ASSOCIATES CORPORATION OF NORTH AMERICA, 10-K, 2000-03-13

ASSOCIATES CORPORATION OF NORTH AMERICA
10-K, 2000-03-13
PERSONAL CREDIT INSTITUTIONS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004

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FORM 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-6154

ASSOCIATES CORPORATION OF NORTH AMERICA
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 74-1494554
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

250 EAST CARPENTER FREEWAY 75062-2729
IRVING, TEXAS (Zip Code)
(Address of principal executive offices)
</TABLE>

Registrant's telephone number, including area code
972-652-4000

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
6% Senior Debentures due June 15, 2001 New York Stock Exchange
8.15% Subordinated Debentures due August 1, 2009 New York Stock Exchange
</TABLE>

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

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

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. -- None

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

As of December 31, 1999, the registrant had 260 shares of Common Stock and
1,000,000 shares of Class B Common Stock issued and outstanding, all of which
were owned directly or indirectly by Associates First Capital Corporation. The
registrant meets the conditions set forth in General Instruction I.(1)(a) and
(b) to Form 10-K and is therefore filing this Form 10-K with the reduced
disclosure format.
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PART I

ITEM 1. BUSINESS.

COMPANY OVERVIEW

Associates Corporation of North America ("Associates" or the "Company"), a
Delaware corporation, is a wholly-owned subsidiary and the principal U.S.-based
operating unit of Associates First Capital Corporation ("First Capital"). The
Company is a leading diversified financial services organization providing
finance, leasing, insurance and related services to individual consumers and
businesses in the United States and Puerto Rico. Associates had 1,520 branch
offices and approximately 18,000 employees at December 31, 1999. The Company's
corporate headquarters are located in Irving, Texas.

On December 31, 1999, First Capital contributed its wholly-owned
subsidiary, Associates World Capital Corporation ("AWCC"), to the Company. The
net assets of AWCC were approximately $268 million on the date of the
contribution. AWCC, through its principal operating subsidiary Associates First
Capital B.V., issues unsecured debt and commercial paper which is used to fund
certain international consumer and commercial finance operations of First
Capital. The consolidated financial statements of the Company have been restated
to reflect the results of this contribution in a manner similar to a
pooling-of-interests method of accounting in accordance with generally accepted
accounting principles. Upon consummation of the contribution, these restated
financial statements became the historical consolidated financial statements of
the Company.

For the year ended December 31, 1999, the Company had total revenues of
$7.5 billion and net earnings of $1.1 billion. At December 31, 1999, aggregate
net finance receivables were $49.8 billion, total assets were $60.2 billion and
stockholders' equity was $9.3 billion.

The Company's finance receivables are geographically dispersed across the
United States and Puerto Rico. At December 31, 1999, 11% of such receivables
were in California, 9% in Texas, 7% in Florida and 5% in North Carolina; no
other individual state had more than 5%.

Although the Company's finance operations are confined to the United States
and Puerto Rico, certain subsidiaries of First Capital, which are also
affiliates of the Company, operate in countries outside the United States,
including Japan, Canada, the United Kingdom, Sweden, Hong Kong, Spain, India,
France, Mexico, Taiwan, Ireland and Costa Rica. The Company provides certain
management and other services to these foreign affiliates. See Note 8 to the
consolidated financial statements. The results of such foreign operations are
not included in the financial or statistical information of the Company
presented herein.

Certain prior year amounts presented herein have been restated to conform
to current year methodology.

AVCO ACQUISITION

On January 6, 1999, First Capital purchased the assets and assumed the
liabilities of Avco Financial Services, Inc. ("Avco"). First Capital
subsequently transferred substantially all of the domestic and Puerto Rico
consumer finance operations of Avco to the Company, which at the time included
approximately $4 billion in finance receivables. Prior to the acquisition, Avco
had the fourth largest U.S. consumer finance branch network with over 2 million
customers and over 4,000 dealer and merchant agreements. Avco's domestic and
Puerto Rico consumer finance product offerings included home equity lending,
retail sales finance and consumer loans. In March 1999, the Company sold 128 of
the consumer branches acquired from Avco to Commercial Credit Corporation, a
subsidiary of Citigroup, Inc. for approximately $640 million.

Avco's headquarters in Costa Mesa, California, were closed in the second
quarter of 1999, as all corporate functions were consolidated with the Company's
headquarters in Irving, Texas. Most of the 400 jobs at Avco's headquarters were
eliminated. The Avco Technology Center, also in Costa Mesa, was closed in the
third quarter of 1999. Avco's Denver Purchasing Center, which had approximately
200 employees and duplicated many of the operations of the Company's credit
processing facility in Salt Lake City, Utah, was closed in the first quarter of
1999.

