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, 2000
                                       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  3,454,309  shares of the  issuer's  Class A
Common Stock held by  non-affiliates,  as of September 8, 2000, was $19,862,277.
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 8, 2000, was 5,816,024 shares. The number of
shares of Class B Common Stock of the Registrant,  without par value, as of such
date was 7,461,608.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2000 Annual Meeting of Shareholders  are
incorporated into Part III.

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

                  UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

                                    FORM 10-K

                                      INDEX

                                   PART I                                Page

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

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

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

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

                                     PART II

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

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

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

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

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

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

                                     PART III

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

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

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

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

                                     PART IV

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

SIGNATURES ...........................................................

                                     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 of the Company by Union Federal Bank of Indianapolis,  previously Union
Federal  Savings  Bank  of  Indianapolis  ("Union  Federal"),  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 39 states  from or  through  referrals  by  approximately  5,000
manufacturer-franchised auto dealerships.

         The  Company  was  incorporated  in  Indiana  in  December  1993,  as a
subsidiary of 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  concurrent
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  research with respect to the automobile finance
industry, total retail new and used automobile sales in the United States during
calendar 1999 were  approximately  $656.0  billion of which $507.0  billion were
financed.  Of the amount financed,  approximately $398.0 billion was believed to
be financed at  manufacturer-franchised  dealerships,  and approximately  $272.0
billion was  believed to be of the credit type that the Company  would  consider
acquiring.  The  Company's  total  receivable  acquisitions  of $1.4 billion for
fiscal 2000 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
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.  The
Company has experienced its most intense competition in the Midwest and the West
Coast.  The Company's  primary  competitors  are regional  banks and the captive
finance affiliates of major automotive manufacturers.

         The  Company   experiences   minor  seasonal   declines  in  receivable
acquisitions 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.

RECEIVABLE LIFE CYCLE

         The process for the  acquisition  and  servicing of  automobile  retail
installment  sales  contracts and  installment  loan  agreements has three major
processes and several subprocesses. These processes are:

1.       Originations

o        Dealer Marketing and Dealer Service
o        Underwriting and Purchasing

2.       Funding
o        Short-term
o        Long-term

3.       Servicing
o        Servicing
o        Collection and Remarketing
o        Final Payoff and Title Transfer

The following section describes each of these processes.

Originations

Dealer Marketing and Dealer Service

         The Company has entered into dealer agreements with approximately 5,000
retail automobile dealers in 39 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  during the fiscal  year
ended June 30, 2000.

         The  Company  currently  divides its credit  analysts  into three focus
areas:

o        Dealer development
o        Regional areas
o        Nights and weekends

         The dealer  development  area focuses on  re-establishing  or improving
relationships  with dealers who did little or no business  with the Company over
the preceding months. The regional areas focus on the Company's existing dealers
who consistently refer receivables to the Company and is divided  geographically
into seven areas.  Performance goals for the dealer marketing and dealer service
areas are based on:

o        acquisition volume

o        applications

o        active dealers and dealers cashing multiple contracts

o        cash  ratios  (ratio  of  receivables   purchased  versus  applications
         approved)

o        yield spreads

o        credit scores

o        underwriting quality control scores

         The Company's ability to acquire  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 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.  The Company
also provides  full phone and support  service  during the standard  evening and
weekend  hours.  With that in mind,  the Company has  developed  the capacity to
quickly  process  a  large  volume  of  applications.   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 and an advance over the vehicle's
book value to qualified customers enhances the dealers' ability to offer desired
financing terms to customers.  The Company  believes its receivable  acquisition
operations  are  structured  to be more  responsive  to  these  needs  than  the
operations of its competitors.

         The  Company  has 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 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.
However,  the  sales   representatives  have  no  authority  to  approve  credit
applications.  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.

         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 direct  loans made by the  Company in Ohio.  Because of
business  considerations and regulatory  limitations,  the Company enters into a
direct loan contract directly with the customer in Ohio. The Company  encourages
the use of ACH payments  instead of drafts (which  authorized  dealer  personnel
submit  for  payment of the amount of each  purchase)  with all of its  dealers.
Approximately 88% of the number of receivables acquired in fiscal 2000 were paid
by ACH payments which is approximately the same as in fiscal 1999. The Company's
representatives  assist dealer personnel in the proper completion and use of the
Company's documentation.


<PAGE>



Underwriting 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.  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
interest rate available. See "Item 1. Business -- Market and Competition."

         Over 70% 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 to develop dealer rapport,
to maintain awareness of local economic trends and to assess that the Company is
meeting the dealers' needs and expectations.

         On a  monthly  basis,  the  Company  quotes  rates at which it will buy
receivables  (the "Buy Rate") from  dealers or, in Ohio,  originate  loans.  Buy
Rates are generally  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. During June 2000, the Company began
migrating to a risk based pricing model which attempts to price the acquisitions
based on perceived  risks such as credit risk,  age of the car,  length of terms
and advance over the vehicle's book value.  The risk based pricing model rewards
those customers with better credit quality with lower rates, which in turn could
potentially lower the Company's net spread. See "Item 7. Management's Discussion
and Analysis of Results of Operations and Financial Condition."

         Dealers  quote  contract  interest  rates to customers at an average of
approximately  1.00%  over  the  Buy  Rate.  In  most  states,  this  difference
represents compensation to the dealership in the form of a Dealer Premium and is
paid by the Company in addition to the amount  financed.  The Dealer  Premium is
paid to the  dealer  each  month for all  receivables  acquired  from the dealer
during the preceding  month.  The Company has multiple  Dealer Premium  programs
which generally fall into two  categories.  Under one category,  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  account.  If the
balance in the dealer  account is  insufficient  to cover the  charge-back,  the
Company invoices the dealer for the difference. This Dealer Premium category was
applicable to approximately 31% of the total number of receivables  acquisitions
in 2000  compared  to 40% in 1999.  Under the  Company's  other  Dealer  Premium
program  category,  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
a charge-back  to 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.
See "Item 7.  Management's  Discussion and Analysis of Results of Operations and
Financial Condition -- Liquidity and Capital Resources."

         Centralization of receivable acquisitions at the Company's Indianapolis
headquarters  enables the Company to ensure uniform  application of underwriting
criteria.  It also enables the Company to respond  quickly and  efficiently to a
large  volume  of  applications.   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 its 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.

         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.  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 the criteria mentioned above in the approval process. An application that
does not meet the minimum  underwriting  guidelines for any of the  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  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 the Company
utilizes a quality  control  department  that  primarily  focuses  on  reviewing
acquisition decisions.

         Of the receivable  applications  received from dealerships for the year
ended June 30, 2000, the Company approved  approximately  20.8%  unconditionally
and  approximately   14.9%  with  conditions.   Of  the  approved   receivables,
approximately  62.2% were  ultimately  acquired.  In other  words,  the  Company
ultimately booked  approximately 13% of the applications  received during fiscal
2000.  During fiscal 2000, the Company  acquired  approximately  $1.4 billion in
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 in the state of Ohio.  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. Because of business considerations and regulatory limitations,  the
Company  enters into a direct loan contract  directly with the customer in Ohio.
In  certain  states,   where  allowed,  the  Company  charges  the  customer  an
origination  fee  in  connection   with  the  receivable   acquisition  and  the
preparation  of Company  forms.  Dealerships  in some  geographic  markets use a
standard form of contract that is accepted by most 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.

         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.  The receivable is processed only after all proper
documentation  has been  received.  Once the receivable has been recorded on the
Company's system,  the Company's  computer system triggers an ACH payment to the
dealer. The use of ACH payments greatly reduces the Company's risk of fraudulent
drafts. In addition,  since the receivables are not funded until they are booked
by the Company, ACH payments also present a cash flow benefit.

         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,  which  may  result in a
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 receivables  are then entered into 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  software  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.


<PAGE>

         Geographic  Concentration:  The  following  table  sets  forth  certain
information  for Tier I  receivables  in the states the Company is operating its
business:

<TABLE>
<CAPTION>
                                                  Receivables Acquired for the
                                                    Twelve Months Ended
                                                                   June 30,                                  At June 30, 2000
                                        ------------------------------------------------------------  -----------------------------
                             Date                                                                        Servicing       Number Of
State                     Established        2000                     1999               1998            Portfolio        Dealers
------------------- -----------------   ---------------          -----------------    -----------     -----------------------------
                                                   (Dollars in Thousands)
<S>                         <C>              <C>                   <C>                 <C>              <C>                   <C>
Arizona                     Jun-91            $29,214               $53,862             $27,231          $82,950               102
California                  Nov-94            150,929               114,843             111,501          278,470               605
Colorado                    Dec-91             28,623                27,323              18,712           51,162               107
Connecticut                 Jun-99              9,925                   423                   -            9,095                53
Delaware                    May-99              7,467                   866                   -            7,135                29
Florida                     Apr-93             82,469               101,235              76,883          189,645               302
Georgia                     Apr-94             63,480                66,444              36,244          125,005               156
Idaho                       Sep-97              5,020                 2,759               1,013            6,279                25
Illinois                    Sep-94            104,896               109,557              69,599          207,132               324
Indiana                     Jan-86             49,466                46,675              25,464           96,994               199
Iowa                        Aug-94             26,906                41,030              23,939           59,267               119
Kansas                      Jan-92              9,157                16,663              10,249           22,929                43
Kentucky                    Jan-90              6,908                10,980               7,383           16,650                44
Maine                       Feb-00             10,755                     -                   -            9,860                30
Maryland                    Nov-95             12,107                19,701              20,279           37,560               110
Massachusetts               Jun-98             32,435                33,681                 990           50,563               137
Michigan                    May-96             28,112                34,504              24,460           61,735               135
Minnesota                   Aug-92             26,613                28,058              13,325           43,166               102
Missouri                    Jan-92             36,654                32,804              18,986           64,513               119
Nebraska                    Nov-94              6,698                 9,219               4,210           13,784                30
Nevada                      Jan-97              9,470                 7,687               3,757           14,384                43
New Hampshire               Feb-00              5,364                     -                   -            4,998                47
New Jersey                  Apr-99              5,520                 1,581                   -            6,040                17
New Mexico                  Dec-94              4,268                 4,500               3,383           10,275                27
New York                    Apr-00              7,130                     -                   -            7,053               129
North Carolina              Jul-93            152,214               160,680              85,515          308,195               283
Ohio                        Apr-88             74,732                72,221              52,699          153,677               257
Oklahoma                    Oct-92             48,791                44,673              33,682           97,567                83
Oregon                      Jun-95             11,378                 5,188               2,331           14,312                50
Pennsylvania                May-96             25,679                14,076               7,712           35,795               121
South Carolina              Jul-94             54,445                54,035              35,711          103,500               138
South Dakota                Jun-98                546                   593                 267              840                 7
Tennessee                   Feb-96             47,350                47,822              26,898           87,148               121
Texas                       Jun-92            157,388               169,094             115,143          350,320               366
Utah                        Sep-92             19,367                10,762               7,121           24,693                62
Vermont                     Mar-00              1,139                     -                   -            1,125                17
Virginia                    May-94             47,238                67,820              63,110          128,568               212
Washington                  Jun-95             18,811                 8,530               7,062           25,706                69
Wisconsin                   Apr-95             21,239                24,472               9,866           40,060               126
                                        -------------- --------------------- -------------------  ---------------  ----------------
TOTAL                                     $ 1,439,903           $ 1,444,361            $944,725      $ 2,848,150             4,946
                                        ============== ===================== ===================  ===============  ================
</TABLE>

         During   fiscal  2000,   the  Company  was  able  to  expand  into  the
northeastern  portion of the country.  For fiscal 2001,  the Company  intends to
focus  primarily  on expanding  its dealer base within its  existing  geographic
markets. In considering  potential 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. See "Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition - Discussion of Forward-Looking Statements."

         Because  the Company is highly  centralized,  the  incremental  cost of
entering new geographic  markets is relatively  low, and the Company can quickly
enter new markets.  Alternatively,  the Company's centralized operations give it
the ability to vacate a market  quickly and without great expense if 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 each
state may fluctuate  significantly over time depending on competitive conditions
and other factors in those areas.

Funding

Short-term

         The Company relies upon external  sources to provide  financing for its
receivable  acquisitions,  Dealer Premiums and other ongoing cash  requirements.
For receivable  acquisitions,  the Company normally  utilizes various  Revolving
Warehouse  Credit  Facilities  ("Credit  Facilities")  with a total  capacity of
$550.0  million at June 30, 2000. The $350.0  million  Credit  Facility  ($450.0
million at June 30, 1999) is insured by a surety bond provider  while the $200.0
million  facility is not. During August 2000, an additional  Credit Facility was
added bringing the total  borrowing  capacity to $750.0  million.  During fiscal
2000,  receivable  acquisitions  were funded utilizing a Credit Facility through
UAFC  Corporation  (formally  known as  Union  Acceptance  Funding  Corporation)
("UAFCC"), a wholly-owned Company subsidiary. During the first quarter of fiscal
2001,  receivable  acquisitions may also be funded  utilizing Credit  Facilities
through  UAFC-1  Corporation  ("UAFC-1")  and  UAFC-2  Corporation   ("UAFC-2"),
wholly-owned  Company  subsidiaries.  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 short-term
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.  The Company employs
a hedging  strategy to mitigate this risk.  The Company uses 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 discussed below. See "Item
7.  Management's  Discussion and Analysis of Results of Operations and Financial
Condition" for a discussion of hedging risks and related issues.  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 was covered by the purchase of a
like volume of U.S. Treasury Notes.

Long-term

         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 the repayment of 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 in public offerings,  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.  At June 30, 2000 such facility had a capacity
of $375.0 million, all of which was available.  During August 2000, the capacity
for this  facility was  increased to $500.0  million.  In  September  2000,  the
Company  sold  $500  million  of  receivables  into  this  facility,  in lieu of
effecting a public  Securitization.  See "Item 7.  Management's  Discussion  and
Analysis of Results of  Operations  and  Financial  Condition  -  Liquidity  and
Capital Resources." Since 1988 (excluding the September 2000 Securitization) the
Company has  securitized  approximately  $8.2 billion in auto  receivables in 37
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. 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.

         In public 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").  In the
September 2000 Securitization the trust issues a floating rate note hedged by an
interest  rate swap which  effectively  results in a fixed  interest  rate.  The
Company has employed the use of subordinated classes of certificates as a credit
enhancement device in its public  transactions.  Surety bonds have been utilized
as additional credit enhancements in the Company's Securitizations. These credit
enhancement  features  allow the  offered  certificates  or notes to achieve the
desired investment grade rating. In certain transactions, the Company chooses to
"turbo" excess cash prior to bringing the Spread Account to required levels. The
"turbo" feature  provides for initial use of excess cash to reduce the principal
balance  of  the  Asset-backed  Securities  to  a  specified  level.  In  future
Securitizations, the Company may employ alternative credit enhancement devices.


