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                                    FORM 10-K

                United States Securities and Exchange Commission
                             Washington, D.C. 20549



(Mark One)

(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934

For the fiscal year ended June 30, 1999
                                       or

( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the Transition Period from _____ to _____

Commission File Number:   0-26412


                          UNION ACCEPTANCE CORPORATION
             (Exact name of registrant as specified in its charter)


            Indiana                                           35-1908796
(State or other jurisdiction                               (I.R.S. Employer
of incorporation or organization)                        Identification Number)



                 250 N. Shadeland Avenue, Indianapolis, IN 46219
               (Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code:  317-231-6400

Securities Registered Pursuant to Section 12(b) of the Act:  NONE

Securities  Registered  Pursuant  to  Section  12(g) of the Act:  Class A Common
Stock, without par value

Indicate by check mark whether  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 filing requirements
for the past 90 days. Yes (X) No ( )

Indicate by check mark if disclosure of delinquent  filers pursuant to Item 405,
Regulation S-K (Section  229.405 of this chapter) is not contained  herein,  and
will not be contained,  to the best of the 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  4,653,386  shares of the  issuer's  Class A
Common Stock held by non-affiliates,  as of September 10, 1999, was $34,318,722.
There is no trading market for the issuer's Class B Common Stock.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

The  number of shares of Class A Common  Stock of the  Registrant,  without  par
value, outstanding as of September 10, 1999, was 5,101,616 shares. The number of
shares of Class B Common Stock of the Registrant,  without par value, as of such
date was 8,150,266.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 1999 Annual Meeting of Shareholders  are
incorporated into Part III.

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<PAGE>

                  UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

                                    FORM 10-K

                                      INDEX


                                      PART I                              Page

Item 1.      Business...................................................     3

Item 2.      Properties.................................................    18

Item 3.      Legal Proceedings..........................................    18

Item 4.      Submission of Matters to a Vote of Security Holders........    18

                                       PART II

Item 5.      Market for Registrant's Common Equity and
             Related Stockholder Matters.................................   19

Item 6.      Selected Consolidated Financial Data........................   20

Item 7.      Management's Discussion and Analysis of
             Financial Condition and Results of Operations...............   21

Item 7a.     Quantitative and Qualitative Disclosures....................   38

Item 8.      Financial Statements and Supplementary Data.................   40

Item 9.      Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure......................   61

                                       PART III

Item 10.     Directors and Executive Officers of the Registrant..........   61

Item 11.     Executive Compensation......................................   61

Item 12.     Security Ownership of Certain Beneficial
             Owners and Management.......................................   61

Item 13.     Certain Relationships and Related Transactions..............   61

                                       PART IV

Item 14.     Exhibits, Financial Statement Schedules, and
             Reports on Form 8-K.........................................   61

SIGNATURES   ............................................................   62
<PAGE>


                                     PART I

Item 1.           Business

         Note: Certain  capitalized terms used but not otherwise defined in this
report are defined in the  "Glossary"  set forth at the  conclusion  of "Item I,
Business."  Unless  otherwise  indicated,  references to the  "Company"  through
fiscal 1995 and before the Spin-off  refer to the conduct of the business by the
Union Division and Union  Acceptance  Corporation  ("UAC") and Subsidiaries as a
combined  business.  References to the "Company"  following  consummation of the
Spin-off by Union Federal  Savings Bank of  Indianapolis of the Company refer to
UAC and Subsidiaries.

Overview

         The Company is a specialized  finance  company engaged in acquiring and
servicing  automobile  retail  installment  sales contracts and installment loan
agreements.  The retail  installment  contracts are  originated  by  dealerships
affiliated with major domestic and foreign manufacturers and the loan agreements
are originated by the Company as a result of referrals by the  dealerships.  The
Company focuses its efforts on acquiring  receivables on late model used and, to
a lesser  extent,  new  automobiles  made to purchasers  who exhibit a favorable
credit  profile  ("Tier I"). The Company  currently  acquires  receivables in 35
states from or through referrals by approximately 4,100  manufacturer-franchised
auto  dealerships.  Effective  January 1, 1999,  the  Company  discontinued  the
acquisition of Tier II quality  receivables  ("Tier II"), which were receivables
from  customers  with adequate  credit quality who would not qualify as a Tier I
receivable.  The Company  acquired  marine  receivables  from June 1996 to March
1998.  Tier II receivable  acquisitions  accounted for 0.9% of total  receivable
acquisitions  during  fiscal  1999.  The Company  made a  strategic  decision to
terminate  the  acquisitions  of marine  receivables  in fiscal 1998 and Tier II
receivables  in  fiscal  1999 to focus on the  higher  credit  quality  and more
profitable Tier I auto receivables.

          The  Company  was  incorporated  in Indiana  in  December  1993,  as a
subsidiary  of Union Federal  Savings Bank of  Indianapolis  ("Union  Federal"),
which is a federally-chartered  savings bank. Union Federal entered the indirect
automobile  finance  business in 1986.  On August 7, 1995,  the  Spin-off of the
Company by Union Federal was consummated concurrently with the Company's initial
public offering of 4,000,000 shares of its Class A Common Stock.

         The Company's  headquarters are located at 250 North Shadeland  Avenue,
Indianapolis,  Indiana,  46219, and the telephone number is (317) 231-6400.  See
"Item 2, Properties."

Market and Competition

         Based on the  Company's  knowledge  and  research  with  respect to the
automobile and finance  industry,  retail new and used  automobile  sales in the
United States during calendar 1998 were  approximately  $602.8 billion.  Of this
amount,   approximately   $399.8   billion  was   believed  to  be  financed  at
manufacturer-franchised   dealerships,  and  approximately  $272.8  billion  was
believed to be of the credit type that the Company would consider acquiring. The
Company's  total  receivable  acquisitions  of $1.5 billion for fiscal 1999 were
less than 1.0% of this market.

         Competition  in the  field  of  financing  retail  automobile  sales is
intense.  The auto finance market is highly fragmented and historically has been
serviced  by a variety of  financial  entities  including  the  captive  finance
affiliates  of major  automotive  manufacturers,  banks,  savings  associations,
independent finance companies, credit unions and leasing companies. Providers of
retail automobile financing have traditionally competed on the basis of interest
rates charged, the quality of credit accepted, the flexibility of contract terms
offered and the quality of service  provided  to the dealers and  customers.  In
seeking to establish  itself as one of the  principal  financing  sources at the
dealerships  it  serves,  the  Company  competes  predominantly  on the basis of

<PAGE>

providing a high level of dealer  service  (including  evening and weekend hours
and quick  application  response time),  accepting  flexible contract terms, and
developing strong  relationships  with  dealerships.  While the Company seeks to
accept or offer rates that are  competitive in each of its  geographic  markets,
the Company  does not  currently  seek to compete by  accepting  or offering the
lowest rates or by accepting lower quality credit.

         The Company's  competition varies among its geographic  markets. In the
Tier I market segment,  the Company has experienced its most intense competition
in the Midwest and the West Coast. The Company's primary  competitors for Tier I
receivables  are  regional  banks and the captive  finance  affiliates  of major
automotive manufacturers.

         The  Company  experiences  minor  seasonal  fluctuations  in the winter
months.  Retail automobile sales can vary during this time due to weather and/or
increased  holiday expenses.  Additionally,  the Company generally expects small
increases in  delinquency  and net credit  losses  during  these  months  before
stabilizing in the spring.


Dealer Marketing and Service

         The Company has entered into dealer agreements with approximately 4,100
retail automobile dealers in 35 states. The Company's objective is to enter into
dealer agreements with a broad spectrum of large domestic and foreign automotive
manufacturer-franchised  dealerships in targeted major  metropolitan  areas. The
Company  believes that  manufacturer-franchised  dealerships  are most likely to
provide  the  Company  with  receivables  that meet the  Company's  underwriting
standards.  No individual  dealer nor group of affiliated  dealers accounted for
more than 2.1% of the Company's  receivable purchases or originations during the
fiscal year ended June 30, 1999.

         The  Company  has made  organizational  changes  that have  resulted in
increased receivable  acquisitions and better quality dealer service.  Beginning
in fiscal 1999,  the Company  divided its credit  analysts into five focus areas
including dealer development,  core dealers,  dealer expansion,  West Coast, and
nights and  weekends.  The dealer  development  area focuses on  re-establishing
relationships  with dealers who did little or no business with the Company,  the
core dealer area focuses on the Company's  existing dealers who consistently use
the Company and the dealer expansion area works with new markets. Goals based on
acquisition  volume,  applications,  active dealers and dealers cashing multiple
contracts  are set for each focus area.  The credit  analysts in these areas are
involved in the goal setting process which creates  accountability  in achieving
these goals.

         The Company's ability to acquire Tier I receivables  depends to a large
extent on its ability to establish and maintain  relationships  with dealerships
and to induce finance  managers to offer customer  applications  to the Company.
The Company's  marketing and  receivable  acquisition  staff  emphasizes  dealer
service and conveniently  accommodating  dealers' needs for customer  financing.
The Company believes its receivable  acquisition operations are structured to be
more responsive to these needs than the operations of its competitors.

         The Company  believes that by expanding  application  processing  times
during the evenings  and  weekends  and by employing a lower  analyst to account
ratio,  it is more likely to be the first  financing  source to indicate  credit
approval and  therefore is more likely to acquire the  receivable.  With that in
mind,  the  Company has  developed  the  capacity  to process a large  volume of
applications rapidly. The Company's average response time to applications during
fiscal 1999 was under one hour.  Although the Company's  receivable  acquisition
process is highly  automated,  the  Company  maintains  a strong  commitment  to
personalized  dealer service.  Sales  representatives and credit analysts are in
frequent  contact  with  dealership  personnel.  Management  believes  that this
personal  contact  and  follow-through  on the part of the  Company's  employees
builds  strong  relations  and  maximizes  receivable  acquisition  volume  from
individual  dealerships.  The Company's  Credit Scoring  models and  centralized
purchasing  assure  dealers  that  the  Company  applies  consistent  purchasing
standards  and is a reliable  financing  source.  The Company's  flexibility  in
offering  longer  contract  terms to qualified  customers  enhances the dealers'
ability to offer desired financing terms to customers.

         The Company has  regional or field sales  representatives  who give the
Company a presence in local  markets.  Company sales  representatives  generally
have auto dealer finance or sales  backgrounds and are generally  recruited from

<PAGE>

within the  geographic  markets they serve.  The Company  believes this helps to
establish  rapport  and  credibility  with  dealership   personnel.   The  sales
representatives  are in  frequent  contact  with the  Company's  dealers and are
available to receive and respond to comments and  complaints  and to explain new
programs  and  forms.  Additionally,  the  Company  created  a  department  that
specifically  handles  dealer  customer  service  issues  in order to allow  the
outside  sales  representatives  and the credit  analysts  to focus  strictly on
marketing and acquiring receivables.  However, the sales representatives have no
authority to approve credit applications.

         When  approaching  a new  dealer,  the  Company  sales  representatives
explain the  Company's  program and describe the ways the dealer can expect more
timely  and  reliable  service  from the  Company  than that  provided  by other
financing  sources.  Dealers  who decide to  establish a  relationship  with the
Company are provided  with a dealer  agreement  and supplied  with copies of the
Company's forms for all receivable documentation.  The dealer agreement provides
the standard terms upon which the Company  purchases  receivables  from dealers,
contains  representations  and  warranties  of the  dealer  and  prescribes  the
calculation  of  the  Dealer  Premium.  Also,  most  dealer  agreements  include
provisions for Automated  Clearing House ("ACH") fund transfers.  ACH agreements
provide for the electronic  transfer of funds to individual  dealer accounts for
the purchase  amount of  receivables  originated by the dealers and purchased by
the Company or fund the loans made by the  Company.  The Company is  encouraging
the use of ACH payments as opposed to drafts (which  authorized dealer personnel
submit for payment of the amount of each  purchase)  with all of its dealers and
is  making  attempts  to  convert  dealers  using  drafts  to the  ACH  program.
Approximately 89% of the number of receivables acquired in fiscal 1999 were paid
by ACH payments.  The Company's  representatives  assist dealer personnel in the
proper completion and use of the Company's documentation.

Receivable Origination and Purchasing

         Retail automobile buyers are customarily directed to a dealer's finance
and insurance  department to finalize  their  purchase  agreements and to review
potential financing sources and rates available from the dealer. If the customer
elects  to pursue  financing  at the  dealership,  an  application  is taken for
submission to the dealer's  financing sources.  Typically,  a dealer submits the
purchaser's  application  to more than one  financing  source  for  review.  The
dealership  finance  manager  decides which source will  ultimately  finance the
automobile purchase based upon the rates being offered,  the Dealer Premium, the
terms for approval and other factors (such as incentives offered by the acquirer
of  the  receivable).  The  Company  believes  that  its  rapid  response  to an
application  coupled with its  commitment to dealer  service and  flexibility in
terms enhances the likelihood  that the dealership will direct the receivable to
the  Company,  even though the Company may not offer the lowest rate  available.
See "Item 1. Business -- Market and Competition."

         Generally on a monthly basis, the Company quotes rates at which it will
buy receivables from dealers or originate loans (the "Buy Rate").  Buy Rates are
based  on  several  factors  including  the age of the  car and the  term of the
receivable.  The  Company  sets rates  generally  with a view to  maintaining  a
predetermined  spread above the relevant treasury security based on the weighted
average expected life of the receivables  being acquired.  The Company publishes
different Buy Rates in different  geographic markets depending on its assessment
of competitive conditions.  See "Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition."

         Centralization of receivable acquisitions at the Company's Indianapolis
headquarters  enables the Company to assure uniform  application of underwriting
criteria.  It also enables the Company to respond very rapidly to a large volume
of applications with a high level of efficiency.  Upon receiving applications by
facsimile  transmission,  certain  data is entered into the  Company's  computer
system,  and the  application  is assigned to a credit  analyst.  The  Company's
computer system obtains a credit bureau report, applies the Credit Scoring model
and generates summary credit analysis for the credit analyst. In April 1998, the
Company automated the calculation of its income and debt ratios and incorporated
these  automated  calculations  as well as credit  score into a quality  control
underwriting screen. The Company evaluates applications based on four key income
or debt to income  ratios as well as credit  score and  judgment  of the  credit
analyst.   Approval   authority  and  advance  amounts  are  determined  by  the
combination of the five key underwriting  criteria.  The credit analyst analyzes
the application data, the quality control data, and the credit bureau report and
sends a response by facsimile transmission to the dealer.
<PAGE>

         Approximately 74% of the Company's  origination  department,  including
sales  and  credit   employees,   have  prior  business   experience  with  auto
dealerships,  many as dealership  finance  managers.  The Company  believes this
common  experience  tends to  strengthen  their  relationships  with dealers and
enhances  dealers'  respect  for  their  credit  decisions.   The  Company  also
frequently  arranges for its credit  analysts to visit dealers and their finance
managers,  both to develop  dealer  rapport and to maintain  awareness  of local
economic trends.

         The Company  utilizes a computerized  Credit Scoring system to evaluate
an applicant's  credit profile.  The Company  continually  evaluates its scoring
methodologies and makes  adjustments based on its experience.  In July 1996, the
Company  implemented an upgraded version of its customized  Credit Scoring model
developed by an independent  firm. In February 1997, the Company  analyzed seven
months of  originations  and  compared  the  predictive  ability of actual  loss
experience  between the  customized  Credit  Scoring  model and a new  scorecard
model.  In March 1997,  the Company  implemented  the new scorecard  model as it
appeared to be more predictive in rank-ordering  risk than the customized Credit
Scoring model. While the Company is pleased with the performance of the existing
scorecard, the Company has been developing a new customized scorecard. Due to an
extended validation process,  the Company is currently in the testing phase with
implementation to follow.

         The Company's purchasing philosophy generally focuses on acquiring high
quality credit at profitable  spreads.  The quality of the Company's  receivable
acquisitions  is due in large part to the  experience,  training and judgment of
the credit  analysts.  Based on  underwriting  guidelines,  credit analysts must
review each of the five criteria,  mentioned above, in the approval process.  An
application  that does not meet the minimum  underwriting  guidelines for any of
the five  underwriting  criteria  requires  the  approval  of a Regional  Credit
Manager.  Credit  analysts  may  approve  applications  that  meet  all of these
guidelines  with limits on advance  amounts based on the combination of the five
criteria.   Regardless  of  the  key   underwriting   ratios,   the  application
characteristics  and credit history must support the credit decision.  The prior
auto  dealership  business  experience  of a majority  of the  Company's  credit
employees is valuable,  not only in assuring sound credit analysis,  but also in
protecting  the Company  from  attempts by dealers or their  customers to obtain
approval of unacceptable credit. Management monitors and regularly audits credit
analysts'  decisions,  and during  fiscal  1998,  the Company  created a quality
control department that primarily focuses on reviewing acquisition decisions.

         Of the Tier I receivable applications received from dealerships for the
year  ended  June  30,   1999,   the  Company   approved   approximately   20.8%
unconditionally  and  approximately  15.7%  with  conditions.  Of  the  approved
receivables,  approximately 67.9% were ultimately acquired.  During fiscal 1999,
the Company acquired approximately $1.4 billion in Tier I receivables.

         If the  Company  approves a  receivable  and is selected to provide the
financing, the automobile buyer enters into a simple-interest retail installment
sales  contract  with  the  dealer  or a  simple-interest  installment  loan and
security  interest  contract  with the Company.  The Company also  acquires some
precomputed interest installment sale contracts in California.  The retail sales
contract includes an assignment of the contract to the Company. In Ohio, because
of business considerations and regulatory limitations, the Company enters into a
direct  loan  contract  directly  with  the  customer.  In  connection  with the
receivable  acquisition and the preparation of Company forms, in certain states,
where allowed,  the Company charges the customer an origination fee. Dealerships
in some  geographic  markets use a standard form of contract that is accepted by
most sales finance  companies (as opposed to the Company's  contract form). Most
of these generic forms do not include  provisions for origination  fees. The use
of generic contract forms became more prevalent during fiscal 1997 and continues
to  increase  as the  Company  enters new  geographic  markets  where the use of
generic contracts is prevalent. For dealers that participate in the ACH program,
ACH payments are made only after all receivable  documentation has been received
and the  receivable  has been recorded on the Company's  system.  The use of ACH
payments  greatly  reduces the Company's  risk of fraudulent  draft use and also

<PAGE>

presents a cash flow  benefit as the  receivables  are not funded until they are
booked by the Company.  For non-ACH  dealers,  when the dealer has completed and
mailed the documents and taken actions required to perfect the security interest
on  the  vehicle,   authorized   dealer  personnel  may  complete  and  remit  a
Company-supplied  draft for payment of the amount financed.  Because the Company
provides  forms of  drafts  to  dealers  in  advance  of  particular  receivable
acquisitions,  it assumes  the risk that such  drafts may be used  fraudulently,
with  corresponding  loss to the  Company.  Historically,  the  Company  has not
sustained  any material  losses due to such uses but there is no assurance  that
such losses will not occur.  The Company  utilized  dealer drafts on its Tier II
quality receivables from the time the Tier I and Tier II origination departments
were  combined,  in  the  third  quarter  of  fiscal  1998,  until  the  Company
discontinued  the  acquisition  of Tier  II  receivables  on  January  1,  1999.
Previously,  the Company  did not utilize  dealer  drafts in  acquiring  Tier II
receivables.

         Dealers  quote  contract  interest  rates to customers at an average of
approximately 1.00% - 1.50% over the Buy Rate. This difference,  in most states,
represents  compensation  to the dealership in the form of a Dealer Premium paid
by the Company in addition to the amount  financed.  See  "Glossary." The Dealer
Premium is paid to the dealer each month for all  receivables  acquired from the
dealer during the preceding month.

         The  Company  has two  Dealer  Premium  programs.  Under the  Company's
original plan, which applied to approximately 40% of the receivable acquisitions
in 1999,  the dealer,  in most  instances,  receives  the entire  benefit of the
spread  between the  interest  rate  charged to the  customer  and the Buy Rate.
However,  if the  receivable  is  prepaid or  defaults  at any time prior to its
scheduled maturity date, the amount of the premium is prorated,  and the portion
allocated to the remaining  scheduled term is  reimbursable to the Company as an
offset  against the premiums to be paid with respect to  subsequent  receivables
through the  dealer's  reserve  account.  If the  balance in the dealer  reserve
account is insufficient to cover the charge-back,  the Company bills the dealer.
Under the Company's  other Dealer Premium  program,  the dealer  receives only a
portion of the benefit of the spread  between the  interest  rate charged to the
customer  and the Buy  Rate,  with an  offset  against  the  dealer  only if the
receivable is prepaid or defaults  within a limited period of time regardless of
the length of the term.  In Ohio,  because the Company  enters into  installment
loan contracts directly with dealers' customers,  it generally pays the dealer a
referral  fee based on a percentage  of the note  amount.  From time to time the
Company may adjust its Dealer  Premium  payment  methods  based on  management's
assessment  of the market.  The Company did not pay a Dealer  Premium to dealers
for Tier II receivables.  See "Item 7.  Management's  Discussion and Analysis of
Results  of  Operations  and  Financial   Condition  --  Liquidity  and  Capital
Resources."



<PAGE>


Geographic Concentration

         The  following  table sets forth  certain  information  concerning  the
states in which the Company is operating its Tier I business:
<TABLE>
<CAPTION>

                                                 Receivables Acquired for the
                                                      Twelve Months Ended                          At June 30,1999
                     Date      Re-entry                     June 30,                   Servicing      Number of    Number Of
    State         Established    Date         1999           1998          1997        Portfolio     Metro Areas    Dealers
    -----         -----------    ----         ----           ----          ----       -------------  -----------    -------
                                                   (Dollars in Thousands)
<S>                      <C>               <C>             <C>         <C>             <C>                <C>         <C>
Indiana              Jan-86                $   46,675      $ 25,464    $   40,858      $   82,076         1           186
Ohio                 Apr-88                    72,221        52,699        69,928         139,222         3           254
Kentucky             Jan-90     Oct-96         10,980         7,383         4,701          15,394         2            37
Arizona              Jun-91                    53,862        27,231        40,452          92,016         1            95
Colorado             Dec-91                    27,323        18,712        17,861          44,548         1           103
Kansas               Jan-92                    16,663        10,249         8,591          24,930         1            42
Missouri             Jan-92                    32,804        18,986        25,034          52,395         1           106
Texas                Jun-92                   169,094       115,143       140,576         325,967         5           342
Minnesota            Aug-92     Apr-97         28,058        13,325         1,167          30,567         1            90
Utah                 Sep-92     Jun-97         10,762         7,121             -          12,253         1            54
Oklahoma             Oct-92                    44,673        33,682        50,459          90,963         1            71
Florida              Apr-93                   101,235        76,883        81,815         179,887         5           259
North Carolina       Jul-93                   160,680        85,515       105,920         267,515         3           253
Georgia              Apr-94                    66,444        36,244        28,610          99,777         2           122
Virginia             May-94                    67,820        63,110        70,134         137,818         3           195
South Carolina       Jul-94                    54,035        35,711        35,353          84,707         3           106
Iowa                 Aug-94                    41,030        23,939        23,672          57,879         2           108
Illinois             Sep-94                   109,557        69,599        78,508         182,122         2           281
California           Nov-94                   114,843       111,501       134,702         237,351         5           532
Nebraska             Nov-94                     9,219         4,210         2,528          11,385         1            28
New Mexico           Dec-94                     4,500         3,383         9,058          11,597         1            28
Wisconsin            Apr-95                    24,472         9,866        14,316          34,401         2            96
Oregon               Jun-95                     5,188         2,331         5,116           8,247         1            33
Washington           Jun-95                     8,530         7,062         9,257          15,113         1            58
Maryland             Nov-95                    19,701        20,279        25,699          39,446         2            94
Tennessee            Feb-96                    47,822        26,898        21,770          66,685         5            99
Michigan             May-96                    34,504        24,460        23,181          54,251         1           116
Pennsylvania         May-96                    14,076         7,712         4,606          18,978         2            99
Nevada               Jan-97                     7,687         3,757         2,192           9,530         1            37
Idaho                Sep-97                     2,759         1,013             -           2,913         0            19
Massachusetts        Jun-98                    33,681           990             -          30,978         1            83
South Dakota         Jun-98                       593           267             -             631         0             7
New Jersey           Apr-99                     1,581                                       1,575         1            13
Delaware             May-99                       866                                         843         0            15
Connecticut          Jun-99                       423                                         411         1            15
                                           ------------------------------------------------------------------------------
        TOTAL                              $1,444,361      $944,725    $1,076,064      $2,464,371        63         4,076
                                           ==============================================================================
</TABLE>

*        Boise,   Idaho  is  considered   part  of  the  Salt  Lake  City,  Utah
         metropolitan area
**       Sioux Falls,  South Dakota is  considered  part of the Omaha,  Nebraska
         metropolitan area.
***      Delaware  is  considered   part  of  the   Philadelphia,   Pennsylvania
         metropolitan area.


         The Company  intends to continue  its  strategy of  expanding  into new
geographic markets. In considering potential markets for expansion,  the Company
carefully  reviews the regulatory and  competitive  environment and economic and
demographic factors, such as the number of auto registrations and dealerships in
the metropolitan area.

         Because  the Company is highly  centralized,  the  incremental  cost of
entering new geographic markets is relatively low, and the Company can enter new
markets quite rapidly. Alternatively,  the Company's centralized operations give
it the  ability  to  vacate  a market  quickly  and  without  great  expense  if

<PAGE>

competitive or other factors arise in the market that make it no longer suitable
for the Company's operations.  The Company's level of receivable acquisitions in
particular metropolitan areas may fluctuate significantly over time depending on
competitive conditions and other factors in those areas.

Receivable Processing and Customer Service

         When a  receivable  is submitted  under the ACH  program,  the original
receivable  documents  are  received  by the  Company  and  processed  into  the
Company's  servicing  system.  Once the  receivable is processed,  the Company's
computer system triggers an ACH payment to the dealer.  If the dealer is using a
draft,  the Company  will  receive the  original  receivable  documents  and the
dealer's  draft  (after  deposit  through the  dealer's  bank) at which time the
receivables  are processed onto the Company's  servicing  system.  The Company's
operations  computer network  interfaces with its receivable  approval system to
retrieve the information  entered when the customer's  application was received,
saving  time on data entry with  respect to  receivable  processing.  The system
transmits  new  receivables  daily  to the  Company's  outside  data  processing
servicer.  Twice a week,  this  servicer  sends data on all new  accounts to the
Company's document service agency which generates payment coupon books and sends
them directly to the customer. Customer payments are sent directly to a lockbox.

         The Company has a separate  remote  outsourcing  agreement  with a data
processing servicer. Under the agreement, the data processing service conducts a
wide array of  applications  in both batch and  on-line  modes,  and it provides
interfacing  with a number  of  Company  developed  systems.  The  service  also
provides off-site data storage at its data centers. The Company provides much of
the  hardware to  facilitate  the on-line  transmission  of data which is routed
through  different  data centers to provide  redundancy  in the event of a power
failure. See - "Year 2000 Compliance."