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Pending Acquisition

In November 1999, First Capital announced an agreement to acquire Arcadia
Financial Ltd. ("Arcadia"). Arcadia is a leading U.S. independent automobile
finance company which services over $5 billion in finance receivables. The
acquisition is expected to close during the first half of 2000.

The Company entered into a continuous asset purchase and sale agreement
under which the Company purchased from Arcadia an aggregate of approximately
$500 million of retail installment sales contracts in November and December
1999. In the event of a termination of the merger agreement between First
Capital and Arcadia, approximately $200 million of these receivables may be
repurchased by Arcadia. Additionally, the Company purchased an aggregate of
approximately $350 million of retail installment sales contracts in January,
February and March 2000.

Subsequent to closing, the Company may begin to purchase automobile finance
receivables originated by Arcadia.

PRODUCT INFORMATION

The Company offers a variety of consumer financing products and services,
including home equity and personal loans, retail sales finance and private label
credit cards and purchases participations in private label credit card
receivables originated by an affiliate. The Company also offers retail and
wholesale financing, and leasing for heavy-duty and medium-duty trucks and truck
trailers, construction, material handling and other industrial and
communications equipment, auto fleet leasing and other products and services to
commercial customers. As part of these finance activities, the Company makes
available to its customers credit-related and other insurance products.

For information on consumer and commercial product revenues see Item 6
"Selected Financial Data."

The Company's consumer finance customers span a wide range of income levels
and credit histories. These customers generally have a history of using credit
from a variety of sources and include homeowners and purchasers of automobiles
and consumer durables (such as furniture, electronics and appliances).

The Company uses credit scoring models to evaluate risk and other factors
in extending credit to its customers. Information considered by the Company in
the credit scoring model includes, among other things, the customer's capacity
to repay (e.g., income, debt ratio, and employment stability), credit history
and available collateral to secure the loan, including home ownership.

The Company distributes its consumer finance and commercial products
through multiple delivery systems, which include branch offices and centralized
operations. Home equity loans account for the largest portion of the Company's
consumer finance portfolio, and are distributed through a branch delivery system
and centralized lending operations. The Company offers automobile financing,
personal installment and revolving loans and purchases consumer retail sales
finance contracts through its branch delivery and centralized lending systems.
In addition, the Company offers private label credit cards through its
subsidiary, Associates Capital Bank, Inc. ("ACB"), and purchases participations
in the private label credit card receivables of an affiliate. The Company,
through certain subsidiaries and third parties, makes available various
credit-related and other insurance products to its consumer finance customers,
including credit life, credit accident and health, accidental death and
dismemberment, involuntary unemployment and personal property insurance. The
Company also provides emergency roadside assistance and auto club services.

Delivery of Consumer and Commercial Products and Services. The Company
distributes its consumer and commercial finance products through branch offices
and centralized lending operations described below:

Consumer Branch System. At December 31, 1999, the Company's consumer
finance branch system consisted of approximately 1,400 geographically
dispersed office locations in the United States and Puerto Rico. These
locations operate under four different nameplates -- Associates Financial
Services, Tran-

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South Financial, First Family Financial Services and Kentucky Finance.
Products distributed include direct origination of home equity loans,
personal loans, automobile finance and retail sales finance.

Commercial Branch System. The Company provides truck and truck trailer
financing, equipment financing and leasing services and related insurance
through 76 branch offices in the United States and Puerto Rico.
Additionally, the Company's sales force regularly contacts truck and truck
trailer dealers and construction equipment dealers to purchase finance
contracts made between those dealers and retailers and the ultimate
end-user. The Company also provides short-term trailer rentals through 23
U.S. branch offices.

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

Additionally, the Company has a centralized warehouse lending
operation, which is conducted through First Collateral Services, Inc.
("FCS"). FCS provides short-term lines of credit secured by residential
mortgages to small and mid-sized mortgage brokers throughout the United
States.

Centralized Commercial Lending, Leasing and Services. The Company
utilizes eight centralized operations to distribute lending, leasing and
fee-based products and services. The Company's auto fleet leasing and fleet
management services operation is directed through Associates Fleet
Services. Additionally, the Company utilizes centralized operations to
provide material handling and other industrial and communications equipment
products, employee relocation services and government guaranteed lending
programs. Insurance products are marketed to commercial finance customers
through the same delivery systems used to market commercial finance
products and services.