<PAGE>

Selected  information  regarding active  Securitizations as of June 30, 2000 are
shown below:

<TABLE>
<CAPTION>

                                                Remaining        Weighted        Weighted
                                                 Balance         Average         Average                                  Net Loss
                                  Original     at June 30,      Receivable      Certificate        Gross       Net       to Original
Securitization                     Amount          2000            Rate            Rate            Spread     Spread       Balance
                               ------------- ---------------- --------------- --------------- --------------------------------------
                                                                                                    (1)        (2)           (3)
                                (Dollars in thousands)
<S>                               <C>              <C>            <C>             <C>              <C>        <C>           <C>
UACSC2000-B Auto Trust            $ 534,294        $ 519,889      13.97%          7.38%            6.59%      5.26%         0.00%
UACSC2000-A Auto Trust            $ 282,721        $ 244,549      13.08%          7.20%            5.88%      4.94%         0.20%
UACSC1999-D Auto Trust            $ 302,693        $ 243,969      13.62%          6.56%            7.06%      5.66%         0.71%
UACSC1999-C Auto Trust            $ 364,792        $ 271,581      13.31%          6.22%            7.09%      6.20%         0.93%
UACSC1999-B Auto Trust            $ 340,233        $ 229,294      13.36%          5.51%            7.85%      6.75%         1.47%
UACSC1999-A Auto Trust            $ 320,545        $ 196,082      12.99%          5.80%            7.19%      6.16%         1.98%
UACSC1998-D Auto Trust            $ 275,914        $ 147,888      12.74%          5.85%            6.89%      5.25%         2.05%
UACSC1998-C Auto Trust            $ 351,379        $ 175,153      12.81%          5.55%            7.26%      5.15%         2.20%
UACSC1998-B Auto Trust            $ 267,980        $ 114,054      12.51%          6.01%            6.50%      5.06%         2.30%
UACSC1998-A Auto Trust            $ 228,938         $ 90,145      12.92%          6.11%            6.81%      5.27%         2.44%
UACSC1997-D Auto Trust            $ 204,147         $ 65,784      13.02%          6.30%            6.72%      5.07%         2.52%
UACSC1997-C Auto Trust            $ 218,390         $ 68,489      13.48%          6.45%            7.03%      5.38%         3.27%
UACSC 1997-BAuto Trust            $ 295,758         $ 78,685      13.21%          6.57%            6.64%      5.15%         3.33%
UACSC 1997-A Auto Trust           $ 293,348         $ 67,668      13.29%          6.33%            6.96%      5.43%         5.01%
UACSC 1996-D Auto Trust           $ 283,085         $ 51,693      13.53%          6.14%            7.39%      5.37%         5.61%
UACSC 1996-C Auto Trust           $ 310,999         $ 47,564      13.26%          6.44%            6.82%      5.11%         5.99%
UACSC 1996-B Auto Trust           $ 245,102         $ 29,988      12.96%          6.45%            6.51%      5.58%         5.28%
UACSC 1996-A Auto Trust (4)       $ 203,048         $ 18,263      13.13%          5.40%            7.73%      5.68%         5.95%
                               ------------- ----------------
Total Tier I
   Securitized Trusts           $ 5,323,366      $ 2,660,738

PSC 1998-1 Grantor Trust           $ 28,659         $ 12,290      18.69%          6.29%            12.40%     8.04%         9.00%
PSC 1996-1 Grantor Trust (5)       $ 34,488           $3,627      19.87%          6.87%            13.00%     8.79%        14.30%
                               ------------- ----------------
Total Tier II
   Securitized Trusts              $ 63,147         $ 15,917
                               ------------- ----------------
 Grand Total                    $ 5,386,513      $ 2,676,655
                               ============= ================
</TABLE>
--------------------------------------------------------------------------------
(1)      Difference  between  weighted  average  receivable  rate  and  weighted
         average certificate rate.
(2)      Gross spread,  net of upfront  costs,  servicing  fees,  ongoing credit
         enhancement fees, trustee fees and the hedging gains or losses.
(3)      Net loss to original balance at June 30, 2000.
(4)      Pool was paid in full in July 2000.
(5)      Pool was paid in full in September 2000.
--------------------------------------------------------------------------------


<PAGE>

Selected information regarding  Securitizations paid in full as of June 30, 2000
are shown below:

<TABLE>
<CAPTION>

                                                         Weighted         Weighted
                                                          Average          Average                                Net Loss
                                       Original         Receivable      Certificate    Gross           Net       to Original
Securitization                          Amount             Rate             Rate       Spread (1)    Spread (2)  Balance (3)
                                   ------------------------------------------------------------------------------------------
                                           (Dollars in thousands)
<S>                                    <C>               <C>              <C>          <C>            <C>          <C>
UACSC 1995-D Auto Trust                $205,550          13.74%           5.97%        7.77%          6.04%        6.49%
UACSC 1995-C Auto Trust                $236,410          14.08%           6.42%        7.66%          6.11%        6.60%
UACSC 1995-B Grantor Trust             $220,426          13.91%           6.61%        7.30%          4.88%        6.19%
UACSC 1995-A Grantor Trust             $173,482          13.22%           7.77%        5.45%          3.88%        5.64%
UFSB 1994-D Grantor Trust              $114,070          12.51%           7.69%        4.82%          3.91%        4.37%
UFSB 1994-C Grantor Trust              $150,725          12.05%           6.77%        5.28%          4.04%        3.34%
UFSB 1994-B Grantor Trust              $142,613          10.74%           6.46%        4.28%          3.54%        3.00%
UFSB 1994-A Grantor Trust              $119,960           9.98%           5.08%        4.90%          3.60%        2.54%
UFSB 1993-C Auto Trust                 $141,811          11.00%           4.88%        6.12%          4.82%        2.60%
UFSB 1993-B Auto Trust                 $212,719          11.50%           4.45%        7.05%          5.31%        2.51%
UFSB 1993-A Grantor Trust              $133,091          11.49%           4.53%        6.96%          4.96%        1.84%
UFSB 1992-C Grantor Trust              $119,280          11.64%           5.80%        5.84%          4.48%        1.71%
UFSB 1992-B Grantor Trust              $116,266          12.39%           4.90%        7.49%          5.49%        1.59%
UFSB 1992-A Grantor Trust              $103,619          13.66%           6.70%        6.96%          5.80%        1.94%
UFSB 1991-B Grantor Trust              $106,612          13.64%           7.15%        6.49%          4.94%        1.72%
UFSB 1991-A Grantor Trust              $150,436          12.52%           8.40%        4.12%          2.25%        0.79%
UFSB 1989-B Grantor Trust               $66,469          14.09%          Variable         -           2.82%        3.15%
UFSB 1989-A Grantor Trust              $113,080          13.24%           8.75%        4.49%          1.97%        1.94%
UFSB 1988 Grantor Trust                $105,179          12.73%           9.50%        3.23%          1.71%        2.74%
                                   -------------
Total Tier I Securitized Trusts      $2,731,798

PSC 1996-2 Grantor Trust                $31,108          19.65%           6.40%        13.25%         9.00%        14.01%
                                   -------------
 Grand Total                         $2,762,906
                                   =============
</TABLE>

--------------------------------------------------------------------------------
(1)      Difference  between  weighted  average  receivable  rate  and  weighted
         average certificate rate.

(2)      Gross spread,  net of upfront  costs,  servicing  fees,  ongoing credit
         enhancement fees, trustee fees and the hedging gains or losses.

(3)      Net loss to original balance at time of repurchase.
--------------------------------------------------------------------------------


         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 in that period 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 ("PSC"),  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."


<PAGE>
Servicing

Servicing

         Under  the  terms  of  its   Credit   Facilities   and   securitization
transactions,  the  Company  acts  as  servicer  with  respect  to  the  related
automobile receivables.  The Company services the receivable pools by collecting
payments due from customers and remitting  payments to the respective 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.  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  following   table  describes  the  composition  of  the  Company's
servicing portfolio at June 30, 2000:

<TABLE>
<CAPTION>

                                 ----------------------------------------------------------------------------------------------
                                                                       Percent of                  Weighted
                                  Aggregate           Aggregate        Aggregate       Average      Average     Weighted
                                  Number of           Principal        Principal     Receivable    Remaining     Average
                                 Receivables         Balance (1)        Balance        Balance     Term (2)       Rate
                                 -----------         -----------        -------        -------     --------       ----
                                                        (dollars in thousands, except average balances)
<S>                                    <C>             <C>                <C>         <C>            <C>         <C>
New auto                               47,711          $ 769,442          27.0%       $ 16,127       61.2        12.39%
Used auto                             188,021          2,078,708          73.0%       $ 11,056       56.2        13.64%
                                 ------------- ------------------  -------------
 Total                                235,732        $ 2,848,150         100.0%       $ 12,082       57.6        13.30%
                                 ============= ==================  =============

Receivables held for sale              15,355          $ 202,167           7.1%       $ 13,166       67.4        13.48%
Other receivables serviced            220,377          2,645,983          92.9%       $ 12,007       56.9        13.29%
                                 ------------- ------------------  -------------
 Total                                235,732        $ 2,848,150         100.0%       $ 12,082       57.6        13.30%
                                 ============= ==================  =============

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

</TABLE>
(1)Balance excludes the Company's Tier II servicing portfolio of $32.3 million.
(2)Terms are shown in months.

         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 $555,000 at June 30, 2000.

         At June  30,  2000,  the  Tier I  servicing  portfolio,  including  the
principal  balance  of auto  receivables  held  for sale  and  securitized  auto
receivables,  was  approximately  $2.8 billion in aggregate  principal  balance.
Approximately  72.6% of the Tier I  servicing  portfolio,  as of June 30,  2000,
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.

         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.  In  September
1999, the Company  implemented a new, enhanced VRU that is capable of handling a
larger call volume and also offers  additional  menu options for the  customers.
The new VRU is also  used for the  dealer  service  calls.  The  Collection  and
Origination  departments  are using this system to improve the efficiency of the
respective  departments.  The VRU received an average of 158,000 calls per month
in fiscal 2000,  up from 87,000 calls per month in fiscal 1999.  The fiscal 2000
average includes  approximately  5,400 calls per month related to dealer service
calls.  The  increase  in the number of calls is due to an  increased  servicing
portfolio and the addition of collection and dealer service calls. Approximately
32% of the  total  calls  are  handled  entirely  by the VRU;  the other 68% are
transferred to live collection  employees.  Lower  percentages of dealer service
and  collection  calls are handled  entirely by the VRU due to the complexity of
this  area.  The  VRU  provides  many   efficiencies  for  the  Company  and  is
user-friendly and convenient for customers.

Collection and Remarketing

         The  Company  seeks to  maintain  low  levels  of  delinquency  and net
charge-offs 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 collection
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 ten days
delinquent  in most  states,  but as early as seven  days  delinquent  for other
states.  The collections  area operates during regular  business hours,  weekday
evenings and on Saturdays.

         The Company utilizes a  computer-controlled  "power dialer" which dials
phone numbers of delinquent  customers from a file of records extracted from the
Company's database. The system typically generates between 1,200 and 1,500 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 240 of these system generated 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.  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.  Repossessions  are effected for
the Company by contracted  repossession agents. During fiscal 2000, repossession
agents  transferred  approximately  80% of the autos to independent auto auction
companies that  recondition the repossessed  autos and sell them for the Company
while  the  other  20% were  transferred  to the  Company's  new car  franchised
dealership in Indianapolis for resale. See "Item 7. Management's  Discussion and
Analysis of Results of Operations  and Financial  Condition --  Delinquency  and
Credit Loss Experience."

Final Payoff and Title Transfer

         The majority of the receivables acquired are ultimately paid off by the
customer or the dealership receiving the vehicle as a trade-in.  The customer or
dealership will call the Company and receive a final payoff amount.  This payoff
amount is calculated based on the outstanding principal, interest and any unpaid
fees.  If a  personal  check is  submitted  for  payment,  the title is held for
approximately 10 days to ensure the availability of the funds.  When the payment
is received from a dealership,  the title is then  transferred to the dealership
and the cancelled  contracts  are  forwarded to the customer.  In the event of a
customer  payoff,  both the title and  cancelled  contracts are forwarded to the
customer.  The  company is  currently  processing  300 to 500 payoffs on a daily
basis.

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 2000, the department reviewed  approximately 40%
of 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.

         In addition, to monitoring the quality of originations, Risk Management
is currently focusing on enhancements of the Company's risk based pricing model,
loss  and  recovery  analysis  including   internally   developed  loss  curves,
development  of a  collection  behavioral  scorecard  and  enhancements  of  its
collection strategies.

EMPLOYEES

         The Company  employs  personnel  experienced in all areas of receivable
acquisition, documentation, collection and administration. None of the employees
are covered by a collective  bargaining  agreement.  Throughout fiscal 2000, 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.  The  following  table  shows a  summary  of all the  full  and
part-time employees from all areas of the Company.

                                     Full Time                   Part Time
                            ------------------------    ------------------------
For the year ended June 30,    2000            1999        2000            1999
                            ------------    --------    ------------    --------

Sales Representatives           43              37           -               -
Originations                    95              75          15               -
Servicing                      105             102           8              13
Collections                    202             184          27              34
Remarketing                     57              47           6               -
Support                         90              66           8               2
                            ------------    --------    ------------    --------

Total                          592             511          64              49
                            ============    ========    ============    ========

REGULATION

         The Company's  operations  are subject to regulation,  supervision  and
licensing  under  various  federal,  state and local  statutes,  ordinances  and
regulations.  The states where the Company primarily  operates are listed in the
Underwritng and Purchasing section and the Geographic  Concentration  chart. The
Company has either filed the necessary  notifications  or  registered  with each
state prior to commencing operations. As the Company expands its operations into
additional states, it will be required to comply with the laws of those states.

         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, state 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, in Ohio, the 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 dealer.

         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.

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 approximately 1.00%. 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 weighted average 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.

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 Facilities ("Credit Facilities" or "Credit Facility")
- External  financing  arrangements  negotiated by the Company with  independent
financial  institutions having an aggregate borrowing capacity of $550.0 million
at June 30,  2000 (and  revised to $750.0  million  during  August  2000).  Such
facilities  are  generally  established  for one year terms and are used to fund
Tier I receivable acquisitions.

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
securityholders  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
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 quarterly for other than temporary  impairment,  with other
than temporary  impairment,  if any, recorded as a component of gain on sales of
receivables, net.

Securitization - The process through which  receivables are pooled and sold to a
trust which issues asset-backed  securities to investors.  Generally,  such term
includes the sale of a pool of receivables funded by a commercial paper conduit.

