consumer net finance receivables outstanding at December
31, 1997. Applicable 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 the "-- Additional Information Regarding the Company -- Regulation"
section.
 
  HOME EQUITY LENDING, PERSONAL LENDING AND RETAIL SALES FINANCE
 
     Home Equity Lending. At December 31, 1997, home equity loans accounted for
the largest share of the Company's consumer finance portfolio. 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. Typically, such loans are not used for the acquisition
of homes, but are made to borrowers primarily for the purpose of debt
consolidation, including the refinancing of existing mortgage loans, home
improvements and a variety of other purposes.
 
     The following table shows certain information with respect to the Company's
home equity lending receivables:
 
                              HOME EQUITY LENDING
 
<TABLE>
<CAPTION>
                                                             AT DECEMBER 31
                                        ---------------------------------------------------------
                                          1997        1996        1995        1994        1993
                                        ---------   ---------   ---------   ---------   ---------
<S>                                     <C>         <C>         <C>         <C>         <C>
Net Receivables (in millions).........  $18,796.0   $16,691.4   $14,316.3   $12,449.9   $10,848.4
Average Account Balance...............  $  44,712   $  42,859   $  41,155   $  40,342   $  36,793
Number of Accounts....................    420,384     389,451     347,864     308,607     294,848
</TABLE>
 
     The Company's home equity loans typically have initial maturities of 180
months. Approximately 15% of the Company's home equity loans are variable rate
loans. Home equity loans may be secured by either first or second mortgages. At
December 31, 1997, 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, and consumer durables. Personal loan contract terms range
up to 60 months and generally require payments on an installment basis. In
general, personal loans are made for debt consolidations, home improvements,
education, vacations, taxes and major purchases of automobiles, 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 electronics and appliances, furniture and
home improvements. The Company generally purchases retail sales finance
contracts from retailers of such items. Such purchases provide an important
source of new loan customers. The newly-established relationship often leads to
other types of financing for the customer based on the individual's credit
needs. The terms of retail sales finance contracts differ based on the amount
financed and the credit quality of the customer. Generally, retail sales finance
contracts have terms ranging from 24 to 36 months.
 
     Statistical information for average personal loan and average retail sales
finance contract receivables is generally similar. For example, at December 31,
1997, the average balance of the Company's outstanding personal loans was
$2,621, and the average balance of the Company's outstanding retail sales
finance contracts was $2,182.
 
                                        3
<PAGE>   5
 
     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
                                    --------------------------------------------------------------
                                       1997         1996         1995         1994         1993
                                    ----------   ----------   ----------   ----------   ----------
<S>                                 <C>          <C>          <C>          <C>          <C>
Net Receivables (in millions).....  $  8,731.6   $  7,425.1   $  6,225.1   $  5,420.3   $  4,485.0
Average Account Balance...........  $    2,450   $    2,294   $    2,252   $    2,231   $    2,175
Number of Accounts................   3,564,612    3,236,903    2,764,050    2,429,281    2,062,200
</TABLE>
 
     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 both domestic and international branch delivery and
centralized lending operations, which are further described as follows:
 
     Domestic Branch System. At December 31, 1997, the Company's domestic
consumer finance branch system consisted of 1,464 geographically dispersed
office 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 acquisition by the Company in order to
retain name recognition and awareness, customer relationships and
market niches.
 
     International Branch System. At December 31, 1997, the Company's
international consumer finance branch system consisted of 684 locations. The
Company operates its international consumer finance business principally in
Japan, but also has operations in the United Kingdom, Canada, Puerto Rico,
Mexico, Costa Rica and Taiwan. The Company's international branches employ
operational disciplines similar to those of the domestic branches. Set forth
below is a description of the Company's international consumer finance branch
system at December 31, 1997.
 
     - Japan. The Company operated 429 branches in Japan through its
wholly-owned subsidiary, AIC. AIC provides home equity and personal loans,
credit cards and purchases retail sales finance contracts. AIC had $2.7 billion
of consumer net finance receivables and employed approximately 2,000
individuals. At or for the year ended December 31, 1997, AIC's home equity loans
totaled $1.1 billion, personal loans and retail sales finance contracts totaled
$1.5 billion and credit cards totaled $0.1 billion (as included in the credit
card discussion that follows).
 
     - United Kingdom. The Company had 62 consumer branches, one centralized
lending operation and $776.7 million of consumer net finance receivables in the
United Kingdom. The operation offers home equity and personal loans, credit
cards, and purchases consumer retail sales finance contracts from retailers.
 
     - Canada. The Company operated 113 branches in Canada and had 2 centralized
lending operations through which the Company purchases retail sales finance
contracts and makes personal and home equity loans. The Canadian consumer
operation was expanded through the purchase of Superior Acceptance Corporation
Limited ("Superior") in September 1997. Superior had 93 locations in Canada at
December 31, 1997.
 
     - Other Consumer International Operations. The Company had 39 consumer
branches in Puerto Rico, which make personal and home equity loans and purchases
retail sales finance contracts from retailers; 38 in Mexico, which provide home
equity and personal loans; 2 in Costa Rica, which provide home equity and
personal loans and purchase retail sales finance contracts; and one in Taiwan,
which purchases retail sales finance contracts.
 
     Centralized Lending. The Company's centralized home equity lending
operation is conducted through Associates Home Equity Services, Inc. ("AHES"), a
subsidiary of Associates. AHES extends both fixed and variable rate closed-end
loans and lines of credit, secured by residential property, to customers. Prior
to January 1, 1998, AHES was known as Ford Consumer Finance Company, Inc. A
majority of the home equity loans at December 31, 1997 in the Company's
centralized home equity lending operation were originated
 
                                        4
<PAGE>   6
 
through mortgage brokers and financial institutions. 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, 1997 were originated as a result of existing customer
relationships, direct mail and telemarketing efforts. The Company's centralized
home equity lending operation covers most of the United States through three
regional service centers and 47 district sales offices located in 26 states.
 
     The Company also conducts a centralized lending operation through
Associates Capital Bank, Inc. ("ACB"), a Federal Deposit Insurance Corporation
("FDIC") insured Utah chartered industrial loan company. ACB offers loans by
mail on a nationwide basis and operates a number of private label retail credit
card programs throughout the United States.
 
  CREDIT CARDS
 
     The Company's credit card receivables in the United States are principally
originated by ANB. ANB's credit card receivables consist primarily of VISA(R)
and MasterCard(R) bankcards and private label credit cards which are marketed
directly to the public and through co-operative 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 customized revolving charge programs for customers of Amoco and
Texaco. Customers use the cards to make purchases at Amoco and Texaco gasoline
stations or to receive cash advances. The Company also offers bankcards to its
customers in Japan and the United Kingdom.
 
     The following table shows certain information regarding the Company's
credit card receivables:
 
                                  CREDIT CARD
 
<TABLE>
<CAPTION>
                                                          AT DECEMBER 31
                                  ---------------------------------------------------------------
                                     1997          1996         1995         1994         1993
                                  -----------   ----------   ----------   ----------   ----------
<S>                               <C>           <C>          <C>          <C>          <C>
Net Receivables (in millions)...  $   8,211.7   $  6,023.8   $  4,984.6   $  4,076.5   $  3,278.5
Average Account Balance(1)......  $       763   $      931   $      798   $      723   $    1,463
Number of Accounts..............   10,767,237    6,470,054    6,246,089    5,638,265    2,241,292
</TABLE>
 
---------------
 
(1) In 1994, ANB acquired Amoco's private label gasoline credit card program,
    which added 3.2 million active accounts. These accounts generally carried
    smaller balances than ANB's bankcard accounts, as did the 3.9 million active
    accounts of the Texaco private label credit card program acquired in 1997.
    These private label acquisitions have had the effect of decreasing the
    average balance for the Company's credit card receivables on an ongoing
    basis.
 
     The Company's revenues from its credit card business are derived from
finance charges on revolving accounts, the interchange fees resulting from
merchant discounts, annual membership and other account fees, as well as, fees
earned from the sale of insurance and other fee-based products. The Company's
credit card receivables typically bear variable interest rates.
 
  OTHER CONSUMER SERVICES
 
     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). The agreement
between the Company and Ford which covers the roadside assistance services
provided to Ford contains a change in control provision which would be engaged
at the proposed Spin-Off date. At such time the agreement would be cancelable on
30 days notice. Should the contract be terminated, such termination would be on
a prospective basis and would not have a material affect on the Company's
results of operations.
 
                                        5
<PAGE>   7
 
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 truck trailers and
construction, material handling and other industrial and communications
equipment. The Company also provides a wide range of retail and wholesale
financing products and services to the manufactured housing sector. In addition,
the Company engages in a number of other commercial activities, including auto
fleet leasing and fleet management services, recreational vehicle financing,
Small Business Administration lending, employee relocation services and
municipal finance. The Company, through certain subsidiaries and other third
parties, 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 also offers commercial auto liability insurance in
certain states. See the "-- Related Insurance" section.
 
     The Company provides truck and truck trailer financing and leasing services
from branch offices in the United States, Canada, Puerto Rico, Mexico, and the
United Kingdom. The Company provides equipment financing and leasing services
from branch offices in the United States, Canada, Puerto Rico, Japan, Mexico and
the United Kingdom. The Company utilizes two centralized lending and service
operations for distributing products and services for material handling and
other industrial and communications equipment. Fee-based services are also
provided from centralized locations. The Company provides manufactured housing
financing through five regional offices and 17 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
                                         --------------------------------------------------------
                                           1997        1996        1995        1994        1993
                                         ---------   ---------   ---------   ---------   --------
<S>                                      <C>         <C>         <C>         <C>         <C>
Truck and Truck Trailer................  $ 9,688.9   $  8598.3   $ 7,724.0   $ 6,739.7   $5,598.4
Equipment..............................    5,300.5     4,571.8     3,781.7     2,947.1    2,486.1
Auto Fleet Leasing.....................    1,551.1     1,090.8       330.8       303.2      278.6
Recreational Vehicles(1)...............      444.0       490.5
Warehouse Lending and Other(2).........      822.4       358.5       290.7        67.9       19.2
                                         ---------   ---------   ---------   ---------   --------
Total Commercial.......................  $17,806.9   $15,109.9   $12,127.2   $10,057.9   $8,382.3
                                         =========   =========   =========   =========   ========
Manufactured Housing(3)................  $ 1,669.4   $ 1,262.7   $ 2,049.3   $ 1,681.1   $1,300.5
                                         =========   =========   =========   =========   ========
</TABLE>
 
---------------
 
(1) During 1997 and 1996, the Company securitized and sold approximately $533
    million and $200 million, respectively, of recreational vehicle retail
    finance receivables.
 
(2) Includes warehouse lending, Small Business Administration lending and
    municipal finance (prior to 1997, municipal finance was included in truck
    and truck trailer and equipment net finance receivables).
 
(3) 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. 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 1997 and 1996, the Company
    securitized and sold approximately $800 million and $1.3 billion,
    respectively, of manufactured housing retail finance receivables.
 
     At December 31, 1997, the interest rates charged on approximately 21% 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 the "-- Regulation" section.
At December 31, 1997, the finance charge
 
                                        6
<PAGE>   8
 
yield on all types of commercial finance receivables averaged approximately 10%
per annum, and original maturities of such receivables averaged 58 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 trucks, heavy-duty trucks and truck trailers, as well as wholesale
financing, accounts receivable financing and working capital loans to dealers
and trucking companies. The Company also provides financing and leasing for
truck and truck trailer purchases by truck leasing and rental companies. The
Company's customers are principally located in the United States and, to a
lesser extent, in Canada and other countries.
 
     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,
                                   --------------------------------------------------------------
                                      1997         1996         1995         1994         1993
                                   ----------   ----------   ----------   ----------   ----------
<S>                                <C>          <C>          <C>          <C>          <C>
Net Receivables (in millions)....  $  9,688.9   $  8,598.3   $  7,724.0   $  6,739.7   $  5,598.4
Retail and Leasing Receivables
  Average account balance........  $   39,228   $   39,314   $   37,552   $   36,502   $   32,927
  Number of accounts.............     223,236      197,070      177,789      164,076      152,638
Wholesale Receivables............
  Average balance per dealer.....  $1,235,942   $1,080,940   $1,427,384   $1,055,696   $  822,557
</TABLE>
 
     The Company provides retail financing of new and used medium-duty trucks,
heavy-duty trucks and truck trailers primarily on an indirect basis through
truck and truck trailer dealers. Under an installment sales contract, the dealer
and purchaser enter into a financing arrangement for the installment purchase of
a truck or truck trailer. Subject to credit approval by the Company, the dealer
assigns the installment contract to the Company. The Company funds the
transaction by a payment to the dealer for the net amount financed in the
contract. The Company also sources retail truck and truck trailer financing
directly 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 provides fleet leasing for users of medium-duty trucks,
heavy-duty trucks and truck trailers. Most of the Company's truck and truck
trailer leases are non-maintenance, open-end leases. Under such leases, the
customer is responsible for the maintenance and residual value of the vehicle
and the Company generally retains the tax depreciation benefit.
 
     The Company also provides truck trailer rental services. These are
represented by short-term operating leases. Under these leases, the Company is
the owner of the equipment and the lessee enjoys the use of the equipment for
periods of a few days or up to several months.
 
     In addition, the Company provides new and used vehicle wholesale financing
to truck and truck trailer dealers throughout the United States. Generally,
wholesale loans are short-term loans with variable rates (prime rate based) and
are secured by inventory.
 
                                        7
<PAGE>   9
 
  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 and, to a lesser extent in other countries. 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.
 
     The following table shows certain information regarding the Company's
equipment financing and leasing receivables:
 
                                   EQUIPMENT
 
<TABLE>
<CAPTION>
                                                              AT DECEMBER 31
                                           ----------------------------------------------------
                                             1997       1996       1995       1994       1993
                                           --------   --------   --------   --------   --------
<S>                                        <C>        <C>        <C>        <C>        <C>
Net Receivables (in millions)............  $5,300.5   $4,571.8   $3,781.7   $2,947.1   $2,486.1
Retail and Leasing Receivables
  Average account balance................  $ 25,668   $ 23,713   $ 24,072   $ 20,632   $ 18,358
  Number of accounts.....................   176,919    164,476    129,276    116,019    112,584
Wholesale Receivables
  Average balance per dealer.............  $641,301   $596,359   $674,522   $580,693   $449,411
</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. Finance leases typically include an
option for the lessee to acquire the equipment at a set time before the
termination of the lease for a specified price (designed to offer the lessee an
incentive to purchase as part of residual risk management) and typically include
an option for the lessee to acquire the equipment at the end of the lease term
for the fair market value.
 
     In addition, the Company 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 that it is the third largest provider of financing to
dealers and purchasers of manufactured housing in the United States, and it
recently entered the Canadian market. 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 certain manufactured housing dealers to provide capital to
build new retail sales centers, update existing facilities or expand into
community park sales.
 
                                        8
<PAGE>   10
 
     The following table sets forth certain information regarding the Company's
manufactured housing receivables:
 
                              MANUFACTURED HOUSING
 
<TABLE>
<CAPTION>
                                                             AT DECEMBER 31
                                          ----------------------------------------------------
                                            1997       1996       1995       1994       1993
                                          --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>
Net Receivables (in millions)(1)........  $1,669.4   $1,262.7   $2,049.3   $1,681.1   $1,300.5
Retail Receivables
  Average account balance...............  $ 36,904   $ 26,288   $ 24,217   $ 22,332   $ 20,507
  Number of accounts(1).................    31,999     30,234     66,762     60,052     51,339
Wholesale Receivables
  Average balance per dealer............  $548,821   $477,106   $443,135   $354,906   $312,753
</TABLE>
 
---------------
 
(1) During 1997 and 1996, the Company securitized and sold approximately $800
    million and $1.3 billion, respectively, of manufactured housing retail
    finance receivables.
 
     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.
 
     At December 31, 1997 and 1996, the Company also managed and serviced
portfolios of approximately $1.9 billion and $1.3 billion, respectively, of
manufactured housing retail finance receivables which have been securitized and
sold.
 
  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
with auto and light truck fleets of 100 or more vehicles. At December 31, 1997
and 1996, the Company had $1.6 billion and $1.1 billion, respectively, 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 and the
acquisition of the U.S. and Canada based commercial auto fleet operation of AT&T
Capital Corporation in December 1997. These acquisitions are further described
in NOTE 4 to the consolidated financial statements.
 
  RECREATIONAL VEHICLE FINANCING
 
     The Company provides retail financing for purchases of recreational
vehicles as well as wholesale financing to dealers in recreational vehicles. The
Company entered this business through its May 1996 acquisition of Fleetwood
Credit Corp., the former financing subsidiary of Fleetwood Enterprises, Inc. At
December 31, 1997 and 1996, the Company had $444.0 million and $490.5 million,
respectively, of outstanding wholesale recreational vehicle finance receivables
and managed securitized portfolios of $1.1 billion and $825.1 million,
respectively, of retail recreational vehicle finance receivables. The Company
typically has securitized substantially all retail recreational vehicle finance
receivables; accordingly, at December 31, 1997, $156.8 million in retail
recreational vehicle receivables are included in other assets as receivables
held for sale in the consolidated financial statements.
 
                                        9
<PAGE>   11
 
  WAREHOUSE LENDING AND OTHER COMMERCIAL ACTIVITIES
 
     The Company's other commercial activities principally include the following
products and services:
 
     Warehouse Lending. The Company provides short-term financing, secured by
real estate mortgages, to mortgage companies and other mortgage lenders.
 
     Small Business Administration Lending. The Company extends credit to
individuals and businesses that is partially guaranteed by the United States
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.
 
     Municipal Finance. The Company provides financing for the acquisition of
real and personal property by state and local government entities, non-profit
(sec.501(c)(3)) corporations and qualified industrial companies in the United
States.
 
RELATED INSURANCE
 
     The Company, through certain of its subsidiaries and other third party
insurance providers, 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 in
most instances. The customer can purchase such insurance either from the Company
or an alternative carrier chosen by the customer. Premiums for insurance
coverage are generally financed as part of the insured's finance obligation.
 