The following table shows net finance receivables outstanding attributable
to the various types of financing products (in millions):

NET FINANCE RECEIVABLES OUTSTANDING

<TABLE>
<CAPTION>
AT DECEMBER 31
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1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Home Equity Lending(1)........ $21,800.3 $20,435.8 $17,437.3 $15,435.9 $13,190.4
Truck and Truck Trailer....... 11,832.7 10,038.0 9,011.1 8,077.6 7,415.7
Personal Lending/Retail Sales
Finance..................... 7,905.2 6,566.2 6,920.6 5,786.5 4,752.7
Equipment..................... 5,398.2 4,882.1 4,899.8 4,261.4 3,729.1
Auto Fleet Leasing............ 1,509.5 1,471.4 1,418.9 1,087.4 327.1
Credit Card(2)................ 54.6 1,398.0 7,333.6 5,517.1 4,616.8
Manufactured Housing(3)....... 23.7 20.7 24.1 1,257.6 2,049.3
Warehouse Lending and
Other(4).................... 1,242.5 1,226.3 809.1 355.4 287.2
--------- --------- --------- --------- ---------
Total............... $49,766.7 $46,038.5 $47,854.5 $41,778.9 $36,368.3
========= ========= ========= ========= =========
</TABLE>

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(1) In December 1999 and March 1998, the Company securitized and sold
approximately $2.4 billion and $235 million of home equity lending
receivables, respectively.

(2) In 1999, the Company sold to First Capital, at book value, approximately
$1.7 billion of the Company's participation interest in First Capital's
private label receivables. These receivables were securitized and sold by
First Capital. In April 1998, the Company sold, at book value, approximately
$5.2 billion of the Company's participation interest in the U.S. bankcard
credit card receivables of First Capital.

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(3) Prior to December 31, 1997, the Company participated in First Capital's
manufacturing housing activities. On December 31, 1997, this participation
was terminated and substantially all of manufacturing housing assets and
liabilities were transferred, at book value, to First Capital. In January
2000, First Capital announced its intention to discontinue the manufactured
housing loan origination operations of its Associates Housing Finance unit.

(4) Includes warehouse lending, government guaranteed lending and municipal
finance (prior to 1997, municipal finance was included in truck and truck
trailer and equipment net finance receivables).

During 1999, the average finance charge yield (finance charge revenue
divided by average net receivables) on consumer finance products and commercial
finance products approximated 14% and 9%, respectively.

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

Home equity loans typically have maturities of up to 360 months. Variable
rates were charged on approximately 6% of home equity finance receivables
outstanding at December 31, 1999. Home equity loans may be secured by either
first or second mortgages. At December 31, 1999, approximately 82% of the
aggregate net outstanding balance of home equity lending receivables was secured
by first mortgages.

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

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

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

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

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

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

Personal Lending/Retail Sales Finance. The Company's personal lending
business consists of direct origination and servicing of secured and unsecured
personal loans to individuals. Personal loans are direct consumer loans that are
generally not secured by real estate. Such loans may be secured by existing
personal property (the realizable value of which may be less than the amount of
the loan secured), including automobiles and consumer durables. Personal loan
contract terms range up to 60 months and generally require payments on an
installment basis. In general, personal loans are made for the purpose of debt
consolidation,

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home improvement, education and purchasing automobiles, appliances and other
durable goods. Personal loans are marketed through direct mail, advertising,
referrals and the solicitation of existing retail sales finance customers.

Retail sales finance contracts are generally for the purchase of items such
as household electronics and appliances, automobiles, furniture and home
improvements. These contracts are generally purchased from retailers of such
items, and provide an important source of new customers. The sales finance
relationship often leads to other types of financing for the customer based on
the individual's needs. The terms of retail sales finance contracts differ based
on the amount financed and the credit quality of the customer. Generally, retail
sales finance contracts have terms ranging from 24 to 36 months. Automobile
contracts can be written for up to 60 months.

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

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

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

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

Auto Fleet Leasing. The Company believes it is one of the leading providers
of auto fleet leasing and management services for corporations and
municipalities in the United States with auto and light truck fleets of
generally 100 or more vehicles. Management services, which are provided through
a centralized operation, primarily include vehicle purchasing and sales, license
and title administration, vehicle maintenance management, accident management,
fuel card management, driver expense report processing and other tailored
services to allow companies to fully outsource their fleet management
operations. Auto fleet leasing receivables increased substantially in 1996 and
1997 principally due to the July 1996 acquisition of certain auto leasing assets
of USL Capital, formerly an affiliate and Ford subsidiary, and the acquisition
of the commercial auto fleet leasing operation of AT&T Capital Corporation in
December 1997.