Senior Notes - Unsecured Senior Notes of the Company of $110.0 million and $65.0
million issued August 1995 and March 1997 respectively.

Senior Subordinated Notes- Unsecured Senior Subordinated Notes of the Company in
the aggregate principal amount of $46.0 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.  The cash in the
Spread Accounts is restricted from use by the Company with such amounts included
as a component of the Retained Interest.  In certain  transactions,  the Company
chooses to "turbo"  excess cash prior to bringing the Spread Account to required
levels.  The "turbo"  feature  provides for initial use of excess cash to reduce
the principal balance of the Asset-backed  Securities to a specified level. 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 were acquired from automotive  dealers under a dealer agreement that
provided 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  approximately
116,000  square feet under a lease with  Shadeland  which expires in April 2003.
The Company sublets a portion of the building to Union Federal.

         The Company owns a 60,000 square foot facility located on approximately
9 acres near its headquarters in Indianapolis. This facility is used for its new
car franchised dealership, the reconditioning and remarketing operations and the
retailing  of a portion  of its  repossessed  autos.  The  facility  contains  a
showroom, service area and office area.

         The  Company  leases a garage of 5,000  square  feet for minor  vehicle
reconditioning to prepare repossessed autos for auction, an office of 500 square
feet  and an  adjacent  car  lot  located  in  Beech  Grove,  Indiana,  from  an
independent party. The Company currently leases the property on a month to month
basis.  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.

Item 3.           Legal Proceedings

      UAC is subject to  litigation  arising  from time to time in the  ordinary
course  of  business  and of a type and scope  common  for  participants  in the
consumer finance  industry.  UAC has been named a defendant in a number of civil
suits.  The  majority  of these  cases have  involved  circumstances  in which a
vehicle  buyer has alleged a problem  with the vehicle  that secures the buyer's
obligations under the retail installment sales contract acquired by the Company.
Although UAC does not make any representation or warranty respecting the vehicle
nor is it deemed to have made any implied warranties as a result of it being the
holder of the contract,  it is, under  applicable FTC rules and most state laws,
subject to all claims and defenses  which the debtor  could  assert  against the
seller of the vehicle.  Therefore,  the buyer typically names the dealer and UAC
in such actions.

      UAC has also,  on  occasion,  been  sued by a buyer for UAC's own  alleged
wrongful  conduct or its  alleged  participation  in the  wrongful  conduct of a
dealer.  The  majority  of these  cases have  involved  allegations  of wrongful
conduct in connection with a repossession,  participation in some fraud or other
wrongful  conduct of a dealer or a technical  violation  of  Regulation  Z or an
applicable state statute.  (For a further  discussion of Regulation Z, see "Item
1, Business - Regulation.") Most of these suits are individual actions and would
not result in any material liability even if the buyer was successful.  However,
buyers  occasionally  purport to bring an action on behalf of a class of buyers.
No such actions are currently pending.

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
2000 and 1999:

                                       Year Ended June 30,
                             2000                                  1999
                -------------------------------     --------------------------
                   High               Low                High           Low
                -------------    --------------     ---------------   --------
First Quarter     8                  6 1/2              8              4 3/4
Second Quarter    8 1/2              6 3/8              6 5/8          3 7/8
Third Quarter     8 7/8              3                  8 1/2          4
Fourth Quarter    5 1/2              4 1/4              8 3/8          6 1/4

         As of  September  8,  2000,  there  were 87  holders  of  record of the
Company's  Class A Common Stock and 6 holders of record of Class B Common Stock.
The Company  estimates  that its Class A Common Stock is owned  beneficially  by
approximately  1,215 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, 2000. 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,
                                                        ---------------------------------------------------------------------------
                                                           2000             1999             1998           1997            1996
                                                        ---------------------------------------------------------------------------
                                                                        (Dollars in thousands, except per share amounts)
Income Statement Data:
<S>                                                           <C>            <C>            <C>            <C>            <C>
Interest on receivables held for sale                         $ 37,461       $ 33,015       $ 27,871       $ 33,914       $ 28,712
Retained interest and other                                     24,963         20,463         13,993         14,989         10,129
                                                        ---------------------------------------------------------------------------
 Total interest income                                          62,424         53,478         41,864         48,903         38,841
Interest expense                                                29,663         27,906         27,178         25,867         22,332
                                                        ---------------------------------------------------------------------------
Net interest margin                                             32,761         25,572         14,686         23,036         16,509
Provision for estimated credit losses                            3,000          5,879          8,050          4,188          2,875
                                                        ---------------------------------------------------------------------------
 Net interest margin after provision for
estimated credit losses                                         29,761         19,693          6,636         18,848         13,634
                                                        ---------------------------------------------------------------------------

Gain (loss) on sales of receivables, net                        16,883         19,133       (11,926)            963         30,357
Servicing fees                                                  24,612         21,716         19,071         16,919         12,302
Late charges and other fees                                      6,337          5,349          4,087          3,820          3,096
                                                        ---------------------------------------------------------------------------
 Other revenues                                                 47,832         46,198         11,232         21,702         45,755
                                                        ---------------------------------------------------------------------------

Total operating expenses                                        49,913         42,588         35,546         30,502         23,841
                                                        ---------------------------------------------------------------------------
Earnings (loss) before provision for income taxes               27,680         23,303       (17,678)         10,048         35,548
Provision (benefit) for income taxes                            10,675          8,979        (7,856)          4,166         14,406
                                                        ---------------------------------------------------------------------------
 Net earnings (loss)                                          $ 17,005       $ 14,324      $ (9,822)        $ 5,882       $ 21,142
                                                        ===========================================================================

Net earnings (loss) per common share
(basic and diluted)                                              $1.28          $1.08        $(0.74)          $0.45          $1.60
                                                        ===========================================================================

-----------------------------------------------------------------------------------------------------------------------------------
Operating Data:
Receivables acquired (dollars):
Tier I                                                     $ 1,439,903    $ 1,444,361       $944,725    $ 1,076,064       $994,834
Tier II                                                              -         12,592         24,027         39,610         36,030
Marine                                                               -              -          2,515          6,590             50
                                                        ---------------------------------------------------------------------------
 Total receivables acquired (dollars)                      $ 1,439,903    $ 1,456,953       $971,267    $ 1,122,264    $ 1,030,914
                                                        ===========================================================================

Receivables acquired (number of receivables):
Tier I                                                          87,608         90,268         64,152         75,844         71,070
Tier II                                                              -            876          1,746          3,050          2,870
Marine                                                               -              -            200            496              6
                                                        ---------------------------------------------------------------------------
 Total receivables acquired (number of receivables)             87,608         91,144         66,098         79,390         73,946
                                                        ===========================================================================

Receivables securitized (dollars):
Tier I                                                     $ 1,479,207    $ 1,288,071       $919,455    $ 1,183,190       $890,110
Tier II                                                          5,293              -         28,659         31,108         34,488
                                                        ---------------------------------------------------------------------------
 Total receivables securitized (dollars)                   $ 1,484,500    $ 1,288,071       $948,114    $ 1,214,298       $924,598
                                                        ===========================================================================

-----------------------------------------------------------------------------------------------------------------------------------
Ratio of operating expenses as a percent of
average servicing portfolio                                      1.88%          1.82%          1.78%          1.67%          1.73%
-----------------------------------------------------------------------------------------------------------------------------------
Credit losses as a percent of average servicing portfoli
Tier I                                                           2.18%          2.20%          2.80%          2.40%          1.58%
Tier II                                                          8.62%          7.04%          7.67%          5.18%          2.37%
Marine                                                               -              -          1.12%          0.25%              -
                                                        ---------------------------------------------------------------------------
 Total credit losses as a percent of average
servicing portfolio                                              2.28%          2.33%          2.96%          2.50%          1.60%
                                                        ===========================================================================

Delinquencies of 30 days or more as a percent of
 servicing portfolio:
Tier I                                                           2.82%          2.63%          3.07%          2.96%          1.84%
Tier II                                                         11.26%          9.42%          8.29%          6.18%          3.35%
Marine                                                               -              -              -          0.10%              -
                                                        ---------------------------------------------------------------------------
Total delinquencies of 30 days or more as a
percent of servicing portfolio                                   2.92%          2.78%          3.24%          3.07%          1.88%
                                                        ===========================================================================
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

Item 6.  Selected Consolidated Financial Data (Continued)

At June 30,                                                2000              1999           1998            1997            1996
                                                        ---------------------------------------------------------------------------
                                                                                   (Dollars in tusands)
Balance Sheet Data:
<S>                                                           <C>            <C>            <C>            <C>            <C>
Receivables held for sale, net                                $206,701       $267,316       $118,259       $121,156       $259,290
Retained interest in securitized assets                        208,431        190,865        171,593        170,791        147,024
Total assets                                                   478,138        514,926        411,533        391,268        451,195
Amounts due under warehouse facilities                         152,235        185,500         73,123         44,455        187,756
Long-term debt                                                 177,000        199,000        221,000        221,000        156,000
Total shareholder's equity                                     110,029         89,479         82,473         86,848         78,624

-----------------------------------------------------------------------------------------------------------------------------------
Other Data:
Servicing portfolio:
Tier I                                                     $ 2,848,150    $ 2,464,366    $ 1,978,920    $ 1,860,272    $ 1,548,538
Tier II                                                         32,328         53,792         66,855         68,289         47,062
Marine                                                               -              -              -          6,227             50
Serviced for others                                                637            912          1,642          2,488          3,420
                                                        ---------------------------------------------------------------------------
 Total servicing portfolio                                 $ 2,881,115    $ 2,519,070    $ 2,047,417    $ 1,937,276    $ 1,599,070
                                                        ===========================================================================

Average servicing portfolio:
Tier I                                                     $ 2,610,803    $ 2,269,177    $ 1,922,977    $ 1,759,666    $ 1,343,770
Tier II                                                         41,545         63,275         69,622         63,305         33,124
Marine                                                               -              -          6,920          2,357              -
Serviced for others                                                751          1,138          1,941          2,799          4,222
                                                        ---------------------------------------------------------------------------
 Total average servicing portfolio                         $ 2,653,099    $ 2,333,590    $ 2,001,460    $ 1,828,127    $ 1,381,116
                                                        ===========================================================================

Number of receivables serviced:
Tier I                                                         235,732        213,746        184,003        173,693        147,722
Tier II                                                          3,879          5,517          6,285          6,056          4,067
Marine                                                               -              -              -            472              6
Serviced for others                                                 88            139            256            402            537
                                                        ---------------------------------------------------------------------------
 Total number of receivables serviced                          239,699        219,402        190,544        180,623        152,332
                                                        ===========================================================================

Number of dealers                                                4,946          4,076          3,628          3,204          2,523
Number of employees (full-time equivalents)                        648            540            529            387            313
</TABLE>


         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 $1.3 million or
$0.10 per share (basic and diluted) and increasing total shareholders' equity by
$941,000.


<PAGE>



Item 7. Management's  Discussion and Analysis if 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  Credit  Facilities,  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 Year Ended June 30, 2000
                                                 --------------------------------------------------------------------------------
                                                       First               Second               Third              Fourth
                                                 ------------------- -------------------- ------------------ --------------------
                                                         (Dollars in thousands)
<S>                                                   <C>                  <C>                <C>                  <C>
Receivables acquired                                  $ 330,282            $ 263,821          $ 395,594            $ 450,206

Gain on Sales of Receivables                            $ 6,770              $ 5,264            $ 2,754              $ 7,379
Less:Other than temporary impairment                      (240)              (4,003)                  -              (1,041)
                                                 --------------- -------------------- ------------------ --------------------
 Gain on Sales of Receivables, net                      $ 6,530              $ 1,261            $ 2,754              $ 6,338
                                                 =============== ==================== ================== ====================

Servicing portfolio at end of period                 $2,579,304           $2,583,298         $2,710,105           $2,881,115

-----------------------------------------------------------------------------------------------------------------------------
Selected Securitization Data:                            1999-C               1999-D             2000-A               2000-B
Original amount                                       $ 364,792            $ 302,693          $ 282,721            $ 534,294

Weighted avg. receivable rate                            13.31%               13.62%             13.08%               13.97%
Weighted average remaining maturity (months)               71.1                 69.9               68.9                 71.6
Weighted average certificate rate                         6.22%                6.56%              7.20%                7.38%
Gross spread (1)                                          7.09%                7.06%              5.88%                6.59%
Net spread (2)                                            6.20%                5.66%              4.94%                5.26%
Cumulative credit loss assumption                         4.50%                4.50%              4.50%                4.75%
-----------------------------------------------------------------------------------------------------------------------------

                                                               For Quarters in the Fiscal Year Ended June 30, 1999
                                                 --------------------------------------------------------------------------------
                                                       First               Second               Third              Fourth
                                                 ------------------- -------------------- ------------------ --------------------

Receivables acquired                                  $ 404,494            $ 361,891          $ 321,856            $ 368,712

Gain on Sales of Receivables                            $ 6,248              $ 5,717           $ 10,679              $ 8,406
Less:Other than temporary impairment                     (3,542)              (1,630)            (4,293)              (2,452)
                                                 --------------- -------------------- ------------------ --------------------
 Gain 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 average remaining maturity (months)               68.8                 69.1               71.5                 71.7
Weighted average 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%
Cumulative credit loss assumption                         4.40%                4.40%              4.50%                4.50%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Difference  between weighted  average  receivable rate and weighted average
     certificate rate.

(2)  Gross  spread,  net  of  upfront  costs,  servicing  fees,  ongoing  credit
     enhancement fees, trustee fees and the hedging gains or losses.



         Acquisition  Volume. The Company currently  acquires  receivables in 39
states from approximately 5,000  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.
During  fiscal  2000,  the  Company  extended  operations  into  several  of the
northeastern states.

         The  Company's  total  receivable  acquisitions  decreased  .1% to $1.4
billion for the year ended June 30, 2000,  from $1.5 billion in fiscal 1999. The
decrease  is due to the lower  than  expected  volume  in the  first and  second
quarters of fiscal 2000 as the result of pricing pressures related to increasing
interest rates.

         The Company's servicing portfolio increased 14.4% to approximately $2.9
billion at June 30,  2000,  compared to  approximately  $2.5 billion at June 30,
1999. Total serviced receivables increased as a result of receivable acquisition
volume in excess of receivable  repayments and gross charge-offs.  The volume of
receivables sold in Securitizations increased to $1.5 billion for the year ended
June 30, 2000,  from $1.3 billion for the prior year.  The  increased  volume of
receivables  securitized  is  primarily  the  result of an  additional  month of
receivable   acquisitions   included  in  the  fourth  quarter  of  fiscal  2000
Securitization.  This fourth  quarter  Securitization  included the  receivables
acquisitions for the months of February,  March, April and May 2000.  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.