         The Customer  Service  Department  utilizes an automated voice response
unit ("VRU") which allows  customers to access standard  account  information as
well as general  information 24 hours a day, seven days a week. The VRU received
an average of 87,000  calls per month in fiscal  1999,  up from 70,000 calls per
month in fiscal 1998. The increase in the number of calls is due to an increased
servicing  portfolio.  Approximately 33% of the total calls are handled entirely
by the VRU; the other 67% are  transferred  to live  collection  employees.  The
percentage of calls handled by the VRU decreased over last year, however,  based
on the  increased  servicing  portfolio,  the number of calls handled by the VRU
were  approximately the same. The VRU provides many efficiencies for the Company
and is user-friendly and convenient for customers. The Company has implemented a
new,  enhanced  VRU that is capable of  handling a larger  call  volume and also
offers  additional  menu options for the customers.  The  Collection  Department
plans to use this system  which  should in turn  improve the  efficiency  of the
department. See - "Year 2000 Compliance."


Receivable Servicing and Servicing Portfolio

         The Company has borrowing  arrangements  with an independent  financial
institution for a $500.0 million  Revolving  Warehouse Credit Facility  ("Credit
Facility")  that is insured by a surety bond  provider to fund Tier I receivable
acquisitions  for a term of one year. The Company also used the Credit  Facility
for Tier II receivable  acquisitions until the Company stopped acquiring Tier II
receivables.   Under  the  terms  of  its  Credit  Facility  and  securitization
transactions,  the  Company  acts  as  servicer  with  respect  to  the  related
automobile  receivables.  During  fiscal  1999,  Tier I and  Tier II  receivable
acquisitions  were funded  utilizing a Credit Facility  through Union Acceptance
Funding Corporation  ("UAFC"),  a wholly-owned  Company subsidiary.  The Company
receives monthly servicing fees; the contractual fee,  typically one percent per
annum on the outstanding  principal balance of the securitized  receivables,  is
paid to the Company through the  securitized  trusts.  The Company  services the
receivable  pools by  collecting  payments  due  from  customers  and  remitting
payments  to the pool  trustee  in  accordance  with the terms of the  servicing
agreements.  The Company  maintains  computerized  records  with respect to each
receivable  to record  all  receipts  and  disbursements  and  prepares  related
reports.  As  servicer,  the Company is  obligated  to monitor  collections  and
collect  delinquent  accounts  and use  diligence to obtain  current  payment of
accounts.


<PAGE>

         The following  tables  describe the composition of the Company's Tier I
servicing portfolio at June 30, 1999:
<TABLE>
<CAPTION>


                                  --------------------------------------------------------------------------------------------------
                                                                         Percent of                       Weighted
                                    Aggregate         Aggregate          Aggregate          Average        Average      Weighted
                                    Number of         Principal          Principal        Receivable      Remaining      Average
                                   Receivables         Balance            Balance           Balance       Term (1)        Rate
                                  ------------        -----------        -----------      -----------    ----------     ---------
                                                                 (Dollars in thousands, except average balances)

<S>                                  <C>               <C>                  <C>            <C>               <C>          <C>
New auto / van                       41,244            $  630,168           25.6%          $   15,279        62.0         12.26%
Used auto / van                     172,502            $1,834,203           74.4%          $   10,633        55.5         13.36%
                                    -------            ----------          -----
   Total                            213,746            $2,464,371          100.0%          $   11,529        57.2         13.08%
                                    =======            ==========          =====


Receivables held for sale            18,925            $  260,857           10.6%          $   13,784        69.7         13.18%
Other receivables serviced(2)       194,821            $2,203,514           89.4%          $   11,310        55.7         13.07%
                                    -------            ----------          -----
   Total                            213,746            $2,464,371          100.0%          $   11,529        57.2         13.08%
                                    =======            ==========          =====
</TABLE>
--------------------------------------------------------------------------------
(1)  Terms are shown in months.

(2)  Amounts  include,  Tier I fixed  rate auto  receivables  securitized  under
     trusts as well as a small  portfolio  of prime fixed rate auto  receivables
     serviced under agreements with Union Federal (approximately $4,000)
--------------------------------------------------------------------------------


         In addition to  servicing  securitized  receivables,  the Company  also
services a portfolio of Union  Federal fixed and variable  rate  receivables  on
mobile homes, boats and autos, of approximately $816,000 at June 30, 1999.

         At June  30,  1999,  the  Tier I  servicing  portfolio,  including  the
principal  balance  of auto  receivables  held  for sale  and  securitized  auto
receivables,  was  approximately  $2.5 billion in aggregate  principal  balance.
Approximately  74.4% of the Tier I  servicing  portfolio,  as of June 30,  1999,
represented  financing of used vehicles;  the remainder represented financing of
new vehicles.  The Company's  receivables  consist primarily of  simple-interest
contracts  which  provide for equal  monthly  payments  (as well as  precomputed
receivables  acquired in  California).  As payments are received  under a simple
interest contract, the interest accrued to date is paid first, and the remaining
payment is applied to reduce  the  unpaid  principal  balance.  In the case of a
liquidation  or  repossession,  amounts  recovered  are applied first to certain
expenses of repossession and then to unpaid principal.

Tier II Receivable Acquisitions

         The Company  acquired Tier II receivables from the fall of 1994 through
January 1999 to fund  receivables to customers with adequate  credit quality who
would not qualify under the Company's Tier I quality criteria.  Originally,  the
Company  operated Tier II  receivable  acquisitions  under the name  Performance
Acceptance Corporation ("PAC").

          The Company,  through its  wholly-owned,  special-purpose  subsidiary,
Performance    Securitization    Corporation   ("PSC"),   effected   its   first
Securitization  of Tier II  receivables  in the third quarter of fiscal 1996 and
completed its second Tier II Securitization  during the second quarter of fiscal
1997.  The Company  completed a third Tier II  Securitization  during the fourth
quarter  of fiscal  1998.  Beginning  in the first  quarter  of fiscal  1999 the
Company began  securitizing Tier II receivables with Tier I receivables  through
its wholly-owned,  special-purpose  subsidiary,  UAC Securitization  Corporation
("UACSC").



<PAGE>

Risk Management

         The Company's Risk  Management  department  strives to develop a better
standard for  measuring  risk  throughout  the Company,  provides  automation to
ensure a more consistent decision matrix in originations,  analyzes and controls
origination and collection risk at multiple levels,  and provides the ability to
quickly implement new standards for immediate results.

         During fiscal 1998, the Company  created a quality  control  department
within risk  management  that  primarily  focuses on monitoring  the  receivable
acquisition  process  by  reviewing  individual   receivable  files  and  credit
analysts' decisions.  In fiscal 1999, the department reviewed  approximately 45%
of  Tier I  cashed  files  based  on  predetermined  high  risk  characteristics
including  high advance rates and approvals of  receivables  that were below the
minimum underwriting criteria. The Company tracks the delinquency and charge-off
rates of all receivables purchased by each individual credit analyst. The review
process has created additional  management controls,  more immediate feedback on
underwriting  trends, and an additional source for capturing valuable receivable
data that can be analyzed  and used as  origination  or  collection  tools.  The
quality control  department is also used in the training  process for new credit
analysts.

Delinquency, Collection and Repossession

         The  Company  seeks to  maintain  low  levels  of  delinquency  and net
charge-offs  first by  ensuring  and  monitoring  the  integrity  of its  credit
approval. The Company tracks the delinquency rate of all receivables approved by
each credit analyst. The Company also seeks to limit delinquency and charge-offs
through highly automated and efficient collection and repossession procedures.

         The   collections   area  is  supported  by  a  separate   computerized
collections  system  provided by the Company's data  processing  servicer and an
automatic telephone dialing system. Delinquent customers are contacted by phone,
mail,  telegram,  and in  special  circumstances,  personal  visits.  Notices to
delinquent  customers are dispatched  automatically by computer when receivables
are 10 days  delinquent in most states,  but as early as 7 days  delinquent  for
other states.  The  collections  area operates  during regular  business  hours,
weekday evenings, and on Saturdays.

         The  Company  utilizes  an  automatic,   computer-controlled   multiple
telephone  line system which dials phone numbers of delinquent  customers from a
file of records  extracted  from the Company's  database.  The system  typically
generates  750-1,000  calls per hour and allows the Company to prioritize  calls
based on a wide  variety of  factors.  Once a call has been  placed,  the system
monitors the call and transfers the call to a collector if it has reached a live
human voice. Collectors handle approximately 400 calls per day.

         After delinquent customers fail to respond to the Company or to fulfill
oral  commitments  made  to  bring  their  receivables   current,   the  Company
repossesses the automobile  securing the receivable.  Repossessions are effected
for  the  Company  by  contracted   repossession  agents.  During  fiscal  1999,
repossession  agents  transferred  approximately 85% of the autos to independent
auto auction  companies that recondition the repossessed autos and sell them for
the Company while the other 15% was transferred to the Company's  dealership for
retail sale.

         The  decision to repossess  and  charge-off  is generally  made after a
receivable  is at  least 90 days but no more  than 120 days  delinquent,  absent
extraordinary  circumstances,  such as refusal to pay,  which  requires  earlier
action.  See  "Item 7.  Management's  Discussion  and  Analysis  of  Results  of
Operations and Financial Condition -- Delinquency and Credit Loss Experience."


<PAGE>



Financing and Sale of Receivables

         Receivable Funding. The Company relies upon external sources to provide
financing for its receivable acquisitons, Dealer Premiums and other ongoing cash
requirements.  For  receivable  acquisitions,  the Company  normally  utilizes a
Credit Facility  currently  having a borrowing  capacity of $500.0 million and a
term of one year. See "Item 7.  Management's  Discussion and Analysis of Results
of Operations and Financial Condition -- Liquidity and Capital Resources."

         Derivative  Financial  Instruments.  The  Company's  sources  for funds
generally have variable rates of interest,  and its receivable  portfolio  bears
interest at fixed  rates.  The Company  therefore  bears  interest  rate risk on
receivables  between  the  setting  of the  Buy  Rate  for  the  acquisition  of
receivables  and  their  sale in a  securitization  transaction,  and  employs a
hedging  strategy to mitigate  this risk.  Prior to March 1999, as a part of the
hedging strategy, the Company used a hedging vehicle that included the execution
of short  sales of U.S.  Treasury  Notes  having a  maturity  approximating  the
average maturity of the receivable  production  during the relevant  period.  At
such time as a  securitization  was  committed,  the hedge  was  covered  by the
purchase of a like volume of U.S.  Treasury Notes.  Beginning in March 1999, the
Company  began  using a hedging  strategy  that  primarily  consists  of forward
interest rate swaps having a maturity  approximating the average maturity of the
receivable   production   during  the  relevant  period.   At  such  time  as  a
securitization  is  committed,  the  interest  rate  swaps are  terminated.  The
Company's  hedging  strategy is an integral part of its practice of periodically
securitizing  receivables.  See "Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition" for a discussion of hedging risks
and related issues.

         Securitizations.  The Company sells its  receivables in  securitization
transactions to increase the Company's liquidity, to provide for redeployment of
capital and to reduce risks  associated  with  interest rate  fluctuations.  The
Company  applies the net  proceeds  from  securitization  transactions  to repay
amounts  owed to  short-term  financing  sources,  thereby  making such  sources
available for future  receivable  acquisitions.  The Company  currently plans to
continue  securitizing  pools of  receivables,  generally on a quarterly  basis.
Management  continually  evaluates  alternative  financing  sources  and, in the
future,  will consider funding its receivable  acquisitions  through a permanent
commercial  paper facility or some other source or  combination  of sources.  In
August  1999,  the  Company  established  a  securitization  arrangement  with a
commercial  paper  conduit  which will be available for future use as management
deems appropriate. Such facility currently has a capacity of $250.0 million, all
of which is  currently  available.  See  "Item 7.  Management's  Discussion  and
Analysis of Results of  Operations  and  Financial  Condition  -  Liquidity  and
Capital  Resources." Since 1988, the Company has securitized  approximately $6.7
billion in auto  receivables in 33 public  offerings and completed three private
placements of Asset-backed  Securities  summarized  below. In each of the public
offerings,  the senior  Asset-backed  Securities  have been  rated  "AAA" or its
equivalent  by  one  or  more  rating  agencies   including  Standard  &  Poor's
Corporation,  Moody's  Investors  Service and FITCH IBCA.  Such  ratings are not
recommendations  of the rating  agencies to invest in the  securities and may be
modified or withdrawn by them at any time.


<PAGE>
<TABLE>
<CAPTION>


                                                            Securitization Transactions

                                                      Remaining       Weighted
                                                       Balance        Average                                             Net Loss
                                        Original     at June 30,     Receivable   Certificate    Gross        Net       to Original
       Securitization                    Amount          1999           Rate         Rate      Spread (1)   Spread (2)   Balance (3)
       --------------                    ------          ----           ----         ----      ----------   ----------   -----------
                                                                  (Dollars in thousands)
<S>                                   <C>            <C>               <C>           <C>          <C>          <C>         <C>
UACSC  1999-B Auto Trust              $  340,233     $  319,616        13.36%        5.51%        7.85%        6.75%       0.01%
UACSC  1999-A Auto Trust              $  320,545     $  278,558        12.99%        5.80%        7.19%        6.16%       0.24%
UACSC  1998-D Auto Trust              $  275,914     $  216,458        12.74%        5.85%        6.89%        5.25%       0.49%
UACSC  1998-C Auto Trust              $  351,379     $  260,871        12.81%        5.55%        7.26%        5.15%       0.69%
UACSC  1998-B Auto Trust              $  267,980     $  174,594        12.51%        6.01%        6.50%        5.06%       0.96%
UACSC  1998-A Auto Trust              $  228,938     $  139,820        12.92%        6.11%        6.81%        5.27%       1.19%
UACSC  1997-D Auto Trust              $  204,147     $  104,891        13.02%        6.30%        6.72%        5.07%       1.47%
UACSC  1997-C Auto Trust              $  218,390     $  110,305        13.48%        6.45%        7.03%        5.38%       2.06%
UACSC 1997-B  Auto Trust              $  295,758     $  129,656        13.21%        6.57%        6.64%        5.15%       2.33%
UACSC 1997-A Auto Trust               $  293,348     $  114,434        13.29%        6.33%        6.96%        5.43%       3.83%
UACSC 1996-D Auto Trust               $  283,085     $   92,496        13.53%        6.14%        7.39%        5.37%       4.55%
UACSC 1996-C Auto Trust               $  310,999     $   88,372        13.26%        6.44%        6.82%        5.11%       5.05%
UACSC 1996-B Auto Trust               $  245,102     $   59,331        12.96%        6.45%        6.51%        5.58%       4.54%
UACSC 1996-A Auto Trust               $  203,048     $   38,673        13.13%        5.40%        7.73%        5.68%       5.35%
UACSC 1995-D Auto Trust               $  205,550     $   35,750        13.74%        5.97%        7.77%        6.04%       6.00%
UACSC 1995-C Auto Trust               $  236,410     $   31,866        14.08%        6.42%        7.66%        6.11%       6.33%
UACSC 1995-B Grantor Trust            $  220,426     $   21,957        13.91%        6.61%        7.30%        4.88%       6.07%
UACSC 1995-A Grantor Trust            $  173,482     Paid in full      13.22%        7.77%        5.45%        3.88%       5.64%
UFSB 1994-D Grantor Trust             $  114,070     Paid in full      12.51%        7.69%        4.82%        3.91%       4.37%
UFSB 1994-C Grantor Trust             $  150,725     Paid in full      12.05%        6.77%        5.28%        4.04%       3.34%
UFSB 1994-B Grantor Trust             $  142,613     Paid in full      10.74%        6.46%        4.28%        3.54%       3.00%
UFSB 1994-A Grantor Trust             $  119,960     Paid in full       9.98%        5.08%        4.90%        3.60%       2.54%
UFSB 1993-C Auto Trust                $  141,811     Paid in full      11.00%        4.88%        6.12%        4.82%       2.60%
UFSB 1993-B Auto Trust                $  212,719     Paid in full      11.50%        4.45%        7.05%        5.31%       2.51%
UFSB 1993-A Grantor Trust             $  133,091     Paid in full      11.49%        4.53%        6.96%        4.96%       1.84%
UFSB 1992-C Grantor Trust             $  119,280     Paid in full      11.64%        5.80%        5.84%        4.48%       1.71%
UFSB 1992-B Grantor Trust             $  116,266     Paid in full      12.39%        4.90%        7.49%        5.49%       1.59%
UFSB 1992-A Grantor Trust             $  103,619     Paid in full      13.66%        6.70%        6.96%        5.80%       1.94%
UFSB 1991-B Grantor Trust             $  106,612     Paid in full      13.64%        7.15%        6.49%        4.94%       1.72%
UFSB 1991-A Grantor Trust             $  150,436     Paid in full      12.52%        8.40%        4.12%        2.25%       0.79%
UFSB 1989-B Grantor Trust             $   66,469     Paid in full      14.09%       Variable        --         2.82%       3.15%
UFSB 1989-A Grantor Trust             $  113,080     Paid in full      13.24%        8.75%        4.49%        1.97%       1.94%
UFSB 1988 Grantor Trust               $  105,179     Paid in full      12.73%        9.50%        3.23%        1.71%       2.74%
                                      ----------     ----------
  Total Tier I Securitized Trusts     $6,570,664     $2,217,648

PSC 1998-1 Grantor Trust              $   28,659     $   19,711        18.69%        6.29%       12.40%        8.04%       3.36%
PSC 1996-2 Grantor Trust              $   31,108     $   11,396        19.65%        6.40%       13.25%        9.00%      10.96%
PSC 1996-1 Grantor Trust              $   34,488     $    7,660        19.87%        6.87%       13.00%        8.79%      14.35%
                                      ----------     ----------
  Total Tier II Securitized Trusts    $   94,255     $   38,767
                                      ----------     ----------
       Grand Total                    $6,664,919     $2,256,415
                                      ==========     ==========
</TABLE>

(1)      Difference  between  weighted  average  receivable rate and Certificate
         Rate.
(2)      Difference  between  weighted  average  receivable rate and Certificate
         Rate, net of upfront costs, servicing fees, ongoing credit enhancements
         and trustee fees, and the hedging gain or loss.
(3)      Net loss to  original  balance at June 30,  1999,  for all pools with a
         remaining principal balance and net loss to original balance at time of
         repurchase for all remaining pools.

In securitization transactions,  the Company transfers automobile receivables to
a  newly-formed   trust,   which  issues  one  or  more  classes  of  fixed-rate
Certificates or notes to investors (the  "Securityholders").  Through the 1994-A
Grantor Trust, the Certificates  were generally  credit-enhanced  by a letter of
credit from an independent financial institution.  The letter of credit provided
Securityholders  with additional  assurance,  to the extent of the amount of the
letter of credit,  that their  receipt of required  payments from the pool would
not be adversely affected by receivable losses.  Typically, the letter of credit
was obtained in the amount,  represented as a percentage of the pool,  necessary
to obtain the desired investment grade ratings for the Certificates. The Company
subsequently  employed  the use of  subordinated  classes of  Certificates  as a
credit enhancement device.  Surety bonds have been utilized as additional credit
enhancements in the Company's Tier I Securitizations since the UACSC 1995-D Auto
Trust. These credit enhancement features allow the offered Certificates or notes
to achieve the desired investment grade rating. In future  Securitizations,  the
Company  may employ any of the above  devices or may employ  alternative  credit
enhancement devices.
<PAGE>

         Gains from the sale of receivables in securitization  transactions have
historically  provided a significant  portion of the net earnings of the Company
and are likely to continue to represent a  significant  portion of the Company's
net  earnings.  If  the  Company  were  unable  or  elected  not  to  securitize
receivables in a financial  reporting period, net earnings would likely be lower
relative to periods in which Securitizations occurred. See "Item 7. Management's
Discussion  and Analysis of Results of  Operations  and  Financial  Condition --
General."

         Commencing  with the 1995-A  Grantor  Trust,  the Company has  effected
Securitizations   through  a  wholly-owned   special-purpose   subsidiary,   UAC
Securitization  Corporation  ("UACSC").  Prior  to  fiscal  1999,  its  Tier  II
Securitizations   have  been   effected   through   Performance   Securitization
Corporation,  also a wholly-owned  special purpose subsidiary.  Beginning in the
first quarter of fiscal 1999, the Company began  securitizing Tier I and Tier II
receivable  acquisitions together through its wholly-owned  subsidiary UACSC. In
the fourth  quarter  of fiscal  1999,  the  Company  created  an  owners'  trust
structure in which the  Securitization  trust issued both  Certificates and debt
securities.  The Company  will  continue to assess  other  structured  financing
alternatives  which may enable it to fund receivables  and/or deploy its capital
with greater  efficiency at a lower cost. See "Item 7.  Management's  Discussion
and Analysis of Results of Operations  and  Financial  Condition - Liquidity and
Capital Resources."


Employees

         The Company  employs  personnel  experienced in all areas of receivable
acquisition,  documentation,  collection  and  administration.   Currently,  the
Company has 511 full-time  employees and 49 part-time  employees,  including 102
full-time and 13 part-time employees in the operations department, 184 full-time
and 34 part-time employees in the collection department,  75 full-time employees
in originations department, 26 full-time employees in the accounting and finance
department,  7 full-time employees in human resources and training, 20 full-time
and 2 part-time  employees in risk management and systems and 13 full-time legal
and   administrative   employees.   In  addition,   the  Company  has  37  sales
representatives  who  reside  and work in the  Company's  receivable  purchasing
market areas and 47 full-time  employees in the  reconditioning  and remarketing
operations.  None  of the  employees  are  covered  by a  collective  bargaining
agreement.  Throughout  fiscal 1999,  all  employees  including  management  and
executive officers of the Company have participated in a formalized professional
development,  supervisory and leadership training program. The feedback has been
very  positive from all areas of the Company,  and the training  appears to have
made an improvement in attitude and overall morale.

Regulation

         The Company's  operations are subject to regulation,  supervision,  and
licensing  under various  federal,  state and local  statutes,  ordinances,  and
regulations.  The  Company's  business  operations  are  conducted  primarily in
Arizona, California,  Colorado, Connecticut,  Delaware, Florida, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky,  Maryland,  Massachusetts,  Michigan,
Minnesota,  Missouri,  Nebraska, Nevada, New Jersey, New Mexico, North Carolina,
Ohio, Oklahoma, Oregon,  Pennsylvania,  South Carolina, South Dakota, Tennessee,
Texas, Utah, Virginia,  Washington and Wisconsin and, accordingly,  the laws and
regulations  of such states govern the Company's  operations  conducted in those
states.  The  Company is required  to be, and is,  licensed  as a sales  finance
company  in  Arizona,   Connecticut,   Delaware,  Florida,  Illinois,  Maryland,
Massachusetts,   Michigan,   Missouri,   Nebraska,   New  Jersey,   New  Mexico,
Pennsylvania,  South Dakota and Wisconsin.  In Colorado,  Idaho, Indiana,  Iowa,
Texas and Utah,  the Company has either  filed the  necessary  notifications  or
registered to accept assignments of installment sale contracts, and in Ohio, the
Company is licensed to make direct loans.  As the Company expands its operations
into  additional  states,  it will be  required to comply with the laws of those
states.


<PAGE>

         Numerous  federal  and  state  consumer  protection  laws  and  related
regulations impose substantial  requirements upon sellers, holders and servicers
involved in consumer finance.  These laws include the Truth-in-Lending  Act, the
Equal Credit  Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Reporting  Act, the  Magnuson-Moss  Warranty  Act, the Federal  Reserve  Board's
Regulations B and Z, state  adaptations of the National  Consumer Act and of the
Uniform  Consumer  Credit Code,  state "lemon" laws,  state motor vehicle retail
installment  sales  acts,  retail  installment  sales  acts,  State  Unfair  and
Deceptive  Trade  Practices  Act, State Fair Debt  Collection  Practices Act and
other similar laws.  Also,  state laws impose finance charge  ceilings and other
restrictions  on consumer  transactions  and  require  contract  disclosures  in
addition to those required under federal law. These statutes and regulations may
impose specific statutory penalties, punitive damages and recovery of attorney's
fees and costs upon creditors who fail to comply with their provisions.  In some
cases,  this  liability  could  affect the  Company's  ability  to  enforce  the
installment sale contracts it purchases and loans it makes.

         The  "Holder-in-Due-Course"  Rule of the Federal Trade  Commission (the
"FTC Rule"),  the  provisions of which are  generally  duplicated by the Uniform
Consumer  Credit  Code,  other  state  statutes,  or the common  laws in certain
states,  has the effect of subjecting  purchasers of installment sales contracts
and even some direct lenders in consumer  credit  transactions to all claims and
defenses which the obligor in the transaction could assert against the seller of
the goods.  The installment  sale contracts  purchased by the Company and direct
loans  made by it are  generally  subject  to the  provisions  of the FTC  Rule.
Accordingly,  the  Company  (or the trust to which a contract  is  assigned in a
Securitization),  as holder of the  contracts or as the direct  lender,  will be
subject to any claims or defenses  that the  purchaser  of the related  financed
vehicle may assert  against the seller of the vehicle.  Liability  under the FTC
Rule is limited to the amounts paid by the obligor under the  contract,  but the
holder of the contract may also be unable to collect any balance  remaining  due
thereunder from the obligor.

         Through the dealer agreement and the contract executed by the consumer,
a dealer makes certain  representations  and warranties to the Company about the
transaction  between the dealer and the consumer  including that the sale of the
vehicle and the  completion  of the  contract  comply with all federal and state
laws and regulations.  Accordingly, if a customer has a claim against the dealer
for the violation of any such laws or  regulations,  and the Company is named in
the claim or materially  impacted by the claim, such violation often constitutes
a breach of the  dealer's  representations  and  warranties  and would allow the
Company to demand repurchase of the contract by the dealers.

         All states in which the Company  operates have adopted a version of the
Uniform  Commercial Code ("UCC").  Except where limited by other state laws, the
UCC governs the Company's rights upon the obligor's default.  Generally, the UCC
allows the  secured  party to conduct a  self-help  repossession,  then sell the
collateral and collect any  deficiency if the proceeds of sale are  insufficient
to pay off the  outstanding  obligation.  The UCC requires the secured  party to
provide the obligor with  reasonable  notice of any sale of the  collateral,  as
well as an opportunity to redeem the collateral  prior to sale. Other state laws
may  expand an  obligor's  rights,  for  example  by  providing  the  obligor an
opportunity to cure default prior to repossession, or by eliminating the secured
party's right to collect a deficiency balance.  In addition,  federal bankruptcy
laws and  related  state  laws may  interfere  with or affect  the  ability of a
secured party to realize upon collateral or enforce a deficiency judgment.


<PAGE>



GLOSSARY

Asset-backed   Securities  -  A  general   reference  to  securities,   such  as
Certificates or Notes, that are backed by financial  assets,  such as automobile
receivables or leases, credit card or trade receivables, home equity receivables
or equipment. Such securities are generally fixed-rate securities payable solely
from cash flows from the pooled receivables.

Buy Rate - An interest  rate quoted by the  Company to dealers,  generally  on a
monthly basis, at which the Company will buy receivables.

Credit  Scoring - The process of  utilizing  standard  models in the  receivable
acquisition  process to evaluate an  applicant's  credit profile to arrive at an
estimate  of the  associated  credit  risk based on  statistical  evaluation  of
several  common  characteristics  that  bear  on  credit  worthiness  and  their
correlation with credit risk.