     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
                                                        ------------------------------------------
                                                         1997     1996     1995     1994     1993
                                                        ------   ------   ------   ------   ------
<S>                                                     <C>      <C>      <C>      <C>      <C>
Net Written Premium
  Credit life, accident and other related.............  $307.1   $282.2   $240.6   $242.4   $195.1
  Physical damage.....................................   210.3    186.2    180.3    168.7    138.9
  Other casualty and liability........................    91.3     75.9     69.6     54.5     35.7
                                                        ------   ------   ------   ------   ------
          Total.......................................  $608.7   $544.3   $490.5   $465.6   $369.7
                                                        ======   ======   ======   ======   ======
Premium Revenue(2)
  Credit life, accident and other related.............  $201.4   $183.8   $164.8   $148.1   $123.6
  Physical damage.....................................   152.9    155.1    148.5    136.7    116.9
  Other casualty and liability........................    66.4     63.2     57.3     44.2     30.4
                                                        ------   ------   ------   ------   ------
          Total.......................................  $420.7   $402.1   $370.6   $329.0   $270.9
                                                        ======   ======   ======   ======   ======
Investment Income.....................................  $ 82.6   $ 71.7   $ 68.5   $ 47.3   $ 41.4
                                                        ======   ======   ======   ======   ======
Benefits Paid or Provided.............................  $145.7   $148.2   $142.5   $147.9   $118.9
                                                        ======   ======   ======   ======   ======
</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 policies underwritten by other
    companies.
                                       10
<PAGE>   12
 
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 generally charged to the provision for losses on finance
receivables. An analysis of changes in the allowance for losses is contained in
NOTE 5 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 contractually delinquent. All other finance
receivables are charged to the allowance for losses when any of the following
conditions occur: (i) the related security has been converted or destroyed; (ii)
the related security has been repossessed and sold or held for sale for one
year; or (iii) the related security has not been repossessed and the receivable
has become contractually delinquent for one year. A contractually delinquent
account is one on which the customer has not made payments as contractually
agreed. Recoveries on losses previously charged to the allowance are credited to
the allowance at the time recovery is collected.
 
     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
                                                 ----------------------------------------------
                                                   1997       1996      1995     1994     1993
                                                 --------   --------   ------   ------   ------
<S>                                              <C>        <C>        <C>      <C>      <C>
Net Credit Losses
  Amount (in millions).........................  $1,229.1   $  885.3   $624.2   $508.6   $441.2
  As a Percentage of Average Net Receivables
     Consumer..................................      3.38%      2.80%    2.35%    2.30%    2.24%
     Commercial................................      0.27       0.33     0.19     0.09     0.29
          Total................................      2.40%      2.03%    1.70%    1.64%    1.68%
Allowance for Losses to Net Finance
  Receivables..................................      3.53%      3.36%    3.20%    3.15%    3.15%
Allowance for Losses to Net Credit Losses......      1.59x      1.77x    2.03x    2.09x    2.02x
60+Days Contractual Delinquency
  Amount (in millions).........................  $1,319.6   $1,107.2   $755.4   $510.3   $454.6
  As a Percentage of Finance Receivables
     Consumer..................................      2.84%      2.77%    2.19%    1.80%    1.81%
     Commercial................................      1.00       1.05     0.64     0.28     0.52
          Total................................      2.23%      2.20%    1.71%    1.35%    1.43%
</TABLE>
 
     The Company's ten largest accounts at December 31, 1997 (all of which were
current at December 31, 1997) represented 1% of the Company's total gross
finance receivables outstanding. All ten of such accounts are commercial finance
accounts and are secured.
 
                                       11
<PAGE>   13
 
  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.
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.
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.
 
     Competition in the credit card industry has been intense over the last
several years. Large money-center banks have been seeking to expand their credit
card units through, among other things, aggressive pricing, marketing and
acquisitions. In addition, many non-bank competitors specialize in certain
growth strategies, such as partnership and database marketing. The Company
addresses these competitive pressures by focusing on targeted segments of the
consumer market, co-branding relationships and its private label credit card
programs.
 
     Competition also varies, depending on 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,
thrifts and other financial institutions, leasing companies, lease brokers,
manufacturers, vendors and others.
 
     The Company believes, based on its experience in the industry, that the
primary competitive factors in the commercial finance and leasing business are
price, product quality, risk management, new account marketing and retention of
customers through emphasis on superior customer service. In addition, the
Company believes that innovation is necessary to compete in the industry,
including enhanced customer service, specialization in certain types of
equipment, 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 in the United States are subject to extensive
state and federal regulation including, but not limited to, the following
federal statutes and regulations: The Consumer Credit Protection
 
                                       12
<PAGE>   14
 
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.
 
     The Company is subject to regulation in most of those countries in which
the Company has operations, and often is required to obtain governmental
licensing or approval before commencing business.
 
     Consumer Finance. The Company's consumer finance business, including its
credit card business, is generally subject to detailed supervision by
governmental authorities under legislation and regulations which generally
require licensing of the lender, limitations on the amount, duration and charges
for various categories of loans, adequate disclosure of certain contract terms
and limitations on collection practices and creditor remedies. Licenses are
renewable, and may be subject to revocation for violations of such laws and
regulations. In addition, most states in the United States have usury laws which
limit interest rates. Federal legislation in the United States preempts state
interest rate ceilings on first mortgage loans and state laws which restrict
various types of alternative home equity receivables, except in those states
which have specifically opted out of such preemption.
 
     The Company is subject to the TILA and Regulation Z promulgated thereunder
in the United States. The TILA requires, among other things, disclosure of
pertinent elements of consumer credit transactions, including the finance
charges and the comparative costs of credit expressed in terms of an annual
percentage rate. The TILA disclosure requirements are designed to provide
consumers with uniform, understandable information with respect to the terms and
conditions of loans and credit transactions in order to enable them to compare
credit terms. The TILA also guarantees consumers a three-day right to cancel
certain credit transactions, including 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.
 
     In addition, the Company is subject to the ECOA which, in part, prohibits
credit discrimination on the basis of race, color, religion, sex, marital
status, national origin 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.
 
     ANB is under the supervision of, and subject to examination by, the Office
of the Comptroller of the Currency ("OCC"). ANB's charter limits its activities
to credit card operations. In addition, ANB is subject to the rules and
regulations of the FDIC. ACB (formerly Associates Investment Corporation) is
regulated by the FDIC and the Utah Department of Financial Institutions. ANB and
ACB are subject to regulation relating to capital adequacy, leverage, loans,
deposits, consumer protection, community reinvestment, the payment of dividends,
transactions with affiliates and other aspects of operations. In addition, both
ANB and ACB are subject to the provisions of the Community Reinvestment Act.
 
     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.
 
                                       13
<PAGE>   15
 
     Commercial Finance. Although most jurisdictions do not regulate commercial
finance, certain jurisdictions 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
United States Small Business Act and the Small Business Investment Act of 1958,
as amended, and may be subject to the same regulations by certain states in the
United States as are other commercial finance operations. The federal statutes
and regulations specify the types of loans and loan amounts which are eligible
for the Small Business Administration's guaranty as well as the servicing
requirements imposed on the lender to maintain Small Business Administration
guarantees.
 
     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 First Capital
and its subsidiaries represent less than 1% of total assets at December 31, 1997
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, 1997, the
Company had 2,265 offices worldwide. The Company owns its administrative
headquarters in Irving, Texas consisting of approximately 550,000 square feet
and a centralized processing center also located in Irving, Texas consisting of
approximately 440,000 square feet.
 
ITEM 3. LEGAL PROCEEDINGS.
 
     Various legal actions, governmental investigations and proceedings and
claims are pending or may be instituted or asserted in the future against the
Company and its subsidiaries. Certain of the pending legal actions are, or
purport to be, class actions. Some of the foregoing matters involve or may
involve compensatory, punitive, or other treble damage claims which, if
adversely held against the Company, would require large expenditures or could
affect the manner in which the Company conducts its business.
 
     Litigation is subject to many uncertainties, and the outcome of individual
litigated matters is not predictable with assurance. Some of the matters
discussed in the foregoing paragraph could be decided unfavorably to the Company
or the subsidiary involved and could require the Company or such subsidiary to
pay damages or make other expenditures in amounts or a range of amounts that
cannot be estimated at December 31, 1997. The Company does not reasonably
expect, based on its analysis, that any adverse outcome from such matters would
have a material effect on future consolidated financial statements for a
particular year, although such an outcome is possible.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     Not required.
 
                                       14
<PAGE>   16
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     The Class A Common Stock of the Company is listed on the New York Stock
Exchange. The high and low sales prices for the Class A Common Stock and the
dividends paid per share of the Class A Common Stock for each full quarterly
period from May 8, 1996, the date the Class A Common Stock began trading on the
New York Stock Exchange, were as follows:
 
<TABLE>
<CAPTION>
                                                         CLASS A COMMON STOCK PRICE PER SHARE*
                                            ---------------------------------------------------------------
                                            FIRST QUARTER   SECOND QUARTER   THIRD QUARTER   FOURTH QUARTER
                                            -------------   --------------   -------------   --------------
<S>                                         <C>             <C>              <C>             <C>
1997
High......................................     52 5/8          59 3/8           66 1/4         72 9/16
Low.......................................     42 1/2          42 1/8           55 1/4          58 3/4
Dividends per share of Class A Common
  Stock and Class B Common Stock..........      $0.10           $0.10            $0.10           $0.10
1996
High......................................        N/A          39 1/8           41 5/8          48 1/2
Low.......................................        N/A          33 1/8           34 3/4          40 3/4
Dividends per share of Class A Common
  Stock and Class B Common Stock..........                                       $0.10           $0.10
</TABLE>
 
---------------
* Prices reflect New York Stock Exchange Composite Transactions. Initial public
  offering price was $29.00 per share.
 
     As of February 12, 1998, stockholders of record of the Company included
1,458 holders of the Class A Common Stock and one holder of the Class B Common
Stock. See NOTE 18 of the consolidated financial statements regarding Ford's
Spin-Off of its interest in the Company.
 
     The Company relies primarily on dividends and other intercompany fees from
its subsidiaries for the payment of dividends to holders of its Class A and B
Common Stock. The terms of the agreements governing certain outstanding
indebtedness of Associates contain certain limitations on the payment of
dividends and certain other transfers of funds to the Company. The principal
restriction, which is contained in a certain issue of debt having a stated
maturity of March 15, 1999, generally limits payments of cash dividends on
Associates 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. In addition, the Company's banking
subsidiaries, ANB and ACB, and the Company's insurance subsidiaries may pay
dividends and make certain other transfers of funds to the Company only up to
amounts permitted by applicable banking and insurance regulations, respectively,
and the repatriation of funds from the Company's foreign subsidiaries may be
subject to withholding taxes or other restrictions.
 
     In connection with the reclassification of the Company's existing common
stock in connection with the Initial Public Offering and Ford's contribution of
Associates International Group to the Company in May 1996, the Company issued
255,881,180 shares of its Class B Common Stock, par value $0.01 per share, to
Ford FSG, Inc. and 23,603,669 shares of its Class A Common Stock, par value
$0.01 per share to Ford Motor Company, respectively.
 
     In 1996, upon completion of the Offering under the terms of the Company's
Incentive Compensation Plan, the Company issued 169,630 shares of Class A Common
Stock, par value $0.01 per share, to approximately 20 employees of the Company
(the "Restricted Stock"). In 1997, the Company issued 42,000 shares of
Restricted Stock to 11 employees. The Company awarded these shares to such
individuals contingent on their continued employment with the Company and such
shares vest on the fifth anniversary of the date of issuance. The Company
believes the issuance of the above shares of common stock was exempt from the
registration requirements of the Securities Act of 1933 (the "Act") under the
provisions of Section 4(2) of the Act.
 
                                       15
<PAGE>   17
 
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, 1997. 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
                                                             ---------------------------------------------------------
                                                               1997        1996        1995        1994        1993
                                                             ---------   ---------   ---------   ---------   ---------
<S>                                                          <C>         <C>         <C>         <C>         <C>
Results of Operations
  Total revenue............................................  $ 8,278.6   $ 7,098.2   $ 6,107.2   $ 4,925.8   $ 4,114.8
  Finance charge revenue...................................    7,560.2     6,481.0     5,560.8     4,445.2     3,709.7
  Interest expense.........................................    2,775.2     2,456.0     2,177.9     1,657.3     1,421.7
  Net interest margin......................................    4,785.0     4,025.0     3,382.9     2,787.9     2,288.0
  Operating expenses.......................................    2,339.6     2,002.9     1,754.7     1,456.1     1,216.8
  Provision for losses.....................................    1,378.1     1,086.5       834.0       647.1       536.1
  Insurance benefits paid..................................      145.7       148.2       142.5       147.9       118.9
  Earnings before provision for income taxes...............    1,640.0     1,404.6     1,198.1     1,017.4       821.3
  Provision for income taxes...............................      608.3       547.6       475.0       414.1       327.3
  Net earnings.............................................    1,031.7       857.0       723.1       603.3       494.0
  Basic earnings per share(1)..............................       2.98        2.47        2.09
  Diluted earnings per share(1)............................       2.97        2.47        2.09
Balance Sheet Data
  Finance receivables, net of unearned finance income:
    Consumer...............................................  $37,408.7   $31,403.0   $27,575.3   $23,627.8   $19,912.4
    Commercial.............................................   17,806.9    15,109.9    12,127.2    10,057.9     8,382.3
                                                             ---------   ---------   ---------   ---------   ---------
        Total..............................................   55,215.6    46,512.9    39,702.5    33,685.7    28,294.7
                                                             =========   =========   =========   =========   =========
        Total managed receivables..........................   58,406.5    48,622.8    39,702.5    33,685.7    28,294.7
  Allowance for losses.....................................    1,949.9     1,563.1     1,268.6     1,061.6       892.3
  Total assets.............................................   57,232.7    48,268.4    41,303.9    35,283.5    30,039.6
  Short-term debt (notes payable)..........................   20,970.6    17,075.2    13,747.3    12,431.9    10,385.9
  Long-term debt(3)........................................   28,228.0    24,029.5    21,372.6    17,306.2    14,826.8
  Stockholders' equity.....................................    6,268.6     5,437.5     4,801.1     4,436.8     3,774.3
  Stockholders' equity per share(1)(2).....................      18.09       15.69       13.85
Selected Data and Ratios
  Net interest margin as a percentage of average net
    finance receivables(4).................................       9.36%       9.29%       9.22%       9.00%       8.69%
  Earnings to fixed charges................................       1.59x       1.57x       1.55x       1.61x       1.57x
  Total debt to equity.....................................        7.8:1       7.5:1       7.2:1       6.6:1       6.6:1
  Total debt to adjusted equity(5).........................        8.8:1       8.8:1       9.0:1       8.5:1       8.7:1
  Total debt to tangible equity............................        9.5:1       9.7:1       9.9:1       9.6:1      10.1:1
  Return on average assets(4)..............................       1.95%       1.93%       1.89%       1.85%       1.76%
  Return on average equity(4)..............................      17.78       17.09       15.66       14.70       14.10
  Return on average adjusted equity(4)(5)..................      21.10       20.94       20.26       19.66       19.25
  Return on average tangible equity(4).....................      22.21       22.63       21.90       21.71       22.31
  60+days contractual delinquency..........................       2.23        2.20        1.71        1.35        1.43
  Net credit losses to average net finance receivables.....       2.40        2.03        1.70        1.64        1.68
  Allowance for losses to net finance receivables..........       3.53        3.36        3.20        3.15        3.15
  Allowance for losses to net credit losses................       1.59x       1.77x       2.03x       2.09x       2.02x
  Number of employees......................................     22,582      18,984      16,647      15,318      13,933
  Number of consumer and commercial branch offices
    Domestic...............................................      1,568       1,634       1,543       1,472       1,378
    International..........................................        697         499         404         329         278
                                                             ---------   ---------   ---------   ---------   ---------
        Total..............................................      2,265       2,133       1,947       1,801       1,656
                                                             =========   =========   =========   =========   =========
</TABLE>
 
---------------
 
(1) Due to the change in the Company's capital structure as a result of the
    Initial Public Offering, share and per share data for 1994 or 1993 are not
    comparable to, or meaningful in the context of, future periods.
 
(2) Based on 346.5 million shares outstanding in 1997 and 346.7 million shares
    outstanding in 1996 and 1995.
 
(3) Includes current portion of long-term debt.
 
(4) During the first quarter of 1996, the Company paid a dividend to FFSG
    totaling $1.85 billion of which $1.75 billion was in the form of an
    intercompany interest bearing note. The Company repaid the $1.75 billion
    intercompany note with FFSG during the second quarter of 1996 and received
    $1.85 billion as a result of the initial public offering. The amounts
    presented above exclude the effect of these transactions. Including the
    impact of these transactions, the Company's net interest margin, return on
    average assets, on average equity, on average adjusted equity and on average
    tangible equity for the year ended December 31, 1996 would have been 9.24%,
    1.89%, 18.31%, 22.86% and 24.98%, respectively.
 
(5) Excludes the push-down goodwill created by Ford's acquisition of foreign
    affiliates of the Company in 1989.
 
                                       16
<PAGE>   18
 
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 and other fee income. The Company's
primary expenses are interest expense from the funding of its finance business,
provision for loan losses and operating expenses. A principal factor determining
the profitability of the Company is 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. 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
                                                        ------------------------------
                                                          1997       1996       1995
                                                        --------    ------    --------
<S>                                                     <C>         <C>       <C>
Net Earnings........................................    $1,031.7    $857.0    $  723.1
Change in Net Earnings
  Amount............................................    $  174.7    $133.9    $  119.8
  Percent...........................................        20.4%     18.5%       19.9%
Return
  On average assets(1)..............................        1.95%     1.93%       1.89%
  On average equity(1)..............................       17.78%    17.09%      15.66%
  On average adjusted equity(1)(2)..................       21.10%    20.94%      20.26%
</TABLE>
 
---------------
 
(1) During the first quarter of 1996, the Company paid a dividend to FFSG
    totaling $1.85 billion of which $1.75 billion was in the form of an
    intercompany interest bearing note. The Company repaid the $1.75 billion
    intercompany note with FFSG during the second quarter of 1996 and received
    $1.85 billion as a result of the initial public offering. The amounts
    presented above exclude the effect of these transactions. Including the
    impact of these transactions, the Company's return on average assets, on
    average equity and on average adjusted equity for the year ended December
    31, 1996 would have been 1.89%, 18.31% and 22.86%, respectively.
 