Delinquency and Credit Loss Experience

         During fiscal 2000,  the Company  experienced  the lowest annual credit
loss ratio since the year ended June 30, 1996.  Recoveries  as a  percentage  of
gross  charge-offs,  on the Tier I portfolio,  for the year ended June 30, 2000,
improved  slightly over the year ended June 30, 1999. This percentage,  however,
remains below management's  expectations,  and the Company continues to look for
ways to improve.  The Company's new car  franchised  dealership in  Indianapolis
retails a portion of its repossessed autos. 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.  The net recovery rate recognized by the dealership  during fiscal
2000  averaged  53.2%.  The net  recovery  rate  utilized by the  dealership  is
computed on a car by car basis which is a different  basis than the net recovery
rate  utilized to measure  the  Company's  net credit  losses  discussed  below.
Approximately 20% of repossessed autos were transferred to the dealership during
fiscal 2000. See "Discussion of Forward-Looking Statements".

         The credit loss  assumptions used in fiscal 2000 were higher than those
used on the  Securitizations in fiscal 1999. The credit loss assumptions used in
the fiscal 2000 Securitizations  ranged from 4.50% to 4.75% compared to 4.40% to
4.50% used in the fiscal  1999  Securitizations.  The  allowance  for  estimated
credit losses on  securitized  receivables  (inherent in Retained  Interest) was
4.45% at June 30, 2000, compared to 4.63% at June 30, 1999. The Company recorded
a pre-tax  charge of $5.3 million and $11.9 million  during the years ended June
30, 2000 and 1999, respectively,  on those pools which were deemed to have other
than temporary impairment primarily due to the increase in the initial 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,
                                                 2000                                  1999
                                  -----------------------------------   -----------------------------------
                                                           (Dollars in thousands)
                                     Number of                             Number of
                                    Receivables          Amount           Receivables          Amount
                                    -----------          ------           -----------          ------
<S>                                    <C>            <C>                  <C>            <C>
Servicing portfolio                    235,732        $2,848,150           213,746        $2,464,371
Delinquencies
 30-59 days                              4,204            45,442             3,962            41,475
 60-89 days                              2,176            25,250             1,614            16,654
 90 days or more                           886             9,710               670             6,754
                                         -----        ----------             -----        ----------
Total delinquencies                      7,266        $   80,402             6,246        $   64,883
                                         =====        ==========             =====        ==========
Total delinquencies
as a % of servicing portfolio             3.08%             2.82%             2.92%             2.63%
</TABLE>



         As  indicated  in  the  above  table,   delinquency  rates  based  upon
outstanding  receivable balances of accounts 30 days past due and over increased
to  2.82%  at June  30,  2000,  from  2.63%  at June  30,  1999,  for the Tier I
portfolio.  Although the  delinquency  rate at June 30, 2000 increased  slightly
compared  to the rate at June 30,  1999,  these two fiscal  years are the lowest
delinquency rates since June 30, 1996. 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.

         Tier  II  portfolio   delinquency   was  11.26%  based  on  outstanding
receivable  balances  of  accounts  30 days past due and over at June 30,  2000,
compared to 9.42% at June 30, 1999.  Credit  losses  during  fiscal 2000 totaled
$3.6  million,  or  8.62%  as a  percentage  of the  average  Tier II  servicing
portfolio,  compared to $4.5 million,  or 7.04%, in fiscal 1999 and $5.3 million
or 7.67% in fiscal 1998.  Tier II  delinquency  as a  percentage  of the Tier II
servicing portfolio may increase in the future, while not actually deteriorating
since the overall Tier II servicing portfolio is decreasing.  This is the result
of a declining  Tier II  servicing  portfolio  since the Company  determined  to
discontinue  Tier II  receivable  acquisitions  effective  January 1, 1999.  See
"Discussion of Forward-Looking Statements."


<PAGE>
<TABLE>
<CAPTION>

                                                         Tier I Credit Loss Experience
                                                         For the Years Ended June 30,
                        ------------------------------------------------------------------------------------------------
                                        2000                              1999                          1998
                        ------------------------------------  ----------------------------  ----------------------------
                             Number of                          Number of                    Number of
                            Receivables          Amount        Receivables      Amount      Receivables      Amount
                            -----------          ------        -----------      ------      -----------      ------
                                                                  (Dollars in thousands)
<S>                             <C>              <C>              <C>          <C>             <C>           <C>
Average servicing
   portfolio                    221,948          $2,610,803       202,187      $2,269,177      179,822       $1,922,977

Gross charge-offs                 7,890              95,815         7,752          82,436        7,909           87,325
Recoveries                                           38,863                        32,525                        33,545
                                              --------------                 -------------                --------------
 Net credit losses                                 $ 56,952                      $ 49,911                      $ 53,780
                                              ==============                 =============                ==============

Gross charge-offs
   as a % of average
   servicing portfolio            3.55%               3.67%         3.83%           3.63%        4.40%            4.54%
Recoveries as a %
    of gross charge-offs                             40.56%                        39.45%                        38.41%
Net credit losses as a %
    of average servicing
    portfolio                                         2.18%                         2.20%                         2.80%
</TABLE>


<PAGE>


Results of Operations

Years Ended June 30, 2000 and 1999

         Net earnings are summarized in the table below. Net earnings  increased
18.7% for the year  ended  June 30,  2000,  compared  to the year ended June 30,
1999.  The increase  over the prior year is primarily  due to an increase in net
interest margin after provision for estimated credit losses.


                                                   Fiscal Year
                                                   Ended June 30,
                                               2000            1999
                                            ------------    ------------
                                           (Dollars in thousands, except per
                                                    share amounts)

Net Earnings                                 $ 17,005          $ 14,324
Net Earnings Per Share
  (basic and diluted)                         $  1.28           $  1.08



         Net  interest  margin  after  provision  for  estimated  credit  losses
increased  51.1% to $29.8 million for the year ended June 30, 2000,  compared to
$19.7  million for fiscal 1999.  The  increase in the net interest  margin after
provision for estimated credit losses as compared to the prior year is primarily
the result of  increases in interest on  receivables  held for sale and retained
interest and other interest income.

         Interest on receivables  held for sale increased 13.5% to $37.5 million
for the year ended June 30, 2000,  compared to $33.0  million for the year ended
June 30, 1999.  The increase in interest on  receivables  held for sale resulted
from an increase in the average outstanding balance of receivables held for sale
to $265.9  million for the year ended June 30,  2000,  from  $236.3  million for
fiscal 1999 and an increase in interest  rates.  The higher average  outstanding
balance of receivables held for sale is primarily the result of the delay in the
timing of the fourth quarter 2000 Securitization.

         Retained  interest and other interest  income  increased 22.0% to $25.0
million for the year ended June 30, 2000, compared to $20.5 million for the year
ended June 30, 1999. The discount  component of Retained  Interest  increased at
June 30, 1999 by increasing the discount rate used to record the gain on sale of
receivables  during the fourth  quarter of fiscal  1999.  The  resulting  effect
during the current period was an increase in the amount of the discount accreted
into income.  The individual  components of Retained interest and other interest
income are shown in the following table.

                                              Fiscal Year
                                             Ended June 30,
                                     2000                    1999
                            -----------------------    -----------------
                                             (In thousands)
Discount accretion               $ 23,789                  $ 18,700
Other interest income               1,174                     1,763
                                ----------                ----------
                                 $ 24,963                  $ 20,463



         Interest  expense  increased  6.3% to $29.7  million for the year ended
June 30, 2000, from $27.9 million for the year ended June 30, 1999. The increase
primarily  related to higher  borrowing  needs resulting from the higher average
balance of  receivables  held for sale for the year ended June 30, 2000 compared
to 1999 and an increase in  interest  rates but was offset by lower  interest on
long-term debt as a result of a principal payment of $22 million in August 1999.
Interest  expense  related to long-term debt was $16.1 million and $17.8 million
for  the  years  ended  June  30,  2000  and  1999,  respectively.  The  average
outstanding  warehouse  borrowings  (excluding the prefunded  amount) was $195.2
million for the year ended June 30,  2000,  compared  to $170.4  million for the
year ended June 30, 1999.  The average  cost of funds on the combined  long-term
debt and warehouse  borrowings  (excluding the prefunded amount),  net of income
earned,  increased to 7.97% for the year ended June 30, 2000, from 7.39% for the
year ended June 30, 1999.  The weighted  average cost of funds on the  Warehouse
Credit  Facilities,  including the prefunded amount,  net of income earned,  was
5.77%  and  5.09%  for the years  ended  June 30,  2000 and 1999,  respectively.
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 decreased to $3.0 million for the
year ended June 30,  2000,  compared to $5.9 million for the year ended June 30,
1999.  The decrease is primarily  related to  improvement  in the quality of the
held for sale portfolio.

         Gain on sales of  receivables,  net decreased  11.8% for the year ended
June 30, 2000. The gain on sales of receivables is a significant  element of the
Company's net earnings.  The gain on sales of receivables is affected by several
factors but is primarily affected by the amount of receivables securitized,  the
net spread and the level of estimation for net credit losses.  The components of
the gain on sales of receivable, net are:


                                                   Fiscal Year
                                                  Ended June 30,
                                             --------------------------
                                                2000           1999
                                             ------------   -----------
                                                  (In thousands)

Gain on sales of receivables                    $ 22,167      $ 31,050
Other than temporary impairments
                                                  (5,284)      (11,917)
                                             ------------   -----------
  Gain on sales of receivables, net             $ 16,883      $ 19,133
                                             ============   ===========



         The receivables sold in the  Securitizations  were $1.5 billion for the
year ended June 30,  2000,  compared to $1.3 billion for the year ended June 30,
1999. The decrease in the securitization  transaction gains primarily relates to
a lower  weighted  average net spread for fiscal 2000 gain on sales  compared to
the gain on sales recorded in the prior fiscal year. Also  contributing to lower
transaction  gains was the  increase in the  discount  rate  assumption  for the
fiscal year 2000 Securitizations. The discount rate was increased beginning with
the fourth quarter 1999  Securitization.  The amount of receivables  sold in the
Securitization  for the  quarter  ended June 30,  2000 was higher than the other
quarters primarily because it included receivable acquisitions for the months of
February,  March, April and May 2000. In general,  the  Securitizations  include
three months of  receivable  acquisitions.  Selected  information  regarding the
Securitizations  for  the  fiscal  years  2000  and  1999 is  summarized  in the
following table:

<TABLE>
<CAPTION>

                                                         First        Second         Third         Fourth
                                                        Quarter       Quarter       Quarter        Quarter
                                                        -------       -------       -------        -------
<S>                                                     <C>          <C>            <C>           <C>
Fiscal 2000 Securitizations                             1999 - C     1999 - D       2000 - A      2000 - B
Credit loss assumption                                    4.50%         4.50%          4.50%         4.75%
Annual prepayment speed assumption                       28.00%        28.00%         28.00%        28.00%
Discount rate assumption                                 14.66%        14.81%         15.61%        15.57%
Weighted average remaining maturity (in months)           71.1          69.9           68.9          71.6


Fiscal 1999 Securitizations                             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

</TABLE>


         Gross and net spreads. Market interest rates were higher in fiscal 2000
as compared to fiscal 1999.  Gross spread is defined as the  difference  between
the weighted average receivable rate and the weighted average  certificate rate.
Net  spread is defined as gross  spread  less  upfront  costs,  servicing  fees,
ongoing credit  enhancement fees,  trustee fees and hedging gains or losses. The
weighted  average net spreads  were 5.46% and 5.85% for the years ended June 30,
2000 and 1999 respectively.

         Management is currently targeting net spreads of approximately 5.00% on
Securitizations  (assuming a pricing spread for Asset-backed Securities over the
two-year treasury note of 100 basis points).  This target is based on historical
credit quality.  However,  management  believes that the net spread in the first
quarter  of 2001  Securitization  may be  closer to 4.50%  based on the  current
upward trend of average credit scores.  Management  believes that by targeting a
gross  spread  of 7.00% to  7.50%  between  receivable  rates  and the  two-year
treasury rate, 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 include the  contractual  fee,  typically one percent of
receivables serviced,  earned from each trust. Servicing fees increased 13.3% to
$24.6  million for the year ended June 30, 2000,  compared to $21.7  million for
the year  ended  June  30,  1999 as a result  of a  higher  average  securitized
receivable  portfolio.  The average securitized  receivable  portfolio increased
13.9% to $2.4  billion for the year ended June 30,  2000,  from $2.1 billion for
the year ended June 30, 1999.

         Late  charges and other fees  increased  18.5% to $6.3  million for the
year ended June 30,  2000,  from $5.3  million for the year ended June 30, 1999.
Other fees consist  primarily of late charges,  gross profit from the dealership
sales and other fee income.  The increase in the current year resulted primarily
from increased late charges. The increase in late charges is due to the increase
in the servicing portfolio over fiscal 1999.

         Salaries and benefits expense  increased 22.7% to $28.9 million for the
year ended June 30, 2000,  from $23.6  million for the year ended June 30, 1999.
This  increase is primarily  the result of an increase in  full-time  equivalent
("FTE")  employees  and  annual  merit  increases  for  the  Company's  existing
employees.  Average FTE's for the year ended June 30, 2000, were 585 compared to
528 for the year  ended  June 30,  1999.  The  Company  has  experienced  growth
primarily in originations, collections and support staff.

         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 10.4% to $21.0 million for the year ended June
30, 2000,  from $19.0 million for the year ended June 30, 1999.  The increase in
other general and administrative  expenses is partially  attributed to increased
promotional  expenses for the dealership and new dealer incentive programs.  The
Company  also  experienced  higher  expenses  related  to outside  services  and
professional fees during fiscal 2000 compared to fiscal 1999.

Years Ended June 30, 1999 and 1998

         Net  earnings  (loss)  increased to $14.3  million,  or $1.08 per share
(basic  and  diluted),  for the year  ended June 30,  1999,  compared  to ($9.8)
million,  or ($.74) per share (basic and  diluted),  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  other  than
temporary  impairments  of Retained  Interest  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 fiscal 1998 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 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 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 $20.5
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 $27.9  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. 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 (basic and diluted).  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 year ended June 30,
1998 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  included 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 30, 1998. As indicated below, credit
loss assumptions on the fiscal 1999  securitization  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>

Fiscal 1999 Securitizations                                1998 - C          1998 - D          1999 - A         1999 - B
<S>                                                          <C>               <C>               <C>             <C>
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>


         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 the weighted
average  certificate  rate. 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.

         Servicing fees include the  contractual  fee,  typically one percent of
receivables serviced,  earned from each trust. Servicing fees 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,  other fee income and the gross
profit from the dealership sales. The increase in fiscal 1999 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.