Credit Card Receivables. Credit card receivables consist of participations
in First Capital's private label credit cards which are marketed to the public
directly and through co-operative marketing programs with other companies. The
private label credit card business has principally consisted of customized
revolving credit programs for commercial customers of Amoco, Texaco, Office
Depot, Office Max, Staples, Radio Shack, Gateway and Goodyear.

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

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Warehouse Lending and Other. The Company's other activities principally
include the following:

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

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

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

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

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

Related Insurance Products and Services. The Company, through certain of
its subsidiaries and other third party insurance providers, makes available
various credit-related and non-credit insurance products to its finance
customers. Insurance products offered to the Company's consumer finance
customers include credit life, credit accident and health, accidental death and
dismemberment, involuntary unemployment and personal property insurance.
Insurance products offered to the Company's commercial finance customers include
commercial auto and dealers' open lot physical damage, credit life and motor
truck cargo insurance. In addition to insurance underwriting, the Company also
receives compensation for certain insurance programs underwritten by other
companies. The Company underwrites liability insurance in certain states for its
commercial auto physical damage customers.

The purchase of insurance by a finance customer is optional, with the
exception of physical damage insurance on loan collateral, which is generally
required. The customer can purchase such insurance from the Company or an
alternative carrier chosen by the customer. Premiums for insurance coverage are
generally financed as part of the insured's finance obligation.

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

INSURANCE STATISTICAL DATA(1)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Written Premium
Credit life, accident and other
related.............................. $205.7 $210.7 $252.3 $232.2 $187.9
Physical damage......................... 173.7 194.7 210.3 186.2 180.3
Other casualty and liability............ 60.1 53.4 64.2 51.4 46.4
------ ------ ------ ------ ------
Total........................... $439.5 $458.8 $526.8 $469.8 $414.6
====== ====== ====== ====== ======
Premium Revenue(2)
Credit life, accident and other
related.............................. $183.7 $187.5 $186.6 $170.5 $164.8
Physical damage......................... 145.3 154.1 140.6 143.8 115.7
Other casualty and liability............ 42.3 42.3 42.9 40.5 44.6
------ ------ ------ ------ ------
Total........................... $371.3 $383.9 $370.1 $354.8 $325.1
====== ====== ====== ====== ======
Investment Income......................... $ 94.4 $ 90.5 $ 78.9 $ 68.4 $ 65.3
====== ====== ====== ====== ======
Benefits Paid or Provided................. $148.4 $144.0 $142.1 $142.9 $135.7
====== ====== ====== ====== ======
</TABLE>

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(1) This table does not reflect any direct or indirect expenses that may be
associated with the Company's insurance operations. The Company markets its
insurance products through its consumer and commercial distribution systems
and, accordingly, does not allocate overhead and related expenses to its
insurance operations.

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

ADDITIONAL INFORMATION REGARDING THE COMPANY

Allowance for Losses, Credit Losses and Contractual Delinquency

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

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

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

ALLOWANCE FOR LOSSES TO NET FINANCE RECEIVABLES

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Allowance for Losses Amount (in millions)..... $1,408.4 $1,378.9 $1,661.9 $1,371.4 $1,109.2
Allowance for Losses to Net Finance
Receivables................................. 2.83% 3.00% 3.47% 3.28% 3.05%
Allowance for Losses to Net Credit
Losses(1)................................... 1.61x 1.76x 1.50x 1.72x 1.99x
</TABLE>

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

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

Competition

The markets in which the Company operates are highly competitive. Many
competitors are large companies that have substantial capital and technological
and marketing resources. Some of these competitors are larger than the Company
and may have access to capital at a lower cost than the Company. The Company
believes that the finance charge rate is one of the primary competitive factors
in many of its markets. From time to time, competitors of the Company may seek
to compete aggressively on the basis of pricing, and the Company may lose market
share to the extent it is not willing to match competitor pricing, in order to
maintain interest margins.

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

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

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

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

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

9
<PAGE> 10

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

Regulation

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

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

The Company's consumer finance businesses, including its credit card
business, are generally subject to detailed supervision by governmental
authorities under legislation and regulations which generally require licensing
of the lender, limitations on the amount, duration and charges for various
categories of loans, adequate disclosure of certain contract terms and
limitations on collection practices and creditor remedies. Licenses are
renewable, and may be subject to revocation for violations of such laws and
regulations. In addition, most states have usury laws which limit interest
rates. Federal legislation preempts state interest rate ceilings on first
mortgage loans and state laws which restrict various types of alternative home
equity receivables, except in those states which have specifically opted out of
such preemption.

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

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

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

10
<PAGE> 11

ACB is regulated by the FDIC and the Utah Department of Financial
Institutions in regard to capital adequacy, leverage, loans, deposits, consumer
protection, community reinvestment, the payment of dividends, transactions with
affiliates and other aspects of operations.