(2) Excludes the push-down goodwill created by Ford's acquisition of foreign
    affiliates of the Company in 1989.
 
     Net earnings increased in each of the years ended December 31, 1997, 1996
and 1995. Net earnings for 1997 increased $174.7 million or 20.4% over 1996,
resulting in a return on average assets of 1.95% and a return on average equity
of 17.78%. Net earnings for 1996 increased $133.9 million or 18.5% over 1995,
resulting in a return on average assets of 1.93% and a return on average equity
of 17.09%.
 
     The Company derived approximately 15.1% of its net earnings in 1997 from
its foreign subsidiaries, principally Japan; see NOTE 17 to the Company's
consolidated financial statements. Management believes that the overall business
factors and economic trends affecting the profitability of the foreign
subsidiaries have not materially affected the profitability of the Company taken
as a whole. See the discussion of the impact of foreign currency translation in
the "-- Market Risk" section that follows and in NOTE 16 to the Company's
consolidated financial statements.
 
     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:
 
                                       17
<PAGE>   19
 
  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
                              --------------------------------------------------------------
                                     1997                  1996                  1995
                              ------------------    ------------------    ------------------
                                         PERCENT               PERCENT               PERCENT
                               AMOUNT      (1)       AMOUNT    (1)(2)      AMOUNT      (1)
                              --------   -------    --------   -------    --------   -------
<S>                           <C>        <C>        <C>        <C>        <C>        <C>
Finance Charge Revenue......  $7,560.2    14.79%    $6,481.0    14.88%    $5,560.8    15.15%
Interest Expense............   2,775.2     6.14      2,456.0     6.32      2,177.9     6.72
                              --------              --------              --------
Net Interest Margin.........  $4,785.0     9.36%    $4,025.0     9.29%    $3,382.9     9.22%
                              ========              ========              ========
</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.
 
(2) The 1996 net interest margin excludes 0.05% of non-recurring interest costs
    related to the 1996 public offering of the Company's Class A Common Stock.
 
     Finance charge revenue increased in each of the years presented in both the
Company's domestic and international operations. The increase in each year
principally resulted from growth in average net finance receivables outstanding
("ANR"). The 1997 and 1996 decreases in finance charge yield (finance charge
revenue divided by ANR) partially offset increases in finance charge revenue
caused by growth. The components of the change in finance charge revenue are set
forth in the following table (in millions):
 
                COMPONENTS OF CHANGES IN FINANCE CHARGE REVENUE
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31
                                                       --------------------------------
                                                         1997        1996        1995
                                                       --------    --------    --------
<S>                                                    <C>         <C>         <C>
Change Due to:
  Growth in receivables..............................  $1,117.6    $1,020.9    $  864.4
  Finance charge yield...............................     (38.4)     (100.7)      251.2
                                                       --------    --------    --------
          Total......................................  $1,079.2    $  920.2    $1,115.6
                                                       ========    ========    ========
</TABLE>
 
     The finance charge yields to ANR for the Company's business segments were
as follows:
 
                          FINANCE CHARGE YIELDS TO ANR
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                                              -----------------------
                                                              1997     1996     1995
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
Consumer Segment............................................  17.23%   17.24%   17.48%
Commercial Segment..........................................  10.00    10.15    10.11
  Total Company.............................................  14.79%   14.88%   15.15%
</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 composition of the finance receivable portfolios (i.e., "product
mix"). A generally declining rate environment, changes in product mix and
increased competition were the primary causes of the movements in finance charge
yield from 1995 to 1997.
 
     Total dollars of interest expense increased in each of the three years
ended 1997. 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.
The increase in interest expense as a result of growth in 1997 and 1996 was
partially offset by a decline, compared to 1995 levels, in the Company's average
borrowing rate (interest expense divided by average outstanding debt). Declines
in the Company's average borrowing rate were primarily caused by
 
                                       18
<PAGE>   20
 
changes in market interest rates, which varied over the corresponding periods,
and by a modest shift toward a higher percentage of floating rate debt as a
percentage of total debt. Floating rate debt rates were lower than long-term
debt rates in each period. Average short- and long-term borrowing rates were as
follows:
 
                            AVERAGE BORROWING RATES
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                                              -----------------------
                                                              1997     1996     1995
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
Short-term Debt.............................................   5.48%    5.53%    5.98%
Long-term Debt(1)...........................................   6.62     6.89     7.21
          Total Debt........................................   6.14%    6.32%    6.72%
</TABLE>
 
---------------
 
(1) Includes the current portion of long-term debt and certain long-term debt
    issues which bear interest on a floating rate basis.
 
     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 maturity in the range of 3-7 years. The changes in short- and long-term
average borrowing rates from 1995 to 1997 are principally due to changes in
market interest rates for debt of a comparable term and credit quality.
Additionally, the Company's average long-term borrowing rate was reduced in all
years, in part, by refinancing maturing debt at lower prevailing market rates,
as well as by issuing larger amounts of long-term debt which bear interest on a
floating rate basis.
 
     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
                                                       --------------------------------
                                                         1997        1996        1995
                                                       --------    --------    --------
<S>                                                    <C>         <C>         <C>
Interest Expense.....................................  $2,775.2    $2,456.0    $2,177.9
 
Change Due to:
  Growth in debt.....................................  $  389.2    $  407.7    $  332.7
  Borrowing rate.....................................     (70.0)     (129.6)      187.9
                                                       --------    --------    --------
          Total......................................  $  319.2    $  278.1    $  520.6
                                                       ========    ========    ========
</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, 1997.
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.
 
  INSURANCE PREMIUM REVENUE
 
     Insurance premium revenue was $420.7 million, $402.1 million and $370.6
million for the years ended December 31, 1997, 1996 and 1995, respectively.
Insurance premium revenue, which is earned over the coverage term, increased
$18.6 million (4.6%) in 1997, $31.5 million (8.5%) in 1996, and $41.6 million
(12.6%) in 1995. 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
 
                                       19
<PAGE>   21
 
commercial finance businesses. The increase in insurance revenue in each of the
years was principally caused 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, 1997, 1996 and
1995 was $297.7 million, $215.1 million and $175.8 million, respectively.
Investment income is derived from realized or unrealized returns on the
Company's investments in trading securities and realized returns on investments
in available for sale securities, both of which are principally owned by the
Company's insurance operation. Other income is primarily derived from service
fees under master servicing agreements related to certain securitized assets and
from fee-based services, such as employee relocation services and emergency
roadside assistance and auto club services. The increase in other income from
1995 through 1997 was principally due to increases in service fees and other
revenue related to 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
                                             ------------------------------------------------------
                                                   1997               1996               1995
                                             ----------------   ----------------   ----------------
                                              AMOUNT    % ANR    AMOUNT    % ANR    AMOUNT    % ANR
                                             --------   -----   --------   -----   --------   -----
<S>                                          <C>        <C>     <C>        <C>     <C>        <C>
Salaries and Benefits......................  $1,110.5   2.17%   $  946.0   2.17%   $  807.7    2.20%
Occupancy, Data Processing and Other.......   1,229.1   2.41     1,056.9   2.43       947.0    2.58
                                             --------   -----   --------   -----   --------   -----
     Total.................................  $2,339.6   4.58%   $2,002.9   4.60%   $1,754.7    4.78%
                                             ========   =====   ========   =====   ========   =====
 
Efficiency Ratio...........................             43.7%              44.6%               46.3%
                                                        =====              =====              =====
</TABLE>
 
     Total operating expenses on a dollar basis increased from 1995 to 1997,
principally due to increased levels of business volume and outstanding
receivables in each year. The increases in salaries and benefits in total
dollars is primarily due to increases in the number of employees to support the
increased levels of business volume and outstanding receivables. As a percentage
of ANR, total operating expenses decreased from 1995 to 1997. In addition, the
Company's total operating efficiency, as measured by the ratio of total
operating expenses to revenues net of interest expense and insurance benefits
paid or provided (the "Efficiency Ratio") improved in each year.
 
  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 unit profitability, each business unit establishes an allowance for
loan loss when a loan is made through a charge to the provision for losses. The
Company manages its allowance for losses on finance receivables on a
Company-wide basis taking into account actual and expected losses in each
business unit, the relationship of the allowance for losses to net finance
receivables outstanding and the relationship of the allowance for losses to
total net credit losses. The resulting charge is included in the provision for
losses.
 
                                       20
<PAGE>   22
 
     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, due to growth in finance receivables, were generally 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 the 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
                                                    -----------------------------------
                                                      1997         1996         1995
                                                    ---------    ---------    ---------
<S>                                                 <C>          <C>          <C>
Balance at Beginning of Period....................  $ 1,563.1    $ 1,268.6    $ 1,061.6
  Provision for losses............................    1,378.1      1,086.5        834.0
 
  Recoveries on receivables charged off...........      224.9        147.2        132.9
  Losses sustained................................   (1,454.0)    (1,032.5)      (757.1)
                                                    ---------    ---------    ---------
          Net credit loss experience..............   (1,229.1)      (885.3)      (624.2)
                                                    ---------    ---------    ---------
  Reserves for acquired businesses and other......      237.8         93.3         (2.8)
                                                    ---------    ---------    ---------
Balance at End of Period..........................  $ 1,949.9    $ 1,563.1    $ 1,268.6
                                                    =========    =========    =========
Allowance for Losses to Net Finance Receivables...       3.53%        3.36%        3.20%
Allowance for Losses to Net Credit Losses.........       1.59x        1.77x        2.03x
</TABLE>
 
     The allowance for losses as a percent of net finance receivables (the
"allowance ratio") increased in each year, reflecting management's opinion that
delinquencies and net credit losses may increase primarily due to higher
consumer debt levels and increased bankruptcies. 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 each year. Notwithstanding the
decrease in the loss coverage ratio, management believes the allowance for
losses at December 31, 1997 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, 1997 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 PROVISION FOR LOSSES
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31
                                                           --------------------------
                                                            1997      1996      1995
                                                           ------    ------    ------
<S>                                                        <C>       <C>       <C>
Change Due to:
  Change in net loss experience..........................  $190.4    $144.5    $ 22.1
  Growth in receivables, change in reserves and other....   101.2     108.0     164.8
                                                           ------    ------    ------
          Total..........................................  $291.6    $252.5    $186.9
                                                           ======    ======    ======
</TABLE>
 
     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 1997, 1996 and 1995 the increase in the allowance ratio
also contributed to the change in the provision for losses in those years.
 
                                       21
<PAGE>   23
 
     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
                                                        ------------------------------
                                                          1997        1996       1995
                                                        --------    --------    ------
<S>                                                     <C>         <C>         <C>
60+Days Contractual Delinquency
  Consumer............................................      2.84%       2.77%     2.19%
  Commercial..........................................      1.00        1.05      0.64
          Total.......................................      2.23%       2.20%     1.71%
          Total dollars delinquent....................  $1,319.6    $1,107.2    $755.4
Net Credit Losses to ANR
  Consumer............................................      3.38%       2.80%     2.35%
  Commercial..........................................      0.27        0.33      0.19
          Total.......................................      2.40%       2.03%     1.70%
          Total dollars...............................  $1,229.1    $  885.3    $624.2
</TABLE>
 
     Consumer contractual delinquency levels and net credit losses increased
from 1995 through 1997, reflecting higher consumer debt levels and increased
bankruptcies. In addition, commercial delinquency levels and net credit losses
increased in 1996 compared to 1995, reflecting generally unfavorable trends in
economic conditions. Commercial delinquency levels and net credit losses
declined slightly in 1997.
 
  INSURANCE BENEFITS PAID OR PROVIDED
 
     Insurance benefits paid or provided were $145.7 million in 1997, $148.2
million in 1996 and $142.5 million in 1995. 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 1997 and 1996 as compared to 1995, primarily as a result of more
insurance in force.
 
  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
                                           ------------------------------------------------------------
                                                  1997                 1996                 1995
                                           ------------------   ------------------   ------------------
                                                    EFFECTIVE            EFFECTIVE            EFFECTIVE
                                                       TAX                  TAX                  TAX
                                           AMOUNT     RATE      AMOUNT     RATE      AMOUNT     RATE
                                           ------   ---------   ------   ---------   ------   ---------
<S>                                        <C>      <C>         <C>      <C>         <C>      <C>
U.S. Statutory Rate......................  $574.0     35.0%     $491.6     35.0%     $419.4    35.0%
  State income taxes.....................    22.6      1.4        20.5      1.5        14.0      1.2
  Non-deductible goodwill................     6.1      0.4         7.1      0.5        10.9      0.9
  Foreign rates in excess of U.S. rate
     and other...........................     5.6      0.3        28.4      2.0        30.7      2.5
                                           ------     ----      ------     ----      ------     ----
Provision for Income Taxes...............  $608.3     37.1%     $547.6     39.0%     $475.0    39.6%
                                           ======     ====      ======     ====      ======     ====
</TABLE>
 
     The effective tax rate decreased in 1997 principally due to an increase in
the foreign tax credits available to the Company under its tax sharing agreement
with Ford. The available foreign tax credits primarily related to estimated
taxes paid or accrued by the Company on its Japan-based earnings.
 
     The Company provides income taxes on its foreign earnings at the statutory
tax rate in effect for the applicable country where such earnings arise. The
principal foreign earnings of the Company arise from its operation in Japan,
where the statutory tax rate is significantly higher than the U.S. statutory tax
rate. While
 
                                       22
<PAGE>   24
 
earnings of the Company's foreign subsidiaries increased as a percentage of
total Company earnings in 1997 and 1996, the Company utilized certain foreign
tax credits which caused the amount of tax and tax rate attributable to such
foreign operations to decrease from 1995.
 
FINANCIAL CONDITION
 
  GROWTH IN NET FINANCE RECEIVABLES
 
     The Company experienced growth in its consumer and commercial finance
receivable portfolios in 1997 and 1996 as follows (dollars in millions):
 
                       GROWTH IN NET FINANCE RECEIVABLES
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED OR AT DECEMBER 31
                                        ---------------------------------------------------------
                                                   1997                          1996
                                        ---------------------------   ---------------------------
                                                     INCREASE FROM                 INCREASE FROM
                                                      PRIOR YEAR                    PRIOR YEAR
                                                    ---------------               ---------------
                                         BALANCE     AMOUNT     %      BALANCE     AMOUNT     %
                                        ---------   --------   ----   ---------   --------   ----
<S>                                     <C>         <C>        <C>    <C>         <C>        <C>
Owned Receivables
  Consumer Finance....................  $37,408.7   $6,005.7   19.1%  $31,403.0   $3,827.7   13.9%
  Commercial Finance..................   17,806.9    2,697.0   17.8    15,109.9    2,982.7   24.6
                                        ---------   --------          ---------   --------
          Total.......................  $55,215.6   $8,702.7   18.7%  $46,512.9   $6,810.4   17.2%
                                        =========   ========          =========   ========
Managed Receivables...................  $58,406.5   $9,783.7   20.1%  $48,622.8   $8,920.3   22.5%
                                        =========   ========          =========   ========
</TABLE>
 
     Approximately 63% and 50% of the growth in managed net finance receivables
during 1997 and 1996, respectively, resulted from internal sources, principally
through additional expansion of the Company's branch network system, increased
penetration in its existing markets, entry into new markets and offering of new
products. The remaining growth portion, in both years, was from the acquisition
of finance receivables and companies.
 
     At December 31, 1997 and 1996, the Company managed approximately $2.9
billion and $2.1 billion, respectively, of securitized assets all of which had
been acquired or originated by the Company. While such securitized loans were
not on the Company's balance sheet, management believes the amount securitized
(shown as part of managed receivables in the above table) is meaningful to
understand the Company's earnings and growth performance. Securitized
receivables were included in the computation of ANR through the date that such
receivables were sold.
 
  DEBT
 
     Total outstanding debt was $49.2 billion and $41.1 billion at December 31,
1997 and 1996, respectively. Such amounts of debt reflect net increases of $8.1
billion (19.7%) in 1997 and $6.0 billion (17.0%) in 1996. In both years, the
increase was primarily a result of the growth in net finance receivables. At
December 31, 1997 and 1996, short-term debt, including the current portion of
long-term debt, as a percent of total debt was 52% and 51%, respectively. The
current portion of long-term debt at December 31, 1997 and 1996 was $4.7 billion
and $3.7 billion, respectively.
 
  STOCKHOLDERS' EQUITY
 
     Stockholders' equity increased to $6.3 billion in 1997 from $5.4 billion in
1996. In each year, the increase was principally as a result of the
aforementioned increase in net earnings. The increases in 1997 and 1996 due to
net earnings were partially offset by unrealized foreign currency translation
losses of $54.6 million and $107.8 million, respectively, which principally
resulted from a decline in the value of the yen compared to the United States
dollar. The weakened yen reduced the United States dollar translated value of
the Company's net investment in Japan. The effects of the weakened yen were
partially offset through the Company's use of
 
                                       23
<PAGE>   25
 
derivative financial instruments as described in NOTE 16 to the consolidated
financial statements. Stockholders' equity was also adjusted in 1997 and 1996 by
unrealized gains/(losses)of $5.0 million and ($12.8) million, respectively,
related to its investments in marketable debt and asset backed securities.
During 1997 and 1996, the Company paid cash dividends in the amount of $138.6
million and $1,998.0 million, respectively, ($69.3 million of the 1996 dividends
on common stock were paid after the Offering). Also, as referenced in NOTE 4 to
the consolidated financial statements, in 1996 the Company recorded an
adjustment to equity in the amount of $31.4 million related to its acquisition
of certain assets from a Ford affiliate. The adjustment 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, interest rate
risk and foreign exchange risk. The Company has a formal process for managing
its liquidity in the United States and internationally to ensure that funds are
available at all times to meet the Company's commitments.
 