         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
efficiencies.  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.

Financial Condition

         Receivables  held for sale,  net and servicing  portfolio.  Receivables
held for sale, net includes:

o        the principal  balance of  receivables  held for sale,  net of unearned
         discount

o        allowance for estimated credit losses

o        receivables in process

o        Dealer Premiums

         The principal  balance for  receivables  held for sale is lower at June
30,  2000  than  at  June  30,  1999  primarily  because  of the  timing  of the
Securitization  in the fourth  quarter  of fiscal  2000  compared  to the fourth
quarter of fiscal 1999. Selected information  regarding the receivables held for
sale, net and servicing portfolio at June 30, 2000 and 1999 is summarized in the
following table.


                                                    June 30,
                                            2000              1999
                                        --------------    --------------
                                                 (In thousands)
Receivables held for sale, net               $206,701          $267,316
Allowance for credit losses                  $(2,978)          $(2,754)
Securitized assets serviced               $ 2,676,655       $ 2,256,415
Total servicing portfolio                 $ 2,881,115       $ 2,519,070



         Retained interest in securitized assets ("Retained Interest"). Retained
Interest increased $17.4 million to $208.4 million at June 30, 2000, from $191.0
million at June 30, 1999. The Company's  collections  are the receipt of the net
interest spread,  including dealer rebates.  Some of the receipts related to the
net  interest  spread may  remain in the spread  account.  The  following  table
illustrates, in thousands, the components of the increase in Retained Interest:

Balance at June 30, 1999                                           $191,029

Amounts capitalized (including estimated dealer rebates)             69,266
Collections                                                         (87,529)
Accretion of discount                                                23,594
Change in accelerated principal                                      23,197
Change in spread accounts                                           (11,258)
Other than temporary impairment                                      (5,284)
Net change in unrealized gain                                         5,416
                                                               -------------
Balance at June 30, 2000                                           $208,431
                                                               =============

         Allowance for net credit losses on securitized  receivables is included
as a component of Retained Interest. At June 30, 2000, the allowance relating to
both Tier I and Tier II securitized receivables totaled $119.0 million, or 4.45%
of the total securitized  receivable  portfolio,  compared to $104.4 million, or
4.63%, at June 30, 1999. The Company's assumptions for valuing Retained Interest
at June 30, 2000,  include the Company's  latest estimates for net credit losses
of  4.00% to  6.24%  on Tier I  receivables  and  12.00%  to  16.32%  on Tier II
receivables  as a  percentage  of original  principal  balance  over the life of
receivables, annual prepayment estimates ranging from 22.11% to 28.00% on Tier I
receivables  and 4.23% to  21.06% on Tier II  receivables,  and  discount  rates
ranging from 9.11% to 15.38% on Tier I receivables  and 11.16% to 14.18% on Tier
II  receivables.  The  weighted  average  discount  rate used to value  Retained
Interest  at June 30,  2000 was  13.78%  compared  to 12.83%  at June 30,  1999.
Impairment of Retained Interest, an available-for-sale  security, is measured on
a  disaggregate  (pool by pool) basis in accordance  with Statement of Financial
Accounting  Standards No. 115,  Accounting  for Certain  Investments in Debt and
Equity Securities. See - "Discussion of Forward-Looking  Statements" and "Impact
of Current Accounting Prouncements."

         Amounts  due under  revolving  warehouse  credit  facility  were $152.2
million at June 30,  2000,  compared  to $185.5  million at June 30,  1999.  The
decrease is primarily the result of the timing of the 2000-B  Securitization  in
June 2000  compared to the 1999-B  Securitization  in May 1999 but was partially
offset by increased  receivable  acquisitions in the month of June 2000 compared
to June 1999.

         Long-term debt was $177.0 million at June 30, 2000,  compared to $199.0
million at June 30,  1999.  The  decrease  in  long-term  debt was a result of a
required principal payment on the Company's Senior Notes in August 1999 of $22.0
million.

         Current and  deferred  income taxes  payable.  The current and deferred
income taxes  payable  totaled $9.7 million at June 30, 2000,  compared to $16.0
million at June 30, 1999.  The decrease is primarily  the result of tax payments
made  during the year,  which are  partially  offset by an  increase  in the tax
liability associated with current year earnings.


<PAGE>

Liquidity and Capital Resources

         Sources and uses of cash in operations. The Company's business requires
significant amounts of cash. Its primary uses of cash include:

o        acquisition and financing of receivables

o        payment of Dealer Premiums

o        securitization costs including cash held in Spread Accounts and similar
         cash collateral accounts under the Credit Facilities

o        servicer  advances of payments on securitized  receivables  pursuant to
         securitization trust agreements

o        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

o        operating expenses

o        payment of income taxes

o        principal payments on long-term debt

o        interest expense

o        capital expenditures

The Company's sources of cash include:

o        standard  servicing fees;  generally 1.00% per annum of the securitized
         portfolio;

o        receipt of Future Servicing Cash Flows

o        Dealer Premium rebates

o        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

o        interest income

o        sales of receivables in securitization transactions

o        proceeds  from  sale  of  interest-only   strips  in  conjunction  with
         securitization transactions

         Operating  Activities.  Net cash used in operating activities decreased
to  $10.0  million  for the year  ended  June 30,  2000,  from net cash  used in
operating  activities  of $221.0  million for the year ended June 30, 1999.  The
decrease was primarily  attributable  to an increase in receivables  securitized
relative to receivables acquired.

         Investing  activities.  Net cash provided by investing  activities  was
$72.7  million  and $63.2  million  for the years  ended June 30, 2000 and 1999,
respectively.  The increase over the prior year relates to higher  collection on
Retained Interest due to lower net credit losses.

         Financing activities.  Net cash used in financing activities for fiscal
2000 was $56.1 million compared to net cash provided by financing  activities of
$90.3 million in the prior year.  The change was primarily a result of decreased
warehouse borrowings at June 30, 2000, relative to the balance at June 30, 1999.
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
Credit  Facilities.  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 should be available for future
use as  management  deems  appropriate,  subject to the agreement of the conduit
participants to increase available funding. At June 30, 2000 such facility had a
capacity of $375.0 million, all of which was available.  During August 2000, the
capacity for this facility was increased to $500.0  million.  In September 2000,
the Company sold $500 million of receivables  into this  facility,  in lieu of a
public Securitization. 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
Facilities  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
Facilities  is  dependent  upon its  compliance  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 Facilities.  The Company
consistently  assesses its long-term receivable funding arrangements with a view
to optimizing cash flows and reducing costs.

         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 2000, derivative financial
instrument  transactions  have  provided  cash of $5.3 million  compared to $3.2
million used during fiscal 1999.

         Warehouse  facilities.  At June 30,  2000 the  Company  had two  Credit
Facility borrowing  arrangements with an independent financial institution for a
total of $550.0  million  The $350.0  million  Credit  Facility  is insured by a
surety bond provider to fund  receivable  acquisitions  while the $200.0 million
Credit  Facility is not  insured.  The Credit  Facilities  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  Warehouses.  At June 30, 2000 and
1999,  $152.2 million and $185.5 million was utilized,  and an additional  $47.1
million  and $67.2  million was  available  to borrow  based on the  outstanding
principal balance of eligible receivables,  respectively. During August 2000, an
additional Credit Facility with another  independent  financial  institution was
added bringing the total borrowing capacity to $750.0 million.

         The  Credit  Facilities  generally  have a term of one  year.  Selected
summary information about the Credit Facilities is shown below:

           Credit Facility         Outstanding              Expiration
              Capacity           at June 30, 2000              Date
              --------           ----------------         ---------------
           (in millions)
                 $350                   $152.2             September 2000
                 $200                   None                 March 2001
                 $200                   N/A                 August 2001


         The $350 million  Credit  Facility was renewed on September 7, 2000 and
expires in September 2001.

         Working  capital line. In June 2000, the Company  established a working
capital line of credit for $15.0  million.  This line of credit is unsecured and
is available to fund short-term cash flow needs of the Company. The facility has
a one year term, and the entire amount was available for use at June 30, 2000.

         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 of $22
million  began on August 1,  1998 and are due on  August 1. 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 Facilities and working capital
line  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.

Discussion of Forward-Looking Statements

         This report  contains  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 , market
expansion and other aspects of its business.  Similar forward-looking statements
may be made by the  Company , orally,  or in  writing,  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 Credit Facilities and/or
its  ability to obtain  funding to replace  and/or  supplement  such  facilities
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 Facilities.

         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  short-term  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. The Company uses 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 as a
Securitization  is committed,  the interest rate swaps are terminated.  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.  In addition,  the commercial  paper conduit
pursuant to which the  Company  Securitized  $500.0  million in  receivables  in
September  2000, may from time to time in the future,  provide for issuance of a
note bearing  interest at a floating rate with the resulting  interest rate risk
covered by a related interest rate swap arrangement.  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  reporting  a lower  or  higher  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. Effective July 1, 2000, the Company adopted the provisions
of  Statement  of  Financial   Accounting  Standards  No.  133  "Accounting  for
Derivatives  Instruments and Hedging Activities" ("SFAS No. 133"). The impact on
the accounting for the Company  hedging  transactions  is described below in the
"Impact of Current Accounting Pronouncements" section.

         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:

o        require  the  Company  to obtain  and  maintain  certain  licenses  and
         qualifications;

o        limit the interest rates, fees and other charges the Company is allowed
         to charge;

o        limit or prescribe certain other terms of the Company's contracts;

o        require specified disclosures; and

o        define the Company's rights to repossess and sell collateral.

         Such  laws are  complex  and vary  widely  from  state to state and the
Company could incur significant liability for even inadvertent violation of such
laws. 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.
The  Statement  as amended,  is  effective  July 1, 2000.  On July 1, 2000,  the
Company  recorded a  liability  in "Other  payables  and  accrued  expenses"  of
approximately $1.3 million and a net of tax charge of approximately  $400,000 to
"Accumulated  other comprehensive  earnings"  which was reported as a "Cumulated
effect of a change in  accounting  principle" in the  consolidated  statement of
shareholders'  equity.  The  adoption of SFAS No. 133 did not have any impact on
the income statement on July 1, 2000.

         In July 2000,  the Emerging  Issues Task Force  ("EITF")  finalized the
provisions  of EITF  Issue  No.  99-20,  "Recognition  of  Interest  Income  and
Impairment  of  Purchased  and  Retained  Beneficial  Interests  in  Securitized
Financial Assets",  ("EITF 99-20").  EITF 99-20 sets forth rules for recognizing
interest  income and  determining  when  securities must be written down to fair
value because of other than temporary  impairments.  EITF 99-20 will require the
"prospective  method" of adjusting the  recognition of interest  income when the
anticipated  cash flows have either  increased or  decreased.  Anticipated  cash
flows can change as the result of factors  such as  prepayment  rates and credit
losses.  Under the provisions of EITF 99-20, an other than temporary  impairment
must be recorded when the  anticipated  cash flows have decreased since the last
estimate and the fair value of the  Retained  Interest is less than the carrying
value.

         The Company  currently  applies  certain  provisions  of EITF Issue No.
93-18 "Recognition of Impairment for an Investment in a Collateralized  Mortgage
Obligation Instrument or in a Mortgage-Backed  Interest-Only Certificate" ("EITF
93-18")  regarding  impairment.  EITF 99-20 will no longer  allow for  temporary
impairments which are based on fair values discounted at risk free rates.

         The  effective  date for EITF 99-20 is January  1, 2001,  with  earlier
adoption permitted. In the event of a write-down, the write-down associated with
the  implementation of EITF 99-20 will be reported as a "cumulative  effect of a
change in accounting principle" and will be reported on a prospective basis. The
Company anticipates  adopting the provision of EITF 99-20 as of January 1, 2001.
The Company has not evaluated the impact of this change.


<PAGE>



Item 7a.          Quantitative and Qualitative Disclosures About Market Risk

         The Company's  sources for  short-term  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.  The Company
uses 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 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. Prior to
March 1999, as 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.  In addition,  the commercial paper conduit pursuant
to which the Company  securitized  $500 million in receivables in September 2000
may from time to time in the  future,  provide for  issuance  of a note  bearing
interest at a floating rate with the  resulting  interest rate risk covered by a
related  interest  rate  swap  arrangement.  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
reporting  a  lower  or  higher  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.  At June 30, 2000,  the Company had an  unrealized  hedging loss on
forward   interest  rate  swaps  of  $1.3  million  based  on  notional  amounts
outstanding  of $426.5  million.  The fair value of long-term  debt increases or
decreases  as market  interest  rates are  reduced or  increased,  respectively.
Effective  July 1, 2000,  the Company  adopted the  provisions  of  Statement of
Financial Accounting  Standards No. 133 "Accounting for Derivatives  Instruments
and Hedging  Activities" ("SFAS No. 133"). 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."

          The following table presents the principal cash repayments and related
weighted average interest rates by maturity date for warehouse  current variable
rate and long-term fixed rate debt at June 30, 2000:
<TABLE>
<CAPTION>

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

<S>                                       <C>              <C>            <C>             <C>                 <C>
Amounts due under warehouse facility      $152,235         $     -        $      -        $152,235            $152,235
    Weighted average variable rate            5.78%              -               -            5.78%

Long-term debt                             $22,000         $43,667        $111,333        $177,000            $167,046
    Weighted average fixed rate               8.53%           8.14%           8.86%           7.69%
</TABLE>

Sensitivity analysis on Retained Interest

         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.  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."

         At June 30, 2000, 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, 2000                                      Tier I               Tier II               Total
---------------------------                                      ------               -------               -----
<S>                                                            <C>                    <C>                  <C>
Fair value of retained interest (1)                            $212,730,070           $3,426,990           $216,157,060

Prepayment speed assumption (annual rate)                     22.11% - 28.00%       4.23% - 21.06%

Impact on fair value of 10% adverse change                     $206,310,601           $3,406,125           $209,716,726
Impact on fair value of 20% adverse change                     $200,239,324           $3,385,996           $203,625,320


Net loss rate assumption (pool life rate)                     4.00% - 6.24%         12.00% - 16.32%

Impact on fair value of 10% adverse change                     $189,706,190           $2,562,992           $192,269,182
Impact on fair value of 20% adverse change                     $166,479,432           $1,717,534           $168,196,966


Discount rate assumption (annual rate)                       9.11% - 15.38%        11.16% - 14.18%

Impact on fair value of 10% adverse change                     $207,225,384           $3,364,519           $210,589,903
Impact on fair value of 20% adverse change                     $201,995,290           $3,303,893           $205,299,183

------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Retained  Interest on the balance  sheet is lower than the total fair value
     included  in  this  analysis.  The  difference  primarily  relates  to  the
     inventory  value of repossessed  autos that have not been sold. This amount
     is included in Retained  Interest as part of the  allowance  for  estimated
     credit losses on securitized receivables but not included in the total fair
     value.