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

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

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

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

ITEM 2. PROPERTIES.

The furniture, equipment and other physical property owned by the Company
and its subsidiaries represent less than 1% of total assets at December 31, 1999
and are therefore not significant in relation to total assets. Branch finance
operations are generally conducted on leased premises under operating leases
with terms not normally exceeding five years. At December 31, 1999, the Company
had 1,520 offices in the United States and Puerto Rico.

ITEM 3. LEGAL PROCEEDINGS.

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

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

Legal actions, governmental inquiries and investigations are subject to
many uncertainties, and the outcome of individual matters is not predictable
with assurance. Some of the matters discussed in the foregoing paragraphs could
be decided unfavorably to the Company or the subsidiary involved and could
require the Company or such subsidiary to pay damages or make other expenditures
in amounts or a range of amounts that cannot be estimated at December 31, 1999.
The Company does not reasonably expect, based on

11
<PAGE> 12

its analysis, that any adverse outcome from such matters would have a material
effect on future consolidated financial statements for a particular year,
although such an outcome is possible.

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

Omitted in accordance with General Instruction I.(2)(c) to Form 10-K.

PART II

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

All of the outstanding common stock of the Company is owned by First
Capital and all of the Class B common stock is owned by Associates International
Holdings Corporation ("AIHC"), a wholly-owned subsidiary of First Capital. In
December 1999 and immediately prior to the contribution of AWCC to the Company,
AWCC sold, at book value, its investment in the Company's Class B common stock
to AIHC. There is no market for the Company's common or Class B stock.

Dividends on the common stock and Class B common stock are paid when
declared by the Board of Directors. Dividends of $14.20 per share per annum on
the Class B common stock outstanding must be paid each year before any dividends
may be paid on the common stock. The Company declared dividends of $14.2 million
and $28.4 million on the Class B common stock in 1999 and 1998, respectively.
The Company declared a dividend of $508.4 million and $230.0 million on the
common stock in 1999 and 1998, respectively.

The Company is subject to various limitations under the provisions of its
outstanding debt and revolving credit agreements, including limitations on the
payment of dividends. A restriction contained in certain revolving credit
agreements requires the Company to maintain a minimum tangible net worth, as
defined, of $2.5 billion. At December 31, 1999, the Company's tangible net worth
was $7.6 billion. In addition, ACB and the Company's insurance subsidiaries may
pay dividends and make certain other transfers of funds to the Company only up
to amounts permitted by applicable banking and insurance regulations,
respectively.

12
<PAGE> 13

ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth selected consolidated financial information
regarding the Company's financial position and operating results, which has been
extracted from the Company's consolidated financial statements for the five
years ended December 31, 1999. This information is being provided in lieu of the
information called for by Item 6 of Form 10-K, in accordance with General
Instruction I.(2)(a) to Form 10-K. The information should be read in conjunction
with Item 7 -- "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and
accompanying notes included elsewhere in this report (dollar amounts in
millions):