     The Company's principal sources of cash are proceeds from the issuance of
short- and long-term debt and cash provided from the Company's operations.
Management believes that the Company 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 it is able
to meet its obligations as they mature. The Company's United States operations
are principally funded through domestic and international borrowings made by
Associates and, to a lesser extent, borrowings made directly by the Company. The
Company's foreign subsidiaries are principally financed through private and
public debt borrowings in the transactional currency and, to a lesser extent,
fully hedged intercompany borrowings.
 
     At December 31, 1997, the Company had short-term debt outstanding of $21.0
billion. Short-term debt principally consists of commercial paper issued by
Associates 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 1997 and 1996 was 5.48% and 5.53%,
respectively. The change in average rates was principally due to the overall
decline in market rates.
 
     At December 31, 1997, the Company had long-term debt outstanding of $28.2
billion. Long-term debt principally consists of senior unsecured long-term debt
issued publicly and privately by Associates in the United States and abroad, and
to a lesser extent, private and public borrowings made by the Company's foreign
subsidiaries. During the years ended 1997 and 1996, the Company raised debt
aggregating $8.2 billion and $6.0 billion, respectively, through public and
private offerings at weighted average effective interest rates and weighted
average terms of 6.02% and 6.5 years and 6.29% and 4.8 years, respectively. The
change in effective average interest rates was primarily caused by overall
changes in market rates during such years and a slight shift in debt mix to
include more floating rate debt instruments. A portion of the long-term debt
raised was used to retire outstanding indebtedness. For the years ended 1997 and
1996, the Company replaced maturing long-term debt in the amount of $3.8 billion
and $3.5 billion, respectively.
 
     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, 1997, these short-term bank
lines, revolving credit facilities and receivable purchase facilities totaled
$15.2 billion. This aggregate facility was allocated as short-term debt for
purposes of providing 75% backup coverage for Associates of $13.7 billion and
First Capital of $1.2 billion. First Capital's foreign subsidiaries were
attributed the remaining $300 million of which $140 million was available.
 
                                       24
<PAGE>   26
 
     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 capital,
including preferred stock and, after the proposed spin-off of the Company by
Ford, common stock.
 
     The Company has entered into various support agreements on behalf of its
foreign subsidiaries. Under these support agreements, the Company has either
guaranteed specific issues of such subsidiaries' debt denominated in foreign
currency or agreed to supervise operations in a responsible manner and to
provide additional support on a lender's reasonable request. See NOTES 9, 10,
and 16 to the Company's consolidated financial statements for a further
description of these borrowings and currency hedging activities.
 
MARKET RISK
 
     The risk management discussion and the estimated amounts generated from the
analysis that follows are forward-looking statements of market risk assuming
certain adverse market conditions occur. Actual results in the future may differ
materially from these projected results due to changes in the Company's product
and debt mix and developments in the global financial markets. The analytical
methods used by the Company to assess and mitigate these risks should not be
considered projections of future events or operating performance.
 
     The Company is exposed to a variety of market risks, including the effects
of movements in interest rates and foreign currency. Interest rate and foreign
exchange rate exposures are monitored and managed by the Company as an integral
part of its overall risk management program. The principal goal of the Company's
risk management program is to reduce the potential impact of interest rate and
foreign exchange exposures on the Company's financial position and operating
performance. The Company utilizes derivative instruments, including foreign
currency forward exchange and currency swaps as well as interest rate swap and
treasury lock agreements, as part of its overall risk management program. See
NOTES 2 and 16 of the consolidated financial statements for a further discussion
of the Company's use of derivative financial instruments. The Company also
believes that its overall balance sheet structure has repricing and cash flow
characteristics that mitigate the impact of interest rate movements.
 
  INTEREST RATE RISK
 
     Interest rate risk is measured and controlled through the use of 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
negative three- and six-month gap, and a positive one-year gap. The Company
targets a one year gap in a range of 5% to 15% of total earning assets. At
December 31, 1997 the one year gap was a positive 8%. The Company's positive one
year gap target range indicates that a greater percentage of assets than
liabilities reprice within a one-year time frame.
 
     In addition to the gap analysis, the Company uses a simulation model to
evaluate the impact on earnings under a variety of scenarios. These scenarios
may include a change in the absolute level of interest rates, the shape of the
yield curve, prepayments, interest rate spread relationships and changes in the
volumes and rates of various asset and liability categories. For an immediate 1%
increase in rates, projected annual after-tax earnings would decline less than
$1 million. An immediate 1% rise in interest rates is a hypothetical rate
scenario, used to calibrate risk, and does not currently represent management's
view of future market developments.
 
     For purposes of the new United States Securities and Exchange Commission
disclosure requirements, the Company has also performed an enterprise-wide value
at risk ("VAR") analysis of the Company's financial assets and liabilities and
their exposure to changes in interest rates. The VAR was calculated using an
historical simulation risk model to calculate changes in earnings due to changes
in interest rates on all significant on- and off-balance sheet exposures. The
simulation generates monthly interest rate scenarios over a forecast horizon of
12 months. The VAR analysis calculates the potential after-tax earnings at risk
associated from changes in interest rates, within a 95% confidence level. The
model assumes interest rates are
                                       25
<PAGE>   27
 
normally distributed and draws volatilities from various market sources. At
December 31, 1997, interest rate movements would affect annual after-tax
earnings by less than $11 million, as calculated under the VAR methodology.
 
  FOREIGN CURRENCY RISK
 
     The Company is exposed to foreign currency risk from changes in the value
of underlying assets and liabilities of its non-United States denominated
foreign investments, principally its Japan based operations. The Company has
employed a variety of risk management tools such as borrowing and lending in the
local currencies as well as using derivative instruments to hedge its investment
in foreign subsidiaries, principally yen based. The Company has also performed a
VAR analysis on the Company's exposure to changes in foreign currency exchange
rates. The VAR is calculated using an historical simulation model to calculate
changes in earnings from foreign currency risk on all significant on- and
off-balance sheet exposures. The simulation generates interest rate scenarios
over a 12-month horizon and calculates the potential after-tax earnings at risk
associated with foreign currency fluctuations, with a 95% confidence level (as
required under applicable United States Securities and Exchange Commission
rules). The model assumes currency prices are normally distributed and draws
volatility and cross currency correlation data from JP Morgan Risk Metrics(TM).
At December 31, 1997, currency volatility would affect annual after-tax earnings
by less than $4 million, as calculated under the VAR methodology.
 
     The Company utilizes a wide variety of risk management methods, including
those discussed above, and believes that no single risk model provides a
reliable method of monitoring and controlling risk. While these models are
relatively sophisticated, the quantitative risk information generated is limited
by the model parameters. Therefore, such models do not substitute for the
experience or judgment of Company management to adjust positions and revise
strategies as deemed necessary.
 
YEAR 2000 COMPLIANCE
 
     The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process date fields containing a 2
digit year is commonly referred to as the Year 2000 Compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information.
 
     The Company has identified all significant applications that will require
modification to ensure Year 2000 Compliance. Internal and external resources are
being used to make the required modifications and test Year 2000 Compliance. The
modification process of all significant applications is substantially complete.
The Company plans on completing the testing process of all significant
applications by December 31, 1998.
 
     In addition, the Company has communicated with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
 
     The total cost to the Company of these Year 2000 Compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. These costs and the date on which the
Company plans to complete the Year 2000 modification and testing processes are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ from those plans.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income", was issued by the Financial Accounting
Standards Board in June 1997. This Statement requires that
 
                                       26
<PAGE>   28
 
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
will adopt SFAS 130 beginning January 1, 1998.
 
     Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information", was
issued by the Financial Accounting Standards Board in June 1997. This Statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company is in the process of
finalizing its determination of its reportable segments under SFAS 131 and plans
to adopt SFAS 131 in the year ending December 31, 1998.
 
FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
 
     The Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 (the "1995 Act"). The 1995
Act provides a "safe harbor" for forward-looking statements to encourage
companies to provide information without fear of litigation so long as those
statements are identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected. Although the Company does not
anticipate that it will make forward-looking statements as a general policy, the
Company will make forward-looking statements as required by law or regulation,
and from time to time may make such statements with respect to management's
estimation of the future operating results and business of the Company.
 
     The following is a summary of the factors the Company believes important
and that could cause actual results to differ from the Company's expectations.
The Company is publishing these factors pursuant to the 1995 Act. Such factors
should not be construed as exhaustive or as an admission regarding the adequacy
of disclosure made by the Company prior to the effective date of the 1995 Act.
Readers should understand that many factors govern whether any forward-looking
statement will be or can be achieved. Any one of those factors could cause
actual results to differ materially from those projected. No assurance is or can
be given that any important factor set forth below will be realized in a manner
so as to allow the Company to achieve the desired or projected results. The
words "believe," "expect," "anticipate," "intend," "aim," "will" and similar
words identify forward-looking statements. The Company cautions readers that the
following important factors, among others, could affect the Company's actual
results and could cause the Company's actual consolidated results to differ
materially from those expressed in any forward-looking statements made by or on
behalf of the Company.
 
     - Rapid changes in interest rates, limiting the Company's ability to
       generate new finance receivables and decreasing the Company's net
       interest margins.
 
     - Increase in non-performing loans and credit losses.
 
     - Rapid changes in receivable prepayment rates.
 
     - The inability of the Company to access capital and financing on terms
       acceptable to the Company.
 
     - Changes in any domestic or foreign governmental regulation affecting the
       Company's ability to declare and pay dividends, conduct business, the
       manner in which it conducts business or the level of the interest rates
       charged by the Company.
 
     - Heightened competition, including the intensification of price
       competition, the entry of new competitors and the introduction of new
       products by new and existing competitors.
 
     - Adverse publicity and news coverage about the Company or about any of its
       proposed products or services.
 
     - Adverse results in litigation matters involving the Company.
 
                                       27
<PAGE>   29
 
     - General economic and inflationary conditions affecting consumer debt
       levels and credit losses and overall increases in the cost of doing
       business.
 
     - Changes in social and economic conditions such as increasing consumer
       bankruptcies, inflation and monetary fluctuations, foreign currency
       exchange rate fluctuations and changes in tax rates or tax laws.
 
     - Changes in accounting policies and practices, and the application of such
       policies and practices to the Company.
 
     - Loss or retirement of key executives, employees or technical personnel.
 
     - The effect of changes within the Company's organization or in
       compensation and benefit plans and the ability of the Company to attract
       and retain experienced and qualified management personnel.
 
     - Natural events and acts of God such as earthquakes, fires or floods.
 
     - Adverse changes, or any announcement relating to a possible or
       contemplated adverse change, in the ratings obtained from any of the
       independent rating agencies relating to the Company's debt securities or
       other financial instruments.
 
                                       28
<PAGE>   30
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
Board of Directors
Associates First Capital Corporation
 
     We have audited the accompanying consolidated balance sheets of Associates
First Capital Corporation (a majority indirect-owned subsidiary of Ford Motor
Company) as of December 31, 1997 and 1996, 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, 1997. Those 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
First Capital Corporation as of December 31, 1997 and 1996 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
 
                                            COOPERS & LYBRAND L.L.P.
 
Dallas, Texas
January 20, 1998
 
                                       29
<PAGE>   31
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
                       CONSOLIDATED STATEMENT OF EARNINGS
                    (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                              ------------------------------
                                                                1997       1996       1995
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
REVENUE
  Finance charges...........................................  $7,560.2   $6,481.0   $5,560.8
  Insurance premiums........................................     420.7      402.1      370.6
  Investment and other income...............................     297.7      215.1      175.8
                                                              --------   --------   --------
                                                               8,278.6    7,098.2    6,107.2
EXPENSES
  Interest expense..........................................   2,775.2    2,456.0    2,177.9
  Operating expenses........................................   2,339.6    2,002.9    1,754.7
  Provision for losses on finance receivables -- NOTE 5.....   1,378.1    1,086.5      834.0
  Insurance benefits paid or provided.......................     145.7      148.2      142.5
                                                              --------   --------   --------
                                                               6,638.6    5,693.6    4,909.1
                                                              --------   --------   --------
EARNINGS BEFORE PROVISION FOR INCOME TAXES..................   1,640.0    1,404.6    1,198.1
PROVISION FOR INCOME TAXES -- NOTE 11.......................     608.3      547.6      475.0
                                                              --------   --------   --------
NET EARNINGS................................................  $1,031.7   $  857.0   $  723.1
                                                              ========   ========   ========
NET EARNINGS PER SHARE -- NOTE 3
  Basic.....................................................  $   2.98   $   2.47   $   2.09
                                                              ========   ========   ========
  Diluted...................................................  $   2.97   $   2.47   $   2.09
                                                              ========   ========   ========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       30
<PAGE>   32
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
                           CONSOLIDATED BALANCE SHEET
                             (DOLLARS IN MILLIONS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                              ----------------------
                                                                1997         1996
                                                              ---------    ---------
<S>                                                           <C>          <C>
CASH AND CASH EQUIVALENTS...................................  $   433.2    $   446.9
INVESTMENTS IN DEBT AND EQUITY SECURITIES -- NOTE 6.........    1,242.4      1,097.5
FINANCE RECEIVABLES, net of unearned finance income,
  allowance for credit losses and insurance policy and
  claims reserves -- NOTE 4.................................   52,482.1     44,236.9
OTHER ASSETS -- NOTE 7......................................    3,075.0      2,487.1
                                                              ---------    ---------
          Total assets......................................  $57,232.7    $48,268.4
                                                              =========    =========
 
                        LIABILITIES AND STOCKHOLDERS' EQUITY
 
NOTES PAYABLE, unsecured short-term -- NOTE 9
  Commercial Paper..........................................  $19,483.5    $15,907.9
  Bank Loans................................................    1,487.1      1,167.3
ACCOUNTS PAYABLE AND ACCRUALS...............................    1,765.5      1,726.2
LONG-TERM DEBT -- NOTE 10
  Senior Notes..............................................   27,802.6     23,604.0
  Subordinated and Capital Notes............................      425.4        425.5
                                                              ---------    ---------
                                                               28,228.0     24,029.5
STOCKHOLDERS' EQUITY
  Class A Common Stock, $0.01 par value, 1,150,000,000
     shares authorized, 90,773,299 shares issued............        0.9          0.9
  Class B Common Stock, $0.01 par value, 400,000,000 shares
     authorized, 255,881,180 shares issued and
     outstanding............................................        2.6          2.6
  Paid-in Capital...........................................    4,004.6      4,007.5
  Retained Earnings.........................................    2,097.4      1,204.3
  Foreign Currency Translation Adjustments..................      168.2        222.8
  Unrealized Gain (Loss) on Available-for-Sale Securities
     -- NOTES 2 and 6.......................................        4.4         (0.6)
  Less 156,526 shares of Class A Common Stock held in
     Treasury in 1997, at cost..............................       (9.5)
                                                              ---------    ---------
          Total stockholders' equity........................    6,268.6      5,437.5
                                                              ---------    ---------
          Total liabilities and stockholders' equity........  $57,232.7    $48,268.4
                                                              =========    =========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       31
<PAGE>   33
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                                                UNREALIZED
                                                                                   GAIN
                                                                   FOREIGN      (LOSS) ON
                                                                   CURRENCY     AVAILABLE-                  TOTAL
                                 COMMON   PAID-IN    RETAINED    TRANSLATION     FOR-SALE    TREASURY   STOCKHOLDERS'
                                 STOCK    CAPITAL    EARNINGS    ADJUSTMENTS    SECURITIES    STOCK        EQUITY
                                 ------   --------   ---------   ------------   ----------   --------   -------------
<S>                              <C>      <C>        <C>         <C>            <C>          <C>        <C>
DECEMBER 31, 1994..............  $47.0    $2,094.9   $ 1,940.2     $ 372.3        $(17.6)     $           $ 4,436.8
  Net Earnings.................                          723.1                                                723.1
  Contributions from Ford......              200.0                                                            200.0
  Capital Distribution to
    Ford.......................             (228.9)                                                          (228.9)
  Cash Dividends...............                         (318.0)                                              (318.0)
  Current Period Adjustment....                                      (41.7)         29.8                      (11.9)
                                 ------   --------   ---------     -------        ------      -----       ---------
DECEMBER 31, 1995..............   47.0     2,066.0     2,345.3       330.6          12.2                    4,801.1
  Net Earnings.................                          857.0                                                857.0
  Contributions from Ford......               47.3                                                             47.3
  Sale of Class A Common
    Stock......................  (43.5)    1,893.5                                                          1,850.0
  Cash Dividends to Ford.......                       (1,928.7)                                            (1,928.7)
  Cash Dividends on Common
    Stock......................                          (69.3)                                               (69.3)
  Current Period Adjustment....                0.7                  (107.8)        (12.8)                    (119.9)
                                 ------   --------   ---------     -------        ------      -----       ---------
DECEMBER 31, 1996..............    3.5     4,007.5     1,204.3       222.8          (0.6)                   5,437.5
  Net Earnings.................                        1,031.7                                              1,031.7
  Cash Dividends on Common
    Stock......................                         (138.6)                                              (138.6)
  Current Period Adjustment....                                      (54.6)          5.0                      (49.6)
  Treasury Stock and other.....               (2.9)                                            (9.5)          (12.4)
                                 ------   --------   ---------     -------        ------      -----       ---------
DECEMBER 31, 1997..............  $ 3.5    $4,004.6   $ 2,097.4     $ 168.2        $  4.4      $(9.5)      $ 6,268.6
                                 ======   ========   =========     =======        ======      =====       =========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       32
<PAGE>   34
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                           ------------------------------------
                                                              1997         1996         1995
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Cash Flows from Operating Activities
  Net earnings...........................................  $  1,031.7   $    857.0   $    723.1
  Adjustments to reconcile net earnings to net cash
     provided from operating activities:
       Provision for losses on finance receivables.......     1,378.1      1,086.5        834.0
       Depreciation and amortization.....................       322.6        224.9        193.8
       Unrealized (gain) loss on trading securities......        (3.1)         1.7         (3.6)
       Increase in insurance policy and claims
          reserves.......................................        70.7         87.5         59.7
       Sales and maturities of trading securities........        56.3          0.6         38.7
       Increase in accounts payable and accruals.........        21.6        288.0        166.5
       Deferred income taxes.............................       (31.7)         1.2        101.1
       Purchases of trading securities...................      (174.0)                     (5.8)
                                                           ----------   ----------   ----------
          Net cash provided from operating activities....     2,672.2      2,547.4      2,107.5
                                                           ----------   ----------   ----------
Cash Flows from Investing Activities
  Finance receivables originated or purchased............   (52,136.8)   (43,801.4)   (37,051.1)
  Finance receivables liquidated.........................    40,715.6     35,008.3     30,689.1
  Finance receivables sold...............................     1,345.9      1,530.7
  Acquisitions of other finance businesses, net..........       (39.7)      (165.6)      (143.9)
  (Increase) decrease in real estate loans held for
     sale................................................       (21.8)        13.5         (3.7)
  Purchases of available-for-sale securities.............      (319.3)      (600.5)      (893.9)
  Sales and maturities of available-for-sale
     securities..........................................       301.9        360.7        635.9
  Increase in other assets...............................      (772.5)      (423.2)      (176.5)
                                                           ----------   ----------   ----------
          Net cash used for investing activities.........   (10,926.7)    (8,077.5)    (6,944.1)
                                                           ----------   ----------   ----------
Cash Flows from Financing Activities
  Issuance of long-term debt.............................     8,183.5      5,980.3      6,327.8
  Retirement of long-term debt...........................    (3,773.3)    (3,454.1)    (2,491.8)
  Increase in notes payable..............................     3,903.1      3,127.1      1,315.4
  Cash dividends.........................................      (138.6)    (1,998.0)      (318.0)
  Treasury stock and other...............................       (12.4)
  Sale of Class A Common Stock...........................                  1,850.0
  Capital contributions..................................                     47.3        200.0
  Capital distribution to Ford...........................                                (228.9)
                                                           ----------   ----------   ----------
          Net cash provided from financing activities....     8,162.3      5,552.6      4,804.5
Effect of foreign currency translation adjustment on
  cash...................................................        78.5       (107.8)       (41.7)
                                                           ----------   ----------   ----------
Decrease in cash and cash equivalents....................       (13.7)       (85.3)       (73.8)
Cash and cash equivalents at beginning of period.........       446.9        532.2        606.0
                                                           ----------   ----------   ----------
Cash and cash equivalents at end of period...............  $    433.2   $    446.9   $    532.2
                                                           ==========   ==========   ==========
Cash paid for:
  Interest...............................................  $  2,741.5   $  2,433.1   $  2,175.8
                                                           ==========   ==========   ==========
  Income taxes...........................................  $    712.2   $    387.6   $    399.7
                                                           ==========   ==========   ==========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       33
<PAGE>   35
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 -- THE COMPANY
 