         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.  The forgoing is further  presented  based on 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 sheets of Union Acceptance
Corporation and  Subsidiaries  (the "Company") as of June 30, 2000 and 1999, and
the related consolidated statements of earnings,  shareholders' equity, and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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,  such consolidated  financial  statements present fairly, in all
material respects,  the financial  position of Union Acceptance  Corporation and
Subsidiaries  as of June 30, 2000 and 1999, and the results of their  operations
and their  cash flows for the years then  ended in  conformity  with  accounting
principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Indianapolis, Indiana
July 21, 2000


<PAGE>




The Board of Directors
Union Acceptance Corporation:


We have audited the  accompanying  consolidated  statements of earnings  (loss),
shareholders'  equity,  and  cash  flows  of Union  Acceptance  Corporation  and
Subsidiaries  for the year 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 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, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of operations and cash flows of
Union  Acceptance  Corporation and Subsidiaries for the year ended June 30, 1998
in conformity with generally accepted accounting principles.

/s/ KPMG LLP

KPMG LLP
Indianapolis, IN
August 27, 1998


<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS
AT JUNE 30,                                                                 2000              1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                <C>
Assets

Cash and cash equivalents                                                    $ 14,792           $ 8,088
Restricted cash                                                                13,010            12,215
Receivables held for sale, net                                                206,701           267,316
Retained interest in securitized assets                                       208,431           191,029
Accrued interest receivable                                                     1,727             2,035
Property,equipment, and leasehold improvements, net                             9,494             8,375
Other assets                                                                   23,983            25,868
                                                                         -------------    --------------

  Total Assets                                                              $ 478,138         $ 514,926
                                                                         =============    ==============

Liabilities and Shareholders' Equity

Liabilities
Amounts due under warehouse facilities                                      $ 152,235         $ 185,500
Long-term debt                                                                177,000           199,000
Accrued interest payable                                                        5,408             5,287
Amounts due to trusts                                                          14,487            13,152
Dealer premiums payable                                                         3,663             2,564
Current and deferred income taxes payable                                       9,740            16,022
Other payables and accrued expenses                                             5,576             3,922
                                                                         -------------    --------------

  Total Liabilities                                                           368,109           425,447
                                                                         -------------    --------------

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; 5,816,024 and 5,099,344 shares
  issued and outstanding at June 30, 2000 and
  June 30, 1999, respectively                                                  58,632            58,452

Class B Common Stock, without par value,
  authorized 20,000,000 shares; 7,461,608 and 8,150,266 shares
  issued and outstanding at June 30, 2000 and
  June 30, 1999, respectively                                                       -                 -

Accumulated other comprehensive earnings, net of income taxes                   3,564               199

Retained earnings                                                              47,833            30,828
                                                                         -------------    --------------

  Total Shareholders' Equity                                                  110,029            89,479
                                                                         -------------    --------------

  Total Liabilities and Shareholders' Equity                                $ 478,138         $ 514,926
                                                                         =============    ==============
</TABLE>

See accompanying notes to consolidated financial statements.



<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
FOR THE YEARS ENDED JUND 30,                                                   2000           1999            1998
(Dollars in thousands, except share data)
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>             <C>
Interest on receivables held for sale                                         $37,461        $33,015         27,871
Retained interest and other                                                    24,963         20,463         13,993
                                                                           ----------- -------------- --------------

   Total interest income                                                       62,424         53,478         41,864
Interest expense                                                               29,663         27,906         27,178
                                                                           ----------- -------------- --------------

   Net interest margin                                                         32,761         25,572         14,686
Provision for estimated credit losses                                           3,000          5,879          8,050
                                                                           ----------- -------------- --------------
   Net interest margin after provision
      for estimated credit losses                                              29,761         19,693          6,636

Gain (loss) on sales of receivables, net                                       16,883         19,133       (11,926)
Servicing fees                                                                 24,612         21,716         19,071
Late charges and other fees                                                     6,337          5,349          4,087
                                                                           ----------- -------------- --------------

Other revenues                                                                 47,832         46,198         11,232
                                                                           ----------- -------------- --------------

Salaries and benefits                                                          28,915         23,572         19,427
Other expenses                                                                 20,998         19,016         16,119
                                                                           ----------- -------------- --------------

Total operating expenses                                                       49,913         42,588         35,546
                                                                           ----------- -------------- --------------

Earnings (loss) before provision (benefit)
   for income taxes                                                            27,680         23,303       (17,678)
Provision (benefit) for income taxes                                           10,675          8,979        (7,856)
                                                                           ----------- -------------- --------------

Net earnings (loss)                                                           $17,005        $14,324        (9,822)
                                                                           =========== ============== ==============

Net earnings (loss)  per common share (basic and diluted)                      $ 1.28         $ 1.08       $ (0.74)
                                                                           =========== ============== ==============

Basic weighted average number of common shares
     outstanding                                                           13,267,493     13,241,593     13,226,651
Dilutive effect of common stock options                                        25,777         12,053              -
                                                                           ----------- -------------- --------------
Diluted weighted average number of common shares
     outstanding                                                           13,293,270     13,253,646     13,226,651
                                                                           =========== ============== ==============
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,                                                        2000             1999             1998
(Dollars in thousands)
--------------------------------------------------------------------------------------------------------------------------------

Cash flows from operating activities:
<S>                                                                                  <C>              <C>             <C>
    Net earnings (loss)                                                           $   17,005         $ 14,324        $  (9,822)
      Adjustments to reconcile net earnings to net cash
      from operating activities:
         Acquisition of receivables held for sale, net of liquidations            (1,429,726)      (1,439,172)        (953,252)
         Dealer premiums paid, net on receivables held for sale                      (34,807)         (51,122)         (40,526)
         Proceeds from securitization of receivables held for sale                 1,484,500        1,288,071          948,114
         Gain on sales of receivables                                                (32,060)         (48,622)         (26,263)
         Proceeds on sale of interest-only strip                                           -            2,847           13,869
         Impairment of retained interest in securitized assets                         5,284           11,917           23,636
         Accretion of discount on retained interest in securitized assets            (23,594)         (18,337)          (7,269)
         Provision for estimated credit losses                                         3,000            5,879            8,050
         Amortization and depreciation                                                 4,050            4,688            4,689
         Restricted cash                                                                (794)           5,551           (1,111)
         Other assets and accrued interest receivable                                    236           (1,983)            (736)
         Amounts due to trusts                                                         1,335           (2,358)            (557)
         Other payables and accrued expenses                                          (4,403)           7,276           (3,383)
                                                                                 -------------  ---------------  ---------------
                   Net cash used in operating activities                              (9,974)        (221,041)         (44,561)
                                                                                 -------------  ---------------  ---------------

Cash flows from investing activities:
    Collections on retained interest in securitized assets
         and changes in spread accounts                                               75,590           65,034           39,513
    Capital expenditures                                                              (2,816)          (1,794)          (6,809)
                                                                                 -------------  ---------------  ---------------
                   Net cash provided by investing                                     72,774           63,240           32,704
                   activities
                                                                                 -------------  ---------------  ---------------

Cash flows from financing activites:
    Principal payment on long-term debt                                              (22,000)         (22,000)               -
    Stock options excercised                                                              93                2                -
    Net change in warehouse credit facilities                                        (33,265)         112,377           28,668
    Payment of borrowing fees                                                           (924)            (102)               -
                                                                                 -------------  ---------------  ---------------
                   Net cash provided by (used in) financing activities               (56,096)          90,277           28,668
                                                                                 -------------  ---------------  ---------------

Change in cash and cash equivalents                                                    6,704          (67,524)          16,811

Cash and cash equivalents, beginning of period                                         8,088           75,612           58,801
                                                                                 -------------  ---------------  ---------------

Cash and cash equivalents, end of period                                            $ 14,792          $ 8,088         $ 75,612
                                                                                 =============  ===============  ===============

Supplemental disclosures of cash flow information:
Income taxes paid                                                                   $ 19,338          $ 2,661             $ 22
                                                                                 =============  ===============  ===============
Interest paid                                                                       $ 28,545         $ 28,276         $ 24,332
                                                                                 =============  ===============  ===============
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>


                                         Number of Common Stock                        Accumulated
                                           Shares Outstanding                             Other                           Total
                                     -------------------------------  Common          Comprehensive      Retained      Shareholders'
                                         Class A         Class B       Stock             Income          Earnings         Equity
                                     -----------------------------------------------------------------------------------------------
Balance at July 1, 1997                    4,016,788      9,200,000     $58,270          $ 2,252         $26,326        $86,848
------------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>           <C>              <C>             <C>           <C>
Comprehensive loss:
Net loss                                           -              -           -                -         (9,822)        (9,822)
    Net unrealized gain on retained
       interest in securitized                     -              -           -            8,527               -          8,527
       assets
    Incomes taxes related to unrealized
       gain in securitized assets                  -              -           -          (3,170)               -        (3,170)
                                                                                                                 ---------------
Total comprehensive 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:
Net earnings                                       -              -           -                -          14,324         14,324
    Net unrealized loss on retained
       interest in securitized                     -              -           -         (11,961)               -       (11,961)
       assets
    Incomes taxes related to unrealized
       loss in securitized assets                  -              -           -            4,551               -          4,551
                                                                                                                 ---------------
Total comprehensive earnings                                                                                              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
--------------------------------------------------------------------------------------------------------------------------------

Comprehensive earnings:
Net earnings                                       -              -           -                -          17,005         17,005
    Net unrealized gain on retained
       interest in securitized                     -              -           -            5,416               -          5,416
       assets
    Incomes taxes related to unrealized
       gain in securitized assets                  -              -           -          (2,051)               -        (2,051)
                                                                                                                 ---------------
Total comprehensive earnings                                                                                             20,370
Grants of common stock                        10,550              -          75                -               -             75
Stock options exercised                       17,472              -          93                -               -             93
Other                                              -              -          12                -               -             12
Conversion of Class B Common Stock
    into Class A Common Stock                688,658       (688,658)          -                -               -              -
                                     ---------------- -------------------------- ---------------- ------------------------------

Balance at June 30, 2000                   5,816,024      7,461,608     $58,632          $ 3,564         $47,833       $110,029
                                     ================ ========================== ================ ==============================
</TABLE>

See accompanying notes to consolidated financial statements.






<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 2000, 1999 and 1998


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    5,000
manufacturer-franchised automobile dealerships in 39 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 less than 1.0% of the receivable servicing portfolio during fiscal
1999, and 1.1% and 2.1% of the receivable  servicing  portfolio at June 30, 2000
and 1999, respectively.

Basis  of  Financial  Statement   Presentation  -  The  consolidated   financial
statements include the accounts of UAC and its wholly-owned subsidiaries:

o        Circle City Car Company
o        Performance Funding Corporation
o        Performance Securitization Corporation
o        UAC Boat Funding Corp.
o        UAC Finance Corporation
o        UAC Securitization Corporation
o        UAFC Corporation (formerly known as Union Acceptance Funding
         Corporation)
o        UAFC-1 Corporation
o        UAFC-2 Corporation
o        Union Acceptance Funding Corporation
o        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 accounting  principles  generally  accepted in the United States
and with the general  practices of those in the consumer  finance  industry.  In
preparing the consolidated financial statements,  management is required to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  at the  date  of the  consolidated  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 consists of funds held in reserve  accounts in
compliance   with  the  terms  of  the   Credit   Facilities'   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  capitalized  and  included  as basis in the  receivables  and are
charged to gain on sale of  receivables,  net at the time of sale.  A portion of
the Dealer  Premiums is  refundable by the dealer to the Company in the event of
receivable prepayment or default.

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
primarily  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 special  purpose  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 various forms.
The Credit enhancements utilized in recent  securitizations has been in the form
of a  specific  cash  account  ("Spread  Account")  held by the  Trust  and over
collateralization.  The Spread Account is required by the  applicable  servicing
agreement to be maintained at specified levels and over collateralization.

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 if applicable,  the Servicing Assets. Retained Interest consists of
the  discounted  estimated  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 base servicing fees for the servicing and collection of the
receivables.  The Company is entitled to the residual  cash flows from the trust
(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 interest 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.  In
certain  transactions,  the  Company  chooses  to "turbo"  excess  cash prior to
bringing the Spread Account to required levels. The "turbo" feature provides for
initial use of excess cash to reduce the principal  balance of the  Asset-backed
Securities  to a specified  level.  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 and turbo  requirements  expressed  generally  as a
percentage of the original collateral principal balance.

The  average of the  interest  rates  received  on the  receivables  exceeds the
interest rates paid 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 22.11% to 28.00%
at June 30, 2000 on Tier I receivables.  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 6.24%  for Tier I
receivables  and 12.00% to 16.32% 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, 2000.

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 to be 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 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 9.11% to 15.38% on the estimated  cash flows to be released from the Spread
Account to value the Retained  Interest at June 30, 2000.  The weighted  average
discount  rate used to value  Retained  Interest  at June 30,  2000 and 1999 was
13.78% and 12.83% 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.

In July 2000, the Emerging  Issues Task Force ("EITF")  finalized the provisions
of EITF Issue No.  99-20,  "Recognition  of Interest  Income and  Impairment  of
Purchased and Retained  Beneficial  Interests in Securitized  Financial Assets",
("EITF 99-20").  EITF 99-20 sets forth rules for recognizing interest income and
determining  when securities must be written down to fair value because of other
than temporary impairments.  EITF 99-20 will require the "prospective method" of
adjusting the  recognition of interest  income when the  anticipated  cash flows
have either  increased or  decreased.  Anticipated  cash flows can change as the
result  of  factors  such as  prepayment  rates  and  credit  losses.  Under the
provisions of EITF 99-20,  an other than temporary  impairment  must be recorded
when the  anticipated  cash flows have decreased since the last estimate and the
fair value of the Retained Interest is less than the carrying value.

The  Company  currently  applies  certain  provisions  of EITF  Issue No.  93-18
"Recognition  of  Impairment  for an  Investment  in a  Collateralized  Mortgage
Obligation Instrument or in a Mortgage-Backed  Interest-Only Certificate" ("EITF
93-18")  regarding  impairment.  EITF 99-20 will no longer  allow for  temporary
impairments which are based on fair values discounted at risk free rates.

The  effective  date for EITF 99-20 is January 1, 2001,  with  earlier  adoption
permitted.  The write-down associated with the implementation of EITF 99-20 will
be reported as a  "cumulative  effect of a change in accounting  principle"  and
will be reported on a prospective  basis. The Company  anticipates  adopting the
provision of EITF 99-20 as of January 1, 2001. The Company has not evaluated the
impact of this change.