Dealer  Premium - The amount paid to the dealer for the purchase of a receivable
above the  principal  amount  financed.  In states  other than Ohio,  the Dealer
Premium is based upon the finance charge that would be paid on the receivable if
it earned  interest at a rate equal to the difference  between the contract rate
and the  Company's  periodically  published  Buy Rate.  The  difference in rates
averages  between  1.00% -  1.50%.  Dealer  Premiums  paid to Ohio  dealers  are
generally in the form of referral fees and are  calculated as the product of the
principal amount of the receivable and a periodically adjusted referral rate set
forth on the Company's rate sheets for receivables with similar terms, note rate
and age of  collateral.  All or a  portion  of a Dealer  Premium  may be paid in
advance at the time the  receivable  is acquired,  subject to being charged back
against the dealer if that receivable prepays or defaults. The Dealer Premium is
generally  advanced  to  the  dealer  in the  month  following  purchase  of the
receivable,  creating the Dealer Premium asset. The unamortized  portion of such
advance,  depending on the dealer agreement,  may be recoverable from the dealer
if the  receivable is prepaid or defaults.  Dealer  premiums are included in the
carrying amount of receivables prior to Securitization.

Future Servicing Cash Flows - Future Servicing Cash Flows are the projected cash
flows resulting from the difference  between the weighted average coupon rate of
the  receivables  sold  and  the  Certificate  Rate  paid  to  investors  in the
securitized trusts, less an allowance for estimated credit losses, the Company's
contractual  servicing  fee of 1.00% (on Tier I), and  ongoing  trust and credit
enhancement fees, plus estimated Dealer Premium rebates.

Gain  (Loss)  on Sales of  Receivables  - Gain  (Loss)  on Sales of  Receivables
represents the difference  between the sales proceeds and the carrying amount of
receivables  after reduction for amounts  allocated to Retained  Interest,  less
expenses of the sale and hedging gains or losses.

Revolving  Warehouse Credit Facility ("Credit Facility") - An external financing
arrangement  negotiated by the Company with an independent financial institution
having a  borrowing  capacity  of $500.0  million and a one year term which will
fund Tier I receivable  acquisitions and funded Tier II receivable  acquisitions
in fiscal 1999.

Retained  Interest  in  Securitized  Assets  ("Retained  Interest")  -  Retained
Interest  represents the Company's retained interest in receivables sold. At the
closing  of  each  Securitization,  the  Company  allocates  its  basis  in  the
receivables between the portion of the receivables sold to asset-backed security
holders  and  the  portion  of  the  receivables  which  is  retained  from  the
Securitizations  ("Retained  Interest"  and  "Servicing  Assets")  based  on the
relative fair values of those  portions at the date of the sale.  The fair value
is based  upon the  cash  proceeds  received  for the  receivables  sold and the
estimated  fair value of the Retained  Interest and Servicing  Assets.  Retained
Interest  consists of the  discounted  cash flows to be received by the Company.
Servicing  Assets represent the present value benefit derived from retaining the
right  to  service  receivables  securitized  in  excess  of  adequate  servicer
compensation.  The excess of the cash received  over the basis  allocated to the
receivables sold, less transaction  costs, and hedging gains and losses,  equals
the net gain on sale of receivables  recorded by the Company.  The fair value of
the Retained  Interest is  determined  by  discounting  the expected  cash flows
released  from the Spread  Account (the cash out method)  using a discount  rate
which the Company believes is commensurate with the risks involved. An allowance
for estimated credit losses is established using information from scoring models

<PAGE>

and available  historical loss data for comparable  receivables and the specific
characteristics  of the  receivables  purchased by the Company.  Discount  rates
utilized are based on current market conditions,  and prepayment assumptions are
based on historical  performance  experience of comparable  receivables  and the
impact  of  trends  in the  economy.  Retained  Interest  is  reduced  by actual
servicing cash flows as received over the life of the  Securitization.  Retained
Interest  is  classified  as  "available-for-sale"  and is carried at fair value
based upon the application of current assumptions to the remaining expected cash
flows.  Unrealized gains and losses attributable to the change in the fair value
of the Retained Interest, which are recorded as "available-for-sale" securities,
net of related  income  taxes are  excluded  from  earnings  and are recorded as
"Accumulated  other  comprehensive  income",  in  shareholders'equity.  Retained
Interest  is  reviewed  monthly  for  other  than  temporary  impairment,   with
impairment,  if any,  recorded as a component  of Gain on Sales of  Receivables,
net.

Securitization - The process through which receivables and other receivables are
pooled and sold to a trust which issues asset-backed securities to investors.

Senior  Notes - Unsecured  Senior  Notes of the Company of $110  million and $65
million issued August 1995 and March 1997 respectively.

Senior Subordinated Notes- Unsecured Senior Subordinated Notes of the Company in
the aggregate principal amount of $46 million issued April 1996.

Servicing  Asset - The present value benefit derived from retaining the right to
service  receivables  securitized in excess of adequate  servicer  compensation.
Servicing Assets are carried at their lower of cost or market.

Spin-off - The pro rata  distribution of the 9,200,000  shares of Class B Common
Stock formerly held by Union Federal to the shareholders of its holding company,
immediately  prior to consummation  of the Company's  initial public offering in
August 1995.

Spread Account (a component of Retained Interest in Securitized Assets) - A cash
collateral  account or  specific  cash  account  maintained  by the trustee of a
Securitization  trust  into which  Future  Servicing  Cash  Flows are  deposited
initially to protect  Certificateholders (and any provider of third-party credit
enhancement)  against credit losses.  The terms of the account,  which vary with
each  Securitization,   state  a  maximum  balance,  generally  expressed  as  a
percentage  of the  current  principal  balance.  Generally,  the  initial  cash
deposit, if required, is funded by the Company from the Securitization  proceeds
and is expressed as a percentage of the original principal balance.  The initial
deposit amount is typically less than the minimum balance  ("floor").  The floor
amount  required is  determined  based on the original  principal  balance.  The
Company receives cash flows from Retained Interest that represent collections on
the  receivables  in  excess  of the  amounts  required  to pay the  Certificate
principal and interest,  the base  servicing fees and certain other fees such as
credit  enhancement  fees.  If the amount of cash  required for the  allocations
exceeds the amount  collected  during the  collection  period,  the shortfall is
drawn from the Spread Account.  If the cash collected  during the period exceeds
the amount necessary for the allocations,  and the related Spread Account is not
at the  required  level,  the excess  cash  collected  is retained in the Spread
Account  until  the  specified  level or  maximum  level is  achieved.  Once the
required or maximum Spread Account level is achieved,  the excess is released to
the Company.  Any remaining  Spread  Account  balance is released to the Company
upon termination of the Securitization.  There is no recourse to the Company for
receivable  losses beyond the balance in the Spread Account and Future Servicing
Cash Flows from the trust.

Tier I - The  Company's  practice of acquiring  receivables  made to  customers,
generally with high quality credit,  through an automotive dealer under a dealer
agreement  that  provides for the  acquisition  of  receivables  at par plus the
payment  of a Dealer  Premium  to the  dealer.  A Tier I  customer  has a credit
history with no or few minor defaults and can finance a new car purchase through
a bank,  a  captive  finance  subsidiary  of an  automobile  manufacturer  or an
independent finance company that focuses on Tier I credit.


Tier  II - The  Company's  prior  practice  of  acquiring  receivables  made  to
customers  who  generally  would  not be  eligible  for  credit  under  Tier  I.
Receivables are acquired from automotive  dealers under a dealer  agreement that
provides for the acquisition of receivables at par without provision for payment
of any Dealer Premium.  A Tier II customer is  characterized  as a customer with
some credit  problems in his or her past which have  subsequently  been resolved
and who has  reestablished an acceptable  payment  history.  To finance a new or
late-model  used car, the Tier II customer may not qualify for a receivable from
a captive  finance  subsidiary  but may access  credit  through  non-traditional
finance sources.

Union  Division  -  The  indirect  automobile  receivable  acquisition  business
conducted as a division of Union Federal through fiscal 1994.

Warehouse - A method whereby receivables are financed by financial  institutions
on a short-term basis. In a Warehouse  arrangement,  receivables are accumulated
or  pooled  on a daily  or less  frequent  basis  and  assigned  or  pledged  as
collateral for short-term borrowings until they are sold in a Securitization.



<PAGE>




Item 2.           Properties


         The Company's  operations are centered in a commercial  office building
owned  by  Shadeland  Properties,  LP  ("Shadeland,"  a  Company  affiliate)  in
Indianapolis,  Indiana. The Company occupies office space of 115,555 square feet
under a lease with Shadeland which expires in April 2003. The Company  currently
utilizes  95,668  square feet and is in the process of  remodeling an additional
17,732 square feet for current operations of the Origination, Collection and MIS
departments and future expansion.  The Company sublets a portion of the building
to Union Federal.

         The  Company  leases a garage of 5,000  square  feet for minor  vehicle
reconditioning  to prepare the repossessed  autos for auction,  an office of 500
square  feet  and a  75-car  lot  located  in  Beech  Grove,  Indiana,  from  an
independent party. The Company currently leases the property on a month to month
basis. The 75-car lot was historically  used to retail some autos repossessed in
central Indiana. Currently, this facility serves as a holding area for the autos
repossessed  from across the country before they are  transferred to the new car
franchised dealership or a local auction.

         In July 1997,  the Company  purchased a 6.5 acre  (60,000  square foot)
facility near its headquarters in Indianapolis at which it has established a new
car franchised  dealership for the purpose of expanding its  reconditioning  and
remarketing  operations  and to  retail  a  portion  of its  repossessed  autos.
Approximately  30,000,  27,000  and 3,000  square  feet are  being  used for the
showroom, service area and office area, respectively.


Item 3.           Legal Proceedings

         The Company is party to litigation in the ordinary  course of business.
Most of the  litigation is initiated by the Company  against  debtors to collect
deficiency balances. Claims are, however, also asserted against the Company on a
regular  basis.  The claims  against the Company  often involve  allegations  of
wrongdoing by the motor vehicle dealer which originated the contract or sold the
vehicle  financed by the Company and the Company is named as a defendant  due to
its status as holder of the contract.  Claims are also asserted directly against
the Company  under the consumer  protection  laws  described  above and on other
theories  and  some of  these  claims  are  asserted  on  behalf  of a class  of
consumers. Similar litigation is common for industry participants.


Item 4.           Submission of Matters to a Vote of Security Holders

         None.


<PAGE>




                                     PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

         Shares of Class A Common Stock are quoted on the Nasdaq Stock  Market's
National Market under the symbol "UACA." The following table sets forth the high
and low sales price per share of Class A Common Stock for each quarter in fiscal
1999 and 1998:

Fiscal Year Ended June 30,           1999                         1998
--------------------------------------------------------------------------------
                                 High      Low               High      Low
                               -------------------------------------------------
First Quarter                   8         4 3/4             11 1/4    8 7/8
Second Quarter                  6 5/8     3 7/8             10 1/4    5 1/8
Third Quarter                   8 1/2     4                  9 1/8    7 1/4
Fourth Quarter                  8 3/8     6 1/4              9 1/8    6 3/4
--------------------------------------------------------------------------------

         As of  September  10,  1999,  there  were 95  holders  of record of the
Company's  Class A Common Stock and 7 holders of record of Class B Common Stock.
The Company  estimates  that its Class A Common Stock is owned  beneficially  by
approximately  1,370 persons.  There is no market for Class B Common Stock,  and
management  has no plans  to list the  Class B  Common  Stock on  Nasdaq  or any
exchange.

         The  Company  currently  intends  to  retain  earnings  for  use in the
operation and expansion of its business and therefore does not anticipate paying
cash  dividends  on  Class A  Common  Stock  or  Class  B  Common  Stock  in the
foreseeable  future.  The payment of dividends is within the  discretion  of the
Board of Directors and will depend,  among other things, upon earnings,  capital
requirements,  any financing  agreement covenants and the financial condition of
the Company. In addition, provisions of the Senior and Senior Subordinated Notes
limit distributions to shareholders.


<PAGE>

Item 6.  Selected Consolidated Financial Data

         The following table sets forth certain selected consolidated  financial
information  reflecting the consolidated  operations and financial  condition of
the Company for each year in the five year period ended June 30, 1999. This data
should  be  read  in  conjunction  with  the  Company's  consolidated  financial
statements  and related notes thereto and "Item 7.  Management's  Discussion and
Analysis of Results of Operations  and  Financial  Condition"  included  herein.
Certain  amounts for prior periods have been  reclassified to conform to current
year presentation.
<TABLE>
<CAPTION>


                                                                               Year Ended June 30,
                                                       -------------------------------------------------------------------
                                                           1999           1998         1997           1996           1995
                                                       ----------    ----------     ----------    ----------    ----------
                                                                              (Dollars in thousands)
<S>                                                    <C>           <C>            <C>           <C>           <C>
Income Statement Data:
Interest on receivables held for sale                  $   33,015    $   27,871     $   33,914    $   28,712    $   14,702
Retained interest and other                                20,008        12,922         14,810        10,072         9,587
                                                       -------------------------------------------------------------------
   Total interest income                                   53,023        40,793         48,724        38,784        24,289
Interest expense (1)                                       27,451        26,107         25,688        22,275        12,961
                                                       -------------------------------------------------------------------
  Net interest margin                                      25,572        14,686         23,036        16,509        11,328
Provision for estimated credit losses                       5,879         8,050          4,188         2,875         1,074
                                                       -------------------------------------------------------------------
   Net interest margin after provision for
      estimated credit losses                              19,693         6,636         18,848        13,634        10,254
                                                       -------------------------------------------------------------------
Gain (loss) on sales of receivables, net                   19,133       (11,926)           963        30,357         8,684
Servicing fees, net                                        21,716        19,071         16,919        12,302         8,977
Late charges and other fees                                 5,349         4,087          3,820         3,096         2,783
                                                       -------------------------------------------------------------------
   Other revenues                                          46,198        11,232         21,702        45,755        20,444
                                                       -------------------------------------------------------------------
Total operating expenses                                   42,588        35,546         30,502        23,841        14,913
                                                       -------------------------------------------------------------------
  Earnings (loss) before provision for income taxes        23,303       (17,678)        10,048        35,548        15,785
  Provision (benefit) for income taxes                      8,979        (7,856)         4,166        14,406         6,396
                                                       -------------------------------------------------------------------
     Net earnings (loss)                               $   14,324    $   (9,822)    $    5,882    $   21,142    $    9,389
                                                       ===================================================================

                                                       -------------------------------------------------------------------
Net earnings (loss) per common share
  (basic and diluted)                                  $     1.08    $    (0.74)    $     0.45    $     1.60           N/M
                                                       ===================================================================

Operating Data:
Receivables acquired (dollars):
Tier I                                                 $1,444,361    $  944,725     $1,076,064    $  994,834    $  766,972
Tier II                                                    12,592        24,027         39,610        36,030        21,511
Marine                                                         --         2,515          6,590            50            --
                                                       -------------------------------------------------------------------
     Total receivables acquired (dollars)              $1,456,953    $  971,267     $1,122,264    $1,030,914    $  788,483
                                                       ===================================================================

Receivables acquired (number of receivables):
Tier I                                                     90,268        64,152         75,844        71,070        58,409
Tier II                                                       876         1,746          3,050         2,870         1,770
Marine                                                         --           200            496             6            --
                                                       -------------------------------------------------------------------
     Total receivables acquired
          (number of receivables)                          91,144        66,098         79,390        73,946        60,179
                                                       ===================================================================

Receivables securitized:
Tier I                                                 $1,288,071    $  919,455     $1,183,190    $  890,110    $  658,703
Tier II                                                        --        28,659         31,108        34,488            --
                                                       -------------------------------------------------------------------
     Total receivables securitized                     $1,288,071    $  948,114     $1,214,298    $  924,598    $  658,703
                                                       ===================================================================

Ratio of operating expenses as a percent of
  average servicing portfolio                                1.82%         1.78%          1.67%                 1.73% 1.49

Credit losses as a percent of
     average servicing portfolio:
Tier I                                                       2.20%         2.80%          2.40%         1.58%         1.36%
Tier II                                                      7.04%         7.67%          5.18%         2.37%         2.97%
Marine                                                         --          1.12%          0.25%          N/A           N/A
                                                       -------------------------------------------------------------------
   Total credit losses as a percent of average
      servicing portfolio                                    2.33%         2.96%          2.50%         1.60%         1.37%
                                                       ===================================================================

Delinquencies of 30 days or more as a percent of
     servicing portfolio:
Tier I                                                       2.63%         3.07%          2.96%         1.84%         1.40%
Tier II                                                      9.42%         8.29%          6.18%         3.35%         1.25%
Marine                                                        N/A           N/A           0.10%          N/A           N/A
                                                       -------------------------------------------------------------------
  Total  delinquencies of 30 days or more as a
      percent of servicing portfolio                         2.78%         3.24%          3.07%         1.88%         1.40%
                                                       ===================================================================
</TABLE>



<PAGE>
Item 6.  Selected Consolidated Financial Data (Continued)
<TABLE>
<CAPTION>



At June 30,                                                1999          1998          1997          1996          1995
                                                       ----------    -----------    ----------    ----------    ----------
<S>                                                    <C>           <C>            <C>           <C>           <C>
                                                                              (Dollars in thousands)
Balance Sheet Data(2):
Receivables held for sale, net                         $  267,316    $  118,259     $  121,156    $  259,290    $  201,022
Retained interest in securitized assets                   190,865       171,593        170,791       147,024       118,076
Total assets                                              514,926       411,533        391,268       451,195       349,283
Due to Union Federal                                           --            --             --            --       338,958
Amounts due under warehouse facilities                    185,500        73,123         44,455       187,756            --
Long-term debt                                            199,000       221,000        221,000       156,000            --
Total shareholder's equity(3)                              89,479        82,473         86,848        78,624             2

Other Data:
Servicing portfolio:
Tier I                                                 $2,464,366    $1,978,920     $1,860,272    $1,548,538    $1,159,349
Tier II                                                    53,792        66,855         68,289        47,062        19,858
Marine                                                         --            --          6,227            50            --
Serviced for others                                           912         1,642          2,488         3,420         5,203
                                                       -------------------------------------------------------------------
     Total servicing portfolio                         $2,519,070    $2,047,417     $1,937,276    $1,599,070    $1,184,410
                                                       ===================================================================

Average servicing portfolio:
Tier I                                                 $2,269,177    $1,922,977     $1,759,666    $1,343,770    $  982,875
Tier II                                                    63,275        69,622         63,305        33,124         9,448
Marine                                                         --         6,920          2,357            NM            --
Serviced for others                                         1,138         1,941          2,799         4,222         6,643
                                                       -------------------------------------------------------------------
     Total average servicing portfolio                 $2,333,590    $2,001,460     $1,828,127    $1,381,116    $  998,966
                                                       ===================================================================

Number of receivables serviced:
Tier I                                                    213,746       184,003        173,693       147,722       117,837
Tier II                                                     5,517         6,285          6,056         4,067         1,687
Marine                                                         --            --            472             6            --
Serviced for others                                           139           256            402           537           836
                                                       -------------------------------------------------------------------
     Total number of receivables serviced                 219,402       190,544        180,623       152,332       120,360
                                                       ===================================================================

Number of dealers                                           4,076         3,628          3,204         2,523         1,604
Number of employees (full-time equivalents)                   540           529            387           313           215
--------------------------------------------------------------------------------------------------------------------------

</TABLE>
(1)      Interest  expense for the year ended June 30, 1995,  was based upon the
         average  monthly  balance  "Due to Union  Federal"  at Union  Federal's
         all-inclusive cost of funds.

(2)      All  consolidated  balance  sheet  amounts,  except the amounts "Due to
         Union Federal", represent actual recorded assets and liabilities of the
         Company's  business.  The amount Due to Union Federal includes division
         funding by Union Federal as well as inter-company funding.

(3)      The consolidated  financial  statements  reflect no allocation of Union
         Federal's historical equity. Earnings of the Company are transferred to
         Union  Federal  through  the Due to Union  Federal  account at June 30,
         1995.




<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         Note: Certain  capitalized terms used but not otherwise defined in this
report are defined in the  "Glossary"  set forth at the  conclusion  of "Item 1.
Business."

General

         The  Company  derives  substantially  all  of  its  earnings  from  the
acquisition,  securitization and servicing of automobile  receivables originated
or  referred  by  dealerships   affiliated   with  major  domestic  and  foreign
manufacturers.  To fund the acquisition of receivables prior to  Securitization,
the Company  utilizes the Credit  Facility,  discussed in "Liquidity and Capital
Resources." Through  Securitizations,  the Company  periodically pools and sells
receivables  to a  trust  which  issues  asset-backed  securities  to  investors
representing   interests  in  the  receivables  sold.  When  the  Company  sells
receivables  in a  securitization,  it  records  a gain or  loss on the  sale of
receivables and establishes Retained Interest as an asset. Future Servicing Cash
Flows  are  received  over  the  life  of the  related  Securitization.  See the
"Glossary"  under "Item 1.  Business"  for  definitions  of terms  pertaining to
Securitizations.

         The  following  table  illustrates   changes  in  the  Company's  total
receivable  acquisition  volume and  information  with respect to Gain (Loss) on
Sales of Receivables,  net and  Securitizations  during the past eight quarters.
More complete quarterly  statements of earnings information is set forth in Note
13 of the Consolidated Financial Statements.
<TABLE>
<CAPTION>
                                                        Selected Quarterly Financial Information
                                                      For Quarters in the Fiscal Years Ended June 30,
                                         -----------------------------------------------------------------
                                                                       1999
                                         ------------------------------------------------------------------
                                             First             Second           Third               Fourth
                                             -----             ------           -----               ------
                                                               (Dollars in thousands)


<S>                                      <C>               <C>               <C>               <C>
Receivables acquired                     $   404,494      $   361,891       $   321,856       $   368,712

Gain on Sales of Receivables             $     6,248      $     5,717       $    10,679       $     8,406
    Less:  Impairment                         (3,542)           (1,630)           (4,293)           (2,452)
    Less:  Cash out adjustment                    --                --               --                --
                                         -----------        -----------      -----------        -----------
Gain  (loss) on Sales of
   Receivables, net                      $     2,706       $     4,087       $     6,386       $     5,954

Servicing portfolio at end of period     $ 2,220,657       $ 2,344,621       $ 2,416,724       $ 2,519,070

Selected Securitization  Data:               1998-C            1998-D            1999-A            1999-B
Original amount                          $   351,379       $   275,914       $   320,545       $   340,233
Weighted avg. receivable rate                  12.81%            12.74%            12.99%            13.36%
Weighted avg
  remaining maturity (mos.)                     68.8              69.1              71.5              71.7
Certificate rate                                5.55%             5.85%             5.80%             5.51%
Gross spread (1)                                7.26%             6.89%             7.19%             7.85%
Net spread (2)                                  5.15%             5.25%             6.16%             6.75%


                                                        Selected Quarterly Financial Information
                                                      For Quarters in the Fiscal Years Ended June 30,
                                         -----------------------------------------------------------------
                                                                       1998
                                         ------------------------------------------------------------------
                                             First             Second           Third               Fourth
                                             -----             ------           -----               ------
                                                               (Dollars in thousands)
Receivables acquired                     $   252,877        $   227,405      $   220,317        $   270,668

Gain on Sales of Receivables             $     5,549        $     3,173      $     5,749        $     5,110
    Less:  Impairment                        (16,396)            (1,153)          (2,636)            (3,451)
    Less:  Cash out adjustment                    --                 --               --             (7,871)
                                         -----------        -----------      -----------        -----------

Gain  (loss) on Sales of
    Receivables, net                     $   (10,847)       $     2,020      $     3,113        $    (6,212)

Servicing portfolio at end of period     $ 1,977,368        $ 2,001,111      $ 2,008,287        $ 2,047,417

Selected Securitization Data:               1997-C             1997-D           1998-A          1998-B/1998-1
Original amount                          $   218,390        $   204,147      $   228,938      $267,980/$28,659
Weighted avg. receivable rate                  13.48%             13.02%           12.92%       12.51%/18.69%
Weighted avg
  remaining maturity (mos.)                     70.7               67.1             70.8         67.5/57.7
Certificate rate                                6.45%              6.30%            6.11%       6.01%/6.29%
Gross spread (1)                                7.03%              6.72%            6.81%       6.50%/12.40%
Net spread (2)                                  5.38%              5.07%            5.27%       5.06%/8.04%
</TABLE>
--------------------------------------------------------------------------------
(1)  Difference  between weighted  average  receivable rate and weighted average
     Certificate Rate.
(2)  Difference  between weighted  average  receivable rate and weighted average
     Certificate Rate, net of upfront costs, servicing fees, ongoing surety bond
     and trustee fees, and hedging gains or losses.
(3)  Two  securitizations  were effected  during the  presented  quarters -- one
     public  securitization  (Tier I  securitization)  and one private placement
     (Tier II securitization)



Acquisition   Volume.   The  Company  currently   acquires   receivables  in  63
metropolitan areas in 35 states from approximately 4,100 manufacturer-franchised
auto  dealerships.  The Company  acquires  receivables  on  automobiles  made to
customers  who  exhibit a  favorable  credit  profile  ("Tier  I").  The Company
previously  offered a second  level of  receivable  quality for  customers  with
adequate  credit  quality but who would not qualify for a  receivable  under the
Company's  Tier I quality  criteria  ("Tier II").  To focus on the higher credit
quality and more  profitable  Tier I receivables,  the Company ceased  acquiring
Tier II  receivables  in  January  1999.  Only  0.9% of fiscal  1999  receivable
acquisitions  represented receivables made to customers for Tier II receivables.
During  fiscal  1999,  the Company  extended  operations  into the states of New
Jersey, Delaware and Connecticut.

         The Company's  total  receivable  acquisitions  increased 50.0% to $1.5
billion for the year ended June 30,  1999,  from $971.3  million in fiscal 1998.
The increase is a result of an expanded  dealer base,  decreased  competition in
the auto finance  market,  organizational  changes made in the first  quarter of
fiscal 1999, and a company-wide commitment to reaching the acquisition goals set
by  management.  The  increase  was  slightly  offset  by the  decision  to stop
acquiring Tier II  receivables.  Tier II receivable  acquisitions  totaled $12.6
million for the year ended June 30,  1999,  compared to $24.0  million in fiscal
1998.

         The Company's servicing portfolio increased 23.0% to approximately $2.5
billion at June 30,  1999,  compared to  approximately  $2.0 billion at June 30,
1998. Total serviced  receivables  increased as a result of increased receivable
acquisition volume in excess of receivable repayments and gross charge-offs. The
volume of receivables sold in Securitizations  increased to $1.3 billion for the
year ended June 30, 1999,  from $948.1 million for the prior year. The increased
volume  of  receivables  securitized  is a  result  of an  increase  in  Tier  I
receivable  acquisitions.  Management  continues to focus on controlled  growth,
recognizing  that the  underlying  credit quality of the portfolio is one of the
most important factors associated with long-term profitability.


<PAGE>

Delinquency and Credit Loss Experience

         The Company has seen improvements in delinquency and credit loss ratios
since the  September  30,  1997,  quarter.  These  improvements  are a result of
strategic  changes in the origination  and collection  departments in the latter
part of fiscal 1997.