     Associates First Capital Corporation ("First Capital" or the "Company"), a
Delaware corporation, is a majority-owned subsidiary of Ford FSG, Inc. and a
majority indirect-owned subsidiary of Ford Motor Company ("Ford"). Associates
Corporation of North America ("Associates") is the principal U.S.-based
operating subsidiary of First Capital. AIC Corporation ("AIC"), with operations
in Japan, is the principal foreign-based operating subsidiary of First Capital.
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 and internationally. As described
in NOTE 18, on October 8, 1997, Ford announced plans to spin off its 80.7%
interest in the Company in the form of a distribution of its First Capital
shares to Ford common and class B stockholders.
 
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
 
     The following is a summary of significant accounting policies:
 
  Basis of Presentation and Consolidation
 
     On May 8, 1996, the Company made an initial public offering (the
"Offering") of 67 million shares of its Class A Common Stock representing a
19.3% interest in the Company. Immediately following the Offering, Ford
continued to own a controlling interest in the Company's common stock.
 
     Prior to the Offering, Ford contributed to First Capital, for stock,
certain foreign finance operations that were managed by First Capital although
owned by other Ford subsidiaries (the "Associates International Group"). The
entities comprising Associates International Group had operations in Japan,
Canada, the United Kingdom, Puerto Rico and Mexico. Subsequent to the
consummation of the contribution, these supplemental combined financial
statements became the historical consolidated financial statements of First
Capital. The contribution was accounted for in a manner similar to the pooling
of interests method of accounting in accordance with generally accepted
accounting principles.
 
     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
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, 1997 and 1996, net finance receivables on
which revenue was not accrued approximated $1.2 billion and $1.0 billion,
respectively.
 
                                       34
<PAGE>   36
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Insurance premiums are recorded as unearned premiums when collected or when
written and are subsequently amortized into income based on the nature and term
of the underlying insurance contracts. The methods of amortization used are pro
rata, sum-of-the-years-digits and a combination thereof.
 
     Gains or losses on sales of securities classified as available for sale are
included in investment and other income when realized. Unrealized gains or
losses on securities classified as available for sale are reported as a
component of stockholders' equity, net of tax. Realized and unrealized gains or
losses on trading securities (principally preferred stock) are included in
investment and other income as incurred. The cost basis of securities sold is
determined by the specific identification method.
 
  Receivables Sold with Servicing Retained
 
     As required, the Company adopted Statement of Financial Accounting
Standards No. 125 ("SFAS 125"), -- Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, on January 1, 1997.
Periodically, the Company securitizes and sells receivables, principally those
secured by manufactured housing units and recreational vehicles. These
transactions are recorded in accordance with SFAS 125. Under SFAS 125, a sale is
recognized when control over the securitized receivable is relinquished. The
difference between the net proceeds received and the carrying amount of the
receivable sold is recognized as a gain or loss on sale. To date, no significant
securitization related gains or losses have been recorded by the Company.
 
     SFAS 125 requires the amounts carried previously as excess servicing assets
be reclassified between a servicing asset or liability and an interest-only
strip with the difference recognized as unrealized loss on securities, net of
tax. On January 1, 1997, in connection with the above reclassification, the
Company recharacterized the excess service asset as an interest-only strip. No
servicing asset or liability was recorded related to the reclassification.
 
     The Company retains a subordinated interest in the finance receivables sold
in the form of a residual or interest-only strip. The residual or interest-only
strip represents the present value of future excess cash flows resulting from
the difference between the finance charge income received from the obligors on
the finance receivables and the interest paid to the investors in the
asset-backed securities, net of credit losses, servicing fees and other
expenses. The allocated basis of the interests retained, including the residual
or interest-only strip is included in other assets. Since such assets can be
contractually prepaid or otherwise settled in such a way that the holder would
not recover all of its recorded investment, the asset is classified as available
for sale and is measured at fair value. Unrealized holding gains are reported
net of income tax effects as a separate component of stockholders' equity until
realized. If a decline in fair value were deemed other than temporary, the
assets would be adjusted to their net realizable value through a charge to
operations.
 
     Receivables which are expected to be securitized and sold are included in
other assets as receivables held for sale and recorded at the lower of cost or
market. The aggregate method is used in determining the lower of cost or market
of receivables held for sale.
 
  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 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
generally charged to the provision for losses on finance receivables.
 
                                       35
<PAGE>   37
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     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 contractually delinquent. All
other finance receivables are charged to the allowance for losses when any of
the following conditions occur: (i) the related security has been converted or
destroyed; (ii) the related security has been repossessed and sold or held for
sale for one year; or (iii) the related security has not been repossessed and
the receivable has become one year contractually delinquent. A contractually
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, 1997 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.
 
  Foreign Currency Translation
 
     Assets and liabilities of foreign subsidiaries are translated at the rate
of exchange in effect on the balance sheet date; income and expenses are
translated at the average rate of exchange prevailing during the year. The
related balance sheet translation adjustments are reflected in the stockholders'
equity section of the consolidated balance sheet while the impact of foreign
currency changes on income and expense items are included in earnings. Such
foreign currency changes resulted in losses of approximately $2.1 million, $0.8
million and $0.6 million during the years ended December 31, 1997, 1996 and
1995, respectively.
 
  Income Taxes
 
     First Capital 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 as well as
taxes related to the foreign subsidiaries. This agreement is discussed further
in NOTE 11.
 
                                       36
<PAGE>   38
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  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.
 
  Disclosures about Fair Value of Financial Instruments
 
     The consolidated financial statements present the information required by
Statement of Financial Accounting Standards No. 107 ("SFAS 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 uses derivative financial instruments for the purpose of
hedging specific exposures as part of its risk management program and holds all
derivatives for purposes other than trading. Deferral (hedge) accounting is
applied only if the derivative reduces the risk of the underlying hedged item
and is designated at inception as a hedge with respect to the underlying hedged
item. Additionally, the derivative must result in cash flows that are expected
to be inversely correlated to those of the underlying hedged item. Such
instruments to date have been limited to foreign currency forward exchange,
currency swap, interest rate swap and treasury lock agreements. See NOTE 16 to
the consolidated financial statements for additional information related to
derivative financial instruments.
 
     Forward currency exchange agreements are used to hedge the Company's net
investment in AIC. Accordingly, unrealized translation gains and losses on these
agreements are recorded, net of tax, as a separate component of stockholders'
equity. The economic discount on such agreements is recognized over the
agreement life on a straight-line basis as an adjustment to interest expense.
 
     Foreign currency swap and interest rate swap agreements are used to hedge
specific debt obligations and financing transactions. Accordingly, the
differential paid or received by the Company on these agreements is recognized
as an adjustment to interest expense over the term of the underlying
transaction.
 
     Treasury lock agreements are used to hedge specific anticipated asset
securitization transactions or debt issuances of the Company. Accordingly, the
differential paid or received by the Company on maturity of a treasury lock
agreement is recognized as an adjustment to interest expense over the term of
the underlying financing transaction.
 
  Recent Accounting Pronouncements
 
     Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income", was issued by the Financial Accounting
Standards Board in June 1997. This Statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company will adopt SFAS
130 beginning January 1, 1998.
 
     Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information", was
issued by the Financial Accounting Standards Board in June 1997. This Statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim
 
                                       37
<PAGE>   39
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
financial reports issued to stockholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company is in the process of finalizing its determination of its
reportable segments under SFAS 131 and plans to adopt SFAS 131 in the year
ending December 31, 1998.
 
NOTE 3 -- EARNINGS PER SHARE
 
     Earnings per share on a basic and diluted basis as required by Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share" is
calculated as follows (in millions, except per share amounts):
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31
                                                          ----------------------------
                                                            1997       1996      1995
                                                          --------    ------    ------
<S>                                                       <C>         <C>       <C>
Basic net earnings per share
  Net earnings..........................................  $1,031.7    $857.0    $723.1
  Weighted average shares outstanding...................     346.5     346.7     346.7
                                                          --------    ------    ------
                                                          $   2.98    $ 2.47    $ 2.09
                                                          ========    ======    ======
Diluted net earnings per share
  Net earnings..........................................  $1,031.7    $857.0    $723.1
  Weighted average shares outstanding plus assumed
     conversions........................................     347.9     347.5     346.7
                                                          --------    ------    ------
                                                          $   2.97    $ 2.47    $ 2.09
                                                          ========    ======    ======
Calculation of weighted average shares outstanding plus
  assumed conversions
  Weighted average shares outstanding...................     346.5     346.7     346.7
  Effect of dilutive securities options -- NOTE 13......       1.4       0.8
                                                          --------    ------    ------
                                                             347.9     347.5     346.7
                                                          ========    ======    ======
</TABLE>
 
                                       38
<PAGE>   40
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 4 -- FINANCE RECEIVABLES
 
  Composition of Finance Receivables
 
     At December 31, 1997 and 1996, net finance receivables consisted of the
following (in millions):
 
<TABLE>
<CAPTION>
                                                                1997           1996
                                                              ---------      ---------
<S>                                                           <C>            <C>
Consumer Finance
  Home equity lending.......................................  $18,796.0      $16,691.4
  Personal lending and retail sales finance.................    8,731.6        7,425.1
  Credit card...............................................    8,211.7        6,023.8
  Manufactured housing(1)...................................    1,669.4        1,262.7
                                                              ---------      ---------
                                                               37,408.7       31,403.0
                                                              ---------      ---------
Commercial Finance
  Truck and truck trailer...................................    9,688.9        8,598.3
  Equipment.................................................    5,300.5        4,571.8
  Auto fleet leasing........................................    1,551.1        1,090.8
  Recreational vehicles(1)..................................      444.0          490.5
  Warehouse lending and other(2)............................      822.4          358.5
                                                              ---------      ---------
                                                               17,806.9       15,109.9
                                                              ---------      ---------
          Finance receivables, net of unearned finance
            income ("net finance receivables")..............   55,215.6       46,512.9
Allowance for losses on finance receivables.................   (1,949.9)      (1,563.1)
Insurance policy and claims reserves........................     (783.6)        (712.9)
                                                              ---------      ---------
          Finance receivables, net of unearned finance
            income, allowance for losses and insurance
            policy and claims reserves......................  $52,482.1      $44,236.9
                                                              =========      =========
</TABLE>
 
---------------
 
(1) During 1997 and 1996, the Company securitized and sold approximately $800
    million and $1.3 billion, respectively of manufactured housing retail
    finance receivables and approximately $533 million and $200 million,
    respectively of recreational vehicle retail finance receivables.
 
(2) Includes warehouse lending, Small Business Administration lending and
    municipal finance (in 1996, municipal finance receivables were included in
    truck and truck trailer and equipment net finance receivables).
 
     From time to time, subsidiaries of the Company have sold manufactured
housing and recreational vehicles receivables through securitizations and have
retained collection and administrative responsibilities as servicer for the
trust holding the receivables. Receivables sold with servicing retained were
$2.9 billion and $2.1 billion at December 31, 1997 and 1996, respectively. No
significant gains or losses were recorded on these securitization transactions.
At December 31, 1997 and 1996, total managed receivables were $58.4 billion and
$48.6 billion, respectively.
 
                                       39
<PAGE>   41
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     At December 31, 1997, contractual maturities of net finance receivables
were as follows (in millions):
 
<TABLE>
<CAPTION>
                                                    CONSUMER     COMMERCIAL
                     YEAR DUE                        FINANCE      FINANCE        TOTAL
                     --------                       ---------    ----------    ---------
<S>                                                 <C>          <C>           <C>
 1998.............................................  $ 6,132.2     $ 6,905.6    $13,037.8
 1999.............................................    4,205.9       4,479.1      8,685.0
 2000.............................................    3,731.2       2,862.1      6,593.3
 2001.............................................    3,481.9       1,747.6      5,229.5
 2002 and thereafter..............................   19,857.5       1,812.5     21,670.0
                                                    ---------     ---------    ---------
                                                    $37,408.7     $17,806.9    $55,215.6
                                                    =========     =========    =========
</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
                                                              --------------------
                                                                1997        1996
                                                              --------    --------
<S>                                                           <C>         <C>
Minimum lease rentals.......................................  $5,953.7    $4,438.0
Unearned finance income.....................................    (826.9)     (638.0)
                                                              --------    --------
  Net investment in direct financing leases.................  $5,126.8    $3,800.0
                                                              ========    ========
</TABLE>
 
     Future net minimum lease rentals on direct financing leases for each of the
years succeeding December 31, 1997 are as follows (in millions):
1998 -- $1,608.1; 1999 -- $1,351.9; 2000 -- $1,066.0; 2001 -- $656.8;
2002 -- $307.7 and 2003 and thereafter -- $136.3.
 
  Estimated Fair Value of Net Finance Receivables
 
     The estimated fair value of net finance receivables at December 31, 1997
and 1996 was $59.1 billion and $50.2 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. At December
31, 1997, approximately 91% of the Company's total receivables were dispersed
across the United States, and the remaining 9% were in foreign countries. Of the
total receivables, 11% were in California, 6% in Florida, 6% in Texas , 5% in
Japan, 4% in Georgia, 4% in North Carolina, 4% in New York, 4% in Pennsylvania ,
4% in Illinois and 4% in Ohio; no other individual state or foreign country had
4% or more.
 
                                       40
<PAGE>   42
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Acquisitions of Finance Businesses
 
     During the years ended December 31, 1997, 1996 and 1995, the Company made
acquisitions of finance receivables and finance businesses, the most significant
of which were as follows:
 
          In December 1997, the Company acquired the United States and Canada
     based commercial auto fleet leasing operation of AT&T Capital Corporation.
     The fair market value of the assets acquired was approximately $369
     million. The transaction was accounted for as a purchase.
 
          In September 1997, the Company acquired Superior Acceptance
     Corporation Limited, a consumer finance company with 91 offices in Canada.
     The fair market value of total assets acquired and liabilities assumed was
     approximately $136 million and $129 million, respectively. The transaction
     was accounted for as a purchase.
 
          In May 1997, the Company acquired a portfolio of proprietary credit
     card receivables and stock from Texaco Refining and Marketing, Inc. and its
     affiliate, Star Enterprise. The fair market value of the assets acquired
     was approximately $704 million. The transaction was accounted for as a
     purchase.
 
          In April 1997, the Company acquired a portfolio of bankcard credit
     card receivables from J. C. Penney, Inc. The fair market value of the
     assets acquired was approximately $700 million. The transaction was
     accounted for as a purchase.
 
          In March 1997, the Company acquired a portfolio of bankcard credit
     card receivables from The Bank of New York. The fair market value of such
     assets acquired totaled approximately $800 million. The transaction was
     accounted for as a purchase. A director of the Company was chairman and
     chief executive officer of The Bank of New York during 1997. The Bank of
     New York and the Company are not otherwise affiliated.
 
          In September 1996, the Company acquired Teletech Financial
     Corporation. The assets of Teletech Financial principally consisted of
     equipment telecommunications receivables. The fair market value of total
     assets acquired and liabilities assumed was $116.8 million and $82.6
     million, respectively. The transaction was accounted for as a purchase.
 
          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.
 
          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 May 1996, the Company acquired Fleetwood Credit Corp., which was
     engaged in the financing of recreational vehicles. The fair market value of
     total assets acquired and liabilities assumed was $473.5 million and $342.1
     million, respectively.
 
          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.
 
                                       41
<PAGE>   43
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The pro forma effect of the above acquisitions, when taken in aggregate for
each reporting period, was not significant.
 