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31(1)
---------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Results of Operations
Total revenue
Consumer finance products(2)................ $ 5,364.0 $ 5,094.0 $ 5,306.4 $ 4,493.2 $ 3,882.4
Commercial finance products(2).............. 2,164.8 2,062.8 1,844.7 1,728.2 1,502.0
--------- --------- --------- --------- ---------
Total.................................. 7,528.8 7,156.8 7,151.1 6,221.4 5,384.4
Finance charge revenue........................ 5,911.2 5,841.5 6,428.5 5,580.3 4,805.3
Interest expense.............................. 2,948.0 2,862.8 2,550.8 2,209.4 1,979.8
Net interest margin........................... 2,963.2 2,978.7 3,877.7 3,370.9 2,825.5
Operating expenses............................ 1,768.8 1,663.4 1,842.5 1,603.3 1,417.8
Provision for losses.......................... 943.2 949.4 1,195.6 963.4 729.7
Insurance benefits paid....................... 148.4 144.0 142.1 142.9 135.7
Earnings before provision for income taxes.... 1,720.4 1,537.2 1,420.1 1,302.4 1,121.4
Provision for income taxes.................... 615.9 563.0 522.0 481.0 413.3
Net earnings.................................. 1,104.5 974.2 898.1 821.4 708.1
Balance Sheet Data
Finance receivables, net of unearned finance
income...................................... $49,766.7 $46,038.5 $47,854.5 $41,778.9 $36,368.3
Allowance for losses.......................... 1,408.4 1,378.9 1,661.9 1,371.4 1,109.2
Total assets.................................. 60,180.1 59,699.6 50,660.4 42,731.6 37,123.8
Short-term debt (notes payable)............... 14,663.6 18,227.9 18,386.5 15,714.4 13,434.8
Long-term debt................................ 34,838.3 32,805.5 25,235.4 20,916.9 18,311.5
Stockholders' equity.......................... 9,279.3 6,815.1 6,076.0 5,118.0 4,544.0
Selected Data and Ratios
Net interest margin as a percentage of average
net finance receivables..................... 5.97% 6.54% 8.51% 8.53% 8.39%
Return on average assets...................... 1.78 1.77 1.92 2.02 2.06
Return on average equity...................... 12.35 14.99 16.05 16.75 16.80
Earnings to fixed charges..................... 1.58x 1.53x 1.55x 1.59x 1.56x
Total debt to equity(3)....................... 5.3:1 7.1:1 7.1:1 7.1:1 6.9:1
Total debt to tangible equity(3)(4)........... 6.5:1 7.5:1 7.6:1 7.6:1 7.5:1
60+days contractual delinquency
Consumer finance products................... 4.02% 3.30% 3.06% 2.90% 2.24%
Commercial finance products................. 1.20 1.06 1.04 1.12 0.64
Total.................................. 2.86% 2.41% 2.35% 2.29% 1.72%
Net credit losses to average net receivables
Consumer finance products................... 2.63% 2.85% 3.45% 2.82% 2.35%
Commercial finance products................. 0.50 0.34 0.27 0.33 0.19
Total.................................. 1.83% 1.94% 2.43% 2.02% 1.66%
Allowance for losses to net finance
receivables................................. 2.83 3.00 3.47 3.28 3.05
Allowance for losses to net credit
losses(5)................................... 1.61x 1.76x 1.50x 1.72x 1.99x
</TABLE>

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

(1) Amounts restated in a manner similar to a pooling-of-interest to reflect the
contribution of Associates World Capital Corporation to the Company by First
Capital on December 31, 1999. See Note 1 to the consolidated financial
statements.

(2) Includes prorata allocation of investment and other income.

(3) Calculated net of short-term investments.

(4) Tangible equity is defined as stockholders' equity minus goodwill as set
forth in Note 9 to the consolidated financial statements.

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

13
<PAGE> 14

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

GENERAL

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

On December 31, 1999, First Capital contributed its wholly-owned
subsidiary, Associates World Capital Corporation ("AWCC"), to the Company. The
net assets of AWCC were $268 million on the date of the contribution. AWCC,
through its principal operating subsidiary, Associates First Capital B.V.,
issues unsecured debt which is used to fund certain international consumer and
commercial finance operations of First Capital. The consolidated financial
statements of the Company have been restated to reflect the results of this
contribution in a manner similar to a pooling-of-interests method of accounting
in accordance with generally accepted accounting principles. Upon consummation
of the contribution, these restated financial statements became the historical
consolidated financial statements of the Company.

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

RESULTS OF OPERATIONS

Summary of Results of Operations

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

EARNINGS AND RELATED DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Earnings before provision for income taxes........... $1,720.4 $1,537.2 $1,420.1
Net earnings......................................... 1,104.5 974.2 898.1
Return
On average assets.................................. 1.78% 1.77% 1.92%
On average equity.................................. 12.35 14.99 16.05
</TABLE>

The return on average assets and return on average equity declined in 1998
compared to 1997 primarily due to the 1998 $5.2 billion sale, at book value, of
the Company's participation interest in First Capital's bankcard receivables as
described in Note 8 to the consolidated financial statements. The return on
average assets in 1999 was consistent with 1998.

The return on average equity declined in 1999 compared with 1998 primarily
as a result of the increase in equity caused by the 1999 contribution of certain
Avco domestic assets. See Note 3 to the consolidated financial statements.

The principal factors which influenced the changes in the Company's
earnings before provision for income taxes and net earnings in each period are
net interest margin, investment and other income, operating expenses and
provision for loan losses, all of which are described in the sections that
follow.

14
<PAGE> 15

Net Interest Margin

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

NET INTEREST MARGIN

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------------------
1999 1998 1997
--------------------- --------------------- ---------------------
AMOUNT PERCENT(1) AMOUNT PERCENT(1) AMOUNT PERCENT(1)
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Finance Charge
Revenue.............. $5,911.2 11.90% $5,841.5 12.83% $6,428.5 14.11%
Interest Expense....... 2,948.0 5.75 2,862.8 6.03 2,550.8 6.41
-------- -------- --------
Net Interest Margin.... $2,963.2 5.97 $2,978.7 6.54 $3,877.7 8.51
======== ======== ========
</TABLE>

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

(1) Finance charge revenue and net interest margin are expressed as a percent of
average net finance receivables outstanding for the indicated period;
interest expense is expressed as a percent of average debt outstanding for
the indicated period.