Inventory - Inventories  consist  primarily of pre-owned  vehicles valued at the
lower of cost or market. Market is considered to be the current wholesale market
value.

Servicing  Assets - The Company  receives  base  servicing  fees,  typically one
percent  of  receivables  serviced,  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.
When this occurs,  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 fair value and are included
in other assets.  Other than temporary impairment is measured using the relative
fair value of the individual Servicing Assets and recognized through a valuation
allowance.

Servicing  Fees - Servicing  fees 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,  688,658;  704,770  and  344,964  shares of Class B
Common Stock were  converted  to shares of Class A Common  Stock  during  fiscal
2000, 1999 and 1998, 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.

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 once a
quarter.  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  expense.
Changes in fair value of the interest rate swaps accounted for under the accrual
method are not reflected in the accompanying  consolidated financial statements.
Since  March  1999,  the  Company  utilizes 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.  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.  Associated  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 No. 133"),  was issued in June 1998.
The  Statement  as amended,  is  effective  July 1, 2000.  On July 1, 2000,  the
Company  recorded a  liability  in "Other  payables  and  accrued  expenses"  of
approximately $1.3 million and a net of tax charge of approximately  $400,000 to
"Accumulated  other  comprehensive  earnings" which was reported as a "Cumulated
effect of a change in  accounting  principle" in the  consolidated  statement of
shareholders'  equity.  The  adoption of SFAS No. 133 did not have any impact on
the income statement on July 1, 2000.

Earnings  Per Share - Options to purchase  shares of common  stock are  excluded
from the  calculation of Earnings Per Share ("EPS")  assuming  dilution when the
exercise  prices of these  options are greater than the average  market price of
the common share during the period. The following chart indicates the numbers of
options to purchase  shares  which were  excluded  from the  calculation  of EPS
assuming dilution for the periods indicated:


                              For the years ended
                      2000           1999          1998
                   -----------   ------------   ----------
                      429,323        324,666      377,139



Segment  Information - 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.


<PAGE>



2.   RECEIVABLES HELD FOR SALE, NET

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

                                                       June 30,
                                                2000             1999
                                              -----------    -------------

Principal balance of Tier I receivables        $ 202,167        $ 260,857
Principal balance of Tier II receivables           1,656              886
Dealer Premiums                                    5,369            8,209
Allowance for credit losses                       (2,978)          (2,754)
Other                                                487              118
                                              ----------        ---------
                                              $  206,701        $ 267,316
                                              ==========        =========



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

                                                   Year ended June 30,
                                             2000         1999          1998
                                           ----------  ------------  -----------

Balance at the beginning of the period       $ 2,754       $ 1,916         $780
    Charge-offs                              (5,638)       (7,708)     (10,635)
    Recoveries                                 2,862         2,667        3,721
    Provision for estimated credit losses      3,000         5,879        8,050
                                           ----------  ------------  -----------
Balance at the end of the period             $ 2,978       $ 2,754      $ 1,916
                                           ==========  ============  ===========


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

                                                              June 30,
                                                        2000           1999
                                                    ------------    -----------
Notional amounts outstanding                           $426,477      $438,250
Unrealized gains (losses) on hedging transactions      $ (1,320)       $1,127



The Company had four interest rate swap agreements  outstanding at June 30, 2000
with notional  amounts  totaling $426.5 million with maturity dates ranging from
February to  September  2006.  With these  interest  rate swap  agreements,  the
Company  is  paying a  weighted  average  fixed  rate of 6.93% and  receiving  a
weighted average variable  receivable rate of 6.54%. The agreements  outstanding
at June 30, 2000 were for existing receivables outstanding of $206.7 million and
projected future acquisitions of $219.8 million.

The  net  realized   gain/(loss)  on  derivative   financial   instruments  were
approximately  $5.3 million,  ($3.2  million),  and ($2.7 million) during fiscal
2000, 1999, and 1998, respectively,  and are recorded as a component of the gain
on sale of receivables, net.


<PAGE>



3.   SERVICED RECEIVABLES

The principal balance of receivables serviced are as follows (in thousands) at:

                                                     June 30,
                                             2000              1999
                                         --------------   ---------------
Receivables held for sale:
   Tier I (net of unearned discount)          $202,167         $ 260,857
   Tier II (net of unearned discount)            1,656               886
   Other                                            82                91
                                         --------------   ---------------
                                               203,905           261,834
Securitized receivables:
   Tier I                                    2,645,983         2,203,509
   Tier II                                      30,672            52,906

Other receivables serviced                         555               821
                                         --------------   ---------------
                                           $ 2,881,115        $2,519,070
                                         ==============   ===============

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

                                                              June 30,
                                                       2000           1999
                                                     -----------   ------------
Weighted averaged interest rate (Tier I)                  13.30%         13.08%
Weighted average interest rate (Tier II)                  18.52%         18.75%
Average receivable balance (Tier I)                     $12,082        $11,529
Average receivable balance (Tier II)                     $8,334         $9,750
Weighted Average term remaining (Tier I) (months)          57.6           57.2
Weighted Average term remaining (Tier II) (months)         34.3           42.9


During fiscal 2000, receivable  acquisitions relating to customers who reside in
Texas,   North  Carolina,   and  California  totaled  10.9%,  10.6%  and  10.5%,
respectively,  of all  receivables  acquired.  At June 30, 2000,  customers  who
reside in Texas,  North Carolina and California  totaled 12.5%,  10.9% and 9.7%,
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, 2000.


<PAGE>



4.   PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS, NET

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

                                             June 30,
                                      2000            1999
                                   ------------    ------------
Building                              $4,376          $4,372
Leasehold improvements                 1,487             553
Land                                     416             367
Equipment                              9,067           7,447
Accumulated depreciation              (5,852)         (4,364)
                                      ------          ------
                                      $9,494          $8,375
                                      ======          ======


5.   RETAINED INTEREST IN SECURITIZED ASSETS

The carrying amount of retained interest in securitized assets is as follows (in
thousands) at:

                                                                June 30,
                                                            2000        1999
                                                         ----------  -----------

Estimated gross interest spread from receivables,
  net of estimated prepayments and fees                   $ 287,661   $ 247,802
Estimated dealer premium rebates refundable                  18,133      22,923
Estimated credit losses on securitized receivables         (119,003)   (104,448)
Accelerated principal (1)                                    24,082         885
Spread accounts                                              58,663      69,921
Discount to present value                                   (61,105)    (46,054)
                                                         ----------  -----------
                                                          $ 208,431   $ 191,029
                                                         ==========  ===========

Outstanding balance of securitized receivables serviced  $2,676,655  $2,256,415
                                                         ==========  ===========

Estimated credit losses as a percentage of
  securitized receivables serviced                            4.45%       4.63%

(1)  Also referred to as "turbo", see Note 1 for further discussion.

<PAGE>

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

                                                     Year ended June 30,
                                               2000         1999        1998
                                              ---------   ---------   ----------

Balance at beginning of period                $191,029     $171,649    $170,791
Amounts capitalized (including estimated
  dealer rebates)                               69,266       89,955      56,082
Collections                                    (87,529)     (67,671)    (35,938)
Accretion of discount                           23,594       18,337       7,269
Change in accelerated principal                 23,197          885           -
Change in spread accounts                      (11,258)       1,752      (3,575)
Other than temporary impairments                (5,284)     (11,917)    (23,636)
Change from cash-in to cash-out                      -            -      (7,871)
Net change in unrealized gain (loss)             5,416      (11,961)      8,527
                                              --------     --------    --------

Balance at end of period                      $208,431     $191,029    $171,649
                                              ========     ========    ========




Spread account activity is as follows (in thousands):


                                                        Year ended June 30,
                                                      2000             1999
                                                   -----------     ------------
Balance at beginning of period                        $69,921          $68,169
Excess cash flows deposited to spread accounts         48,851           50,788
Initial spread account deposits                         5,125            2,011
Interest earned on spread accounts                      3,372            3,313
Less: excess cash flows released to the Company      (68,606)         (54,360)
                                                   -----------     ------------
Balance at end of period                              $58,663          $69,921
                                                   ===========     ============


The weighted  average yield on spread accounts was 5.69% and 4.75% for the years
ended June 30, 2000 and 1999,  respectively.  The weighted average yield at June
30, 2000 and 1999 was 6.46% and 4.79%, respectively.

Because of trends with respect to credit loss and  delinquency and their effects
on the valuation of the retained  interest in  securitized  assets,  the Company
recorded  pre-tax  charges of $5.3 million,  $11.9 million and $23.6 million for
the other than  temporary  impairment  of the retained  interest in  securitized
assets  during  fiscal  2000,  1999 and 1998,  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 fair value of 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 (basic and diluted).


<PAGE>



6.   OTHER ASSETS

Other assets are as follows (in thousands) at:

                                               June 30,
                                         2000            1999
                                   --------------     -----------

Repossessed assets                     $ 7,808           $ 5,086
Accrued servicing fees                   7,717             6,243
Servicing assets                         1,201             2,719
Deferred borrowing fees                  1,845             1,596
Income taxes refundable                  1,265             5,000
Advance of delinquent interest           1,389             1,117
Other                                    2,758             4,107
                                   ------------       -----------
                                      $ 23,983          $ 25,868
                                   ============       ===========




7.   AMOUNTS DUE UNDER WAREHOUSE FACILITIES AND WORKING CAPITAL LINE

At June 30, 2000 and 1999, the Company, through its wholly owned special-purpose
subsidiaries,  had borrowing  arrangements  with a financial  institution  which
provided for two and one,  respectively,  revolving  Credit  Facilities  with an
aggregate  borrowing  capacity  of $550.0  million  at June 30,  2000 and $450.0
million  at June 30,  1999.  The second  Credit  Facility  was added  during the
quarter  ended June 30, 2000 and the  existing  facility  was  modified.  During
August  2000,  an  additional  Credit  Facility  through a  different  financial
institution was added bringing the total  borrowing  capacity to $750.0 million.
Borrowings  under the current Credit  Facilities are  collateralized  by certain
receivables held for sale.  Outstanding borrowings of the Credit Facilities were
$152.2 and $185.5 million at June 30, 2000 and 1999,  respectively.  At June 30,
2000 and 1999, an additional $47.1 million and $67.2 million,  respectively, 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, 2000 and 1999, was 5.78% and 5.09%, respectively.

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 Credit  Facilities  generally have terms of one year.  Selected  information
about the Credit Facilities is shown below:

      Credit Facility                 Outstanding                Expiration
         Capacity                  at June 30, 2000                Date
---------------------------    -------------------------    ------------------
      (in millions)
           $ 350                       $ 152.2                September 2000
           $ 200                         None                   March 2001
           $ 200                         N/A                    August 2001


In June 2000, the Company established a working capital line of credit for $15.0
million.  This line of credit is unsecured  and is available to fund  short-term
cash flow needs of the Company.  The facility has a one year term and the entire
amount was available for use at June 30, 2000.

8.   LONG-TERM DEBT

In connection  with the Company's  initial  public  offering in August 1995, the
Company issued, in a private placement, $110.0 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 with  annual  principal  payments  of $22.0
million on August 1.

In April 1996, the Company issued, in a private  placement,  $46.0 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.

In March 1997, the Company issued, in a private placement,  $50.0 million Series
A 7.75% Senior Notes due 2002 and $15.0 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, with a principal  reduction of $21.7 million on March
15, 2002.

All of the above  mentioned  Senior  Notes  and  Senior  Subordinated  Notes are
redeemable,  in whole or in part,  at the option of the Company,  in a principal
amount not less than $1.0 million,  together with accrued and unpaid interest to
the  date of  redemption  and a  yield-maintenance  premium  as  defined  in the
respective note agreements.

The following chart shows interest expense related to long-term debt.

                       For the year ended June 30,
                  2000            1999            1998
              -------------   ------------    ------------
                             (in thousands)
                   $16,147        $17,817         $19,485

Scheduled contractual maturities of long-term debt at June 30, 2000 follows:

2001                                                              $22,000
2002                                                               43,667
2003                                                              111,333
                                                             -----------------
Total                                                            $177,000
                                                             =================



9.   INCOME TAXES

Amounts  currently  payable/(refundable)  at June 30,  2000 and 1999 were  $(.5)
million and $6.3, respectively.

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

                                                Year ended June 30,
                                       2000           1999           1998
                                   ------------    -----------    -----------

Current tax expense (benefit)         $ 12,421        $ (922)       $(9,863)
Deferred tax expense (benefit)         (1,746)          9,901          2,007
                                   ------------    -----------    -----------
                                      $ 10,675         $8,979       $(7,856)


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

                                                 Year ended June 30,
                                          2000           1999           1998
                                      ------------    -----------    -----------

Statutory rate                              35.0%          35.0%          35.0%
     State income taxes                      3.2%           3.2%           3.2%
     Change in commercial domicile           0.0%           0.0%           4.9%
     Other                                   0.4%           0.3%           1.3%
                                      ------------    -----------    -----------
Effective rate                              38.6%          38.5%          44.4%



The composition of deferred income taxes payable is as follows (in thousands):

                                                             June 30,
                                                       2000           1999
                                                    -----------    -----------
Deferred tax assets:
     Allowance for estimated credit losses              $1,156         $1,052
     Mark to market and allowance for
       credit losses                                     3,833          2,450
                                                    -----------    -----------
                                                         4,989          3,502

Deferred tax liabilities:
     Retained interest in securitized                    1,153         10,875
     assets
     Gain on securitizations                            11,989          2,528
     Depreciation and Amortization                           2              -
     Unrealized gain (loss) on retained interest
       in securitized assets                             2,102          (204)
                                                    -----------    -----------
                                                        15,246         13,199

                                                    -----------    -----------
Deferred income taxes payable                          $10,257         $9,697
                                                    ===========    ===========



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.

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, 2000 and 1999
are set forth below:

<TABLE>
<CAPTION>
                                                          2000                            1999
                                              -----------------------------   -----------------------------
                                                Carrying          Fair          Carrying          Fair
                                                 Value           Value           Value           Value
                                              -------------   -------------   -------------   -------------
                                                                  (Dollars in thousands)

Financial Assets:
<S>                                                <C>             <C>              <C>             <C>
   Cash and cash equivalents                       $14,792         $14,792          $8,088          $8,088
   Restricted cash                                  13,010          13,010          12,215          12,215
   Retained interest in securitized assets         208,431         208,431         191,029         191,029
   Receivables held for sale, net                  206,701         209,404         267,316         274,180
   Accrued interest receivable                       1,727           1,727           2,035           2,035

Financial Liabilities:
   Amounts due under warehouse
      facilities                                   152,235         152,235         185,500         185,500
   Long-term debt                                  177,000         167,046         199,000         175,620
   Accrued interest payable                          5,408           5,408           5,287           5,287

Off-Balance Sheet Derivatives:
   Interest rate swap                             n/a              (1,320)        n/a                1,127

</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, amounts due under warehouse facilities and accrued interest
payable.