NOTE 5 -- 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
                                                       --------------------------------
                                                         1997        1996        1995
                                                       ---------   ---------   --------
<S>                                                    <C>         <C>         <C>
Balance at beginning of period.......................  $ 1,563.1   $ 1,268.6   $1,061.6
  Provision for losses...............................    1,378.1     1,086.5      834.0
  Recoveries on receivables charged off..............      224.9       147.2      132.9
  Losses sustained...................................   (1,454.0)   (1,032.5)    (757.1)
  Reserves of acquired businesses and other..........      237.8        93.3       (2.8)
                                                       ---------   ---------   --------
Balance at end of period.............................  $ 1,949.9   $ 1,563.1   $1,268.6
                                                       =========   =========   ========
</TABLE>
 
NOTE 6 -- INVESTMENTS IN DEBT AND EQUITY SECURITIES
 
  Available for Sale Securities
 
     The Company invests in debt and asset backed 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 these securities as available-for-sale and adjusts its recorded
value to market. During 1997 and 1996, gross realized gains and losses on sales
amounted to $2.4 million and $0.2 million, and $3.5 million and $0.1 million,
respectively. 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, 1997 and
1996 (in millions):
 
<TABLE>
<CAPTION>
                                                                   1997
                                              -----------------------------------------------
                                                            GROSS        GROSS
                                                          UNREALIZED   UNREALIZED   ESTIMATED
                                              AMORTIZED    HOLDING      HOLDING      MARKET
                                                COST        GAINS        LOSSES       VALUE
                                              ---------   ----------   ----------   ---------
<S>                                           <C>         <C>          <C>          <C>
U.S. Government obligations.................  $  182.6       $2.4        $(0.8)     $  184.2
Corporate obligations.......................     219.5        1.1         (1.1)        219.5
Mortgage-backed.............................     598.4        5.4         (0.3)        603.5
Other.......................................     104.1        0.1                      104.2
                                              --------       ----        -----      --------
          Total available for sale
            securities......................  $1,104.6       $9.0        $(2.2)     $1,111.4
                                              ========       ====        =====      ========
</TABLE>
 
<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.......................................      63.1        0.1                       63.2
                                              --------       ----        -----      --------
          Total available for sale
            securities......................  $1,088.0       $7.4        $(8.2)     $1,087.2
                                              ========       ====        =====      ========
</TABLE>
 
                                       42
<PAGE>   44
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The amortized cost and estimated market value of available for sale
securities at December 31, 1997 and 1996, by contractual maturity, are shown
below (in millions):
 
<TABLE>
<CAPTION>
                                                       1997                    1996
                                               ---------------------   ---------------------
                                                           ESTIMATED               ESTIMATED
                                               AMORTIZED    MARKET     AMORTIZED    MARKET
                                                 COST        VALUE       COST        VALUE
                                               ---------   ---------   ---------   ---------
<S>                                            <C>         <C>         <C>         <C>
Due in one year or less......................  $  169.7    $  170.2    $  107.6    $  108.2
Due after one year through five years........     383.7       386.6       422.5       424.2
Due after five years through ten years.......     195.5       195.7       269.8       268.1
Due after ten years..........................     355.7       358.9       288.1       286.7
                                               --------    --------    --------    --------
                                               $1,104.6    $1,111.4    $1,088.0    $1,087.2
                                               ========    ========    ========    ========
</TABLE>
 
  Trading Securities
 
     Trading securities, principally preferred stock, are recorded at market
value. Unrealized gains or losses on trading securities are included in
earnings. The estimated market value at December 31, 1997 and 1996 was $131.0
million and $10.3 million, respectively. Historical cost at December 31, 1997
and 1996 was $126.7 million and $7.8 million, respectively.
 
     Estimated market values of debt and equity securities are based on quoted
market prices.
 
NOTE 7 -- OTHER ASSETS
 
     The components of other assets at December 31, 1997 and 1996 were as
follows (in millions):
 
<TABLE>
<CAPTION>
                                                                1997        1996
                                                              --------    --------
<S>                                                           <C>         <C>
Goodwill....................................................  $1,104.0    $1,206.4
Property and equipment......................................     383.2       261.3
Finance receivables held for sale...........................     268.8
Collateral held for resale..................................     225.3       169.1
Relocation client advances..................................     140.6       159.3
Operating agreements........................................     107.5        97.8
Other.......................................................     845.6       593.2
                                                              --------    --------
          Total other assets................................  $3,075.0    $2,487.1
                                                              ========    ========
</TABLE>
 
     Additions to goodwill due to acquisitions were $39.5 million and $143.2
million in 1997 and 1996, respectively. Reductions as a result of amortization
to goodwill were $42.7 million and $43.6 million for 1997 and 1996,
respectively. Other changes in the amount of goodwill were principally due to
changes in foreign exchange rates which impact the translation of yen
denominated goodwill carried on the books of AIC.
 
                                       43
<PAGE>   45
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 8 -- CREDIT FACILITIES
 
     At December 31, 1997, the Company had the following domestic credit
facilities (in millions):
 
<TABLE>
<CAPTION>
                                    FACILITY
   CREDIT FACILITY DESCRIPTION       AMOUNT
----------------------------------  ---------
<S>                                 <C>
Lines of Credit                     $ 5,635.9*
Revolving Lines                       7,505.0*
Receivables Purchase Facilities       1,775.0
                                    ---------
                                    $14,915.9
                                    =========
</TABLE>
 
---------------
 
* Included in the Company's lines of credit and revolving lines are $210 million
  and $2.6 billion of lines of credit and revolving lines, respectively, that
  are available to First Capital.
 
     In addition, at December 31, 1997, the Company's foreign subsidiaries
available credit facilities totaled $139.5 million.
 
     Lines of credit, revolving lines and receivables purchase facilities may be
withdrawn only under certain standard conditions, including, as to the credit
facilities of Associates identified above, failure to pay principal or interest
when due, breach of representation, warranties or covenants, default on other
debt, or bankruptcy or other insolvency-type proceedings. As to the credit
facilities of the foreign operations, in addition to the foregoing standard
conditions, certain facilities contain provisions which prohibit withdrawals as
a result of any material adverse changes in the financial conditions of such
operations. Associates pays fees for the availability of its credit facilities
ranging from .06 to .17 of 1% per annum of the facility amount.
 
NOTE 9 -- NOTES PAYABLE
 
     Commercial paper notes are issued by Associates and First Capital in the
minimum amount of $100,000 with terms from 1 to 270 days. Bank loan terms range
from 3 to 101 days. Information pertaining to the Company's commercial paper
notes and bank loans is set forth below for the periods indicated (dollar
amounts in millions):
 
<TABLE>
<CAPTION>
                                                              COMMERCIAL       BANK
                                                              PAPER NOTES     LOANS
                                                              -----------    --------
<S>                                                           <C>            <C>
Domestic Notes Payable
  Ending balance at December 31, 1997.......................   $18,625.4     $1,202.1
  Weighted average interest rate at December 31, 1997.......        5.91%        7.51%
  Ending balance at December 31, 1996.......................   $15,449.2     $1,001.8
  Weighted average interest rate at December 31, 1996.......        5.80%        7.94%
Foreign Notes Payable
  Ending balance at December 31, 1997.......................   $   858.1     $  285.0
  Weighted average interest rate at December 31, 1997.......        4.66%        7.80%
  Ending balance at December 31, 1996.......................   $   458.7     $  165.5
  Weighted average interest rate at December 31, 1996.......        3.49%        6.98%
Total Notes Payable
  Ending balance at December 31, 1997.......................   $19,483.5     $1,487.1
  Weighted average interest rate at December 31, 1997.......        5.85%        7.56%
  Ending balance at December 31, 1996.......................   $15,907.9     $1,167.3
  Weighted average interest rate at December 31, 1996.......        5.74%        7.80%
</TABLE>
 
     The amounts reported in the consolidated balance sheet approximate fair
value.
 
                                       44
<PAGE>   46
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 10 -- LONG-TERM DEBT
 
     Outstanding balances of long-term debt at December 31 were as follows (in
millions):
 
<TABLE>
<CAPTION>
                                          INTEREST     MATURITIES
                                         RATE RANGE     THROUGH       1997        1996
                                        ------------   ----------   ---------   ---------
<S>                                     <C>            <C>          <C>         <C>
Senior Notes:
  Domestic:
     Notes............................   5.96%-8.55%      2037      $25,067.8   $20,921.5
     Investment notes.................   6.10%-7.38%      2001          179.4       288.4
                                                                    ---------   ---------
                                                                     25,247.2    21,209.9
                                                                    ---------   ---------
  Foreign:
     Japan............................  1.67%- 5.15%      2004        1,707.0     1,786.7
     All other foreign................  5.75%-15.42%      2002          848.4       607.4
                                                                    ---------   ---------
                                                                      2,555.4     2,394.1
                                                                    ---------   ---------
          Total senior notes..........                               27,802.6    23,604.0
                                                                    ---------   ---------
Subordinated and Capital Notes:
  Domestic:
     Subordinated.....................   6.88%-8.15%      2009          425.0       425.0
     Capital..........................   6.73%-6.73%      2002            0.4         0.5
                                                                    ---------   ---------
          Total subordinated and
            capital notes.............                                  425.4       425.5
                                                                    ---------   ---------
     Total long-term debt.............                              $28,228.0   $24,029.5
                                                                    =========   =========
</TABLE>
 
     The weighted average interest rate for total long-term debt was 6.58% at
December 31, 1997 and 6.84% at December 31, 1996.
 
     The estimated fair value of long-term debt at December 31, 1997 and 1996
was $24.2 billion and $24.6 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: 1998, $4,685.2 million;
1999, $5,875.3 million; 2000, $4,023.6 million; 2001, $3,848.2 million; 2002,
$4,555.2 million and 2003 and thereafter, $5,240.5 million. Certain debt issues
are subject to put or call redemption provisions whereby repayment may be prior
to the maturity date. As applicable, the amount of the option premium received
by the Company is deferred and amortized over the expected life of the debt
obligation.
 
     Associates, First Capital's principal operating subsidiary, 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 Associates debt securities which
matures on March 15, 1999, generally limits payments of cash dividends on
Associates Common Stock in any year to not more than 50% of Associates
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, $781.1 million was available for dividends at December 31,
1997.
 
                                       45
<PAGE>   47
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  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 $2.0
billion. At December 31, 1997, Associates tangible net worth was approximately
$5.7 billion.
 
NOTE 11 -- INCOME TAXES
 
     The following table sets forth the components of the provision for income
taxes and deferred income tax (benefit) for the periods indicated (in millions):
 
<TABLE>
<CAPTION>
                                                      UNITED STATES
                                                     ---------------
                                                     FEDERAL   STATE   FOREIGN    TOTAL
                                                     -------   -----   -------   -------
<S>                                                  <C>       <C>     <C>       <C>
Year Ended December 31, 1997
  Current..........................................  $443.5    $34.8   $161.8    $ 640.1
                                                     ------    -----   ------    -------
  Deferred:
     Leasing transactions..........................    52.8                         52.8
     Finance revenue...............................   (37.1)                       (37.1)
     Goodwill amortization.........................                      (7.8)      (7.8)
     Provision for losses on finance receivables
       and other...................................   (30.2)             (9.5)     (39.7)
                                                     ------    -----   ------    -------
          Total deferred...........................   (14.5)            (17.3)     (31.8)
                                                     ------    -----   ------    -------
                                                     $429.0    $34.8   $144.5    $ 608.3
                                                     ======    =====   ======    =======
Year Ended December 31, 1996
  Current..........................................  $358.8    $31.5   $156.1    $ 546.4
                                                     ------    -----   ------    -------
  Deferred:
     Leasing transactions..........................   102.5                        102.5
     Finance revenue...............................    (6.9)                        (6.9)
     Net operating loss utilized...................                       2.6        2.6
     Goodwill amortization.........................                     (10.0)     (10.0)
     Provision for losses on finance receivables
       and other...................................   (54.6)            (32.4)     (87.0)
                                                     ------    -----   ------    -------
          Total deferred...........................    41.0             (39.8)       1.2
                                                     ------    -----   ------    -------
                                                     $399.8    $31.5   $116.3    $ 547.6
                                                     ======    =====   ======    =======
Year Ended December 31, 1995
  Current..........................................  $342.0    $21.5   $ 10.4    $ 373.9
                                                     ------    -----   ------    -------
  Deferred:
     Leasing transactions..........................    66.7                         66.7
     Finance revenue...............................    14.0                         14.0
     Net operating loss utilized...................                     167.4      167.4
     Goodwill amortization.........................                     (11.0)     (11.0)
     Provision for losses on finance receivables
       and other...................................   (71.8)            (64.2)    (136.0)
                                                     ------    -----   ------    -------
          Total deferred...........................     8.9              92.2      101.1
                                                     ------    -----   ------    -------
                                                     $350.9    $21.5   $102.6    $ 475.0
                                                     ======    =====   ======    =======
</TABLE>
 
                                       46
<PAGE>   48
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     At December 31, 1997 and 1996, the components of the Company's net deferred
tax asset and liability were as follows (in millions):
 
<TABLE>
<CAPTION>
                                                               1997       1996
                                                              -------    -------
<S>                                                           <C>        <C>
Deferred tax assets:
  Provision for losses on finance receivables and other.....  $ 714.9    $ 795.5
  Foreign tax credits.......................................     34.4
  Postretirement and other employee benefits................     57.3       69.2
                                                              -------    -------
                                                                806.6      864.7
Deferred tax liabilities:
  Leasing transactions......................................   (397.1)    (344.3)
  Unamortized tax deductible goodwill.......................   (167.8)    (289.1)
  Finance revenue and other.................................   (178.8)    (191.9)
                                                              -------    -------
                                                               (743.7)    (825.3)
                                                              -------    -------
          Net deferred tax asset............................  $  62.9    $  39.4
                                                              =======    =======
</TABLE>
 
     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 affiliated group of corporations filing
combined, consolidated or unitary (as applicable) federal, state and local
income tax returns. With respect to certain tax items, however, such as foreign
tax credits, the Company's right to reimbursement will be determined based on
the usage of such foreign tax credits and alternative minimum tax credits by the
Ford consolidated group.
 
     The effective tax rate differed from the statutory United States federal
income tax rate as follows:
 
<TABLE>
<CAPTION>
                                                                % OF PRETAX INCOME
                                                              YEAR ENDED DECEMBER 31
                                                              -----------------------
                                                              1997     1996     1995
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
Statutory tax rate..........................................  35.0%    35.0%    35.0%
State tax rate..............................................   1.4      1.5      1.2
Non-deductible goodwill.....................................   0.4      0.5      0.9
Foreign rates in excess of United States rate and other.....   0.3      2.0      2.5
                                                              ----     ----     ----
          Effective tax rate................................  37.1%    39.0%    39.6%
                                                              ====     ====     ====
</TABLE>
 
     On October 8, 1997, Ford announced its intention to distribute shares of
the Company pursuant to the tax-free spin-off provisions of the Internal Revenue
Code, subject to receiving a favorable ruling from the Internal Revenue Service.
Ford and the Company plan to enter into a separation agreement which, among
other matters, will determine how Ford and the Company will settle certain tax
matters related to open year tax returns subject to the existing tax sharing
agreement; accordingly, the related amounts due to or from Ford have not been
finalized.
 
NOTE 12 -- LEASE COMMITMENTS
 
     Leases on the Company's branch and operating center facilities are
primarily short-term and generally provide for renewal options not exceeding the
initial term. Total rent expense for the years ended
 
                                       47
<PAGE>   49
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
December 31, 1997, 1996 and 1995 was $123.8 million, $103.7 million, and $92.6
million, respectively. Minimum rental commitments as of December 31, 1997 for
all noncancelable leases (primarily office leases) for the years ending December
31, 1998, 1999, 2000, 2001 and 2002 are $83.9 million, $63.4 million, $42.3
million, $25.6 million and $12.6 million, respectively, and $36.3 million
thereafter.
 
NOTE 13 -- EMPLOYEE BENEFITS
 
  Defined Benefit Plans
 
     The Company sponsors various qualified and nonqualified pension plans (the
"Plan" or "Plans"), which together cover substantially all United States based
employees who meet certain eligibility requirements.
 
     Net periodic pension cost for the years indicated includes the following
components (in millions):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                           --------------------------
                                                            1997      1996      1995
                                                           ------    ------    ------
<S>                                                        <C>       <C>       <C>
Service cost.............................................  $ 20.1    $ 18.8    $ 13.1
Interest cost............................................    29.4      26.4      23.1
Actual return on Plan assets.............................  (76.7)     (49.3)    (51.1)
Net amortization.........................................    50.0      28.7      33.9
                                                           ------    ------    ------
  Net periodic pension cost..............................  $ 22.8    $ 24.6    $ 19.0
                                                           ======    ======    ======
Assumed discount rate, beginning of year.................    7.25%     7.00%     8.25%
                                                           ======    ======    ======
</TABLE>
 
     The funded status of the Plan is as follows (in millions):
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31
                                          ------------------------------------------------------
                                                    1997                         1996
                                          -------------------------    -------------------------
                                          QUALIFIED    NONQUALIFIED    QUALIFIED    NONQUALIFIED
                                            PLAN          PLANS          PLAN          PLANS
                                          ---------    ------------    ---------    ------------
<S>                                       <C>          <C>             <C>          <C>
Actuarial present value of benefit
  obligation:
  Vested................................   $344.4         $ 34.0        $275.0         $25.3
  Nonvested.............................     15.9            2.7          12.1           0.3
                                           ------         ------        ------         -----
Accumulated benefit obligation..........    360.3           36.7         287.1          25.6
Effect of projected future salary
  increases.............................     84.6           11.1          77.5          10.6
                                           ------         ------        ------         -----
Projected benefit obligation............    444.9           47.8         364.6          36.2
Plan assets at fair market value........    473.5                        376.1
                                           ------         ------        ------         -----
(Excess)/shortage of plan assets over
  plan obligation.......................    (28.6)          47.8         (11.5)         36.2
Unamortized transition obligation and
  amendments............................     (2.2)          (2.9)         (3.6)         (3.4)
Unamortized net loss....................    (12.8)         (17.1)        (15.0)         (8.6)
Adjustment required to recognize minimum
  liability.............................                     8.9                         1.4
                                           ------         ------        ------         -----
  (Prepaid)/accrued pension liability...   $(43.6)        $ 36.7        $(30.1)        $25.6
                                           ======         ======        ======         =====
Assumed discount rate...................     6.75%          6.75%         7.25%         7.25%
                                           ======         ======        ======         =====
Projected compensation increases........     5.00%          5.00%         6.00%         6.00%
                                           ======         ======        ======         =====
Expected return.........................     9.00%          9.00%         9.00%         9.00%
                                           ======         ======        ======         =====
</TABLE>
 
                                       48
<PAGE>   50
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Associates Savings and Profit-Sharing Plan
 
     The Company sponsors a defined contribution plan that covers substantially
all United States based employees, who meet certain eligibility requirements, is
intended to provide assistance in accumulating personal savings for retirement
and is designed to qualify for favorable tax treatment under Sections 401(a) and
401(k) of the United States Internal Revenue Code of 1986, as amended. For the
years ended December 31, 1997, 1996 and 1995, the Company's pretax contributions
to the plan were $25.6 million, $21.3 million and $18.2 million, respectively.
 