The decrease in net interest margin in 1999 compared to 1998 and 1997 was
primarily due to a shift in product mix towards more secured portfolios. Secured
portfolios typically have lower finance charge yields and net margins than
unsecured portfolios. The 1998 margin decrease was principally due to the second
quarter 1998 sale, at book value, of approximately $5.2 billion of the Company's
participation interest in the U.S. bankcard credit card receivables of First
Capital which resulted in a shift in product mix toward more secured portfolios.
The 1999 sale, at book value, of approximately $1.7 billion of the Company's
credit card receivables to First Capital caused a further shift in product mix.
See Note 6 to the consolidated financial statements for more information on
these transactions.

The impact of these shifts in product mix were partially offset by the
decline in interest expense as a percentage of average debt outstanding from
1997 to 1999. This was primarily due to an increase in Japanese Yen denominated
debt which has a lower average borrowing cost than the Company's U.S. dollar
denominated debt. Japanese yen denominated debt is used to fund certain
international finance operations of First Capital.

Finance Charges

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

FINANCE CHARGES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Finance Charge Revenue............................... $5,911.2 $5,841.5 $6,428.5
Yield(1)............................................. 11.90% 12.83% 14.11%
</TABLE>

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

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

Finance charge revenue increased, on a dollar basis, in 1999 compared to
1998 primarily due to the growth in average net finance receivables outstanding.
This was somewhat offset by the shift in the product mix toward more secured
portfolios. Secured portfolios generally have lower yields than unsecured
portfolios. Finance charge revenue decreased in 1998 compared to 1997 due to the
decline in average net finance receivables caused by the receivable sales and
securitization activity during 1998. See Note 6 to the consolidated financial
statements for more information on these transactions.

The principal factors which influence the trend of finance charge yields
are (i) the composition of the finance receivable portfolios (i.e., "product
mix"); (ii) the interest rate environment; and (iii) the level of business
competition. The shift in product mix towards more secured portfolios due to the
aforementioned

15
<PAGE> 16

sales of credit card receivables was the primary cause of the decline in finance
charge yields in 1999 and 1998 compared to 1998 and 1997. A changing interest
rate environment and increased competition also contributed to the decrease.

Interest Expense

Total dollars of interest expense increased in the years ended December 31,
1999 and 1998. In each year the increase was principally due to higher average
outstanding debt as a result of the Company's growth in total assets. The
increase in interest expense in 1999 and 1998 was partially offset by a decline
in the Company's average borrowing rate in each period.

Insurance Premium Revenue

Insurance premium revenue was $371.3 million, $383.9 million and $370.1
million for the years ended December 31, 1999, 1998 and 1997, respectively.
Insurance premium revenue, which is earned over the coverage term, decreased
$12.6 million (3.3%) in 1999, and increased $13.8 million (3.7%) in 1998 and
$15.3 million (4.3%) in 1997. The insurance operation is engaged in underwriting
credit-related and other specialized insurance products for finance customers.
Therefore, insurance sales, and resulting revenue, are largely dependent on
business activities and volume.

Investment and Other Income

Investment and other income is derived from income on notes due from
related parties, gains and losses on the Company's investments in debt and
equity securities, fee-based services, such as employee relocation services,
emergency roadside assistance and auto club services, servicing related income
and from royalty, guarantee and service fees the Company receives from its
foreign affiliates. Investment and other income for the years ended December 31,
1999, 1998 and 1997 was $1,246.3 million, $931.4 million and $352.5 million,
respectively. The increase in investment and other income in 1999 compared to
1998 was principally due to an increase in income on notes receivable from
related parties and servicing fees and a $30 million net gain recorded on the
home equity securitization and sales transactions described in Note 6 to the
consolidated financial statements. The increase in 1998 compared to 1997 was
principally due to increased earnings on notes receivable from related parties.