         Recoveries  as a  percentage  of  gross  charge-offs,  on  the  Tier  I
portfolio,  for the year ended June 30, 1999,  improved  slightly  over the year
ended June 30,  1998.  This  percentage,  however,  remains  below  management's
expectations,  and the Company  continues  to look for ways to improve.  In July
1998, the Company opened a new car franchised dealership in Indianapolis and has
begun retailing a portion of its repossessed  autos through the dealership.  The
Company  anticipates  that  this  method of  repossession  disposal  along  with
stricter  monitoring of the  repossession  and resale process should continue to
increase the recovery percentage to within management's  expectations over time.
The Company  does not  finance  any of its  repossessed  auto  resales.  The net
recovery rate recognized by the dealership  during fiscal 1999 averaged  54.79%.
See "Discussion of Forward-Looking Statements".

         Current credit loss assumptions utilized in the calculation of the Gain
on Sales of  Receivables  during  the year were  4.40% for 1998-C and 1998-D and
4.50% for 1999-A and  1999-B.  The credit loss  assumptions  used in fiscal 1999
were higher than 4.00%  which was used on the Tier I  Securitizations  in fiscal
1998  because  the current  year  Securitizations  included  Tier I, Tier II and
modified  receivables.  Allowance  for estimated  credit  losses on  securitized
receivables (inherent in Retained Interest) was 4.63% at June 30, 1999, compared
to 4.67% at June 30,  1998.  The  Company  recorded  a  pre-tax  charge of $11.9
million  and $23.6  million  during  the years  ended June 30,  1999,  and 1998,
respectively,  on those  pools  which were  deemed to have other than  temporary
impairment   primarily  due  to  the  increase  in  the  estimated  credit  loss
assumptions.

         Tier I Portfolio. Set forth below is certain information concerning the
delinquency  experience  and net credit  losses on the Tier I fixed rate  retail
automobile,  light truck and van receivables serviced by the Company.  There can
be no assurance that future  delinquency  and net credit loss  experience on the
receivables  will be  comparable  to that set forth below.  See  "Discussion  of
Forward-Looking Statements."

<TABLE>
<CAPTION>


                                                      Tier I Delinquency Experience
                                                               At June 30,
                                      ----------------------------------------------------------
                                                  1999                            1998
                                      --------------------------       -------------------------
                                                         (Dollars in thousands)
                                        Number of                       Number of
                                       Receivables      Amount         Receivables      Amount
                                       -----------      ------         -----------      ------

<S>                                      <C>          <C>                <C>          <C>
Servicing portfolio                      213,746      $2,464,371         184,003      $1,978,920
Delinquencies
     30-59 days                            3,962          41,475           3,179          32,967
     60-89 days                            1,614          16,654           1,907          20,819
     90 days or more                         670           6,754             657           6,992
                                           -----      ----------           -----      ----------
Total delinquencies                        6,246      $   64,883           5,743      $   60,778
                                           =====      ==========           =====      ==========
Total delinquencies
    as a % of servicing portfolio           2.92%           2.63%           3.12%           3.07%
</TABLE>


As  indicated  in the above  table,  delinquency  rates  based upon  outstanding
receivable  balances of accounts 30 days past due and over decreased to 2.63% at
June 30, 1999,  from 3.07% at June 30, 1998, for the Tier I portfolio.  This was
the seventh consecutive  quarter of improved or stable  delinquency.  The steady
improvement is a direct result of the Company's  continued focus on refining its
collection  practices and consistent  application of  conservative  underwriting
guidelines.

<TABLE>
<CAPTION>

                                                            Tier I Credit Loss Experience
                                                             For the Years Ended June 30,
                             -----------------------------------------------------------------------------------------
                                        1999                            1998                            1997
                             --------------------------      --------------------------      -------------------------
                              Number of                        Number of                      Number of
                             Receivables        Amount        Receivables       Amount       Receivables       Amount
                             -----------        ------        -----------       ------       -----------       ------
                                                                (Dollars in thousands)
<S>                             <C>          <C>                <C>          <C>                <C>          <C>
Avg. servicing
   portfolio                    202,187      $2,269,177         179,822      $1,922,977         164,858      $1,759,666

Gross charge-offs                 7,752          82,436           7,909          87,325           6,280          70,830
Recoveries                                       32,525                          33,545                          28,511
                                             ----------                      ----------                      ----------
 Net credit losses                           $   49,911                      $   53,780                      $   42,319
                                             ==========                      ==========                      ==========

Gross charge-offs
   as a % of avg
   servicing portfolio             3.83%           3.63%           4.40%           4.54%           3.81%           4.03%
Recoveries as a %
    of gross charge-offs                          39.45%                          38.41%                          40.25%
Net credit losses as a %
    of avg. servicing
    portfolio                                      2.20%                           2.80%                           2.40%
</TABLE>



         As  indicated  in the  table  above,  net  credit  losses on the Tier I
portfolio  totaled  $49.9  million for the fiscal year ended June 30,  1999,  or
2.20% as a  percentage  of the average  servicing  portfolio,  compared to $53.8
million,  or 2.80%,  compared to the same period a year ago.  Net credit  losses
have decreased, and recovery rates have increased over one year ago.

         Tier II portfolio delinquency was 9.42% based on outstanding receivable
balances  of accounts  30 days past due and over at June 30,  1999,  compared to
8.29% at June 30, 1998.  Credit  losses during fiscal 1999 totaled $4.5 million,
or 7.04% as a percentage of the average Tier II servicing portfolio, compared to
$5.3 million, or 7.67%, in fiscal 1998 and $3.3 million or 5.18% in fiscal 1997.
Tier II  delinquency  as a percentage of the servicing  portfolio is expected to
increase,  while not actually deteriorating,  as a result of a declining Tier II
average servicing  portfolio  resulting from the determination to eliminate Tier
II  receivable  acquisitions  effective  January 1,  1999.  See  "Discussion  of
Forward-Looking Statements."



<PAGE>


Results of Operations

         The following table  illustrates the Company's  consolidated  financial
results for the past eight fiscal quarters.  More complete earnings  information
can be found in the Consolidated Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>


                                                  Selected Quarterly Financial Information
                                                For Quarters in the Fiscal Year Ended June 30,
                                             ------------------------------------------------
                                                                    1999
                                             -------------------------------------------------
                                                First       Second        Third        Fourth
                                              --------     --------     --------     --------
                                                            (Dollars in thousands)
<S>                                           <C>          <C>          <C>          <C>
Interest on receivables held for sale         $  8,251     $  6,938     $  8,087     $  9,739

Retained interest and other                      5,479        5,037        4,798        4,694
                                              --------     --------     --------     --------
   Total interest income                        13,730       11,975       12,885       14,433
Interest expense                                 6,952        6,338        6,919        7,242
                                              --------     --------     --------     --------
   Net interest margin                           6,778        5,637        5,966        7,191
Provision for estimated credit losses            2,325        1,275        1,225        1,054
                                              --------     --------     --------     --------

   Net interest margin after provision
      for estimated credit losses                4,453        4,362        4,741        6,137
                                              --------     --------     --------     --------
Gain (loss) on sales
      of receivables, net                        2,706        4,087        6,386        5,954
Servicing fees, net                              4,953        5,469        5,601        5,693
Late charges and other fees                      1,206        1,173        1,442        1,528
                                              --------     --------     --------     --------
   Other revenues                                8,865       10,729       13,429       13,175
                                              --------     --------     --------     --------

Total operating expenses                         9,991       10,309       11,241       11,047
                                              --------     --------     --------     --------
Earnings (loss) before provision
  (benefit) for income taxes                     3,327        4,782        6,929        8,265
Provision (benefit) for income taxes             1,270        1,859        2,665        3,185
                                              --------     --------     --------     --------

   Net earnings (loss)                        $  2,057     $  2,923     $  4,264     $  5,080
                                              ========     ========     ========     ========


                                                  Selected Quarterly Financial Information
                                                For Quarters in the Fiscal Year Ended June 30,
                                             ------------------------------------------------
                                                                    1998
                                             -------------------------------------------------
                                                First       Second        Third        Fourth
                                              --------     --------     --------     --------
                                                            (Dollars in thousands)
Interest on receivables held for sale         $  6,627      $  6,473      $  7,133     $  7,638

Retained interest and other                      3,113         3,191         3,230        3,388
                                              --------      --------      --------     --------
   Total interest income                         9,740         9,664        10,363       11,026
Interest expense                                 6,053         6,167         6,990        6,897
                                              --------      --------      --------     --------
   Net interest margin                           3,687         3,497         3,373        4,129
Provision for estimated credit losses            1,505         1,770         1,900        2,875
                                              --------      --------      --------     --------

   Net interest margin after provision
      for estimated credit losses                2,182         1,727         1,473        1,254
                                              --------      --------      --------     --------
Gain (loss) on sales
      of receivables, net                      (10,847)        2,020         3,113       (6,212)
Servicing fees, net                              4,745         4,803         4,742        4,781
Late charges and other fees                      1,020           985         1,065        1,017
                                              --------      --------      --------     --------
   Other revenues                               (5,082)        7,808         8,920         (414)
                                              --------      --------      --------     --------

Total operating expenses                         8,623         9,036         8,822        9,065
                                              --------      --------      --------     --------
Earnings (loss) before provision
  (benefit) for income taxes                   (11,523)          499         1,571       (8,225)
Provision (benefit) for income taxes            (4,656)         (711)          654       (3,143)
                                              --------      --------      --------     --------

   Net earnings (loss)                        $ (6,867)     $  1,210      $    917     $ (5,082)
                                              ========      ========      ========     ========
</TABLE>

Years Ended June 30, 1999 and 1998

         Net earnings (loss) increased to $14.3 million, or $1.08 per share, for
the year ended June 30, 1999,  compared to a loss of $9.8 million,  or $0.74 per
share,  for the year  ended June 30,  1998.  The  increase  in net  earnings  is
primarily a result of higher gains recognized on the fiscal 1999  Securitization
transactions of $31.0 million pre-tax ($19.2 million net of tax) compared to the
fiscal 1998 Securitization  transactions of $19.6 million pre-tax ($12.0 million
net of tax). Gains on the Securitizations  were offset by charges taken for pool
by pool  impairments  of the Retained  Interest  asset of $11.9 million  pre-tax
($7.4 million net of tax) and $23.6 million  pre-tax  ($14.2 million net of tax)
for the years ended June 30, 1999 and 1998, respectively.

         Net  interest  margin  after  provision  for  estimated  credit  losses
increased 196.8% to $19.7 million for the year ended June 30, 1999,  compared to
$6.6  million for fiscal 1998.  The  increase in the net  interest  margin after
provision for estimated credit losses as compared to the prior year is primarily
a result of an increase in retained interest and other interest income.

         Interest on receivables  held for sale increased 18.5% to $33.0 million
for the year ended June 30, 1999,  compared to $27.9  million for the year ended
June 30, 1998.  The increase in interest on  receivables  held for sale resulted
from an increase in the average outstanding balance of receivables held for sale

<PAGE>

to $236.3  million for the year ended June 30,  1999,  from  $206.2  million for
fiscal 1998, which was a result of increased receivable  acquisitions.  Interest
earned on the Tier II  portfolio  was  approximately  $795,000  for fiscal  1999
compared to approximately $5.2 million in fiscal 1998.

         Retained  interest and other interest  income  increased 54.8% to $20.0
million for the year ended June 30, 1999, compared to $12.9 million for the year
ended June 30, 1998. The increase in retained interest and other interest income
relates  primarily  to the  implementation  of the "cash out"  method of valuing
Retained  Interest  at June 30,  1998,  which  increased  the  initial  discount
recorded  from the sale of  receivables  resulting in a  subsequent  increase in
discount  accretion,  but was  offset by lower  collection  and  spread  account
interest.  Retained  interest  and other  interest  income  related to  discount
accretion  was $18.7  million and $7.3 million for the years ended June 30, 1999
and 1998,  respectively.  Retained interest and other interest income related to
restricted cash accounts  (collection and spread  accounts) was $1.3 million for
the year ended June 30,  1999,  compared to $5.6 million for the year ended June
30, 1998. Cash collection  accounts  represent  customer  payments held in trust
until  disbursement  by the trustee.  Interest is earned by the Company on these
funds prior to  distribution  of such funds to investors  and  servicer.  Spread
Account  balances  represent  credit  enhancement on the securitized  pools; the
Spread  Account  requirements  are  affected  by the  size  of  the  securitized
servicing  portfolio  as well as loss and  delinquency  trends which may trigger
higher spread requirements.

         Interest  expense  increased  5.2% to $27.5  million for the year ended
June 30, 1999, from $26.1 million for the year ended June 30, 1998. The increase
primarily  related to higher average  borrowing  needs due to higher  receivable
acquisitions  for the year ended June 30, 1999 compared to 1998,  but was offset
by lower interest on long-term debt as a result of a principal payment in August
1998.  Interest  expense  related to long-term  debt was $17.8 million and $19.5
million for the years ended June 30,  1999 and 1998,  respectively.  The average
outstanding  warehouse  borrowings  (excluding the prefunded  amount) was $170.4
million for the year ended June 30,  1999,  compared  to $111.2  million for the
year ended June 30, 1998.  The average  cost of funds on the combined  long-term
debt and warehouse  borrowings  (excluding the prefunded amount),  net of income
earned,  decreased to 7.39% for the year ended June 30, 1999, from 7.86% for the
year ended June 30, 1998.  The weighted  average cost of funds on the  Warehouse
Credit Facility, including the prefunded amount, net of income earned, was 5.09%
and 5.88% for the years  ended June 30,  1999 and 1998,  respectively.  Interest
rates on the Credit  Facility are variable in nature and are affected by changes
in market rates of interest.

         Provision for estimated credit losses decreased to $5.9 million for the
year ended June 30,  1999,  compared to $8.1 million for the year ended June 30,
1998.  The decrease is primarily  related to  improvement  in the quality of the
held for sale portfolio and a decrease in the amount of modified receivables.

         Gain (Loss) on Sales of  Receivables,  net and interest rate risk. Gain
(Loss) on Sales of  Receivables  continues  to be a  significant  element of the
Company's net earnings.  The Gain (Loss) on Sales of  Receivables is affected by
several factors, primarily the amount of receivables securitized, the net spread
and the level of estimated  credit  losses.  During the fourth quarter of fiscal
1999, the Company refined its methodology of determining  discount rates used to
calculate the gain on sales of receivables  and value Retained  Interest.  See -
"Financial  Condition - Retained  Interest in Securitized  Assets  below".  This
change had the effect of reducing gain on sale of  receivables  by $3.1 million,
pretax  ($1.9  million  net of  taxes)  or  $0.15  per  share.  Gain on sales of
receivables  totaled $19.1 million for the year ended June 30, 1999, compared to
a loss of $11.9  million for the year ended June 30, 1998.  The increase in Gain
(Loss) on Sales of Receivables is primarily a result of higher gains  recognized
on fiscal 1999 securitization transactions compared to fiscal 1998. The gain for
the year ended June 30, 1999 and 1998,  consisted of gains on new securitization
transactions  of $31.0  million and $19.6  million,  offset by charges for other
than  temporary  impairments  of Retained  Interest  of $11.9  million and $23.6
million,  respectively.  The net gain for the year ended June 30, 1999, was also
higher than the prior year due to a $7.9  million  charge in fiscal 1998 related
to the implementation of the "cash out" method of valuing Retained Interest. The
increase  in the Gain (Loss) on Sales of  Receivables  is also  attributed  to a
35.9%  increase in the volume of  receivables  securitized  to $1.3  billion for
fiscal  1999  compared  to $948.1  million for fiscal  1998.  Additionally,  the
weighted average net spread increased to 5.85% for the year ended June 30, 1999,
compared to 5.28% for the year ended June 30,  1998.  The  weighted  average net
spread  includes four Tier I  securitizations  for the year ended June 30, 1999,
and four Tier I and one Tier II securitizations for the year ended June 3, 1998.
As indicated below,  credit loss  assumptions on the fiscal 1999  securitization


<PAGE>

transactions  were  4.40% on 1998-C  and  1998-D  and 4.50% on 1999-A and 1999-B
compared to 4.00% on the Tier I transactions  throughout fiscal 1998. The credit
loss  assumptions  on the fiscal  1999  Securitizations  were based on  combined
securitizations of Tier I, Tier II and modified  receivables.  The allowance for
credit losses was 12.00% for the Tier II fiscal 1998  securitization.  Indicated
in  the  table  below  are  the  assumptions  related  to the  Tier I  quarterly
Securitizations for fiscal 1999 and 1998:
<TABLE>
<CAPTION>

                                                         1st Qtr           2nd Qtr            3rd Qtr           4th Qtr
                                                         -------           -------            -------           -------
Fiscal 1999 Securitizations
<S>                                                      <C>               <C>                <C>               <C>
                                                         1998 - C          1998 - D           1999 - A          1999 - B
Credit loss assumption                                      4.40%              4.40%              4.50%            4.50%
Annual prepayment speed assumption                         25.00%             25.00%             28.00%           28.00%
Discount rate assumption                                    9.58%              9.76%              9.84%           14.28%
Weighted average remaining maturity (in months)             68.8               69.1               71.5             71.7

Fiscal 1998 Securitizations
                                                         1997 - C          1997 - D           1998 - A          1998 - B
Credit loss assumption                                      4.00%              4.00%              4.00%            4.00%
Annual prepayment speed assumption                         28.46%             28.60%             28.04%           25.00%
Discount rate assumption                                   10.96%             10.67%             10.61%           10.46%
Weighted average remaining maturity (in months)             70.7               67.1               70.8             67.5
</TABLE>



         The  Company  adjusts  its  pricing  frequently  and  employs a hedging
strategy to maintain an adequate net spread in the ensuing Securitization, while
mitigating  the risks of  increasing  interest  rates and the  volatility in net
spreads. See "Discussion of Forward-Looking Statements."

         Gross and net spreads.  Market interest rates were lower in fiscal 1999
as compared to the corresponding periods of fiscal 1998. Gross spread is defined
as the difference  between the weighted average receivable rate and rate born by
the related Asset-backed Securities.  Net spread is defined as gross spread less
servicing fees, upfront costs, ongoing credit enhancement fees and trustee fees,
and hedging gains or losses.  Net spreads  increased  steadily over the year and
reached record amounts in the third and fourth quarter  Securitizations of 6.16%
and 6.75%,  respectively.  Net spreads are expected to decline from these record
spreads due to increases in treasury rates.

         Management is currently targeting net spreads of 5.50% to 6.00% on Tier
I  Securitizations  (assuming a pricing spread for Asset-backed  Securities over
the two-year  treasury note of 100 basis  points).  Management  believes that by
targeting  a gross  spread of 7.50% to 8.00%  between  receivable  rates and the
two-year  treasury  rate,  that  these net  spreads  can be  achieved.  Although
management  believes  these  net  spreads  can  be  achieved,  material  factors
affecting the net spreads are difficult to predict and could cause  management's
projections to be materially inaccurate. These include current market conditions
with respect to interest rates and demand for Asset-backed  Securities generally
and for  securities  issued in  Securitizations  sponsored by the  Company.  See
"Discussion of Forward-Looking Statements."

         Servicing fees, net consists primarily of contractual servicing fees of
1.00% on Tier I  Securitizations.  Servicing  fees, net increased 13.9% to $21.7
million for the year ended June 30, 1999, compared to $19.1 million for the year
ended  June 30,  1998 as a result  of a higher  average  securitized  receivable
portfolio.  The average securitized receivable portfolio increased 16.9% to $2.1
billion for the year ended June 30,  1999,  from $1.8 billion for the year ended
June 30, 1998.

         Late  charges and other fees  increased  30.9% to $5.3  million for the
year ended June 30,  1999,  from $4.1  million for the year ended June 30, 1998.
Other fees consist  primarily of late charges and other fee income and the gross
profit from the  dealership  sales.  The increase in the current  year  resulted
primarily from the dealership gross profit on sales of $751,000 for fiscal 1999.
Additionally,  late  charges and other fee income  increased  for the year ended
June 30,  1999,  compared to 1998.  The  increase in late  charges and other fee
income is due to the increase in receivable acquisitions and servicing portfolio
over fiscal 1998.


<PAGE>

         Salaries and benefits expense  increased 21.3% to $23.6 million for the
year ended June 30, 1999,  from $19.4  million for the year ended June 30, 1998.
This  increase  resulted  primarily  from an  increase in  full-time  equivalent
("FTE")  employees.  Average  FTE's for the year ended June 30,  1999,  were 528
compared to 466 for the year ended June 30,  1998.  The Company has  experienced
growth  primarily  in  accounting,  operations  and retail  operations,  and the
Company has  experienced a decrease in the number of collection  employees.  The
increase in the operations area is in response to a growing servicing portfolio.
The increase in retail  operations is a result of growing the new car franchised
dealership  business  that  was  opened  in  July  1998.  The  decrease  in  the
collections  area  resulted  from improved  collection  strategies  and internal
efficiences.  Other  increases in salary and benefit  expense were due to annual
merit  increases for the Company's  existing  employees  and  performance  based
annual incentive bonuses.

         Other  general  and  administrative   expense  includes  occupancy  and
equipment  costs,  outside  and  professional  services,   receivable  expenses,
promotional  expenses,  travel,  office  supplies and other.  Other  general and
administrative  expense increased 18.0% to $19.0 million for the year ended June
30, 1999,  from $16.1 million for the year ended June 30, 1998.  The increase in
other general and administrative expenses is partially attributed to the opening
of  the  new  car  franchised  dealership.  Additionally,   receivable  expenses
increased  as  receivable  acquisitions  were higher in fiscal 1999  compared to
fiscal 1998.  Total operating  expenses  (including  salaries and benefits) as a
percentage of the average servicing  portfolio increased to 1.82% from 1.78% for
the year ended June 30, 1999 and 1998, respectively.

Years Ended June 30, 1998 and 1997

         Net earnings  (loss)  decreased to ($9.8)  million or ($0.74) per share
for the year ended June 30, 1998, compared to $5.9 million or $.45 per share for
the year ended June 30, 1997. The decrease in net earnings is primarily a result
of lower gains  recognized  on the fiscal 1998  securitization  transactions  of
$19.6  million  pre-tax  ($12.0  million net of tax) compared to the fiscal 1997
securitization transactions of $32.1 million pre-tax ($19.1 million net of tax).
Gains on the  Securitizations  were  offset  by  charges  taken for pool by pool
impairments  of the Retained  Interest  asset of $23.6  million  pre-tax  ($14.2
million net of tax) and $31.2 million pre-tax ($18.5 million net of tax) for the
years ended June 30, 1998 and 1997,  respectively.  Net earnings also  decreased
due to the  implementation  of valuing Retained  Interest on a "cash out" rather
than  "cash  in" basis  effectively  reducing  after-tax  net  earnings  by $4.9
million.  Exclusive of the  after-tax  other than  temporary  Retained  Interest
impairment  charges (and the after-tax  "cash out" charge for fiscal 1998),  net
earnings  would  have been $9.3  million  or $0.70  per  share for  fiscal  1998
compared to $24.4 million and $1.85 per share for fiscal 1997.

         The "cash out" method  estimates  Retained  Interest by discounting the
expected  excess cash flows from the time they are projected to be released from
the  Spread  Account  using a  discount  rate  which  the  Company  believes  is
commensurate  with the risks  involved.  Historically  the Company has estimated
Retained  Interest,  recognized  as a  component  of the gain on  sale,  and its
subsequent fair value by discounting the projected  Future  Servicing Cash Flows
from the time they are received by the respective  trust,  the "cash in" method.
Use of the "cash out" method resulted in a larger discount of estimated Retained
Interest due to the timing of the expected  excess cash flows  released from the
Spread  Account.  Additionally,  interest  income earned on the Spread  Accounts
became a component of the expected excess cash flows and beginning in the fourth
quarter of fiscal 1998, are no longer recognized as interest income.  Offsetting
the lower gain on sales and the reduction of interest  earned was an increase in
the accretion of discounted Retained Interest.

         Net  interest  margin  after  provision  for  estimated  credit  losses
decreased  64.8% to $6.6 million for the year ended June 30,  1998,  compared to
$18.8 million for fiscal 1997. The decreased interest margin after provision for
credit losses as compared to prior year is a result of a combination  of factors
but is  primarily  due to a decrease  in the average  receivables  held for sale
balance and an increase in the provision for estimated credit losses.


<PAGE>

         Interest on receivables  held for sale decreased 17.8% to $27.9 million
for the year ended June 30, 1998,  compared to $33.9 million for year ended June
30, 1997. The decrease in interest on receivables  held for sale resulted from a
decrease  in the average  outstanding  balance of  receivables  held for sale to
$206.2 million for the year ended June 30, 1998,  from $228.3 million for fiscal
1997, which was a result of decreased  receivable  acquisitions during the first
three quarters of fiscal 1998. Interest earned during fiscal 1999 on the Tier II
and marine portfolios was approximately $5.2 million and $801,000, respectively.

         Retained  interest and other interest  income  decreased 12.8% to $12.9
million for the year ended June 30, 1998, compared to $14.8 million for the year
ended June 30, 1997.  Retained interest and other interest income is composed of
interest on  restricted  cash  accounts  (collection  and spread),  accretion of
discount  and rebates  received in excess of original  estimate for fiscal 1997.
The decrease is partially  due to the  reclassification  of  collection  account
interest. As a result of the implementation of SFAS 125, the Company established
a Servicing Asset related to all securitization transactions after UACSC 1996-D.
The Servicing Asset related to fiscal 1998 Securitizations  totaled $2.3 million
compared to $1.5 million for fiscal 1997 Securitizations. Such amounts equal the
discounted  projected cash flow of the interest earned on the collection account
and are  deemed to be  additional  servicing  compensation.  Such  amounts  were
recognized as a component of the gain on sale with the discount being  accretive
into income in future  periods.  Establishment  of the  Servicing  Asset had the
effect of reducing  other  interest  income by $1.1 million and $153,000 for the
years ended June 30, 1998 and 1997,  respectively.  The decrease  related to the
establishment  of the  Servicing  Asset was partially  offset by higher  average
balances on the cash  collection  and Spread  Accounts.  The average  balance of
these accounts was $139.2 million in fiscal 1998,  compared to $127.4 million in
fiscal 1997. The increased  restricted  cash balances  result from the increased
size of the securitized  servicing  portfolio.  Average  securitized  receivable
balances were $1,793.3 million during fiscal 1998,  compared to $1,445.4 million
in fiscal 1997. The decrease in retained  interest and other interest  income is
also a result of the  reclassification of rebates received in excess of original
estimate.  During fiscal 1998,  rebates received in excess of original estimate,
inherent in the gain  calculation,  were  recorded  as a  reduction  of Retained
Interest,  but were recorded as other interest income in fiscal 1997 and totaled
$2.3 million.  The change in recording  excess rebates was made during the third
quarter of fiscal 1997. Cash collection  accounts  represent  customer  payments
held in trust  until  disbursement  by the  trustee.  Interest  is earned by the
Company on these  funds prior to  distribution  of such funds to  investors  and
servicer.   Spread  Account  balances   represent  credit   enhancement  on  the
securitized  pools; the Spread Account  requirements are affected by the size of
the securitized servicing portfolio as well as loss and delinquency trends which
may trigger higher spread requirements.