  Employers' Accounting for Postretirement Benefits Other Than Pensions
 
     The Company provides certain postretirement benefits through unfunded plans
sponsored by the Company. These benefits are currently provided to substantially
all United States based employees who meet certain eligibility requirements. The
benefits of such plans can be modified or terminated at the discretion of the
Company. The amount paid for postretirement nonpension benefits for the years
ended December 31, 1997, 1996 and 1995 was $2.8 million, $2.7 million and $2.0
million, respectively.
 
                                       49
<PAGE>   51
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Net periodic postretirement benefit cost for 1997, 1996 and 1995 includes
the following components (in millions):
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                             ------------------------
                                                              1997     1996     1995
                                                             ------    -----    -----
<S>                                                          <C>       <C>      <C>
Service cost...............................................  $  7.1    $ 7.5    $ 5.5
Interest cost..............................................     8.2      8.2      7.7
Net amortization...........................................    (1.4)    (0.7)    (1.3)
                                                             ------    -----    -----
  Net periodic postretirement benefit cost.................  $ 13.9    $15.0    $11.9
                                                             ======    =====    =====
Assumed discount rate, beginning of year...................    7.50%    7.25%    8.75%
                                                             ======    =====    =====
</TABLE>
 
     Accrued postretirement benefit cost at December 31, 1997 and 1996 is
composed of the following (in millions):
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                              ----------------
                                                               1997      1996
                                                              ------    ------
<S>                                                           <C>       <C>
Accumulated postretirement benefit obligation ("APBO"):
  Retired participants......................................  $ 48.3    $ 45.2
  Fully eligible participants...............................    30.0      24.9
  Other active participants.................................    51.5    45.1..
                                                              ------    ------
          Total APBO........................................   129.8     115.2
Unamortized amendments......................................     2.5       3.9
Unrecognized actuarial loss.................................    (9.8)     (7.9)
                                                              ------    ------
  Accrued postretirement benefit cost.......................  $122.5    $111.2
                                                              ======    ======
Assumed discount rate                                           7.00%     7.50%
                                                              ======    ======
</TABLE>
 
     For measurement purposes, an 11.27% and 11.67% weighted average annual rate
of increase in per capita cost of covered health care benefits was assumed for
1997 and 1996, 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, 1997 and 1996 by $9.5 million
and $8.4 million, respectively, and the aggregate of the service and interest
cost components of the net periodic postretirement benefit cost by $1.1 million
and $1.2 million, respectively.
 
INCENTIVE COMPENSATION PROGRAMS
 
     The Company sponsors various compensation plans covering certain officers
and employees.
 
  Incentive Compensation Plan and Long-Term Performance Plan
 
     The Company sponsors the Incentive Compensation Plan (the "ICP"), which
beginning in 1997 provided, among other types of compensation, for corporate
annual performance pay bonuses. The size of the ICP bonus pools is determined
based, in part, on the performance of the Company. Prior to 1997, corporate
annual performance bonuses were provided for by the Corporate Annual Performance
Plan (the "CAPP"). 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, in part, on the success of the Company in achieving a
target level of profits established for each year of the performance period,
with such annual performance then averaged for the performance period. Bonuses
reflect individual participants' performances during the applicable performance
period. Amounts charged to expense for these bonus plans amounted to
 
                                       50
<PAGE>   52
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
$25.1 million, $23.3 million and $16.1 million during the years ended December
31, 1997, 1996 and 1995, respectively.
 
  Phantom Stock Appreciation Right Plan
 
     The Company sponsored a long-term cash plan, the Phantom Stock Appreciation
Right Plan (the "PSAR Plan"). The Company terminated the PSAR Plan as of
December 1995 and extinguished, principally by cash payment, all outstanding
phantom stock appreciation rights ("PSARs") prior to completion of the Company's
initial public offering in 1996. 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 $30.1 million during the year ended
December 31, 1995. No amounts were charged to expense in 1997 and 1996. Upon
termination of the PSAR Plan, certain officers of the Company 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 in accordance with the
terms of the Equity Deferral Plan (the "EDP"), sponsored by the Company.
 
  Stock-Based Compensation Plans
 
     Incentive Compensation Plan -- The Company sponsors the ICP, formerly known
as the Long-Term Equity Compensation Plan, which was established in 1996,
amended and renamed effective January 1, 1997. The Company had no outstanding
grants under any other stock-based compensation plan prior to 1996. The ICP
allows the Company to issue to employees awards of up to 20,799,268 shares of
its Class A Common Stock ("Common Stock"). Awards may be made as nonqualified or
incentive stock options, stock appreciation rights, restricted stock,
performance units or performance shares.
 
     A summary of the activity of option grants by First Capital under the ICP
for the years ended December 31, 1997 and 1996 is presented below:
 
<TABLE>
<CAPTION>
                                              1997                           1996
                                  ----------------------------   ----------------------------
                                              WEIGHTED-AVERAGE               WEIGHTED-AVERAGE
                                   OPTIONS     EXERCISE PRICE     OPTIONS     EXERCISE PRICE
                                  ---------   ----------------   ---------   ----------------
<S>                               <C>         <C>                <C>         <C>
Outstanding at beginning of
  year..........................  2,374,440        $29.07                         $
Granted.........................  2,386,025         43.59        2,436,290         29.07
Exercised.......................   (216,604)        30.10
Forfeited.......................   (349,010)        36.96          (61,850)        29.00
                                  ---------                      ---------
Outstanding at end of year......  4,194,851        $36.62        2,374,440        $29.07
                                  =========       =======        =========       =======
Options exercisable at year
  end...........................    520,419        $29.09
                                  =========       =======
Weighted-average fair value of
  options granted during the
  year..........................  $   11.24                      $    9.32
                                  =========                      =========
</TABLE>
 
     The fair value was determined at the date of grant using the Black-Scholes
option-pricing model which assumed a 1997 and 1996 dividend yield range of
0.65%-0.92% and 0.97%-1.38%, expected volatility of 22.00% and 30.44%, risk free
interest rate range of 5.90%-6.81% and 6.30%-6.66%, respectively, and an
expected option life range of 4-6 years.
 
                                       51
<PAGE>   53
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The weighted average remaining life and weighted average exercise price for
total options outstanding and exercisable options outstanding at December 31,
1997 is summarized below:
 
<TABLE>
<CAPTION>
                                       OPTIONS OUTSTANDING                 OPTIONS EXERCISABLE
                           -------------------------------------------   ------------------------
        RANGE OF                       WEIGHTED-AVG.    WEIGHTED-AVG.              WEIGHTED-AVG.
     EXERCISE PRICES        OPTIONS    REMAINING LIFE   EXERCISE PRICE   OPTIONS   EXERCISE PRICE
     ---------------       ---------   --------------   --------------   -------   --------------
                                          (YEARS)
<S>                        <C>         <C>              <C>              <C>       <C>
$29.00 to $39.99.........  2,010,881        8.35            $29.02       517,755       $29.03
 40.00 to  62.19.........  2,183,970        9.02             43.61         2,664        41.38
                           ---------                                     -------
 29.00 to  62.19.........  4,194,851        8.70             36.62       520,419        29.09
                           =========                                     =======
</TABLE>
 
     Under the ICP, in 1997 and 1996, the Company issued 42,000 and 169,630
shares of restricted Common Stock to employees, of which 200,500 were
outstanding at December 31, 1997.
 
     Deemed Investment in Stock -- In 1997 and 1996 under the EDP, the Company
credited PSAR amounts deferred by selected employees to unfunded accounts that
are deemed to be invested in shares of Common Stock. Accounts are created with
amounts that reflect dividends paid on Common Stock, which amounts are then
deemed to be reinvested in Common Stock. Amounts deferred are fully vested and
payable beginning in May 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 860 and 131,890 deemed shares
were issued during 1997 and 1996, respectively, including 860 and 608 respective
shares related to the reinvestment of dividends, 104,257 of which were
outstanding at December 31, 1997. The value of all such shares at year end based
on $71 3/16 per common share was $7.4 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, in the years ended December 31, 1997 and 1996
the Company's net income, basic earnings per share and diluted earnings per
share would have been $1,022.9 million, $2.95 and $2.94; and $854.3 million,
$2.46 and $2.46, respectively.
 
NOTE 14 -- COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
 
     Various legal actions, governmental investigations and proceedings and
claims are pending or may be instituted or asserted in the future against the
Company and its subsidiaries. Certain of the pending legal actions are, or
purport to be, class actions. Some of the foregoing matters involve or may
involve compensatory, punitive, or other treble damage claims which, if
adversely held against the Company, would require large expenditures or could
affect the manner in which the Company conducts its business.
 
     Litigation is subject to many uncertainties, and the outcome of individual
litigated matters is not predictable with assurance. Some of the matters
discussed in the foregoing paragraph could be decided unfavorably to the Company
or the subsidiary involved and could require the Company or such subsidiary to
pay damages or make other expenditures in amounts or a range of amounts that
cannot be estimated at December 31, 1997. The Company does not reasonably
expect, based on its analysis, that any adverse outcome from such matters would
have a material effect on future consolidated financial statements for a
particular year, although such an outcome is possible.
 
NOTE 15 -- TRANSACTIONS AND BALANCES WITH RELATED PARTIES
 
     The Company paid cash dividends to Ford of $111.8 million, $1,928.7 million
and $318.0 million during the years ended December 31, 1997, 1996 and 1995,
respectively. Of the 1996 cash dividend paid on common
 
                                       52
<PAGE>   54
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
stock, $55.9 million was paid to Ford after the Offering. In 1996 and 1995, Ford
made cash capital contributions to the Company of $47.3 million and $200.0
million, respectively. No capital contributions were made by Ford in 1997.
 
     The Company provides certain emergency roadside assistance and auto club
services and employee relocation services to Ford. Revenues related to these
services were $36.0 million, $33.4 million and $29.7 million for the years ended
December 31, 1997, 1996 and 1995, respectively. The agreement between the
Company and Ford which covers the roadside assistance services provided to Ford
contains a change in control provision which would be engaged at the proposed
spin-off date. At such time the agreement would be cancelable on 30 days notice.
Should the contract be terminated, such termination would be on a prospective
basis and would not have a material affect on the Company's results of
operations.
 
     The Company pays fees for certain administrative services provided by its
Ford-affiliated parent. Such fees were $8.0 million, $9.7 million and $8.8
million for the years ended December 31, 1997, 1996 and 1995, respectively.
 
     At December 31, 1997 and 1996, the Company's current income taxes payable
to its Ford-affiliated parent amounted to $24.7 million and $77.4 million,
respectively. In connection with the spin-off, Ford and the Company plan to
enter into a separation agreement which, among other matters, will determine how
Ford and the Company will settle certain tax matters related to open year tax
returns subject to the existing tax sharing agreement; accordingly, the related
amounts due to or from Ford have not been finalized.
 
     In March 1997, the Company acquired a portfolio of approximately $800
million in credit card receivables from The Bank of New York. A director of the
Company was Chairman and Chief Executive officer of The Bank of New York during
1997. The Bank of New York and the Company are not otherwise affiliated.
 
NOTE 16 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISKS
 
     The Company maintains cash, cash equivalents, investments, and certain
other financial instruments with various major financial institutions. To the
extent such deposits exceed maximum insurance levels, they are uninsured.
 
     The Company uses derivative financial instruments for the purpose of
hedging specific exposures as part of its risk management program. Such
instruments to date have been limited to foreign currency forward exchange,
currency swap, interest rate swap and treasury lock agreements.
 
     The Company manages its exposure to counterparty credit risk by limiting
its total position with any single counterparty and monitoring the financial
condition of each counterparty. In the unlikely event that a counterparty fails
to meet the terms of an agreement, the Company's financial exposure is limited
to the fair value of the agreement. Estimated fair values of such agreements are
determined by the Company using available market information and present
value-based valuation methods.
 
     At December 31, 1997, the Company had foreign currency forward exchange
agreements wherein the Company is obligated to deliver yen in exchange for
United States dollars at varying times over the next 3 years. The aggregate
notional amount of these agreements at December 31, 1997 was $921.8 million. The
fair value of such agreements at December 31, 1997 was $97.6 million. At
December 31, 1996, the Company had one agreement in the notional amount of $68.5
million, with a fair value of $5.7 million. Such agreements are held for
purposes other than trading and have been designated for accounting purposes as
a hedge of the Company's net investment in AIC.
 
                                       53
<PAGE>   55
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     At December 31, 1997, the Company had foreign currency swap agreements
wherein the Company is obligated to deliver or receive a specific foreign
currency in exchange for United States dollars at varying times over the next 5
years. The aggregate notional amount of these agreements at December 31, 1997
was $1,083.7 million. The fair value of such agreements at December 31, 1997 was
$28.8 million. The Company had no currency swap agreements at December 31, 1996.
Such agreements have been designated by the Company for accounting purposes as
hedges of specific debt obligations and are held for purposes other than
trading.
 
     Interest rate swap and treasury lock agreements are held for purposes other
than trading and are used by the Company to hedge the effect of interest rate
movements on existing debt and anticipated debt and asset securitization
transactions. Such agreements are executed as an integral element of specific or
anticipated financing transactions. The aggregate notional amount of interest
rate swap and treasury lock agreements at December 31, 1997 was $2.0 billion.
The fair value of such agreements at December 31, 1997 was $(7.3) million.
Interest rate swap and treasury lock agreements mature on varying dates over the
next 4 years and 9 months, respectively. The Company had $40.2 million of
interest rate swap agreements at December 31, 1996 with a fair value of $1.7
million.
 
     The consumer finance business grants revolving lines of credit to certain
of its credit card and other revolving customers. At December 31, 1997, the
unused portion of these lines aggregated $43.4 billion. 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, 1997,
the unused portion of these lines aggregated $1.5 billion. The potential risk
associated with, and the estimated fair value of, the unused credit lines are
not considered to be significant.
 
NOTE 17 -- BUSINESS SEGMENT INFORMATION
 
     The Company's primary business activities are consumer finance and
commercial finance. The consumer finance operation is engaged in home equity,
personal loan and sales finance lending. Credit card and certain related credit
activities are conducted primarily through a wholly-owned credit card bank and
industrial loan company. The consumer finance operation also provides emergency
roadside assistance and auto club services. The commercial finance operation is
principally engaged in the financing and leasing of transportation, industrial
and communication equipment, auto fleet leasing and fleet management services,
recreational vehicle financing, financing of manufactured homes, warehouse
lending, Small Business Administration lending, municipal finance and employee
relocation 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.
 
                                       54
<PAGE>   56
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table sets forth information by business segment (in
millions):
 
<TABLE>
<CAPTION>
                                             BUSINESS SEGMENT(1)
                                            ----------------------
                                            CONSUMER    COMMERCIAL                  FOREIGN
                                             FINANCE    FINANCE(2)   COMBINED    OPERATIONS(1)
                                            ---------   ----------   ---------   -------------
<S>                                         <C>         <C>          <C>         <C>
Year Ended or at December 31, 1997
  Revenue.................................  $ 6,328.5    $ 1,950.1   $ 8,278.6     $1,054.7
                                            =========    =========   =========     ========
  Operating income
     From segment.........................  $ 1,156.8    $   439.5   $ 1,596.3     $  403.2
     Corporate and other(3)...............       31.7         12.0        43.7       (102.5)
                                            ---------    ---------   ---------     --------
          Total...........................  $ 1,188.5    $   451.5   $ 1,640.0     $  300.7
                                            =========    =========   =========     ========
  Total assets............................  $37,273.5    $19,959.2   $57,232.7     $6,000.7
                                            =========    =========   =========     ========
Year Ended or at December 31, 1996
  Revenue.................................  $ 5,302.1    $ 1,796.1   $ 7,098.2     $  873.6
                                            =========    =========   =========     ========
  Operating income
     From segment.........................  $ 1,176.3    $   377.3   $ 1,553.6     $  340.1
     Corporate and other(3)...............     (112.8)       (36.2)     (149.0)       (94.9)
                                            ---------    ---------   ---------     --------
          Total...........................  $ 1,063.5    $   341.1   $ 1,404.6     $  245.2
                                            =========    =========   =========     ========
  Total assets............................  $32,208.0    $16,060.4   $48,268.4     $4,858.0
                                            =========    =========   =========     ========
Year Ended or at December 31, 1995
  Revenue.................................  $ 4,595.6    $ 1,511.6   $ 6,107.2     $  765.3
                                            =========    =========   =========     ========
  Operating income
     From segment.........................  $ 1,010.2    $   313.7   $ 1,323.9     $  284.4
     Corporate and other(3)...............      (95.6)       (30.2)     (125.8)       (86.6)
                                            ---------    ---------   ---------     --------
          Total...........................  $   914.6    $   283.5   $ 1,198.1     $  197.8
                                            =========    =========   =========     ========
  Total assets............................  $27,128.2    $14,175.7   $41,303.9     $4,102.8
                                            =========    =========   =========     ========
</TABLE>
 
---------------
 
(1) The revenues, operating income and total assets of the Company's foreign
    operations are included in the business segments of the Company as set forth
    above. The foreign operations of the Company consist principally of its
    consumer finance operation in Japan (more than 68% of total foreign
    operations) and, to a lesser extent, its consumer and commercial operations
    in the United Kingdom, Canada, Puerto Rico, Mexico, Costa Rica and Taiwan
    (the "Other Foreign Operations"). Total revenue, operating income and total
    assets, respectively, for Japan were: 1997 -- $721.4 million, $249.1 million
    and $3.3 billion, respectively; 1996 -- $643.9 million, $204.3 million and
    $3.2 billion, respectively; 1995 -- $587.7 million, $164.8 million and $3.0
    billion, respectively. Total revenue, operating income and total assets,
    respectively, for the Other Foreign Operations were: 1997 -- $333.3 million,
    $51.6 million and $2.4 billion, respectively; 1996 -- $229.8 million, $40.9
    million and $1.7 billion, respectively; 1995 -- $177.6 million, $33.0
    million and $1.1 billion, respectively.
 