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  interest  rate swap is the  estimated  amount the Company
would have to pay to enter into equivalent agreements at June 30, 2000 and 1999,
with the  counterparty to the swap agreements.  See Note 1 regarding  changes in
the Company's accounting for derivative financial  instruments effective July 1,
2000.


<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, 2000 are as follows:

                                           (In thousands)
2001                                             $984
2002                                              975
2003                                              973
2004                                                7
Thereafter                                          -
                                           -----------

Total                                         $ 2,939
                                           ===========



These  agreements  include,  in  certain  cases,  various  renewal  options  and
contingent rental agreements. Rental expense for premises and equipment amounted
to  approximately  $2.1 million,  $2.1  million,  and $1.9 million for the years
ended June 30,  2000,  1999 and 1998,  respectively.  A  majority  of the rental
expense  relates  to the  lease  of the  Company's  principal  offices  from  an
affiliate.

The Company is subject to  litigation  arising from time to time in the ordinary
course  of  business  and of a type and scope  common  for  participants  in the
consumer finance industry. The Company has been named a defendant in a number of
civil suits. The majority of these cases have involved  circumstances in which a
vehicle  buyer has alleged a problem  with the vehicle  that secures the buyer's
obligations under the retail installment sales contract acquired by the Company.
Although the Company does not make any representation or warranty respecting the
vehicle nor is it deemed to have made any implied  warranties  as a result of it
being the holder of the  contract,  it is, under  applicable  FTC rules and most
state laws,  subject to all claims and  defenses  which the debtor  could assert
against the seller of the  vehicle.  Therefore,  the buyer  typically  names the
dealer and the Company in such actions.

The Company has also,  on occasion,  been sued by a buyer for the  Company's own
alleged wrongful conduct or its alleged participation in the wrongful conduct of
a dealer.  The  majority of these cases have  involved  allegations  of wrongful
conduct in connection with a repossession,  participation in some fraud or other
wrongful  conduct of a dealer or a technical  violation  of  Regulation  Z or an
applicable state statute.  (For a further  discussion of regulation Z, see "Item
1, Business - Regulation.") Most of these suits are individual actions and would
not result in any material liability even if the buyer was successful.  However,
buyers  occasionally  purport to bring an action on behalf of a class of buyers.
No such actions are currently pending.

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
earnings and earnings per share would have been reduced to the pro forma amounts
indicated below (in thousands, except share data):

                                                      June 30,

                                           2000         1999        1998
Net earnings (loss):
        As reported                      $17,005     $ 14,324     $ (9,822)
        Pro forma                         16,424       13,546      (10,951)

Net earnings (loss) per common share
   (basic and diluted):
        As reported                      $  1.28     $   1.08     $  (0.74)
        Pro forma                           1.24         1.02        (0.83)


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  (basic  and  diluted,  a portion  of which  were
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 Plan are  exercisable at such times
(up to ten years from the date of 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  using  the  following  weighted  average
assumptions:


                                            Year ended June 30,
                                2000               1999               1998
                           ---------------     --------------     --------------
Dividend yield                         -                  -                  -
Expected volatility                56.14%             55.04%            100.00%
Risk-free interest rate             5.88%              4.85%              5.45%
Expected lives                   10 years           10 years           10 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, 2000,
1999 and 1998 and changes during the years then ended is presented below:

<TABLE>
<CAPTION>
                                     2000                          1999                           1998
                           ---------------------------   ---------------------------    --------------------------
                                           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        414,665         $ 11.28        368,675        $ 14.86        314,485        $ 16.02
Options granted                59,500            7.00         48,700           5.31         74,000           9.69
Options reacquired                  -               -      (116,425)          14.28              -              -
Options granted
   (repriced)                       -               -        116,425           5.31              -              -
Options exercised            (17,472)            5.31          (350)           5.31              -              -
Options canceled                (400)            5.31        (2,360)           5.31       (19,810)          14.63
                           -----------    ------------   ------------   ------------    -----------    -----------

Options outstanding
  at end of year              456,293         $ 10.96        414,665        $ 11.28        368,675        $ 14.86

Weighted average fair
  value of options granted
  during the year              $ 5.10                         $ 3.47                        $ 8.86
</TABLE>


The following table summarizes  information  about stock options  outstanding at
June 30, 2000:

<TABLE>
<CAPTION>
                 OPTIONS OUTSTANDING                                      OPTIONS EXERCISABLE
-------------------------------------------------------    ----------------------------------------------------

                       Weighted           Weighted
    Average            Average            Remaining           Average                               Average
   Exercise             Number           Contractual         Exercise            Number           Exercisable
     Price           Outstanding       Life (in years)         Price           Exercisable           Price
----------------    ---------------    ----------------    --------------    ----------------    --------------

<S>                        <C>              <C>                  <C>                <C>                <C>
      $5.31                144,543          6.70                 $5.31              71,930             $5.31
      $7.00                 59,500          9.10                 $7.00               7,500             $7.00
      $9.69                 35,000          7.10                 $9.69              10,000             $9.69
     $16.00                217,250          5.20                $16.00             162,312            $16.00
                    ---------------    ----------------    ------------       -------------        ----------

                           456,293           6.3                                   251,742            $12.43
                    ---------------    ----------------                       -------------        ----------
</TABLE>

In addition to the options  outstanding at June 30, 2000,  there were 400 shares
in the 1994 Plan and  265,675  shares  in the 1999 Plan of Class A Common  Stock
available for future grants or awards.

The 1994 Plan and 1999 Plan also provide  that each  director of the Company who
is not an executive  officer is  automatically  granted shares of Class A Common
Stock  with  a  fair  value  of  $15,000   following   each  annual  meeting  of
shareholders.  Shares so granted under the 1994 Plan have a six-month  period of
restriction  during which they may not be  transferred;  shares so granted under
the 1999 Plan are not subject to said restriction.


<PAGE>



Certain information regarding the plans are presented in the following table:

                                             Year ended June 30,
                                2000              1999                1998
                           --------------     ------------     ---------------
1994 Plan shares granted             725           17,778              14,694
1999 Plan shares granted           9,825                -                   -

Compensation cost                $75,000          $90,000             $90,000



In  February  2000,  the  Company's  directors  approved  the  Union  Acceptance
Corporation  Employee Stock  Purchase Plan ("Stock  Purchase  Plan").  The Stock
Purchase  Plan  provides a means for  employees  to  purchase  shares of Class A
Common Stock at market prices  current at the time of purchase  through  regular
payroll  deductions.  As an additional  benefit,  the Company will contribute an
amount  equal to 10%  (subject  to change  at the  discretion  of the  Company's
directors) of the employee's payroll deductions.


<PAGE>



13.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

                    Selected Quarterly Financial Information
                 For Quarters in the Fiscal Year Ended June 30,

<TABLE>
<CAPTION>
                                                                          Year ended June 30, 2000
                                                   First            Second            Third            Fourth            Total
                                               ---------------   --------------   ---------------   --------------   ---------------
                                                                (Dollars in thousands, except per share amounts)
<S>                                                   <C>              <C>               <C>             <C>               <C>
Interest on receivables held for sale                 $ 8,145          $ 6,684           $ 8,221         $ 14,411          $ 37,461
Retained interest and other                             5,728            6,442             6,704            6,089            24,963
                                               ---------------   --------------   ---------------   --------------   ---------------
 Total interest income                                 13,873           13,126            14,925           20,500            62,424
Interest expense                                        6,564            6,179             6,805           10,115            29,663
                                               ---------------   --------------   ---------------   --------------   ---------------
 Net interest margin                                    7,309            6,947             8,120           10,385            32,761
Provision for estimated credit losses                     750              665               840              745             3,000
                                               ---------------   --------------   ---------------   --------------   ---------------
 Net interest margin after provision
for estimated credit losses                             6,559            6,282             7,280            9,640            29,761
                                               ---------------   --------------   ---------------   --------------   ---------------

Gain on sales of receivables, net                       6,530            1,261             2,754            6,338            16,883
Servicing fees                                          6,068            6,188             6,217            6,139            24,612
Late charges and other fees                             1,505            1,508             1,667            1,657             6,337
                                               ---------------   --------------   ---------------   --------------   ---------------
 Other revenues                                        14,103            8,957            10,638           14,134            47,832
                                               ---------------   --------------   ---------------   --------------   ---------------

Salaries and benefits                                   6,927            6,737             7,354            7,897            28,915
Other general and administrative fees                   4,914            4,993             5,215            5,876            20,998
                                               ---------------   --------------   ---------------   --------------   ---------------
Total operating expenses                               11,841           11,730            12,569           13,773            49,913
                                               ---------------   --------------   ---------------   --------------   ---------------
Earnings before provision
for income taxes                                        8,821            3,509             5,349           10,001            27,680
Provision for income taxes                              3,402            1,361             2,065            3,847            10,675
                                               ---------------   --------------   ---------------   --------------   ---------------
Net earnings                                          $ 5,419          $ 2,148           $ 3,284          $ 6,154          $ 17,005
                                               ===============   ==============   ===============   ==============   ===============

Net earning per common
share (basic and diluted)                             $ 0.41           $ 0.16            $ 0.25           $ 0.46            $ 1.28
                                               ===============   ==============   ===============   ==============   ===============

Basic weighted average common shares
outstanding                                        13,250,660       13,264,379        13,277,632       13,277,632        13,267,493

Diluted weighted average common
shares outstanding                                 13,295,546       13,308,923        13,294,314       13,277,632        13,293,270
</TABLE>


<PAGE>


<TABLE>
<CAPTION>


                                                                           Year ended June 30, 1999
                                                   First            Second            Third            Fourth            Total
                                               ---------------   --------------   ---------------   --------------   ---------------
                                                                (Dollars in thousands, except per share amounts)
<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                             5,632            5,195             4,875            4,761            20,463
                                               ---------------   --------------   ---------------   --------------   ---------------
 Total interest income                                 13,883           12,133            12,962           14,500            53,478
Interest expense                                        7,105            6,496             6,996            7,309            27,906
                                               ---------------   --------------   ---------------   --------------   ---------------
 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 on sales of receivables, net                       2,706            4,087             6,386            5,954            19,133
Servicing fees                                          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
                                               ---------------   --------------   ---------------   --------------   ---------------
Earnings 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 earning 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>




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  2000 Proxy  Statement  for its 2000
Annual Shareholder Meeting (the "2000 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  "Management  Remuneration  and Related  Transactions" in the 2000 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 2000 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 2000 Proxy Statement.

                                     PART IV

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

(a)          The following documents are filed as part of this 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, 2000 and 1999

             Consolidated Statements of Earnings (Loss) for the Years Ended
             June 30, 2000, 1999 and 1998

             Consolidated Statements of Cash Flows for the Years Ended
             June 30, 2000, 1999 and 1998

             Consolidated Statement of Shareholders' Equity for the Years
             Ended June 30, 2000, 1999 and 1998

(b)          Reports on Form 8-K

             Registrant filed no reports on Form 8-K during the quarter ended
             June 30, 2000

(c)          The exhibits filed herewith or incorporated by reference
             herein are set forth  following the signature page which
             appears on page 66.


<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.

4.4         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)


<PAGE>

4.5         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

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

4.7         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)

4.7(a)      Amendment  No. 1 to Note  Purchase  Agreement,  dated       10K 1999
            September 9, 1999                                             4.8(a)

4.7(b)      Amended and Restated  Note Purchase  Agreement  among
            UAFC,  Enterprise  Funding  Corporation,  and Bank of
            America, N.A., dated as of May 12, 2000

4.7(c)      Amendment No. 1 to Amended and Restated Note Purchase
            Agreement dated June 30, 2000 [Diane]

4.8         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)

4.8(a)      Amendment  No. 1 to Security  Agreement,  dated as of       10K 1999
            May 25, 1999                                                  4.9(a)

4.8(b)      Amendment  No. 2 to Security  Agreement,  dated as of       10K 1999
            September 9, 1999.                                            4.9(b)

4.8(c)      Amended  and  Restated   Security   Agreement   among
            Enterprise  Funding  Corporation,  UAFC  Corporation,
            Union   Acceptance   Funding    Corporation,    Union
            Acceptance  Corporation,  MBIA Insurance  Corporation
            and Bank of America, N.A., dated as of May 12, 2000.

4.8(d)      Amendment No. 1 to the Amended and Restated Security
            Agreement dated June 30, 2000 [Diane]

4.8(e)      Amendment  No. 1 to  Amended  and  Restated  Security
            Agreement dated as of August 31, 2000.

4.9         Note  Purchase  Agreement  among UAFC-1  Corporation,
            Enterprise  Funding  Corporation and Bank of America,
            N.A. dated as of May 25, 2000.

4.10        Security  Agreement  among Union  Acceptance  Funding
            Corporation,  Enterprise Funding Corporation,  UAFC-1
            Corporation, Union Acceptance Corporation and Bank of
            America, N.A. dated as of May 25, 2000.

4.10(b)     Amendment No. 1 to Security Agreement dated as July 14,
            2000.

4.11        Loan and Security Agreement among UAFC-2 Corporation,
            Union   Acceptance   Corporation,   Variable  Funding
            Capital  Corporation,  First Securities,  Inc., Asset
            Guaranty  Insurance  Company and First Union National
            Bank dated as of August 1, 2000.


<PAGE>

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.

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
            Alltel   Information,   Inc.  and  Union   Acceptance
            Corporation effective as of October 1, 1998.

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 Savings    S-1,  10.26
            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,  (which assigned its rights  thereunder          10.19
            to  Shadeland  Properties  LP) and  Union  Acceptance
            Corporation dated 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      10K  1999
            Plan effective as of July 1, 1999                              10.19

21          Subsidiaries of the Registrant


<PAGE>

23.1        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

     10K 1999 -- Refers to  Registrant's  Form 10-K for the year  ended June 30,
     1999




<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, 2000                     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:                                 )
                                                             )
         /s/ Rick A. Brown                                   )
         ---------------------------     Treasurer, and Chief)
         Rick A. Brown                   Financial Officer   )
                                                             )
                                                             )
(3)      A Majority of the Board                             )
         of Directors:                                       )
                                                             )
         /s/ John M. Davis               Director            )September 28, 2000
         -----------------                                   )
         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/ Michael G. Stout            Director            )
         --------------------                                )
         Michael G. Stout                                    )
                                                             )
         /s/ Jerry D. Von Deylen         Director            )
         -----------------------                             )
         Jerry D. Von Deylen                                 )
                                                             )
         /s/ Thomas M. West              Director            )
         ------------------                                  )
         Thomas M. West                                      )