         Interest  expense  increased  1.6% to $26.1  million for the year ended
June 30, 1998, from $25.7 million for the year ended June 30, 1997. The increase
relates to the  issuance  of $65.0  million in Senior  Notes  during  March 1997
resulting in higher long-term debt expense for all four quarters of fiscal 1998,
but only the  fourth  quarter  of  fiscal  1997.  Interest  expense  related  to
long-term  debt was $19.5 million and $15.7 million for the years ended June 30,
1998 and 1997,  respectively.  The  increase  in  interest  expense  related  to
long-term debt was offset by a decrease in the average warehouse borrowing needs
for fiscal 1998 compared to fiscal 1997. The average outstanding borrowings were
$111.2 million for the year ended June 30, 1998,  compared to $174.2 million for
the year  ended  June  30,  1997.  The  average  cost of  funds on the  combined
long-term  debt and warehouse  borrowings  increased to 7.86% for the year ended
June 30, 1998,  from 7.39% for the year ended June 30, 1997.  Interest  rates on
the Credit  Facilities  are  variable  in nature and are  affected by changes in
market rates of interest.

         Provision for estimated credit losses increased to $8.1 million for the
year ended June 30,  1998,  compared to $4.2 million for the year ended June 30,
1997.  Increased  provisions  were made in  response  to  increased  losses  and
delinquency  trends being  experienced  by the Company during the latter part of
fiscal  1997 and the first  quarter  of  fiscal  1998 and the  consumer  finance
industry in general.  The increase in the provision was also related to a higher
balance of modified  receivables  at June 30,  1998,  compared to June 30, 1997,
that were not eligible  for  Securitization  until the fourth  quarter of fiscal
1998.


<PAGE>

         Gain (Loss) on Sales of  Receivables,  net and interest rate risk. Gain
(Loss) on Sales of  Receivables  continues  to be a  significant  element of the
Company's net earnings.  The Gain (Loss) on Sales of  Receivables is affected by
several factors, primarily the amount of receivables securitized, the net spread
and the  level  of  estimated  credit  losses.  Historically,  the  Company  has
estimated the Future  Servicing Cash Flows recognized as a component of the gain
on sale by discounting the projected  Future  Servicing Cash Flows from the time
they are received by the respective trust. However,  management  implemented the
"cash out" method during the fourth  quarter of fiscal 1998 which  discounts the
expected  Future  Servicing  Cash Flows from the time they are released from the
Spread  Account  to the  Company.  Loss on sales of  receivables  totaled  $11.9
million for the year ended June 30, 1998, compared to a gain of $963,000 for the
year ended June 30, 1997. The decrease in Gain (Loss) on Sales of Receivables is
primarily  a result of lower  gains  recognized  on fiscal  1998  securitization
transactions compared to fiscal 1997. The gain for the years ended June 30, 1998
and 1997, consisted of gains on new securitization transactions of $19.6 million
and $32.1 million,  (including  $2.3 million and $1.5 million of Servicing Asset
income),  offset by charges  for other than  temporary  impairments  of Retained
Interest of $23.6 million and $31.2 million,  respectively. The net gain for the
year ended June 30,  1998,  was also lower than prior year due to a $7.9 million
charge  related  to the  implementation  of the "cash  out"  method  of  valuing
Retained  Interest.  The decrease in the Gain (Loss) on Sales of  Receivables is
also attributed to a 21.9% decrease in the volume of receivables  securitized to
$948.1  million for fiscal 1998,  compared to $1,214.3  million for fiscal 1997.
Additionally,  the weighted  average net spread  decreased to 5.28% for the year
ended June 30, 1998,  compared to 5.36% for the year ended June 30, 1997. Credit
loss assumptions on the Tier I transactions  were 4.00%  throughout  fiscal 1998
compared to 3.25%  throughout  most of fiscal  1997.  The  allowance  for credit
losses was 12.00% for the Tier II fiscal 1998 Securitization  compared to 10.00%
for the two previous Securitizations.

         Gross and net spreads.  Market interest rates were lower in fiscal 1998
as compared to the  corresponding  periods of fiscal 1997. Net spreads peaked in
the third  quarter of fiscal 1997 at 5.43% and  fluctuated  over the  succeeding
five quarters between 5.06% and 5.38%.

         Servicing  fees,  net is  comprised  of fees  earned by the  Company as
Servicer of the securitized  receivable  portfolio  (typically 1.00% per annum).
Servicing fees, net increased 12.7% to $19.1 million for the year ended June 30,
1998,  compared to $16.9  million for the year ended June 30, 1997.  The average
securitized  receivable  portfolio  increased 24.1% to $1.8 billion for the year
ended June 30, 1998, from $1.4 billion for the year ended June 30, 1997.

         Late charges and other fees increased 7.0% to $4.1 million for the year
ended June 30, 1998,  from $3.8  million for the year ended June 30,  1997.  The
increase in fiscal 1998  resulted  primarily  from  increases in late charge fee
income to $3.3  million  from $2.6 million in the prior year but was offset by a
decrease in other fees.  The increase in late charge fee income is primarily due
to the  increase  in the  servicing  portfolio  as well as higher  delinquencies
experienced during fiscal 1998 compared to fiscal 1997.

         Salaries and benefits expense  increased 24.0% to $19.4 million for the
year ended June 30, 1998,  from $15.7  million for the year ended June 30, 1997.
This increase  resulted  primarily from an increase in FTE's.  Average FTE's for
the year ended June 30,  1998,  were 466 compared to 368 for the year ended June
30, 1997. The Company  experienced  growth in  collections,  human resources and
training,  operations,  systems  and retail  operations.  The  increases  in the
collections  and  operations  areas  were  in  response  to an  increase  in the
servicing  portfolio  and an  increase  in  delinquencies  during  fiscal  1998.
Increases in human  resources  and training  resulted  from a focus on providing
better  training to employees.  The systems area increased  because of a Company
commitment to improve  internal  analysis and reporting of corporate  financial,
origination and collection data that is now being used to improve operations and
lead to a stronger  more  profitable  portfolio.  The  increase in the number of
reconditioning and remarketing  operations employees was due to the opening of a
new automotive dealership in July 1998 to facilitate  remarketing of repossessed
vehicles.  Increases in salary and benefit expense were also due to annual merit
increases for the Company's existing employees.


<PAGE>

         Other  general  and  administrative   expense  includes  occupancy  and
equipment  costs,  outside  and  professional  services,   receivable  expenses,
promotional  expenses,  travel,  office  supplies and other.  Other  general and
administrative  expense  increased 8.7% to $16.1 million for the year ended June
30, 1998,  from $14.8 million for the year ended June 30, 1997.  The increase in
other general and administrative expense was primarily attributed to an increase
in consulting and professional  fees for the Activity Based  Management  ("ABM")
consulting project that began in July 1997 and the non-recurring fees related to
the change in commercial domicile for five of the Company's subsidiaries. ABM is
used as a tool to better  manage  the  Company's  business  and to  improve  the
pricing of products and overall operating  efficiency.  The change in commercial
domicile  provided a  one-time  income tax  benefit  of  $860,000  in the second
quarter of fiscal 1998 which was recorded as a component of income tax expense.


Financial Condition

         Receivables  held for sale,  net and servicing  portfolio.  Receivables
held for sale, net includes the principal  balance of receivables held for sale,
net of unearned discount, allowance for estimated net credit losses, receivables
in process,  and prepaid Dealer Premiums.  Receivables,  net increased to $267.3
million at June 30, 1999,  from $118.3  million at June 30, 1998.  This increase
was primarily due to the timing of the fiscal 1999 fourth quarter Securitization
in May compared to the fiscal 1998 fourth  quarter  Securitization  in June. The
timing difference resulted in more receivables on balance sheet at June 30, 1999
compared to June 30, 1998. The increase was offset by the  Securitization of all
eligible  Tier II  receivables  and  approximately  $11.0  million  of  modified
receivables.  Allowance for credit losses on receivables  held for sale was $2.8
million at June 30, 1999, compared to $1.9 million at June 30, 1998. The Company
serviced $2.3 billion and $1.9 billion in securitized receivables, and the total
servicing  portfolio  was $2.5  billion and $2.0 billion as of June 30, 1999 and
1998, respectively.

         Retained interest in securitized assets ("Retained Interest"). Retained
Interest increased $19.3 million to $190.9 million at June 30, 1999, from $171.6
million at June 30, 1998. The Retained  Interest balance  increased or decreased
by amounts capitalized upon consummation of the Tier I Securitizations including
estimated Dealer Premium rebates, collections,  accretion of discount, change in
spread  accounts,  impairment  and net change in unrealized  gain. The Company's
collections are the receipt of the net interest spread.

         The  following  table  illustrates  the  components  of the increase in
Retained Interest:

Amounts capitalized (including estimated dealer rebates)      $     80,518
Collections                                                        (57,712)
Accretion of discount                                               18,700
Change in spread accounts                                            1,644
Impairment                                                         (11,917)
Net change in unrealized gain                                      (11,961)
                                                              ------------
  Increase in Retained Interest                               $     19,272
                                                              ============



         Beginning in the fourth quarter of fiscal 1999, the Company began using
tiered  discount  rates based on a pool's  specific risk factors up to 900 basis
points over the applicable  U.S.  Treasury Rate. This change in estimate had the
effect  of  reducing  Retained  Interest  by $11.8  million  at June  30,  1999.
Allowance for estimated credit losses on securitized  receivables is included as
a component of Retained  Interest.  At June 30, 1999, the allowances  related to
both Tier I and Tier II securitized receivables totaled $104.4 million, or 4.63%
of the total securitized  receivable  portfolio,  compared to $90.2 million,  or
4.67%, at June 30, 1998. The Company's assumptions for valuing Retained Interest
on a "cash out" basis at June 30, 1999,  include the Company's  latest estimates
for net  credit  losses of 4.00% to 6.39% on Tier I  receivables  and  12.00% to
14.72% on Tier II receivables as a percentage of original principal balance over
the life of  receivables,  annual  prepayment  estimates  ranging from 22.10% to
28.00% on Tier I  receivables  and 17.06% to 20.49% on Tier II  receivables  and
discount rates ranging from 8.06% to 14.49% on Tier I receivables  and 12.09% to
15.43% on Tier II receivables.  The weighted average discount rate used to value
Retained Interest at June 30, 1999 and 1998 was 12.83% and 9.33%,  respectively.
Impairment of Retained Interest, an available-for-sale  security, is measured on
a disaggregate  basis (pool by pool) in accordance  with SFAS 115. See - "Note 1
of the Consolidated Financial Statements."


<PAGE>

         Amounts due under credit  facility  and  long-term  debt.  Beginning in
August 1995, after the Spin-off from its parent, the revolving Credit Facilities
and Senior Notes constituted the Company's primary funding sources.  The Company
issued in a private  placement  $46.0  million in Senior  Subordinated  Notes in
April 1996 and $65.0  million in Senior Notes in March 1997.  The balance of the
Credit Facility and the Senior and Senior  Subordinated Notes was $384.5 million
at June 30, 1999,  compared to $294.1  million at June 30, 1998. The increase in
borrowings  was  primarily  related to the timing of the  Securitization  in the
fourth quarter of fiscal 1999 but was offset by a required  principal payment on
the Company's Senior Note in August 1998 of $22.0 million. The June 1999 quarter
Securitization  was effected  during the second  month of the quarter  while the
fiscal 1998 fourth quarter Securitization was effected during the third month of
the quarter.  The timing difference  resulted in the Company borrowing a greater
amount in respect of receivable  acquisitions for more days after the closing of
the securitization  transaction in the quarter ended June 30, 1999,  compared to
the quarter ended June 30, 1998.

         Current and  deferred  income taxes  payable.  The current and deferred
income taxes payable  totaled  $16.0 million at June 30, 1999,  compared to $9.6
million at June 30, 1998.  The increase is a result of current year net earnings
compared  to a prior year net loss and as a result of the  deferral of a portion
of the  gain on sale of  receivables  for the  Securitizations  effected  during
fiscal 1999 in excess of previously deferred income recognized currently for tax
purposes.


<PAGE>

Liquidity and Capital Resources

         Sources and uses of cash in operations. The Company's business requires
significant  amounts of cash to support  operations.  Its  primary  uses of cash
include:  (i) acquisitions and financing of receivables;  (ii) payment of Dealer
Premiums;  (iii) securitization costs including cash held in Spread Accounts and
similar  cash  collateral  accounts  under the Credit  Facility;  (iv)  servicer
advances of  payments  on  securitized  receivables  pursuant to  securitization
trusts;  (v) losses on hedging  transactions  realized  in  connection  with the
closing of securitization transactions where interest rates have declined during
the period  covered by the hedge;  (vi)  operating  expenses;  (vii)  payment of
income taxes; and (viii) interest  expense.  The Company's  sources of cash from
operations  include:  (i) standard servicing fees;  generally 1.00% per annum of
the Tier I securitized portfolio; (ii) Future Servicing Cash Flows; (iii) Dealer
Premium rebates;  (iv) gains on hedging transactions realized in connection with
the closing of securitization  transactions  where interest rates have increased
during the periods  covered by the hedge;  (v)  interest  income;  (vi) sales of
receivables  in  securitization  transactions;  and (vii)  proceeds from sale of
interest-only strips in conjunction with securitization  transactions.  Net cash
from operating  activities decreased to ($212.1) million for the year ended June
30, 1999,  from net cash from  operating  activities of ($37.6)  million for the
year ended June 30, 1998. The decrease was primarily  attributable to a decrease
in receivables  securitized  relative to receivables  acquired and a decrease in
proceeds  from  the  sale of  interest-only  strips.  Proceeds  from the sale of
interest-only  strips generated $2.8 million in cash for the year ended June 30,
1999, compared to $13.9 million for the year ended June 30, 1998. In structuring
a  securitization,  the Company  considers  many factors in order to achieve the
most cost effective  structure  which provides the largest  proceeds.  Given the
asset-backed   market,   the   available   net   spread  in  the   fiscal   1999
securitizations,  and the  Company's  cash  position,  the Company chose to sell
fewer interest only  securities  than in the prior year. The decrease was also a
result of gain on sale of  receivables  of $39.2 million for the year ended June
30,  1999,  compared  to $19.3  million  for 1998,  respectively.  Net cash from
investing  activities  was $54.3  million and $25.8  million for the years ended
June 30, 1999 and 1998,  respectively.  The increase  over prior year relates to
higher  collection on Retained Interest due to lower net credit losses offset by
an increase in the purchase of property for the new car franchised dealership.

         Derivative  financial  instruments.   Derivative  financial  instrument
transactions  may  represent  a source  or a use of cash  during a given  period
depending on changes in interest rates. During fiscal 1999, derivative financial
instrument transactions have required a net use of cash of $3.2 million compared
to $2.7 million used during fiscal 1998.

         Financing  activities.  Net cash from  financing  activities for fiscal
1999 was $90.3 million compared to $28.7 million in the prior year. The increase
was a result of an increase in warehouse  borrowings at June 30, 1999,  relative
to the  balance  at June 30,  1998,  offset by a required  principal  payment of
long-term  debt of $22.0  million in August  1998.  The Company has  substantial
capital  requirements to support its ongoing operations and anticipated  growth.
The  Company's  sources  of  liquidity  are  currently  funds  from  operations,
securitization transactions and external financing including long-term debt, and
the Credit Facility.  Historically,  the Company has used the  securitization of
receivable pools as its primary source of long-term funding. In August 1999, the
Company  established an additional  source of liquidity through a securitization
arrangement  with a commercial  paper conduit which will be available for future
use as  management  deems  appropriate.  Such  facility has a capacity of $250.0
million, all of which is currently available. Securitization transactions enable
the Company to improve its liquidity,  to recognize  gains from the sales of the
receivable pools while maintaining the servicing rights to the receivables,  and
to control  interest  rate risk by  matching  the  repayment  of amounts  due to
investors in the securitization  transaction with the actual cash flows from the
securitized  assets.  Between  securitization  transactions,  the Company relies
primarily on the Credit Facility to fund ongoing  receivable  acquisitions  (not
including Dealer Premiums).  In addition to receivable  acquisition funding, the
Company  also  requires  substantial  capital  on an  ongoing  basis to fund the
advances  of  Dealer  Premiums,   securitization  transaction  costs,  servicing
obligations and other cash  requirements  described above. The Company's ability
to borrow under the Credit Facility is dependent upon its compliance

<PAGE>

with the terms and conditions thereof. The Company's ability to obtain successor
facilities  or  similar  financing  will  depend on,  among  other  things,  the
willingness  of financial  institutions  to  participate  in funding  automobile
financing  business  and  the  Company's  financial  condition  and  results  of
operations.   Moreover,  the  Company's  growth  may  be  inhibited,   at  least
temporarily,  if the Company is not able to obtain  additional  funding  through
these or other  facilities  or if it is  unable to  satisfy  the  conditions  to
borrowing  under the Credit  Facility.  The Company  consistently  assesses it's
long-term  receivable funding  arrangements with a view to optimizing cash flows
and reducing costs. In anticipation of some volatility in the  asset-backed  and
swap markets during the final calendar  quarter of 1999 the Company is currently
exploring  its options for funding  during that period.  The Company has several
options for funding in the last calendar quarter including,  but not limited to,
a public asset backed securitization, a sale into the recently closed commercial
paper  facility,  a private sale, or temporarily  holding the  receivables.  The
Company will continue to evaluate  market  conditions  and  available  liquidity
throughout the quarter. If the Company's cash position and available  short-term
funding  is  sufficient,  there  is a  possibility  that  the  Company  may  not
securitize during the final quarter of calendar 1999.

         Warehouse  facility.  The Company has  borrowing  arrangements  with an
independent  financial  institution for a $500.0 million Credit Facility that is
insured by a surety bond provider to fund  receivable  acquisitions.  The Credit
Facility provides funding for receivable  acquisitions at a purchase price of up
to 100% of the outstanding principal balance of eligible receivables at the time
of purchase  and the advance  rate may be adjusted  based on an actual net yield
percentage  that is measured  monthly on all  receivables in the  Warehouse.  In
connection with the annual renewal of the Credit Facility in September 1999, the
facility size was increased from $450.0 million to $500.0  million.  At June 30,
1999 and 1998, $185.5 million and $73.1 million was utilized,  and an additional
$67.2 million and $4.7 million was available to borrow based on the  outstanding
principal balance of eligible receivables, respectively. According to the credit
agreement, modified receivables can not be pledged as collateral, thus, they are
not considered eligible receivables that can be borrowed against.

         Long-term debt. The Company issued $110.0 million of 8.53% Senior Notes
due August 1, 2002, in connection  with the Company's  initial public  offering.
Interest on the Notes is payable  semiannually,  and  principal  payments  began
August 1, 1998, and are due on each subsequent  August 1, in the amount equal to
approximately 20% of the stated original principal  balance.  In April 1996, the
Company  completed  a  private  placement  of  $46.0  million  of  9.99%  Senior
Subordinated  Notes due March 30, 2003,  with  interest  payable  quarterly  and
principal due at maturity.  In March 1997,  the Company  issued $65.0 million of
Senior Notes due  December 27, 2002.  The Notes were issued as "Series A" in the
principal  amount of $50.0  million  at 7.75%  interest  and  "Series  B" in the
principal  amount of $15.0 million at 7.97%  interest.  Interest on the Notes is
payable  semiannually  and a  principal  payment is due March 15,  2002,  in the
amount equal to approximately 33 1/3% of the stated original balance.

         The Company's credit agreements, among other things, require compliance
with monthly and quarterly  financial  maintenance tests as well as restrict the
Company's ability to create liens, incur additional indebtedness,  sell or merge
assets and make investments. The Company is in compliance with all covenants and
restrictions imposed by the terms of indebtedness.

         Based on current cash flow  projections,  management  believes that the
Company's  existing  capital  resources,  the Credit Facility  described  above,
future  earnings,  expected  growth in  receivable  acquisitions,  and  periodic
Securitization of receivables should provide the necessary capital and liquidity
for its operations  through at least the next twelve  months.  The period during
which its  existing  capital  resources  will  continue to be  sufficient  will,
however, be affected by the factors described above affecting the Company's cash
requirements.  A number of these factors are difficult to predict,  particularly
including the cash effect of hedging  transactions,  the availability of outside
credit enhancement in Securitizations or other financing  transactions and other
factors  affecting  the net cash provided by  Securitizations.  Depending on the
Company's  ongoing  cash  and  liquidity  requirements,  market  conditions  and
investor  interest,  the  Company  may seek to issue  additional  debt or equity
securities in the near term. The sale of additional  equity,  including  Class A
Common  Stock  or  preferred  stock,  would  dilute  the  interests  of  current
shareholders.



<PAGE>

Discussion of Forward-Looking Statements

         The above discussions  contain  forward-looking  statements made by the
Company  regarding  its results of  operations,  cash flow needs and  liquidity,
receivable   origination   volume,   target  spreads,   changes  in  competitive
environment  and  other  aspects  of  its  business.   Similar   forward-looking
statements  may be made by the Company from time to time.  Such  forward-looking
statements are subject to a number of important factors that cannot be predicted
with  certainty  and which could  cause such  forward-looking  statements  to be
materially inaccurate. Among these factors are the following:

         Capital requirements and availability. The Company requires substantial
amounts of cash to support its business and growth as described  above. Its cash
requirements can vary depending on the cash-effect of hedging transactions,  the
availability  of  external  credit   enhancement  in  Securitizations  or  other
financing  transactions  and the other factors that affect the net cash provided
by  Securitizations  (at  closing  and over time) as well as the  percentage  of
principal  amount of  receivables  acquired  for which the  Company  can  obtain
Warehouse  financing.  The  Company's  ability  to meet these  ongoing  cash and
liquidity  requirements  depends  on  several  factors.  First is the  Company's
ability to effect periodic  Securitizations of its receivable  portfolio and the
terms of such  Securitizations  which are dependent on market factors generally,
changes  in  interest  rates,   demand  for  Asset-backed   Securities  and  the
asset-backed securities offered in the Company's  Securitizations  particularly.
Another important factor is the Company's ability to continue to comply with the
terms of its Senior and Senior  Subordinated Notes and Warehouse Facility and/or
its ability to obtain funding to replace and/or  supplement such facility should
it  become  necessary  to do so.  The  Company's  ability  to  obtain  successor
facilities  or  similar  financing  will  depend on,  among  other  things,  the
willingness  of financial  institutions  to  participate  in funding  automobile
financing  businesses  and the  Company's  financial  condition  and  results of
operations.  Moreover,  the Company's  operations may be adversely affected,  at
least  temporarily,  if the  Company  is not able to obtain  additional  funding
through these or other  facilities or if it is unable to satisfy the  conditions
to borrow under the Credit Facility.

         Receivable  acquisition volume,  spread and growth. Many factors affect
the Company's  receivable  acquisition volume and spread, which have significant
impact on the Company's net earnings.  Volume is affected by overall  demand for
new and used automobiles in the economy generally, the willingness of automobile
dealers to forward prospective  customers'  applications to the Company, as well
as the  number  of  qualified  customers  whose  credit  is  approved  and whose
receivables  are  ultimately  acquired by the  Company.  Competition  can impact
significantly both acquisition volume and the interest rate at which receivables
are originated. Generally, competition in the Company's business is intense. The
Buy  Rate  offered  by  the  Company  is a  significant  competitive  factor.  A
competitor offering a lower Buy Rate may be more likely to acquire a receivable.
The  continued  growth  of  the  Company's   servicing   portfolio  will  depend
significantly  on the  receptivity  to the  Company's  program of new dealers in
existing  geographic markets as well as new markets and the continued  stability
of the Company's relationships with its existing dealer network.

         Interest rate risk.  The  Company's  sources for funds  generally  have
variable rates of interest, and its receivable portfolio bears interest at fixed
rates. The Company  therefore bears interest rate risk on receivables until they
are securitized and employs a hedging  strategy to mitigate this risk.  Prior to
March  1999,  as a part of the  hedging  strategy,  the  Company  used a hedging
vehicle that included the execution of short sales of U.S. Treasury Notes having
a maturity  approximating  the average  maturity of the  receivable  acquisition
volume  during  the  relevant  period.  At  such  time as a  securitization  was
committed,  the hedge  was  covered  by the  purchase  of a like  volume of U.S.
Treasury  Notes.  Beginning  in March 1999,  the  Company  began using a hedging
strategy  that  primarily  consists  of forward  interest  rate  swaps  having a
maturity approximating the average maturity of the acquisition volume during the
relevant period. At such time a securitization  is committed,  the interest rate
swaps  are  terminated.  There  is  no  assurance  that  these  strategies  will
completely  offset changes in interest  rates.  In particular,  such  strategies
depend on management's  estimates of receivable acquisition volume and timing of
its  Securitizations.  The Company  realizes a gain on its hedging  transactions
during periods of increasing interest rates and realizes a loss on such

<PAGE>

transactions  during periods of decreasing  interest rates.  The hedging gain or
loss will in part offset  changes in interest  rates as  reflected by a lower or
higher  reported  gain on sales of  receivables,  respectively.  Recognition  of
unrealized gains or losses is deferred until the sale of receivables  during the
Securitization.  On the date of the sale,  deferred hedging gains and losses are
recognized as a component of the Gain (Loss) on Sales of Receivables.

         Receivable  losses and prepayment  rates. The Company bears the primary
risk of loss due to defaults in its servicing portfolio. Default and credit loss
rates are impacted by general economic factors that affect customers' ability to
continue  to  make  timely  payments  on  their  indebtedness.   Prepayments  on
receivables  in the  servicing  portfolio  reduce the size of the  portfolio and
reduce the  Company's  servicing  income.  The Gain on Sales of  Receivables  in
connection  with each  securitization  transaction  and the  amount of  Retained
Interest  recognized in each  transaction  reflect  deductions  for estimates of
future net  credit  losses  and  prepayments.  The  carrying  value of  Retained
Interest may be adjusted  periodically to reflect  differences between estimated
and actual credit losses and prepayments on past Securitizations.  The Company's
results of operations could be adversely affected if default or prepayment rates
on  securitized  receivables  substantially  exceed  the  estimated  levels.  In
addition,  declines  in  demand  for  used  cars in the  economy  generally  can
adversely  affect the amounts the Company is able to recover upon liquidation of
repossessed vehicles securing defaulted receivables.

         Regulation.  The Company's  business is subject to numerous federal and
state consumer  protection laws and regulations  which,  among other things: (i)
require the Company to obtain and maintain certain licenses and  qualifications;
(ii) limit the interest rates,  fees and other charges the Company is allowed to
charge; (iii) limit or prescribe certain other terms of the Company's contracts;
(iv)  require  specified  disclosures;  and (v) define the  Company's  rights to
repossess and sell  collateral.  Changes in existing laws or regulations,  or in
the  interpretation  thereof,  or the  promulgation  of any  additional  laws or
regulation could have an adverse effect on the Company's business.

Impact of Current Accounting Pronouncements

         In June 1998, Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Statement is
effective  for fiscal  years  beginning  after June 15, 2000,  as amended,  with
earlier  application  allowed.  Management is currently  assessing the impact of
this  Statement on the  financial  condition of  operations  of the Company upon
adoption.