(2) Includes information pertaining to the financing of manufactured housing
    purchases which are managed by the commercial finance operation.
 
(3) Includes operating income pertaining to the Company's non-operating
    subsidiaries.
 
     Capital expenditures and depreciation and amortization expense are not
significant.
 
NOTE 18 -- SUBSEQUENT EVENT
 
     On October 8, 1997, Ford announced plans to spin off its 80.7% interest in
the Company in the form of a distribution of its First Capital shares to Ford
common and class B stockholders. The transaction is subject to a ruling from the
United States Internal Revenue Service that the transaction will be tax-free to
Ford and its stockholders. The ruling process is expected to be completed in the
first half of 1998.
 
                                       55
<PAGE>   57
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 19 -- UNAUDITED QUARTERLY FINANCIAL DATA
 
     The following table sets forth the unaudited quarterly results of
operations (in millions, except earnings per share):
 
<TABLE>
<CAPTION>
                                                                 1997
                                               -----------------------------------------
                                                FOURTH     THIRD      SECOND     FIRST
                                               QUARTER    QUARTER    QUARTER    QUARTER
                                               --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>
Finance charges..............................  $1,990.8   $1,935.3   $1,872.4   $1,761.7
                                               ========   ========   ========   ========
Interest expense.............................  $  739.4   $  718.8   $  679.6   $  637.4
                                               ========   ========   ========   ========
Earnings before provision for income taxes...  $  440.4   $  433.1   $  389.0   $  377.5
Provision for income taxes...................     162.4      162.2      144.0      139.7
                                               --------   --------   --------   --------
Net earnings.................................  $  278.0   $  270.9   $  245.0   $  237.8
                                               ========   ========   ========   ========
Net earnings per share
  Basic......................................  $   0.80   $   0.78   $   0.71   $   0.69
                                               ========   ========   ========   ========
  Diluted....................................  $   0.80   $   0.78   $   0.71   $   0.68
                                               ========   ========   ========   ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                 1996
                                               -----------------------------------------
                                                FOURTH     THIRD      SECOND     FIRST
                                               QUARTER    QUARTER    QUARTER    QUARTER
                                               --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>
Finance charges..............................  $1,727.7   $1,680.7   $1,567.6   $1,505.0
                                               ========   ========   ========   ========
Interest expense.............................  $  644.3   $  637.7   $  593.5   $  580.5
                                               ========   ========   ========   ========
Earnings before provision for income taxes...  $  378.9   $  381.3   $  327.6   $  316.8
Provision for income taxes...................     144.6      151.1      127.4      124.5
                                               --------   --------   --------   --------
Net earnings.................................  $  234.3   $  230.2   $  200.2   $  192.3
                                               ========   ========   ========   ========
Net earnings per share (Basic and Diluted)...  $   0.68   $   0.66   $   0.58   $   0.55
                                               ========   ========   ========   ========
</TABLE>
 
                                       56
<PAGE>   58
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 20 -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)
 
     Condensed unconsolidated financial information of First Capital as of or
for the years ended December 31, 1997, 1996 and 1995 was as follows (in
millions):
 
                        CONDENSED STATEMENT OF EARNINGS
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                                            --------------------------
                                                              1997      1996     1995
                                                            --------   ------   ------
<S>                                                         <C>        <C>      <C>
Revenue
  Interest and other income...............................  $   58.8   $ 20.6   $ 10.2
  Dividends from subsidiaries.............................      52.5    370.4    284.0
                                                            --------   ------   ------
                                                               111.3    391.0    294.2
Expenses
  Interest expense........................................      44.4     99.7     66.0
  Operating expenses......................................      34.9     24.9     23.3
                                                            --------   ------   ------
                                                                79.3    124.6     89.3
                                                            --------   ------   ------
Income before credit for federal income taxes and equity
  in net earnings of subsidiaries.........................      32.0    266.4    204.9
Credit for federal income taxes resulting from tax
  agreements with subsidiaries............................      40.2     36.3     28.0
                                                            --------   ------   ------
Earnings before equity in undistributed earnings of
  subsidiaries............................................      72.2    302.7    232.9
Equity in undistributed earnings of subsidiaries..........     959.5    554.3    490.2
                                                            --------   ------   ------
Net earnings..............................................  $1,031.7   $857.0   $723.1
                                                            ========   ======   ======
</TABLE>
 
                 See notes to condensed financial information.
 
                            CONDENSED BALANCE SHEET
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              --------------------
                                                                1997        1996
                                                              --------    --------
<S>                                                           <C>         <C>
Assets
  Investment in subsidiaries................................  $7,167.8    $6,277.6
  Advances to subsidiaries, eliminated in consolidation, and
     other..................................................   1,185.6       580.0
                                                              --------    --------
          Total assets......................................  $8,353.4    $6,857.6
                                                              ========    ========
Liabilities and Stockholders' Equity
  Accounts payable and accruals.............................  $   32.2    $   45.1
  Short-term notes payable..................................   1,628.2       736.6
  Notes payable and long-term debt..........................     424.4       638.4
  Stockholders' equity......................................   6,268.6     5,437.5
                                                              --------    --------
          Total liabilities and stockholders' equity........  $8,353.4    $6,857.6
                                                              ========    ========
</TABLE>
 
     The estimated fair value of notes payable and long-term debt at December
31, 1997 and 1996 was $631.0 million and $501.8 million, respectively. Fair
values were estimated by discounting expected cash flows at discount rates
currently available to the Company for debt with similar terms and remaining
maturities.
 
                 See notes to condensed financial information.
 
                                       57
<PAGE>   59
 
                      ASSOCIATES FIRST CAPITAL CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                       CONDENSED STATEMENT OF CASH FLOWS
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                                1997         1996        1995
                                                              ---------    ---------    -------
<S>                                                           <C>          <C>          <C>
Cash Flows from Operating Activities
  Net earnings.............................................   $ 1,031.7    $   857.0    $ 723.1
  Adjustments to net earnings for non-cash items:
     Depreciation and amortization.........................                                 0.1
     (Decrease) increase in accounts payable and
       accruals............................................       (12.9)        (7.4)      19.5
     Equity in undistributed earnings of subsidiaries......      (959.5)      (554.3)    (490.2)
  Other....................................................         1.2        (16.8)      29.5
                                                              ---------    ---------    -------
     Net cash provided from operating activities...........        60.5        278.5      282.0
                                                              ---------    ---------    -------
Cash Flows from Investing Activities
  Cash dividends from subsidiaries.........................        52.5        370.4      284.0
  Increase in investments in and advances to
     subsidiaries..........................................      (584.5)      (894.6)    (492.6)
                                                              ---------    ---------    -------
     Net cash used for investing activities................      (532.0)      (524.2)    (208.6)
                                                              ---------    ---------    -------
Cash Flows from Financing Activities
  Increase in notes payable and long-term debt.............       891.6        853.0      438.9
  Sale of Class A common stock.............................                  1,850.0
  Cash contributions from Ford.............................                     47.3      200.0
  Cash dividends to Ford...................................                 (1,928.7)    (318.0)
  Cash dividends paid on common stock......................      (138.6)       (69.3)
  Retirement of long-term debt.............................      (214.0)      (395.2)    (354.4)
  Treasury stock and other.................................       (12.4)
                                                              ---------    ---------    -------
     Net cash provided from (used for) financing
       activities..........................................       526.6        357.1      (33.5)
Effect of foreign currency translation adjustments on
  cash.....................................................       (54.6)      (107.8)     (41.7)
                                                              ---------    ---------    -------
Increase (decrease) in cash and cash equivalents...........         0.5          3.6       (1.8)
Cash and cash equivalents at beginning of period...........         0.7         (2.9)      (1.1)
                                                              ---------    ---------    -------
Cash and cash equivalents at end of period.................   $     1.2    $     0.7    $  (2.9)
                                                              =========    =========    =======
</TABLE>
 
NOTES TO CONDENSED FINANCIAL INFORMATION:
 
     (1) The ability of the Company's subsidiaries to transfer funds to the
Company in the form of cash dividends is restricted pursuant to the terms of
certain debt agreements entered into by the Company's principal operating
subsidiary, Associates Corporation of North America. See NOTE 10 to the
consolidated financial statements for a summary of the most significant of these
restrictions.
 
     (2) Notes payable and long-term debt bear interest at rates from 5.65% to
8.40%. The estimated maturities of the notes outstanding, at December 31, 1997,
during subsequent years were as follows (in millions):
 
<TABLE>
<S>                                                           <C>
1998........................................................  $142.5
1999........................................................   128.6
2000........................................................    92.9
2001........................................................    60.4
                                                              ------
                                                              $424.4
                                                              ======
</TABLE>
 
                                       58
<PAGE>   60
 
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.
 
     The information called for by Item 10 is incorporated by reference from the
information under the caption "Election of Directors" and "Executive Officers
and Compensation" in the Company's Proxy Statement for its 1998 annual meeting
of stockholders.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
     The information called for by Item 11 is incorporated by reference from the
information under the caption "Executive Officers and Compensation" in the
Company's Proxy Statement for its 1998 annual meeting of stockholders.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
     The information called for by Item 12 is incorporated by reference from the
information under the caption "Security Ownership" in the Company's Proxy
Statement for its 1998 annual meeting of stockholders.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     The information called for by Item 13 is incorporated by reference from the
information under the caption "Certain Relationships and Related Transactions"
in the Company's Proxy Statement for its 1998 annual meeting of stockholders.
 
                                    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...........................   29
        Consolidated Statement of Earnings for the years ended
          December 31, 1997, 1996 and 1995..........................   30
        Consolidated Balance Sheet at December 31, 1997 and 1996....   31
        Consolidated Statement of Changes in Stockholders' Equity
          for the years ended December 31, 1997, 1996 and 1995......   32
        Consolidated Statement of Cash Flows for the years ended
          December 31, 1997, 1996 and 1995..........................   33
        Notes to consolidated financial statements..................   34
</TABLE>
 
     (b) Reports on Form 8-K
 
         During the quarter ended December 31, 1997, First Capital filed Current
         Reports on Form 8-K dated October 8, 1997 (related to the announcement
         of Ford's planned spin-off of the Company) and October 14, 1997
         (related to the release of third quarter earnings).
 
                                       59
<PAGE>   61
 
     (c) Exhibits
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER
        -------
<C>                      <S>
         3.1             Restated Certificate of Incorporation. (3.1)*
         3.2             By-laws. (3.2)**
         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.
        10.1             Corporate Agreement between the Company and Ford. (10.1)*
        10.2             Tax-Sharing Agreement between the Company and Ford. (10.2)*
        10.3             Management Services Agreement between the Company and Ford.
                         (10.3)*
        10.4             Trademark License Agreement between the Company and Ford.
                         (10.4)*
        10.5             Form of Employment Agreement.
        10.6             Omitted.
        10.7             The Company's Equity Deferral Plan. (10.7)*
        10.8             The Company's Incentive Compensation Plan.
        10.9             Omitted.
        10.10            Omitted.
        10.11            The Company's Corporate Annual Performance Plan. (10.11)*
        10.12            The Company's Long-Term Performance Plan.(10.12)*
        10.13            The Company's Executive Deferred Salary Plan. (10.13)*
        10.14            The Company's Deferred Compensation Unit Plan Agreement.
                         (10.14)*
        10.15            The Company's Executive Incentive Plan. (10.15)*
        10.16            The Company's Supplemental Retirement Income Plan. (10.16)*
        10.17            The Company's Excess Benefits Plan. (10.17)*
        10.18            Ford Motor Company 1990 Long-Term Incentive Plan. (10.18)*
        10.19            The Company's Long-Term Equity Compensation Plan Stock
                         Option Award Agreement -- IPO.**
        10.20            The Company's Long-Term Equity Compensation Plan Stock
                         Option Award Agreement -- 1996.**
        10.21            The Company's Long-Term Equity Compensation Plan Stock
                         Option Award Agreement -- 1997.**
        10.22            The Company's Incentive Compensation Plan Stock Option Award
                         Agreement -- 1998.
        10.23            Form of Restricted Stock Award Agreement.
        12.              Computation of Ratio of Earnings to Fixed Charges.
        21.              Subsidiaries of the Registrant.
        23.              Consent of Independent Accountants.
        24.              Powers of Attorney.
        27.              Financial Data Schedule.
</TABLE>
 
---------------
 
    *  Incorporated by reference to the exhibit listed in parenthesis contained
       in the Company's registration statement on Form S-1 filed with the
       Securities and Exchange Commission on February 8, 1996.
 
    ** Incorporated by reference to the exhibit listed in parenthesis contained
       in the Company's Annual Report on Form 10-K for the fiscal year ended
       December 31, 1996.
 
                                       60
<PAGE>   62
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                        ASSOCIATES FIRST CAPITAL CORPORATION
 
                                        By:        /s/ JOHN F. STILLO
 
                                           -------------------------------------
                                                      John F. Stillo
                                           Senior Vice President and Comptroller
                                                     February 17, 1998
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                    DATE
                      ---------                                    -----                    ----
<C>                                                    <S>                            <C>
 
                /s/ KEITH W. HUGHES*                   Chairman of the Board,
-----------------------------------------------------    Principal Executive Officer
                  (Keith W. Hughes)                      and Director
 
                /s/ J. CARTER BACOT*                   Director
-----------------------------------------------------
                  (J. Carter Bacot)
 
                  /s/ JOHN DEVINE*                     Director
-----------------------------------------------------
                    (John Devine)
 
                                                       Director
-----------------------------------------------------
                  (Eric S. Dobkin)
 
                                                       Director
-----------------------------------------------------
                 (William M. Isaac)
 
               /s/ HAROLD D. MARSHALL*                 President and Director         February 17, 1998
-----------------------------------------------------
                (Harold D. Marshall)
 
                /s/ H. JAMES TOFFEY*                   Director
-----------------------------------------------------
                  (H. James Toffey)
 
                /s/ KENNETH WHIPPLE*                   Director
-----------------------------------------------------
                  (Kenneth Whipple)
 
                 /s/ ROY A. GUTHRIE*                   Director, Senior Executive
-----------------------------------------------------    Vice President and Chief
                  (Roy A. Guthrie)                       Financial Officer
 
                 /s/ JOHN F. STILLO                    Senior Vice President,
-----------------------------------------------------    Comptroller and Principal
                  (John F. Stillo)                       Accounting Officer
</TABLE>
 
     By signing his name hereto, John F. Stillo 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/ JOHN F. STILLO
 
                                              ----------------------------------
                                                       Attorney-in-fact
 
                                       61
<PAGE>   63
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                                    EXHIBIT
      -------                                   -------
<C>                   <S>
 
       3.1            Restated Certificate of Incorporation. (3.1)*
       3.2            By-laws. (3.2)**
       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.
      10.1            Corporate Agreement between the Company and Ford. (10.1)*
      10.2            Tax-Sharing Agreement between the Company and Ford. (10.2)*
      10.3            Management Services Agreement between the Company and Ford.
                      (10.3)*
      10.4            Trademark License Agreement between the Company and Ford.
                      (10.4)*
      10.5            Form of Employment Agreement.
      10.6            Omitted.
      10.7            The Company's Equity Deferral Plan. (10.7)*
      10.8            The Company's Incentive Compensation Plan.
      10.9            Omitted.
      10.10           Omitted.
      10.11           The Company's Corporate Annual Performance Plan. (10.11)*
      10.12           The Company's Long-Term Performance Plan.(10.12)*
      10.13           The Company's Executive Deferred Salary Plan. (10.13)*
      10.14           The Company's Deferred Compensation Unit Plan Agreement.
                      (10.14)*
      10.15           The Company's Executive Incentive Plan. (10.15)*
      10.16           The Company's Supplemental Retirement Income Plan. (10.16)*
      10.17           The Company's Excess Benefits Plan. (10.17)*
      10.18           Ford Motor Company 1990 Long-Term Incentive Plan. (10.18)*
      10.19           The Company's Long-Term Equity Compensation Plan Stock
                      Option Award Agreement -- IPO.**
      10.20           The Company's Long-Term Equity Compensation Plan Stock
                      Option Award Agreement -- 1996.**
      10.21           The Company's Long-Term Equity Compensation Plan Stock
                      Option Award Agreement -- 1997.**
      10.22           The Company's Incentive Compensation Plan Stock Option Award
                      Agreement -- 1998.
      10.23           Form of Restricted Stock Award Agreement.
      12.             Computation of Ratio of Earnings to Fixed Charges.
      21.             Subsidiaries of the Registrant.
      23.             Consent of Independent Accountants.
      24.             Powers of Attorney.
      27.             Financial Data Schedule.
</TABLE>
 
---------------
 
    *  Incorporated by reference to the exhibit listed in parenthesis contained
       in the Company's registration statement on Form S-1 filed with the
       Securities and Exchange Commission on February 8, 1996.
 
    ** Incorporated by reference to the exhibit listed in parenthesis contained
       in the Company's Annual Report on Form 10-K for the fiscal year ended
       December 31, 1996.
 
                                       62