Year 2000 Compliance

         During  the  year  ended  June  30,  1997,  the  Company  began  a risk
evaluation of potential Year 2000 issues. The outcome of this evaluation was the
formation of a Year 2000  Committee  that  consists of officers and employees of
the  Company.  The  purpose of this  committee  is to assess all risks,  analyze
current  systems  including  information  technology  ("IT") and non-IT systems,
coordinate  upgrades  and  replacements,  and report the current  and  projected
status of all known Year 2000 compliance issues.

         During the assessment  phase,  over thirty  service  bureaus and system
vendors   which   include  third  parties  which  the  Company  has  a  material
relationship  were  identified  that  performed or supplied  potential Year 2000
compliance  issues.  The list included  eight service  bureaus,  seven  software
vendors,  seven hardware  vendors,  one electric  company,  six  maintenance and
supplies companies and four telecommunications  companies. Once the systems were
identified,  an  immediate  correspondence  was  established  for the purpose of
educating  the  Company  on known  Year  2000  issues  or Year  2000  compliance
certification.

         The systems  identified were put through one of two possible phases. If
the  vendor  provided  proof that the system in  question  had proper  Year 2000
compliance  certification  and a testing  cycle  was  possible,  an  appropriate
testing cycle was performed. If the testing cycle failed or the system had known
Year 2000 issues, a mission critical evaluation and replacement  recommendations
were performed.


<PAGE>

         At this time,  all known  mission  critical  systems  have been  either
replaced  or  upgraded  with Year 2000  compliant  solutions.  The last of these
upgrades  was  performed  in March  1999,  as  scheduled.  The  Company has been
re-testing  all systems and plans on  completing  these tests by  September  30,
1999.  Beginning  October 1, 1999, the Company will be entering a "quiet period"
on in-house  development and implementations that will last through December 31,
1999. The purpose of the "quiet period" is to eliminate any new Year 2000 issues
by blocking any new software or hardware installations or upgrades except as may
be necessary to correct a Year 2000 problem.

         The replacement or remediation  costs for Year 2000  compliance  issues
with the  Company  is  estimated  to be less than  $100,000,  which the  Company
recognizes as incurred.  This estimated cost is mostly due to software  upgrades
that include new features which are combined with Year 2000 corrections.

         The  Company  estimates  that the worst case Year 2000  issue  scenario
would be discontinuance  of electrical power.  Although the Company has numerous
power backup  devices,  a long-term  power outage would have a material  adverse
effect on the Company's  operations.  Although the  discontinuance of electrical
power is possible,  the Company  believes the likelihood of such an outage to be
remote. The Company continuously  monitors the status of its Year 2000 plan and,
based on such information,  will develop  contingency plans as necessary.  See -
"Discussion of Forward-Looking Statements".





<PAGE>



Item 7a.          Quantitative and Qualitative Disclosures About Market Risk



         The Company  bears the primary risk of loss due to credit losses in its
servicing portfolio.  Credit loss rates are impacted by general economic factors
that affect  customers'  ability to  continue  to make timely  payments on their
indebtedness.  Prepayments on receivables in the servicing  portfolio reduce the
size of the  portfolio and reduce the Company's  servicing  income.  The gain on
sales of receivables in connection with each securitization  transaction and the
amount of Retained Interest  recognized in each transaction  reflect  deductions
for estimates of future defaults and prepayments. The carrying value of Retained
Interest may be adjusted  periodically to reflect  differences between estimated
and actual  net  credit  losses and  prepayments  on past  Securitizations.  For
example,  if net credit  losses  increased or decreased by 100 basis points on a
$300.0 million  Securitization,  the gain on sale would result in a reduction or
an increase of the Gain (Loss) on Sales of  Receivables  by  approximately  $3.0
million pre-tax,  before  consideration  of any discounting.  The same 100 basis
points  increase or decrease  would  result in a reduction or an increase of the
Retained Interest of approximately  $23.0 million,  before  consideration of any
discounting, based on a securitized receivable portfolio of $2.3 billion at June
30, 1999.  The forgoing  examples are  developed  utilizing  the cash flow model
employed by management  to calculate the fair market value of Retained  Interest
by changing  the credit  loss  assumption  as  described.  The Company  does not
believe fluctuations in interest rates materially affect the rate of prepayments
on receivables.  See "Item 7. Management's Discussion and Analysis of Results of
Operations  and  Financial  Condition"  and "Item 8.  Financial  Statements  and
Supplementary Data -Notes 1 and 5."

         The  Company's  sources  of  funds  generally  have  variable  rates of
interest,  and its  receivable  portfolio  bears  interest at fixed  rates.  The
Company  therefore  bears  interest  rate  risk on  receivables  until  they are
securitized and employs derivative financial  instruments to mitigate this risk.
As a part of the Company's hedging strategy, the Company executed short sales of
U.S. Treasury securities having a maturity approximating the average maturity of
receivables  to be  acquired  during  the  relevant  period  until  March  1999.
Beginning  in March  1999,  the  Company  began  using a hedging  strategy  that
primarily  consists of the execution of forward interest rate swaps. There is no
assurance  that these  strategies  will  completely  offset  changes in interest
rates.  In  particular,  such  strategies  depend on  management's  estimates of
receivable  acquisition  volume and timing of its  Securitizations.  The Company
realizes  a gain  on its  hedging  transactions  during  periods  of  increasing
interest  rates and  realizes  a loss on such  transactions  during  periods  of
decreasing interest rates. The hedging gain or loss should  substantially offset
changes in interest rates as seen by a lower or higher reported gain on sales of
receivables, respectively. Recognition of unrealized gains or losses is deferred
until the sale of  receivables  during  the  Securitization.  On the date of the
sale,  deferred  hedging gains and losses are  recognized as a component of Gain
(Loss) on Sales of Receivables.  Increases or decreases in interest rates reduce
or increase the fair value of long-term  debt,  respectively.  At June 30, 1999,
the Company had an  unrealized  hedging loss on forward  interest  rate swaps of
$1.1 million based on notional amounts outstanding of $438.0 million.  See "Item
7.  Management's  Discussion and Analysis of Results of Operations and Financial
Condition" and "Item 8. Financial Statements and Supplementary Data -Notes 2 and
7."



<PAGE>



         The following  table presents the principal cash repayments and related
weighted  average  interest rates by maturity date for current variable rate and
long-term fixed rate debt at June 30, 1999:
<TABLE>
<CAPTION>


                                             2000             2001          2002       2003             Total         Fair Value
                                             ----             ----          ----       ----             -----         ----------
                                                                          (Dollars in thousands)

<S>                                          <C>             <C>          <C>         <C>           <C>             <C>
Amounts due under warehouse facility         $185,500        $     -      $     -     $      -      $    185,500    $    185,500
   Weighted average variable rate               5.09%

Long-term debt                               $ 22,000        $22,000      $43,667     $111,333      $    199,000    $    175,620
   Weighted average fixed rate                  8.53%           8.53%        8.14%        8.86%             8.63%
</TABLE>

Sensitivity analysis on Retained Interest

At June 30, 1999, key economic  assumptions  and the  sensitivity of the current
fair value of Retained  Interest  to  immediate  10% and 20% adverse  changes in
assumed economics is as follows:

<TABLE>
<CAPTION>

Amounts as of June 30, 1999                            Tier I              Tier II               Total
                                                    -----------        --------------         -----------
<S>                                                 <C>                    <C>                <C>
Fair value of retained interest                     187,546,378            8,683,356          196,229,735

Prepayment speed assumption (annual rate)           22.10-28.00%        17.06%-20.49%

Impact on fair value of 10% adverse change          181,863,917            8,613,093          190,477,010
Impact on fair value of 20% adverse change          176,468,158            8,544,894          185,013,052


Net loss rate assumption (pool life rate)            4.00%-6.39%        12.00%-14.72%


Impact on fair value of 10% adverse change          169,548,822            7,557,304          177,106,127
Impact on fair value of 20% adverse change          151,450,552            6,390,753          157,841,305


Discount rate assumption (annual rate)              8.06%-14.49%        12.09%-15.43%


Impact on fair value of 10% adverse change          183,577,500            8,515,450          192,092,950
Impact on fair value of 20% adverse change          179,778,418            8,351,847          188,130,265
</TABLE>


These  sensitivities  are hypothetical  and should be used with caution.  As the
figures  indicate,  any  change  in  fair  value  based  on a 10%  variation  in
assumptions  cannot be  extrapolated  because the  relationship of the change in
fair value is not linear.  Also,  in this table,  the effect of a variation in a
particular  assumption on the fair value of the retained  interest is calculated
independent from any change in another  assumption;  in reality,  changes in one
factor may result in changes in another,  which might magnify or counteract  the
sensitivities.  We have made the  assumption  that any  increase in the discount
rate would cause a  corresponding  increase in the  interest  rate earned on the
spread  and  collection   accounts.   See  -  "Discussion   of   Forward-Looking
Statements."




<PAGE>

Item 8.           Financial Statements and Supplementary Data

Independent Auditors' Reports

Board of Directors
Union Acceptance Corporation
Indianapolis, Indiana

We have audited the accompanying  consolidated balance sheet of Union Acceptance
Corporation  and  Subsidiaries  (the  "Company")  as of June 30,  1999,  and the
related  consolidated  statements of earnings,  shareholders'  equity,  and cash
flows for the year then ended. These consolidated  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  such 1999 consolidated  financial statements present fairly, in
all material respects,  the financial  position of Union Acceptance  Corporation
and  Subsidiaries  as of June 30, 1999, and the results of their  operations and
their cash flows for the year then ended in conformity  with generally  accepted
accounting principles.


/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
July 29, 1999


<PAGE>



The Board of Directors
Union Acceptance Corporation:


We have audited the accompanying consolidated balance sheets of Union Acceptance
Corporation and  Subsidiaries as of June 30, 1998, and the related  consolidated
statements of earnings (loss),  shareholders' equity, and cash flows for each of
the  years in the  two-year  period  ended  June 30,  1998.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of the Union Acceptance
Corporation  and  Subsidiaries  as of June 30,  1998,  and the  results of their
operations  and their  cash flows for each of the years in the  two-year  period
ended June 30, 1998 in conformity with generally accepted accounting principles.

As discussed in note 1 to the  consolidated  financial  statements,  the Company
adopted the provisions of the Financial  Accounting  Standards Board's Statement
of Financial Accounting Standard No. 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, on January 1, 1997.


/s/ KPMG LLP

KPMG LLP
August 27, 1998
Indianapolis, IN

<PAGE>

<TABLE>
<CAPTION>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT JUNE 30,                                                                      1999         1998
(Dollars in thousands, except share data)
----------------------------------------------------------------------------------------------------
Assets
<S>                                                                            <C>          <C>
Cash and cash equivalents                                                      $  8,088     $ 75,612
Restricted cash                                                                  12,379       17,823
Receivables held for sale, net                                                  267,316      118,259
Retained interest in securitized assets                                         190,865      171,593
Accrued interest receivable                                                       2,035        1,045
Property, equipment, and leasehold improvements, net                              8,375        7,921
Other assets                                                                     25,868       19,280
                                                                               --------     --------

Total Assets                                                                   $514,926     $411,533
                                                                               ========     ========

Liabilities and Shareholders' Equity

Liabilities
  Amounts due under warehouse facilities                                       $185,500     $ 73,123
  Long-term debt                                                                199,000      221,000
  Accrued interest payable                                                        5,287        6,280
  Amounts due to trusts                                                          13,152       15,510
  Dealer premiums payable                                                         2,564        1,374
  Current and deferred income taxes payable                                      16,022        9,573
  Other payables and accrued expenses                                             3,922        2,200
                                                                               --------     --------

Total Liabilities                                                               425,447      329,060
                                                                               --------     --------

Commitment and Contingencies (Note 11)

Shareholders' Equity
  Preferred stock, without par value, authorized 10,000,000 shares;  none            --           --
    issued and outstanding

  Class A common stock, without par value, authorized 30,000,000 shares;
    5,099,344 and 4,376,446 shares issued and outstanding at June 30, 1999
    and 1998, respectively                                                       58,452       58,360

  Class B common stock, without par value, authorized 20,000,000 shares;
    8,150,266 and 8,855,036 shares issued and outstanding at June 30, 1999
    and 1998, respectively                                                           --           --

Accumulated other comprehensive earnings, net of income taxes                       199        7,609
Retained earnings                                                                30,828       16,504
                                                                               --------     --------

Total Shareholders' Equity                                                       89,479       82,473
                                                                               --------     --------

Total Liabilities and Shareholders' Equity                                     $514,926     $411,533
                                                                               ========     ========
</TABLE>



See accompanying notes to consolidated financial statements.



<PAGE>

<TABLE>
<CAPTION>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
FOR THE YEARS ENDED JUNE 30,                                         1999            1998              1997
(Dollars in thousands, except share data)
---------------------------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>               <C>
Interest on receivables held for sale                           $     33,015     $     27,871      $     33,914
Retained interest and other                                           20,008           12,922            14,810
                                                                ------------     ------------      ------------

  Total interest income                                               53,023           40,793            48,724

Interest expense                                                      27,451           26,107            25,688
                                                                ------------     ------------      ------------

  Net interest margin                                                 25,572           14,686            23,036

Provision for estimated credit losses                                  5,879            8,050             4,188
                                                                ------------     ------------      ------------

  Net interest margin after provision
    for estimated credit losses                                       19,693            6,636            18,848
                                                                ------------     ------------      ------------

Gain (loss) on sales of receivables, net                              19,133          (11,926)              963
Servicing fees, net                                                   21,716           19,071            16,919
Late charges and other fees                                            5,349            4,087             3,820
                                                                ------------     ------------      ------------

  Other revenues                                                      46,198           11,232            21,702
                                                                ------------     ------------      ------------

Salaries and benefits                                                 23,572           19,427            15,673
Other general and administrative expenses                             19,016           16,119            14,829
                                                                ------------     ------------      ------------

  Total operating expenses                                            42,588           35,546            30,502
                                                                ------------     ------------      ------------

Earnings (loss) before provision (benefit) for income taxes           23,303          (17,678)           10,048
Provision (benefit) for income taxes                                   8,979           (7,856)            4,166
                                                                ------------     ------------      ------------

  Net earnings (loss)                                           $     14,324     $     (9,822)     $      5,882
                                                                ============     ============      ============

  Net earnings (loss) per common share
     (basic and diluted)                                        $       1.08     $      (0.74)     $       0.45
                                                                ============     ============      ============

Basic weighted average number of common shares
  outstanding                                                     13,241,593       13,226,651        13,215,112

Diluted weighted average number of common
  shares outstanding                                              13,253,646       13,226,651        13,215,112
</TABLE>



See accompanying notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,                                                  1999             1998             1997
(Dollars in thousands)
-------------------------------------------------------------------------------------------------------------------------


Cash flows from operating activities:
<S>                                                                        <C>              <C>              <C>
  Net earnings (loss)                                                      $    14,324      $    (9,822)     $     5,882
  Adjustments to reconcile net earnings (loss) to net cash
    provided (used) by operating activities:
      Increase in receivables held for sale, net of liquidations            (1,439,172)        (953,252)      (1,087,065)
      Dealer premiums paid, net on receivables held for sale                   (51,122)         (40,526)         (53,461)
      Proceeds from securitization of receivables held for sale              1,288,071          948,114        1,214,298
      Gain on sales of receivables                                             (39,185)         (19,253)         (46,713)
      Proceeds on sale of interest only strip                                    2,847           13,869           31,773
      Impairment of retained interest in securitized assets                     11,917           23,636           34,828
      Accretion of discount on retained interest in securitized assets         (18,700)          (7,293)          (6,244)
      Provision for estimated credit losses                                      5,879            8,050            4,188
      Amortization and depreciation                                              4,688            4,689            3,979
      Restricted cash                                                            5,444           (1,166)          (1,868)
      Other assets and accrued interest receivable                              (1,983)            (736)          (7,824)
      Amounts due to trusts                                                     (2,358)            (557)           8,136
      Other payables and accrued expenses                                        7,275           (3,383)           5,697
                                                                           -----------      -----------      -----------
            Net cash from operating activities                                (212,075)         (37,630)         105,606
                                                                           -----------      -----------      -----------

Cash flows from investing activities:
  Collections on retained interest in securitized assets
     and change in spread accounts                                              56,068           32,582           20,356
  Capital expenditures                                                          (1,794)          (6,809)            (967)
                                                                           -----------      -----------      -----------
            Net cash from investing activities                                  54,274           25,773           19,389
                                                                           -----------      -----------      -----------

Cash flows from financing activities:
  Principal payment on long-term debt                                          (22,000)              --               --
  Stock options exercised                                                            2               --               --
  Net change in warehouse credit facilities                                    112,377           28,668         (143,301)
  Proceeds from issuance of senior notes                                            --               --           65,000
  Payment of borrowing fees                                                       (102)              --           (1,352)
                                                                           -----------      -----------      -----------
            Net cash from financing activities                                  90,277           28,668          (79,653)
                                                                           -----------      -----------      -----------

Change in cash and cash equivalents                                            (67,524)          16,811           45,342

Cash and cash equivalents, beginning of year                                    75,612           58,801           13,459
                                                                           -----------      -----------      -----------

Cash and cash equivalents, end of year                                     $     8,088      $    75,612      $    58,801
                                                                           ===========      ===========      ===========

Supplemental disclosures of cash flow information:
  Income taxes paid                                                        $     2,661      $        22      $     4,288
  Interest paid                                                            $    28,276      $    24,332      $    25,268
</TABLE>



See accompanying notes to consolidated financial statements.

<PAGE>
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(Dollars in thousands, except share data)

<TABLE>
<CAPTION>


                                                     Number of
                                                    Common Stock                        Accumulated
                                                       Shares                              Other                          Total
                                                     Outstanding             Common    Comprehensive    Retained       Shareholders'
                                              Class A          Class B        Stock        Income       Earnings         Equity
                                             -----------     -----------     --------  --------------  ----------     --------------
<S>                                           <C>             <C>            <C>         <C>           <C>             <C>
Balance at June 30, 1996                      4,011,358       9,200,000      $58,180     $     --      $   20,444      $   78,624
------------------------------------------------------------------------------------------------------------------------------------

Comprehensive earnings (loss):
  Net earnings                                       --              --           --           --           5,882           5,882
  Net unrealized gain on retained
    interest in securitized assets                   --              --           --        3,785              --           3,785
  Income taxes related to unrealized
    gain in securitized assets                       --              --           --       (1,533)             --          (1,533)
                                                                                                                       ----------
Total comprehensive earnings (loss)                                                                                         8,134

Grants of common stock                            5,430              --           90           --              --              90
                                              ---------       ---------      -------     --------      ----------      ----------


Balance at June 30, 1997                      4,016,788       9,200,000       58,270        2,252          26,326          86,848
------------------------------------------------------------------------------------------------------------------------------------

Comprehensive earnings (loss):
Net loss                                             --              --           --           --          (9,822)         (9,822)
  Net unrealized gain on retained
     interest in securitized assets                  --              --           --        8,527              --           8,527
  Income taxes related to unrealized
    gain in securitized assets                       --              --           --       (3,170)             --          (3,170)
                                                                                                                       ----------
Total comprehensive earnings (loss)                                                                                        (4,465)

Grants of common stock                           14,694              --           90           --              --              90

Conversion of Class B
  Common Stock into
  Class A Common Stock                          344,964        (344,964)          --           --              --              --
                                              ---------       ---------      -------     --------      ----------      ----------

Balance at June 30, 1998                      4,376,446       8,855,036       58,360        7,609          16,504          82,473
------------------------------------------------------------------------------------------------------------------------------------

Comprehensive earnings (loss):
  Net earnings                                       --              --           --           --          14,324          14,324
  Net unrealized gain (loss) on retained
    interest in securitized assets                   --              --           --      (11,961)             --         (11,961)
  Income taxes related to unrealized
    gain in securitized assets                       --              --           --        4,551              --           4,551
                                                                                                                       ----------
Total comprehensive earnings (loss)                                                                                         6,914

Grants of common stock                           17,778              --           90           --              --              90

Stock options exercised                             350              --            2           --              --               2

Conversion of Class B
  Common Stock into
  Class A Common Stock                          704,770        (704,770)          --           --              --              --
                                              ---------       ---------      -------     --------      ----------      ----------

Balance at June 30, 1999                      5,099,344       8,150,266      $58,452     $    199      $   30,828      $   89,479
                                              =========       =========      =======     ========      ==========      ==========
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>

UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1999


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Description of Business - Union Acceptance  Corporation ("UAC") and its
subsidiaries  (collectively,  the "Company") is an Indiana  corporation  engaged
primarily in the  business of  acquiring,  securitizing,  and  servicing  retail
automobile installment sales contracts originated by dealerships affiliated with
major  domestic  and foreign  automobile  manufacturers.  The Company  currently
acquires     receivables    from    a    network    of    approximately    4,100
manufacturer-franchised automobile dealerships in 35 states.

         The Company's  indirect auto program  focuses on acquiring one level of
receivable quality.  The Company acquires receivables from customers who exhibit
a  favorable  credit  profile  ("Tier I")  purchasing  late model used and, to a
lesser  extent,  new  automobiles.  The Company also acquired  receivables  from
customers  with adequate  credit quality who would not qualify for the Company's
Tier I credit  quality  criteria  ("Tier  II")  until  January  1, 1999 when the
Company discontinued the acquisition of Tier II receivables.  Tier II receivable
acquisitions  accounted for 0.9% of total receivable  acquisitions during fiscal
1999 and 2.1% of the receivable servicing portfolio at June 30, 1999.

         Basis of Financial Statement  Presentation - The consolidated financial
statements include the accounts of UAC and its wholly-owned subsidiaries,  Union
Acceptance  Funding  Corporation,  UAC Securitization  Corporation,  Performance
Funding Corporation,  Performance Securitization  Corporation,  UAC Boat Funding
Corp., UAC Finance  Corporation,  Circle City Car Company,  and Union Acceptance
Receivables Corporation.

         All  significant  intercompany  balances  and  transactions  have  been
eliminated in  consolidation.  The consolidated  financial  statements have been
prepared in conformity with generally  accepted  accounting  principles and with
those in the general practice of the consumer finance industry. In preparing the
financial  statements,  management is required to make estimates and assumptions
that affect the reported  amounts of assets and  liabilities  at the date of the
financial  statements and the reported  amounts of revenues and expenses  during
the  reporting  period.  Actual  results could differ  significantly  from those
estimates.  Material estimates that are particularly  susceptible to significant
change  in the near  term  relate  to the  valuation  of  retained  interest  in
securitized assets,  gain (loss) on sales of receivables,  and the allowance for
credit losses.

         Cash and Cash Equivalents - The Company  considers all investments with
a maturity of three months or less when purchased to be cash equivalents.

         Restricted Cash - Restricted  cash primarily  consists of funds held in
reserve  accounts  in  compliance  with  the  terms  of the  Warehouse  Facility
Agreements and securitization payahead accounts.

         Receivables  Held for Sale, Net - All receivables are held for sale and
include  automobile,  light-truck,  van, and other receivables  including dealer
premiums.   Such   receivables  are  packaged  and  sold  through   asset-backed
securitization   transactions   and  are  carried  at  their  principal   amount
outstanding plus dealer premiums  (amortized cost) which  approximates the lower
of cost or market, net of unearned discount and the allowance for credit losses.
Interest on these  receivables is accrued and credited to interest  income based
upon the daily principal amount  outstanding.  The Company provides an allowance
for credit losses from the date of  origination  to the date of  securitization.
The  Company  accrues  interest on  receivables  until the earlier of an account
being charged-off or becoming 120 days delinquent.

         Receivables  held for sale,  net  includes  dealer  premiums  which are
incentives  paid to dealers in connection  with the  acquisition of receivables.
Dealer premiums are deferred and charged to gain on sale of receivables,  net at
the time of sale. A portion of the dealer  premiums are refundable by the dealer
to the Company in the event of receivable prepayment or default.


<PAGE>

         On  January  1,  1997,  the  Company  adopted  Statement  of  Financial
Accounting  Standards  No.  125,  Accounting  for  Transfers  and  Servicing  of
Financial Assets and  Extinquishments of Liabilities (SFAS 125). The adoption of
SFAS 125 had the effect of reducing  fiscal 1997 net earnings by  $1,311,000  or
$0.10 per share and increasing total shareholders' equity by $941,000.

         Accrued Interest  Receivable - Accrued interest  receivable  represents
interest earned but not collected on receivables held for sale.

         Property,  Equipment,  and  Leasehold  Improvements,  Net  -  Property,
equipment,  and leasehold  improvements  are recorded at cost.  Depreciation  is
determined  on  accelerated  methods  over  the  estimated  useful  lives of the
respective assets.

         Retained Interest in Securitized Assets and Gain on Sale of Receivables
- The Company acquires  receivables with the intention of reselling them through
securitizations.  In  the  securitization  transactions,  the  Company  sells  a
portfolio of  receivables  to a wholly owned  subsidiary  ("SPS") which has been
established  for the  limited  purpose of buying  and  reselling  the  Company's
receivables.  The SPS  transfers  the same  receivables  to a trust vehicle (the
"Trust"), which issues interest-bearing  asset-backed securities. The securities
are  generally  sold to investors  in the public  market.  The Company  provides
credit  enhancement  for the benefit of the  investors in the form of a specific
cash  account  ("Spread  Account")  held by the  Trust.  The  Spread  Account is
required by the  applicable  servicing  agreement to be  maintained at specified
levels.

         At the closing of each securitization,  the Company allocates its basis
in the  receivables  between the  portion of the  receivables  sold  through the
certificates   and  the   portion   of  the   receivables   retained   from  the
securitizations  ("Retained  Interest"  and  "Servicing  Assets")  based  on the
relative fair values of those  portions at the date of the sale.  The fair value
is based  upon the  cash  proceeds  received  for the  receivables  sold and the
estimated  fair value of the Retained  Interest and Servicing  Assets.  Retained
Interest  consists of the  discounted  cash flows to be received by the Company.
Servicing  Assets represent the present value benefit derived from retaining the
right  to  service  receivables  securitized  in  excess  of  adequate  servicer
compensation.  The excess of the cash received  over the basis  allocated to the
receivables sold, less transaction  costs, and hedging gains and losses,  equals
the net gain on sale of receivables recorded by the Company.

         The Company receives periodic base servicing fees for the servicing and
collection  of the  receivables.  The Company is entitled to the cash flows from
the Retained Interest that represent collections on the receivables in excess of
the amounts required to pay the principal and interest on the securities  issued
in the  securitization,  the base  servicing fees and certain other fees such as
credit  enhancement fees. In general,  at the end of each collection period, the
aggregate cash  collections from the receivables are allocated first to the base
servicing  fees, then to the security  holders for interest at the  pass-through
rate on the securities  plus  principal as defined in the  applicable  servicing
agreement,  and finally to the credit  enhancement  fees.  If the amount of cash
required  for the above  allocations  exceeds  the amount  collected  during the
collection period,  the shortfall is drawn from the Spread Account.  If the cash
collected  during  the  period  exceeds  the  amount  necessary  for  the  above
allocations,  and the related Spread Account is not at the required  level,  the
excess cash  collected  is retained in the Spread  Account  until the  specified
level is achieved. The cash in the Spread Accounts is restricted from use by the
Company with such amounts included as a component of the Retained Interest. Once
the required  Spread Account level is achieved,  the excess is released from the
Trust to the Company.  Cash held in the various  Spread  Accounts is invested in
high quality  liquid  investment  securities,  as  specified  in the  applicable
servicing agreement.  The specified credit enhancement levels are defined in the
applicable servicing agreement as the Spread Account balance expressed generally
as a percentage of the current collateral principal balance.

         The  average of the  annual  percentage  rates paid on the  receivables
exceeds  the  interest  rates on the  securities  issued in the  securitization.
Accordingly, the Retained Interest described above is a significant asset of the
Company.  In determining  the fair value of the Retained  Interest,  the Company
must  estimate the future rates of net credit  losses and credit loss  severity,
delinquencies  and  prepayments,  as they  impact  the  amount and timing of the
estimated cash flows. The Company estimates prepayments by evaluating historical
prepayment performance of comparable receivables and the impact of trends in the
economy. The Company has used annual prepayment estimates ranging from 17.06% to
28.00% at June 30, 1999. The Company estimates net credit losses and credit loss
severity using available historical loss data for comparable receivables and the
specific  characteristics  of the  receivables  purchased  by the  Company.  The
Company  used net  credit  losses of 4.00% to 6.39% for Tier I  receivables  and
12.00%  to  14.72%  for Tier II  receivables  as a  percentage  of the  original
principal balance over the life of the receivables to value Retained Interest at
June 30, 1999.

         The Company  records  unrealized  gains or losses  attributable  to the
change in the fair value of the Retained Interest in each securitization,  which
are recorded as  "available-for-sale"  securities,  net of related income taxes,
until  realized.  The  unrealized  gains or losses are recorded as  "Accumulated
other comprehensive  income", in shareholders'  equity. The Company is not aware
of an  active  market  for  the  purchase  or  sale of  Retained  Interest,  and
accordingly,  the Company  determines  the estimated  fair value of the Retained
Interest by  discounting  the expected  cash flows  released from the Trust (the
cash  out  method)  using  a  discount  rate  which  the  Company   believes  is
commensurate with the risks involved.  Beginning in the fourth quarter of fiscal

<PAGE>

1999, tiered discount rates were used based on a pool's specific risk factors up
to 900 basis points over the applicable U.S. Treasury Rate. The Company utilized
discount rates ranging from 8.06% to 15.43% on the estimated cash flows released
from the Spread  Account to value the Retained  Interest at June 30,  1999.  The
weighted average discount rate used to value Retained  Interest at June 30, 1999
and 1998 was 12.83% and 9.33% respectively.

         An other than temporary impairment  adjustment to the carrying value of
the  Retained  Interest  may be required if the present  value of an  individual
Retained Interest (the pool by pool method),  discounted at a risk free rate, is
less than its carrying  value.  In addition,  management  evaluates  and adjusts
accordingly,  if determined  necessary,  Retained  Interest using a pool by pool
method by reviewing  current  economic  trends and trends in the  assumptions to
determine if the Retained  Interest is other than  temporarily  impaired.  Other
than  temporary  impairment  adjustments  are recorded as a component of gain on
sales of receivables, net.

         Servicing  Assets - The Company  receives  periodic base servicing fees
for the servicing and  collection of the  receivables  which is considered to be
adequate servicer compensation. Servicing Assets are the Company's present value
benefit derived from retaining the right to service  receivables  securitized in
excess of adequate  servicer  compensation.  The Company has recorded  Servicing
Assets at the time of the sale of  receivables  and has allocated the total cost
of the  receivables  to the Servicing  Asset retained and the  receivables  sold
based on their  relative  fair  values.  Servicing  assets are  recognized  as a
component of gain on sale of receivables,  net. Accretion of related discount to
present value is recognized as a component of interest income.

         Servicing  Assets  are  carried  at the lower of cost or market and are
included in other assets.  Impairment is measured  using  relative fair value of
the individual Servicing Assets and recognized through a valuation allowance.

         Servicing Fees, Net - Servicing fees, net include the contractual  fee,
typically one percent of receivables serviced, earned from each trust.

         Common Stock - In election of directors,  the holders of Class B Common
Stock are  entitled  to five  votes  per  share,  and  Class A Common  Stock are
entitled  to one vote per  share.  On all  matters  other than the  election  of
directors, holders of Class B and A have one vote per share and vote as a single
class.

         The  Company's  charter  provides  that shares of Class B Common  Stock
convert  automatically  to shares of Class A Common  Stock on a  share-for-share
basis upon transfer  outside a prescribed  group of initial  holders and certain
affiliates. Pursuant to such provision, 704,770, 344,964 and 0 shares of Class B
Common Stock were  converted  to shares of Class A Common  Stock  during  fiscal
1999, 1998 and 1997, respectively.

         Income Taxes - Deferred tax assets and  liabilities  are recognized for
the future tax  consequences  attributable to differences  between the financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective  tax basis.  Deferred tax assets and  liabilities  are measured using
enacted  tax rates  expected  to apply to  taxable  income in the years in which
those temporary  differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

         Amounts  Due to  Trusts  -  Amounts  due  to  trusts  represent  monies
collected but not paid to the trustee for principal and interest  remittances as
well as recovery  payments in respect of  securitized  receivables.  All amounts
collected by the Company are remitted to the trustee  within two business  days,
and  subsequently  distributed  by the trustee to the investors,  servicer,  and
credit enhancers on a monthly basis.


<PAGE>

         Derivative   Financial   Instruments  -  The  Company  uses  derivative
financial  instruments  as a means of managing the interest rate exposure of its
fixed-rate  receivables  held  for  sale and  forecasted  receivable  production
through the estimated date of sale of such receivables in a  securitization  and
does not use them  for  trading  purposes.  Historically,  securitizations  have
occurred  approximately every three months. The derivative financial instruments
are accounted for under the accrual method.  Under this method the  differential
to be paid or  received  on  instruments  is  recognized  over  the  life of the
agreements in interest income.  Changes in fair value of the interest rate swaps
accounted  for under the accrual  method are not  reflected in the  accompanying
financial  statements.  Prior to March 1999, the Company used a hedging  vehicle
that  included  the  execution  of short sales of U.S.  Treasury  Notes having a
maturity  approximating the average maturity of the receivable production during
the relevant period. At such time as a securitization  was committed,  the hedge
would be  covered  by the  purchase  of a like  volume of U.S.  Treasury  Notes.
Beginning  in March  1999,  the  Company  began  using a hedging  strategy  that
primarily   consists  of  forward   interest   rate  swaps   having  a  maturity
approximating  the average  maturity  of the  receivable  production  during the
relevant  period.  At such time as a securitization  is committed,  the interest
rate swaps are terminated. Gains or losses on the terminated interest rate swaps
are included in income at the time the  designated  receivables  are sold and as
such are included in the  determination of the gain on sales of receivables.  To
qualify for such  accounting,  the  interest  rate swaps are  designated  to the
receivables and alter the receivables' interest rate characteristics.

         Statement of Financial  Accounting  Standards No. 133,  Accounting  for
Derivative  Instruments  and Hedging  Activities  (SFAS 133), was issued in June
1998 and is  effective  for all fiscal  quarters of all fiscal  years  beginning
after June 15, 2000,  as amended.  This  statement  establishes  accounting  and
reporting standards for derivative  instruments and for hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the consolidated  balance sheets and measure those instruments at
fair value.  If certain  conditions  are met, a derivative  may be  specifically
designated  as a fair  value  hedge,  a cash flow  hedge,  or a hedge of foreign
currency exposure.  The accounting for changes in the fair value of a derivative
(gains  and  losses)  depends  on the  intended  use of the  derivative  and the
resulting  designation.  The Company has not completed the process of evaluating
the impact that will result from adopting  SFAS No. 133 and is therefore  unable
to disclose the impact that  adopting the  statement  will have on its financial
position and results of operations when such statement is adopted.

         Earnings Per Share - Basic  earnings  per share for fiscal 1999,  1998,
and 1997  have been  computed  on the basis of the  weighted  average  number of
common shares outstanding.  The effect of stock options not exercised during the
twelve  months ended June 30, 1999 are dilutive  although the effect on earnings
per share is less than $.01.  The effect of stock options not  exercised  during
the 1998 and 1997 periods  presented are  anti-dilutive  and therefore  were not
included in diluted earnings per share;  however,  effective  November 19, 1998,
116,425 outstanding options of non-executive officers were repriced resulting in
those options becoming dilutive.


<PAGE>



         The following is a reconciliation of the weighted average common shares
for the basic and diluted earnings per share  computation (in thousands,  except
share data):

<TABLE>
<CAPTION>
                                       For the Year Ended                 For the Year Ended             For the Year Ended
                                         June 30, 1999                      June 30, 1998                   June 30, 1997
                                --------------------------------  --------------------------------  ------------------------------
                                  Net                  Per Share     Net                 Per Share    Net                Per Share
                                Earnings    Shares      Amount     (Loss)      Shares      Amount   Earnings    Shares     Amount
                                --------    ------      ------     ------      ------      ------   --------    ------     ------

<S>                             <C>        <C>           <C>      <C>        <C>           <C>       <C>       <C>          <C>
Basic earnings per share        $14,324    13,241,593    $1.08    $(9,822)   13,226,651    $(0.74)   $5,882    13,215,112   $0.45

Effect of dilutive securities
  Stock options                      --        12,053             $    --            --     --       $   --            --   $  --

Diluted earnings per share      $14,324    13,253,646    $1.08    $(9,822)   13,226,651    $(0.74)   $5,882    13,215,112   $0.45
</TABLE>


         Segment Information - The Company has adopted SFAS No. 131, Disclosures
about  Segments of an Enterprise  and Related  Information  (SFAS 131) effective
June 30, 1999. SFAS 131 provides new guidance on segment reporting.  The Company
determined it has a single reportable  segment which is acquiring,  securitizing
and  servicing  retail  automobile  installment  sales  contracts  originated by
dealerships affiliated with major domestic and foreign automobile manufacturers.
The single segment was determined  based on  management's  approach to operating
decisions, assessing performance and reporting of financial information.

         Reclassification  - Certain  amounts  for the prior  periods  have been
reclassified to conform to the current presentation.


2.    RECEIVABLES HELD FOR SALE, NET

         Receivables held for sale, net are as follows (in thousands) at:

                                                            June 30,
                                                    1999                1998

Principal balance of Tier I receivables         $ 260,857            $ 108,159
Principal balance of Tier II receivables              886                7,624
Other receivables                                      91                  171
Receivables in process                                 27                 (154)
Dealer premiums                                     8,209                4,375
Allowance for credit losses                        (2,754)              (1,916)
                                                ---------            ---------
                                                $ 267,316            $ 118,259
                                                =========            =========

<PAGE>

         Activity in the  allowance for credit  losses on  receivables  held for
sale (in thousands):

<TABLE>
<CAPTION>
                                                      Year ended June 30,
                                              1999          1998          1997

<S>                                         <C>           <C>           <C>
Balance at the beginning of the period      $  1,916      $    780      $  1,099
  Charge-offs                                 (7,708)      (10,635)       (7,361)
  Recoveries                                   2,667         3,721         2,854
  Provision for estimated credit losses        5,879         8,050         4,188
                                            --------      --------      --------
Balance at the end of the period            $  2,754      $  1,916      $    780
                                            ========      ========      ========
</TABLE>



       Notional  amounts and  unrealized  gain (losses)  related to  outstanding
hedges are as follows (in thousands) at:

                                                               June 30,
                                                         1999          1998

Notional amounts outstanding                          $ 438,250     $ 210,000
Unrealized gains (losses) on hedging transactions     $   1,127     $    (394)


         The Company had five interest rate swap agreements outstanding totaling
a notional  amount of $438 million at June 30, 1999 with maturity  dates ranging
from August 2004 to  September  2005 and with a weighted  average  fixed rate of
5.72% and a weighted  average  receivable  rate of 5.84% at June 30,  1999.  The
agreements   outstanding  at  June  30,  1999  were  for  existing   receivables
outstanding  of $261.7  million  and  projected  future  acquisitions  of $176.6
million. Of the notional amounts outstanding at June 30, 1999, $380 million were
closed on August 5, 1999,  and  notional  amounts of $210 million were closed in
September  1998 for amounts  outstanding  at June 30, 1998.  The  remaining  $58
million of notional amounts outstanding at June 30, 1999 that were not closed in
August 1999  represent  acquisitions  with contract dates in July 1999 that were
not received until August 1999 which was after the securitization cutoff date.

         Net  realized   losses  on  derivative   financial   instruments   were
approximately $3,190,000, $2,669,000 and $6,293,000 during fiscal 1999, 1998 and
1997,  respectively,  and are  recorded  as a  component  of the gain on sale of
receivables, net.

3.   SERVICED RECEIVABLES

         The  principal  balance of  receivables  serviced  are as  follows  (in
thousands) at:
<TABLE>
<CAPTION>
                                                            June 30,
                                                     1999               1998

Receivables held for sale:
<S>                                              <C>                <C>
  Tier I (net of unearned discount)              $  260,857         $  108,159
  Tier II (net of unearned discount)                    886              7,624
  Other                                                  91                171
                                                 ----------         ----------
                                                    261,834            115,954
Securitized receivables:
  Tier I                                          2,203,509          1,870,750
  Tier II                                            52,906             59,231

Other receivables serviced                              821              1,482
                                                 ----------         ----------
                                                 $2,519,070         $2,047,417
                                                 ==========         ==========
</TABLE>


<PAGE>

         Certain  characteristics  of  receivables  serviced  are as follows (in
thousands) at:

<TABLE>
<CAPTION>
                                                                  June 30,
                                                           1999            1998

<S>                                                         <C>             <C>
Weighted average interest rate (Tier I)                     13.08%          13.09%
Weighted average interest rate (Tier II)                    18.75%          19.03%
Average receivable balance (Tier I)                    $   11,529      $   10,755
Average receivable balance (Tier II)                   $    9,750      $   10,637
Weighted Average term remaining (Tier I) (months)            57.2            55.3
Weighted Average term remaining (Tier II) (months)           42.9            49.0
</TABLE>


         During fiscal 1999,  receivable  acquisitions relating to customers who
reside in Texas, North Carolina,  and California totaled 11.8%, 11.1%, and 7.9%,
respectively,  of all  receivables  acquired.  At June 30, 1999,  customers  who
reside in Texas, North Carolina,  and California totaled 13.5%, 11.0%, and 9.5%,
respectively,  of the  receivable  servicing  portfolio.  A significant  adverse
change in the economic  climate in Texas,  North  Carolina,  California or other
states could potentially result in fewer receivables  acquired as well as impact
the  recoverability  of  Retained  Interest.  No  individual  dealer or group of
affiliated  dealers  accounted  for more than 2.1% of the  Company's  receivable
acquisitions during the year ended June 30, 1999.


4.    PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS, NET

         Property, equipment, and leasehold improvements, net are as follows (in
thousands) at:

                                                     June 30,
                                               1999             1998

Building                                     $ 4,372          $ 3,897
Leasehold improvements                           553              354
Land                                             367              367
Equipment                                      7,447            6,792
Accumulated depreciation                      (4,364)          (3,489)
                                             -------          -------
                                             $ 8,375          $ 7,921
                                             =======          =======




<PAGE>

5.    RETAINED INTEREST IN SECURITIZED ASSETS

         The carrying  amount of retained  interest in securitized  assets is as
follows (in thousands) at:
<TABLE>
<CAPTION>
                                                                       June 30,
                                                                1999              1998

<S>                                                         <C>               <C>
Estimated gross interest spread from receivables,
  net of estimated prepayments and fees                     $   248,687       $   201,082
Estimated dealer premium rebates refundable                      22,923            25,718
Estimated credit losses on securitized receivables             (104,448)          (90,203)
Spread accounts                                                  69,757            68,113
Discount to present value                                       (46,054)          (33,117)
                                                            -----------       -----------
                                                            $   190,865       $   171,593
                                                            ===========       ===========

Outstanding balance of securitized receivables serviced     $ 2,256,415       $ 1,929,981
                                                            ===========       ===========

Estimated credit losses as a percentage of
  securitized receivables serviced                                 4.63%             4.67%
</TABLE>




         Retained  interest  in  securitized  assets  activity is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                Year ended June 30,
                                                      1999              1998              1997
<S>                                                <C>               <C>               <C>
Balance at beginning of period                     $ 171,593         $ 170,791         $ 147,024
Amounts capitalized (including estimated
  dealer rebates)                                     80,518            49,071            68,922
Collections                                          (57,712)          (28,951)          (28,510)
Accretion of discount                                 18,700             7,293             6,244
Change in spread accounts                              1,644            (3,631)            8,154
Impairment                                           (11,917)          (23,636)          (34,828)
Change from cash-in to cash-out                           --            (7,871)               --
Net change in unrealized gain (loss)                 (11,961)            8,527             3,785
                                                   ---------         ---------         ---------
Balance at end of period                           $ 190,865         $ 171,593         $ 170,791
                                                   =========         =========         =========
</TABLE>




<PAGE>

         Spread account activity is as follows (in thousands) at:
<TABLE>
<CAPTION>

                                                                June 30,
                                                          1999          1998

<S>                                                     <C>           <C>
Balance at beginning of period                          $ 68,113      $ 71,744
Excess cash flows deposited to spread accounts            50,680        25,290
Initial spread account deposits                            2,011        10,077
Interest earned on spread accounts                         3,313         3,681
Less:  excess cash flows released to the Company         (54,360)      (42,679)
                                                        --------      --------

Balance at end of period                                $ 69,757      $ 68,113
                                                        ========      ========
</TABLE>


         The weighted  average yield, on spread accounts was 4.75% and 5.30% for
the years ended June 30, 1999 and 1998, respectively.

         Because of current trends with respect to credit loss and  delinquency,
and their  effects on the  valuation  of the  retained  interest in  securitized
assets,  the Company  recorded a pre-tax charge of $11,917,000,  $23,636,000 and
$34,828,000  for the impairment of the retained  interest in securitized  assets
during fiscal 1999,  1998 and 1997,  respectively.  During the fourth quarter of
fiscal 1999, the Company refined its  methodology of determining  discount rates
used to calculate the gain on sale of receivables  and value Retained  Interest.
This change in estimate reduced the retained  interest in securitized  assets by
$11.8  million as of June 30, 1999,  and had the effect of reducing  fiscal 1999
net earnings by $3.1  million,  pre-tax ($1.9 million net of taxes) or $0.15 per
share.


6.    OTHER ASSETS

         Other assets are as follows (in thousands) at:
<TABLE>
<CAPTION>


                                                          June 30,
                                                    1999              1998

<S>                                               <C>               <C>
Repossessed assets                                $ 5,086           $ 5,934
Accrued servicing fees                              6,243             3,228
Servicing assets                                    2,719             2,743
Deferred borrowing fees                             1,596             1,981
Income tax receivable                               5,000             1,577
Advance of delinquent interest                      1,117             1,387
Other                                               4,107             2,430
                                                  -------           -------
                                                  $25,868           $19,280
                                                  =======           =======

</TABLE>


7.    AMOUNTS DUE UNDER WAREHOUSE FACILITIES

         At June 30,  1999 and 1998,  the  Company,  through  its  wholly  owned
special-purpose  subsidiaries,  had  borrowing  arrangements  with  a  financial
institution which provided for one and two,  respectively,  revolving  Warehouse
Facilities (the Facilities) with an aggregate borrowing capacity of $450 million
at June 30, 1999 and $400  million at June 30,  1998.  During the quarter  ended
September 30, 1998, the two Facilities  used for the funding of auto  receivable
acquisitions  were  combined  into one  Facility.  Borrowings  under the current
Facility are  collateralized by certain  receivables held for sale.  Outstanding
borrowings of the Facility at June 30, 1999 were  $185,500,000,  and outstanding
borrowings of the two Facilities at June 30, 1998 were $73,123,000.  At June 30,
1999 and 1998,  an  additional  $67.2  million and $4.7 million was available to
borrow  based on the  outstanding  principal  balance of  eligible  receivables,
respectively. The weighted average cost of funds including the prefunded amount,
net of income earned,  of the  Facility(s) for the years ended June 30, 1999 and
1998, was 5.09% and 5.88%, respectively.


<PAGE>

         The cost of funds includes a variable  interest rate on the outstanding
commercial paper,  fees on the used and unused portions of the Facility(s),  and
the  amortization of prepaid  warehouse fees. The largest portion of the cost of
funds related to the Facility(s) is the variable rate interest on the commercial
paper issued by the financing conduit.  Upfront warehouse fees are non-recurring
costs related to the initial set-up of the Facility.

         The  Facility  agreement  specifies a term of one year and is renewable
annually. The Facility expires in September 1999.


8.    LONG-TERM DEBT

         In connection  with the  Company's  initial  public  offering in August
1995, the Company issued, in a private placement,  $110 million principal amount
of 8.53%  Senior  Notes  due  2002.  Interest  on the  Senior  Notes is  payable
semi-annually on February 1 and August 1 of each year, and commenced on February
1, 1996.  Principal payments began August 1, 1998, in the amount of $22 million,
and are due on each  subsequent  August 1, in the amount equal to  approximately
20% of the stated original principal  balance.  The Senior Notes are redeemable,
in whole or in part,  at the option of the  Company,  in a principal  amount not
less than $1 million,  together with accrued and unpaid  interest to the date of
redemption and a yield-maintenance premium as defined in the note agreement.

         In April 1996, the Company issued, in a private placement,  $46 million
9.99% Senior  Subordinated Notes due 2003.  Interest on the Senior  Subordinated
Notes is payable quarterly on March 30, June 30, September 30 and December 30 of
each year,  and commenced on June 30, 1996.  The Senior  Subordinated  Notes are
redeemable,  in whole or in part,  at the option of the Company,  in a principal
amount not less than $1 million,  together  with accrued and unpaid  interest to
the date of redemption  and a  yield-maintenance  premium as defined in the note
agreement.

         In March 1997, the Company issued, in a private placement,  $50 million
Series A 7.75% Senior Notes due 2002 and $15 million Series B 7.97% Senior Notes
due 2002. Interest on the Senior Notes is payable  semi-annually on March 15 and
September 15 of each year and  commenced  September  15, 1997,  with a principal
reduction  occurring  on March 15, 2002 of $21.7  million.  The Senior Notes are
redeemable,  in whole or in part,  at the option of the Company,  in a principal
amount not less than $1 million,  together  with accrued and unpaid  interest to
the date of redemption  and a  yield-maintenance  premium as defined in the note
agreement.

         The Company  recognized  $17,817,000,  $19,485,000  and  $15,697,000 of
interest  expense  during  the  years  ended  June  30,  1999,  1998  and  1997,
respectively, related to long-term debt.

Scheduled contractual maturities of long-term debt at June 30, 1999 follows:

                   2000                                         $ 22,000,000
                   2001                                           22,000,000
                   2002                                           43,666,667
                   2003                                          111,333,333
                                                                ------------
                  Total                                         $199,000,000
                                                                ============



<PAGE>

9.    INCOME TAXES

         Amounts  currently  payable at June 30, 1999 and 1998 were $6.3 million
and $0.0, respectively.

         The  composition  of income tax  expense  (benefit)  is as follows  (in
thousands):


                                             Year ended June 30,
                                      1999          1998          1997

Current tax expense (benefit)      $ 15,252      $ (9,863)     $ (1,644)
Deferred tax expense (benefit)       (6,273)        2,007         5,810
                                   --------      --------      --------
                                   $  8,979      $ (7,856)     $  4,166
                                   ========      ========      ========


         The  effective  income  tax rate  differs  from the  statutory  federal
corporate tax rate as follows:


                                                 Year ended June 30,
                                        1999           1998           1997

Statutory rate                          35.0%          35.0%          35.0%
  State income taxes                     3.2            3.2            5.5
  Change in commercial domicile           --            4.9             --
  Other                                  0.3            1.3            1.0
                                        ----           ----           ----
Effective rate                          38.5%          44.4%          41.5%
                                        ====           ====           ====




         The  composition  of deferred  income  taxes  payable is as follows (in
thousands):
<TABLE>
<CAPTION>

                                                                         June 30,
                                                                    1999         1998

Deferred tax assets:
<S>                                                              <C>           <C>
  Net operating losses carryforward                              $     --      $ 11,304
  Allowance for estimated credit losses                             1,052           732
  Mark to market and allowance for credit losses                    2,450         5,713
                                                                 --------      --------
                                                                    3,502        17,749

Deferred tax liabilities:
  Retained interest in securitized assets                          10,875        22,619
  Gain on securitizations                                           2,528            --
  Unrealized gain on retained interest in securitized assets         (204)        4,703
                                                                 --------      --------
                                                                   13,199        27,322

Deferred income taxes payable                                    $  9,697      $  9,573
                                                                 ========      ========
</TABLE>

         The Company  believes the deferred tax assets will more likely than not
be realized due to the reversal of deferred tax  liabilities and expected future
taxable income.  Accordingly, no deferred tax asset valuation allowance has been
established.

<PAGE>

10.   ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated  carrying values,  fair values and various methods and assumptions
used in valuing the Company's financial instruments as of June 30, 1999 and 1998
are set forth below:
<TABLE>
<CAPTION>


                                                               1999                                   1998
                                                   ------------------------------        -----------------------------
                                                     Carrying          Fair                Carrying            Fair
                                                      Value            Value                 Value             Value
                                                   ------------------------------        -----------------------------
(Dollars in thousands)
<S>                                                <C>               <C>                   <C>               <C>
Financial Assets:
   Cash and cash equivalents                       $   8,088         $   8,088             $  75,612         $  75,612
   Restricted cash                                    12,379            12,379                17,823            17,823
   Retained interest in securitized assets
      (including spread accounts)                    190,865           190,865               171,593           171,593
   Receivables held for sale, net                    267,316           274,180               118,259           121,625
   Accrued interest receivable                         2,035             2,035                 1,045             1,045
   Repossessed assets                                  5,086             5,086                 5,934             5,934

Financial Liabilities:
   Amounts due under warehouse
      facilities                                     185,500           185,500                73,123            73,123
   Long-term debt                                    199,000           175,620               221,000           195,000

Off-Balance Sheet Derivatives:
   Interest rate swap                                    n/a             1,127                   n/a               n/a
   Short sales of U.S. Treasury Notes                    n/a               n/a                   n/a              (394)
</TABLE>



         The carrying value  approximates  fair value due to the nature of these
accounts for the following accounts: cash and cash equivalents, restricted cash,
accrued interest receivable, repossessed assets, and amounts due under warehouse
facilities.

         The fair  value of  receivables  held for sale,  net,  is  computed  by
assuming such  receivables had been securities as of year end and estimating the
discounted future net cash flows using historical prepayment,  loss and discount
rates.

         The fair value of retained interest in securitized assets is determined
by discounting  the expected cash flows released from the spread account using a
discount  rate  which  the  Company  believes  is  commensurate  with the  risks
involved.  An  allowance  for  estimated  credit  losses  is  established  using
information  from  scoring  models  and  available   historical  loss  data  for
comparable  receivables  and the  specific  characteristics  of the  receivables
purchased by the Company.  Discount rates utilized are based upon current market
conditions,  and  prepayment  assumptions  are based on  historical  performance
experience of comparable receivables and the impact of trends in the economy.

         The fair value of  long-term  debt is  determined  by  discounting  the
scheduled  loan  payments  to  maturity  using  rates  that are  believed  to be
currently available for debt of similar terms and maturities.

         The fair value of the derivative financial instruments is the estimated
amount the Company would have to pay to enter into equivalent agreements at June
30, 1999 and 1998, with the  counterparty to the swap or short sale  agreements,
respectively.


<PAGE>



11.   COMMITMENTS AND CONTINGENCIES

         Future  minimum  payments  under  noncancelable   operating  leases  on
premises and equipment with terms of one year or more as of June 30, 1999 are as
follows:

                        2000                         $1,187,000
                        2001                            954,000
                        2002                            911,000
                        2003                            759,000
                        2004                                 --
                   Thereafter                                --
                                                     ----------
                   Total                             $3,811,000
                                                     ==========


         These agreements include, in certain cases, various renewal options and
contingent rental agreements. Rental expense for premises and equipment amounted
to approximately $2,074,000,  $1,900,000 and $1,572,000 for the years ended June
30, 1999, 1998 and 1997, respectively.  A majority of the rental expense relates
to the lease of the Company's principal offices from an affiliate.

12.   STOCK-BASED COMPENSATION

         The Company has two stock-based compensation plans, which are described
below.  The Company  applies APB Opinion No. 25,  Accounting for Stock Issued to
Employees  and  related   Interpretations   in  accounting  for  the  plan.  Had
compensation  cost been determined based on the fair value at the grant date for
awards  under those plans  consistent  with the method of Statement of Financial
Accounting  Standards No. 123,  Accounting for  Stock-Based  Compensation  (SFAS
123), the Company's net income and earnings per share would have been reduced to
the pro forma amounts indicated below (in thousands, except share data):
<TABLE>
<CAPTION>

                                                                               June 30,
                                                                 1999           1998           1997

<S>                                                          <C>            <C>            <C>
Net earnings (loss):
  As reported                                                $    14,324    $    (9,822)   $     5,882
  Pro forma                                                       13,546        (10,951)         4,543
Net earnings (loss) per common share (basic and diluted):
  As reported                                                       1.08          (0.74)          0.45
  Pro forma                                                         1.02          (0.83)          0.34
</TABLE>


         The Union Acceptance  Corporation 1994 Incentive Stock Plan (1994 Plan)
and the Union  Acceptance  Corporation 1999 Incentive Stock Plan (1999 Plan) are
the Company's  long-term  incentive plans for directors,  executive officers and
other key employees. The plans authorize the Company's Compensation Committee to
award  executive  officers and other key employees  incentive and  non-qualified
stock options and restricted  shares of Class A Common Stock. A total of 500,000
shares of Class A Common Stock have been  reserved  for issuance  under the 1994
Plan, of which  options for 271,875  shares of Class A Common Stock were granted
at an  issue  price  of $16 per  share  (and  subsequently  repriced  as  herein
discussed) to senior officers upon  consummation of the Company's initial public
offering  of the  Class A Common  Stock.  A total of  300,000  shares of Class A
Common Stock have been reserved for issuance under the 1999 Plan.

         Options or other grants to be received by  executive  officers or other
employees in the future are within the discretion of the Company's  Compensation
Committee, although options under the 1999 plan may be granted by the full board
of  directors.  Stock  options  granted  under  the  Incentive  Stock  Plan  are
exercisable  at such  times (up to ten years  from the date of the grant) and at
such exercise  prices (not less than 85% of the fair market value of the Class A
Common Stock at date of grant) as the Committee  determines and will,  except in
limited circumstances, terminate if the grantee's employment terminates prior to
exercise.  The outstanding  options'  maximum term is ten years. The majority of
options vest over a period of five years, with one-fifth becoming exercisable on
each anniversary of the option grant.

         The fair value of each option  grant is  estimated on the date of grant
using the  Black-Scholes  options  pricing  model  with the  following  weighted
average  assumptions used for grants in 1999, 1998, and 1997;  dividend yield of
0.0% for all three years;  expected  volatility of 55.04%,  100.00% and 100.00%,
respectively;  weighted  average  risk-free  interest rates of 4.85%,  5.45% and
6.50%, respectively; and expected lives of ten years for all three years.

         In November  1998,  the  Company's  Compensation  Committee  approved a
repricing of the outstanding option grants of all non-executive officers.  There
were no  changes to the number of options  granted or the  vesting  schedule.  A
total of 116,425 option grants with a weighted  average exercise price of $14.28
were repriced.


<PAGE>



         A summary of the status of the Company's  stock option plans as of June
30,  1999,  1998 and 1997 and changes  during the years then ended is  presented
below:
<TABLE>
<CAPTION>

                                                  Weighted                       Weighted                      Weighted
                                                  Average                        Average                        Average
                                                  Exercise                       Exercise                      Exercise
                                    Shares         Price          Shares          Price           Shares         Price
                                    -------      ---------       -------      -------------       -------      ---------
<S>                                 <C>          <C>             <C>          <C>                 <C>          <C>
Options outstanding at
  beginning of year                 368,675      $   14.86       314,485      $       16.02       276,915      $   16.03
Options granted                      48,700           5.31        74,000               9.69        39,750          16.00
Options reacquired                 (116,425)     $   14.28
Options granted (repriced)          116,425           5.31
Options exercised                      (350)          5.31            --                 --            --             --
Options canceled                     (2,360)          5.31       (19,810)             14.63        (2,180)         17.48
                                    -------      ---------       -------      -------------       -------      ---------

Options outstanding at
  end of year                       414,665      $   11.28       368,675      $       14.86       314,485      $   16.02

Weighted average fair
  value of options
  granted during the year                  $  3.47                     $   8.86                         $   14.71

</TABLE>

         The  following  table  summarizes   information   about  stock  options
outstanding at June 30, 1999:
<TABLE>
<CAPTION>


                                Options outstanding                         Options exercisable
---------------------------------------------------------------    ----------------------------------------
                                      Weighted       Weighted
                                      Average        Remaining       Average                      Average
                                      Number        Contractual     Exercise          Number      Exercise
Average exercise price              Outstanding       Life           Price         Exercisable     Price
----------------------              -----------       ----           -----         -----------     -----

<S>                                  <C>              <C>          <C>                <C>        <C>
       $  5.31                       162,415          7.60         $    5.31          63,419     $    5.31
       $  9.69                        35,000          8.10              9.69           5,000          9.69
       $ 16.00                       217,250          6.20             16.00         121,125         16.00
                                     -------          ----         ---------         -------     ---------
                                     414,665          6.90         $   11.28         189,544     $   12.26
                                     =======          ====         =========         =======     =========
</TABLE>


         In addition to the options  outstanding  at June 30,  1999,  there were
shares  35,725  shares of Class A Common Stock  available  for future  grants or
awards.

         The  Incentive  Stock  Plan also  provides  that each  director  of the
Company who is not an executive officer is automatically granted shares of Class
A Common Stock with a fair market value of $15,000 following each annual meeting
of shareholders. Shares so granted have a six-month period of restriction during
which they may not be  transferred.  Shares  granted  under this  section of the
Incentive Stock Plan totaled  17,778,  14,694 and 5,430 in fiscal 1999, 1998 and
1997, respectively,  and compensation cost charged against income was $90,000 in
1999, 1998 and 1997.



<PAGE>

13.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

         Quarterly  financial  information is as follows (in  thousands,  except
share data):
<TABLE>
<CAPTION>


Year ended June 30, 1999                         First            Second            Third            Fourth             Total
                                             ------------      ------------      ------------      ------------      ------------

<S>                                          <C>               <C>               <C>               <C>               <C>
Interest on receivables held for sale        $      8,251      $      6,938      $      8,087      $      9,739      $     33,015
Retained interest and other                         5,479             5,037             4,798             4,694            20,008
                                             ------------      ------------      ------------      ------------      ------------

Total interest income                              13,730            11,975            12,885            14,433            53,023
                                             ------------      ------------      ------------      ------------      ------------

Interest expense                                   (6,952)           (6,338)           (6,919)           (7,242)          (27,451)

Net interest margin                                 6,778             5,637             5,966             7,191            25,572

Provision for estimated credit losses              (2,325)           (1,275)           (1,225)           (1,054)           (5,879)
                                             ------------      ------------      ------------      ------------      ------------

Net interest margin after provision
    for estimated credit losses                     4,453             4,362             4,741             6,137            19,693
                                             ------------      ------------      ------------      ------------      ------------

Gain (loss) on sales of receivables, net            2,706             4,087             6,386             5,954            19,133
Servicing fees, net                                 4,953             5,469             5,601             5,693            21,716
Late charges and other fees                         1,206             1,173             1,442             1,528             5,349
                                             ------------      ------------      ------------      ------------      ------------

Other revenues                                      8,865            10,729            13,429            13,175            46,198
                                             ------------      ------------      ------------      ------------      ------------
Salaries and benefits                               5,670             5,453             6,328             6,121            23,572
Other general and administrative fees               4,321             4,856             4,913             4,926            19,016
                                             ------------      ------------      ------------      ------------      ------------

Total operating expenses                            9,991            10,309            11,241            11,047            42,588
                                             ------------      ------------      ------------      ------------      ------------

Earning before provision
  for income taxes                                  3,327             4,782             6,929             8,265            23,303
Provision for income taxes                          1,270             1,859             2,665             3,185             8,979
                                             ------------      ------------      ------------      ------------      ------------

Net earnings                                 $      2,057      $      2,923      $      4,264      $      5,080      $     14,324
                                             ============      ============      ============      ============      ============

Net earnings per common
  share (basic and diluted)                  $       0.16      $       0.22      $       0.32      $       0.38      $       1.08
                                             ============      ============      ============      ============      ============

Basic weighted average common shares
  outstanding                                  13,231,482        13,236,313        13,249,260        13,249,571        13,241,593
Diluted weighted average common
  shares outstanding                           13,231,482        13,236,313        13,277,130        13,281,142        13,253,646
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


Year ended June 30, 1998                         First            Second            Third            Fourth             Total
                                             ------------      ------------      ------------      ------------      ------------

<S>                                          <C>               <C>               <C>               <C>               <C>
Interest on receivables held for sale        $      6,627      $      6,473      $      7,133      $      7,638      $     27,871
Retained interest and other                         3,113             3,191             3,230             3,388            12,922
                                             ------------      ------------      ------------      ------------      ------------

Total interest income                               9,740             9,664            10,363            11,026            40,793

Interest expense                                    6,053             6,167             6,990             6,897            26,107
                                             ------------      ------------      ------------      ------------      ------------

Net interest margin                                 3,687             3,497             3,373             4,129            14,686

Provision for estimated credit losses              (1,505)           (1,770)           (1,900)           (2,875)           (8,050)
                                             ------------      ------------      ------------      ------------      ------------

Net interest margin after provision
  for estimated credit losses                       2,182             1,727             1,473             1,254             6,636
                                             ------------      ------------      ------------      ------------      ------------

Gain (loss) on sales of receivables, net          (10,847)            2,020             3,113            (6,212)          (11,926)
Servicing fees, net                                 4,745             4,803             4,742             4,781            19,071
Late charges and other fees                         1,020               985             1,065             1,017             4,087
                                             ------------      ------------      ------------      ------------      ------------

Other revenues                                     (5,082)            7,808             8,920              (414)           11,232
                                             ------------      ------------      ------------      ------------      ------------

Salaries and benefits                               4,610             4,871             4,815             5,131            19,427
Other general and administrative expenses           4,013             4,165             4,007             3,934            16,119
                                             ------------      ------------      ------------      ------------      ------------

 Total operating expenses                           8,623             9,036             8,822             9,065            35,546
                                             ------------      ------------      ------------      ------------      ------------

Earnings (loss) before provision (benefit)
  for income taxes                                (11,523)              499             1,571            (8,225)          (17,678)
Provision (benefit) for income taxes               (4,656)             (711)              654            (3,143)           (7,856)
                                             ------------      ------------      ------------      ------------      ------------

Net earnings (loss)                          $     (6,867)     $      1,210      $        917      $     (5,082)     $     (9,822)
                                             ============      ============      ============      ============      ============

Net earnings (loss) per common
  share (basic and diluted)                  $      (0.52)     $       0.09      $       0.07      $      (0.38)     $      (0.74)
                                             ============      ============      ============      ============      ============

Weighted average common
  shares outstanding (basic and diluted)       13,216,788        13,227,010        13,231,482        13,231,482        13,226,651

</TABLE>



Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

Previously Reported
                                    PART III

Item 10.          Directors and Executive Officers of the Registrant

         The  information  required by this item with  respect to  directors  is
incorporated  by  reference  to the  information  contained  under  the  caption
"Election of  Directors"  in the  Company's  1999 Proxy  Statement  for its 1999
Annual Shareholder Meeting (the "1999 Proxy Statement").

Item 11.          Executive Compensation

         Only the  information  required by this item to be  included  with this
report is  incorporated  by reference  to the  information  contained  under the
caption "Compensation" in the 1999 Proxy Statement.

Item 12.          Security Ownership of Certain Beneficial Owners and Management

         The  information  required by this item is incorporated by reference to
the information  contained under the captions  "Voting  Securities and Principal
Holders Thereof" and "Election of Directors" in the 1999 Proxy Statement.

Item 13.          Certain Relationships and Related Transactions

         The  information  required by this item is incorporated by reference to
the information  contained under the caption "Certain  Transactions with Related
Persons" in the 1999 Proxy Statement.

                                     PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)           List the following documents filed as part of the report:

              Financial Statements -- Included Under Item 8:

              Report of Deloitte & Touche LLP, Independent Auditors

              Report of KPMG LLP, Independent Auditors

              Consolidated Balance Sheets as of June 30, 1999 and 1998

              Consolidated Statements of Earnings (Loss) for the Years Ended
              June 30, 1999, 1998, 1997

              Consolidated Statements of Cash Flows for the Years Ended
              June 30, 1999, 1998, 1997

              Consolidated Statement of Shareholders' Equity for the Years
              Ended June 30, 1999, 1998, 1997

(b)           Reports on Form 8-K

              Registrant filed no reports on Form 8-K during the quarter
              ended June 30, 1999

(c)           The exhibits filed herewith or incorporated by reference
              herein are set forth  following the signature page which
              appears on page 62.

<PAGE>

                                  EXHIBIT INDEX

Exhibit No.           Description                                 Page (Ex. No.
                                                             Cross Reference)(1)
-------------------------------------------------------------------------------
3.1         Registrant's  Articles of  Incorporation,  as amended       S-1, 3.1
            and restated.

3.2         Registrant's   Code  of   By-Laws,   as  amended  and       S-1, 3.2
            restated.

3.3         Form of Share Certificate for Class A Common Stock.         S-1, 3.3

4.1         Articles  V and VI of the  Registrant's  Articles  of       S-1, 4.1
            Incorporation  respecting  the  terms * of  shares of
            Common Stock,  are  incorporated  by reference to the
            Registrant's    Articles   of   Incorporation   filed
            hereunder as Exhibit 3.1

4.2         Article III -  "Shareholder  Meetings,"  Article VI -       S-1, 4.2
            "Certificates  for Shares,"  Article VII - "Corporate
            Books  and  Records  -  Section  3" and  Article  X -
            "Control   Share   Acquisitions   Statute"   of   the
            Registrant's  Code of  By-Laws  are  incorporated  by
            reference  to  the  Registrant's   Restated  Code  of
            By-Laws filed herewith as Exhibit 3.2.

4.3         Transfer   and    Administration    Agreement   among      S-1, 4.3
            Enterprise  Funding  Corporation,   Union  Acceptance
            Funding Corporation and Union Acceptance Corporation,
            dated as of June 27, 1995 ("UAFC Transfer and
            Administration Agreement").

4.3(a)      Amendment  No. 1  to UAFC Transfer and  Administration      10Q 9/95
            Agreement dated September 8, 1995                             4.3(a)

4.3(b)      Amendment  No. 2  to UAFC Transfer and  Administration      10Q 9/95
            Agreement dated September 29, 1995                            4.3(b)

4.3(c)      Letter    Agreement    regarding  UAFC  Transfer   and      10K 1996
            Administration Agreement dated November 13, 1995              4.3(c)

4.3(d)      Amendment  No. 3  to  UAFC Transfer and  Administration     10K 1996
            Agreement dated March 1, 1996                                 4.3(d)

4.3(e)      Letter  Agreement UAFC regarding  UAFC  Transfer  and       10K 1996
            Administration Agreement dated May 30, 1996                   4.3(e)

4.3(f)      Amendment No. 4  to UAFC Transfer and  Administration       10K 1996
            Agreement dated September 5, 1996                             4.3(f)

4.3(g)      Amendment No. 5 to UAFC Transfer  and  Administration       10K 1997
            Agreement dated October 31, 1996                              4.3(g)

4.3(i)      Amendment No. 6  to UAFC Transfer and  Administration      10Q 12/96
            Agreement dated December 23, 1996                                4.1

4.3(h)      Amendment No. 7  to UAFC Transfer and  Administration       10K 1997
            Agreement dated March 31, 1997                                4.3(h)

4.3(j)      Letter  Agreement  No. 3 with respect to UAFC Transfer      10K 1997
            and Administration Agreement, dated April 28, 1997            4.3(j)

4.4         Note  Purchase  Agreement  between  Union  Acceptance       10K 1995
            Corporation and certain lenders dated as of August 7,            4.4
            1995.

4.4(a)      Amendment  No.  1 to Note  Purchase  Agreement  dated      10Q 12/95
            November 22, 1995                                             4.4(a)

4.5         Transfer   and    Administration    Agreement   among       S-1, 4.5
            Enterprise Funding  Corporation,  Performance Funding
            Corporation and Union Acceptance  Corporation,  dated
            as of July 24, 1995.


<PAGE>

4.5(a)      Amendment  No.  1  to  Transfer  and   Administration      10Q 12/95
            Agreement dated September 8, 1995                             4.5(a)

4.5(b)      Letter    Agreement     regarding     Transfer    and       10K 1996
            Administration Agreement dated October 12, 1995               4.5(b)

4.5(c)      Amendment  No.  2  to  Transfer  and   Administration       10K 1996
            Agreement dated May 10, 1996                                  4.5(c)

4.5(d)      Letter    Agreement     regarding     Transfer    and       10K 1996
            Administration Agreement dated July 11, 1996                  4.5(d)

4.5(e)      Letter    Agreement     regarding     Transfer    and       10K 1996
            Administration Agreement dated August 20, 1996                4.5(e)

4.5(f)      Amendment  No.  3  to  Transfer  and   Administration      10Q 12/96
            Agreement,  dated  December  23, 1996                            4.2

4.5(g)      Letter    Agreement  No. 4  to   Transfer  and              10K 1997
            Administration Agreement dated April 25, 1997                 4.5(g)

4.5(h)      Amendment  No.  5  to  Transfer  and   Administration       10K 1997
            Agreement dated June 6, 1997                                  4.5(h)

4.5(i)      Letter   Agreement   with  regard  to  Transfer   and       10K 1997
            Administration Agreement dated June 24, 1997                  4.5(i)

4.5(j)      Amendment No. 6 to Transfer and Administration Agreement    10K 1997
            dated as of July 29, 1997                                     4.5(j)

4.6         Note  Purchase  Agreement  dated as of April 3,  1996       10Q 3/96
            among  Union   Acceptance   Corporation  and  several            4.1
            purchasers of Senior Subordinated Notes due 2003

4.7         Note Purchase Agreement,  dated March 24, 1997, among       10Q 3/97
            Union Acceptance  Corporation and certain  purchasers           10.1
            of Senior Notes, due 2002.

4.8         Note Purchase Agreement among Union Acceptance Funding
            Corporation, Enterprise Funding Corporation, Nationsbank,   10K 1998
            N.A., Dated as of September 18, 1998                          4.9(a)

4.8(a)      Amendment  No. 1 to Note  Purchase  Agreement,  dated
            September 9, 1999                                             _____

4.9         Security Agreement among Enterprise Funding Corporation,
            Union Acceptance Funding Corporation, Union Acceptance
            Corporation, Mbia Insurance Corporation and Nationsbank,    10K 1998
            N.A., dated as of September 18, 1998                          4.9(b)

4.9(a)      Amendment  No. 1 to Security  Agreement,  dated as of
            May 25, 1999                                                  _____

4.9(b)      Amendment  No. 2 to Security  Agreement,  dated as of
            September 9, 1999.                                            _____

9(a)        Voting Trust Agreement  among Richard D.  Waterfield,      S-1, 9(a)
            as trustee,  and  certain  existing  shareholders  of
            Union Holding Company, Inc., dated June 10, 1994.

9(b)        First  Amendment to Voting Trust Agreement dated June      S-1, 9(b)
            1, 1995.

10.1        Remittance  Processing Agreement by and between Union     S-1, 10.5
            Federal  Savings  Bank  of  Indianapolis   and  Union
            Acceptance Corporation dated June 29, 1994.


<PAGE>

10.2        Software  License and  Maintenance  Agreement  by and    S-1, 10.10
            between  Union Federal  Savings Bank of  Indianapolis
            and Union Acceptance Corporation dated June 29, 1994.

10.3        Loan Servicing Agreement by and between Union Federal    S-1, 10.11
            Savings  Bank of  Indianapolis  and Union  Acceptance
            Corporation dated June 29, 1994.

10.4        General  Subservicing  Agreement by and between Union    S-1, 10.12
            Federal  Savings  Bank  of  Indianapolis   and  Union
            Acceptance Corporation dated as of January 1, 1995.

10.5        Loan  Collection   Agreement  by  and  between  Union    S-1, 10.13
            Federal  Savings  Bank  of  Indianapolis   and  Union
            Acceptance Corporation dated June 29, 1994.

10.6        Letter  respecting  Terms of Bank Accounts from Union    S-1, 10.14
            Federal   Savings  Bank  of   Indianapolis  to  Union
            Acceptance Corporation dated May 25, 1994.

10.7        Supplement  to Account  Agreement  Re:  Drafts by and    S-1, 10.15
            between  Union Federal  Savings Bank of  Indianapolis
            and Union Acceptance Corporation dated June 29, 1994.

10.8        Tax Allocation Agreement by and between Union Holding    S-1, 10.16
            Company,  Inc. and its subsidiaries dated February 1,
            1991, as amended.

10.9        Form of Remote  Outsourcing  Agreement by and between    S-1, 10.18
            Systematics   Financial  Services,   Inc.  and  Union
            Acceptance Corporation.

10.9(a)     Letter Agreement by and among  Systematics  Financial  S-1, 10.18(a)
            Services,   Inc.,   Union  Federal  Savings  Bank  of
            Indianapolis and Union Acceptance  Corporation  dated
            July 13, 1994 respecting Provision of Data Processing
            Services.

10.9(b)     Memorandum respecting Billing Procedure in connection  S-1, 10.18(b)
            with Remote  Outsourcing  Agreement from  Systematics
            System  Financial  Services,  Inc.  to Union  Federal
            Savings  Bank of  Indianapolis  and Union  Acceptance
            Corporation dated October 25, 1994.


<PAGE>

10.10   Union Acceptance Corporation Incentive Stock Plan.            S-1, 10.24

10.11   Letter  respecting  Access  to  Records  from  Union          S-1, 10.25
        Acceptance Corporation to Union Federal Savings Bank
        of Indianapolis dated September 13, 1994.

10.12   Letter   Agreement  by  and  between  Union  Federal         S-1,  10.26
        Savings Bank of  Indianapolis  and Union  Acceptance
        Corporation  dated  December  14, 1994  amending and
        initiating    terms   of    certain    Inter-Company
        Agreements.

10.13   Letter  respecting  terms  and  conditions  of  bank          S-1, 10.27
        accounts   from  Union   Federal   Savings  Bank  of
        Indianapolis to Union Acceptance  Corporation  dated
        December 16, 1994.

10.14   Lease Agreement between Waterfield Mortgage Company,           10Q 12/95
        Incorporated, and Union Acceptance Corporation dated               10.19
        as of November 1, 1995

10.15   Purchase  Agreement among Union  Acceptance  Funding            10Q 3/96
        Corporation,  Union Acceptance Corporation and Union                10.1
        Federal  Savings  Bank of  Indianapolis  dated as of
        January 18, 1996

10.16   Sublease    Agreement   between   Union   Acceptance            10K 1996
        Corporation   and  Union  Federal  Savings  Bank  of               10.26
        Indianapolis dated as of August 1, 1996

10.17   Annual Bonus Plan for Management Employees, dated              10Q 12/97
        July 1, 1997                                                        10.1

10.18   Annual Bonus and Deferral Plan for Senior Officers,            10Q 12/97
        dated July 1, 1997                                                  10.2

10.19   Union Acceptance Corporation 1999 Stock Incentive Plan
        effective as of July 1, 1999                                       _____

21      Subsidiaries of the Registrant                                     _____

23.2    Consent of Deloitte & Touche LLP.                                  _____

23.2    Consent of KPMG LLP.                                               _____

27      Financial Data Schedule                                            _____

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

(1)  Exhibits  set  forth  above  that are not  included  with this  filing  are
     incorporated by reference to the Registrant's previously filed registration
     statement or reports (and the indicated exhibit number) as indicated in the
     right hand column above, as follows:

     S-1 -- Refers to Registrant's  Registration Statement on Form S-1 (Reg. No.
     33-82254

     10K 1995 -- Refers to  Registrant's  Form 10-K for the year  ended June 30,
     1995

     10K 1996 -- Refers to  Registrant's  Form 10-K for the year  ended June 30,
     1996

     10K 1997 -- Refers to  Registrant's  Form 10-K for the year  ended June 30,
     1997

     10K 1998 -- Refers to  Registrant's  Form 10-K for the year  ended June 30,
     1998

     10Q (month/year) -- Refers to Registrant's  Form 10-Q for the quarter ended
     at the end of such month in such calendar year





<PAGE>
SIGNATURES

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

                                    UNION ACCEPTANCE CORPORATION

September 28, 1999                    By:  /S/   John M. Stainbrook
                                          -------------------------
                                          John M. Stainbrook
                                          President and Chief Executive Officer

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

      Signature                        Title                       Date

(1)   Principal Executive Officer:                         )
                                                           )
      /s/  John M. Stainbrook          President and Chief )
      John M. Stainbrook               Executive Officer   )
                                                           )
(2)   Principal Financial/                                 )
      Accounting Officer:                                  )
                                                           )
                                       Treasurer, Secretary)
      /s/ Rick A. Brown                and Chief Financial )
      ------------------               Officer             )
      Rick A. Brown                                        )
                                                           )
(3)   A Majority of the                                    )
      Board of Directors:                                  )
                                                           )
      /s/ John M. Davis                Director            ) September 28, 1999
      -----------------                                    )
      John M. Davis                                        )
                                                           )
      /s/ Fred M. Fehsenfeld           Director            )
      ---------------------                                )
      Fred M. Fehsenfeld                                   )
                                                           )
      /s/ Donald A. Sherman            Director            )
      ---------------------                                )
      Donald A. Sherman                                    )
                                                           )
      /s/ John M. Stainbrook           Director            )
      ---------------------                                )
      John M. Stainbrook                                   )
                                                           )
      /s/ Jerry D. Von Deylen          Director            )
      ---------------------                                )
      Jerry D. Von Deylen                                  )
                                                           )
      /s/ Richard D. Waterfield        Director            )
      ---------------------                                )
      Richard D. Waterfield                                )
                                                           )
      /s/ Thomas M. West               Director            )
      ---------------------                                )
      Thomas M. West                                       )