Operating Expenses

Operating expenses, which do not include interest expense, were as follows
(dollars in millions):

OPERATING EXPENSES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
AMOUNT % ANR AMOUNT % ANR AMOUNT % ANR
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaries and Benefits......... $ 986.7 1.99% $ 919.5 2.02% $ 961.0 2.11%
Data Processing............... 160.2 0.32 141.0 0.31 145.1 0.32
Occupancy..................... 128.2 0.26 113.5 0.24 111.8 0.24
Other......................... 493.7 0.99 489.4 1.08 624.6 1.37
-------- ---- -------- ---- -------- ----
Total............... $1,768.8 3.56% $1,663.4 3.65% $1,842.5 4.04%
======== ==== ======== ==== ======== ====
Efficiency Ratio.............. 39.9% 40.1% 41.3%
==== ==== ====
</TABLE>

Operating expense, on a dollar basis, decreased in 1998 compared to 1997
primarily due to the $5.2 billion sale of the Company's participation interest
in First Capital's U.S. bankcard credit card receivables. The operating expense,
on a dollar basis, increased in 1999 compared to 1998, primarily as a result of
the increase in outstanding receivables and additional intangible amortization
expense from the Avco acquisition. This was somewhat offset by the sale of $1.7
billion of the Company's participation in First Capital private label credit
card receivables in 1999.

16
<PAGE> 17

As a percentage of average net receivables ("ANR"), total operating
expenses decreased from 1997 to 1999, primarily as a result of the previously
mentioned reduction in the Company's private label credit card receivable
portfolio participation. Credit card receivable portfolios typically have higher
operating expense levels than most of the Company's other receivable portfolios.

In addition, the Company's total operating efficiency, as measured by the
ratio of total operating expenses to revenues net of interest expense and
insurance benefits paid or provided (the "Efficiency Ratio") remained consistent
from 1998 to 1999 and improved from 1997 to 1998.

Allowance for Losses, Losses and Asset Quality

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

17
<PAGE> 18

The balance of the allowance for losses was principally influenced by the
provision for losses and by net credit loss experience. Additions to the
allowance, due to growth in finance receivables, were generally charged to the
provision for losses at the time the growth occurred. Losses were charged to the
allowance as incurred and recoveries on losses previously charged to the
allowance were credited to the allowance at the time the recovery was collected.
The components of the changes in the allowance for losses were as follows
(dollars in millions):

COMPONENTS OF CHANGES IN THE ALLOWANCE FOR LOSSES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance at Beginning of Period...................... $ 1,378.9 $ 1,661.9 $ 1,371.4
Provision for losses.............................. 943.2 949.4 1,195.6

Recoveries on receivables charged off............. 154.4 150.5 190.5
Losses sustained.................................. (1,062.4) (1,032.5) (1,298.3)
--------- --------- ---------
Net credit loss experience................ (908.0) (882.0) (1,107.8)
--------- --------- ---------
Reserves of receivables sold(1)................... (153.4) (359.4) --
Reserves of acquired businesses and other......... 147.7 9.0 202.7
--------- --------- ---------
Balance at End of Period............................ $ 1,408.4 $ 1,378.9 $ 1,661.9
========= ========= =========
Allowance for Losses to Net Finance Receivables..... 2.83% 3.00% 3.47%
Loss Coverage Ratio(2).............................. 1.61x 1.76x 1.50x
</TABLE>

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

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

The allowance for losses as a percent of net finance receivables declined
from 1997. The decline in 1999 and 1998 is principally due to the 1999 sale of
approximately $1.7 billion of private label credit card receivables and the 1998
sale of approximately $5.2 billion of U.S. bankcard credit card receivables.
These sales caused a shift in product mix towards more secured portfolios.
Secured portfolios generally have lower losses and therefore lower allowance
requirements than unsecured portfolios. Management believes the allowance for
losses at December 31, 1999 is sufficient to provide adequate protection against
losses in its portfolios. Although the allowance for losses on finance
receivables reflected in the Company's consolidated balance sheet at December
31, 1999 is considered adequate by the Company's management, there can be no
assurance that this allowance will prove to be adequate over time to cover
ultimate losses in connection with the Company's finance receivables. This
allowance may prove to be inadequate due to unanticipated adverse changes in the
economy or discrete events adversely affecting specific customers or industries.
The Company's results of operations and financial condition could be materially
adversely affected to the extent that the Company's allowance is insufficient to
cover such changes or events.

The Company's provision for losses declined to $943.2 million for the year
ended December 31, 1999 from $949.4 million and $1.2 billion for the years ended
December 31, 1998 and 1997, respectively. This decline was primarily due to a
decrease in the Company's total net credit losses as a percentage of average net
finance receivables ("Loss Ratio") to 1.83% at December 31, 1999 from 1.94% and
2.43% at December 31, 1998 and 1997, respectively. A shift in product mix
towards more secured portfolios was the primary cause of the lower Loss Ratio as
secured portfolios generally have lower loss rates than unsecured portfolios.

18
<PAGE> 19

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

CONTRACTUAL DELINQUENCY AND NET CREDIT LOSSES

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
60+ Days Contractual Delinquency
Consumer finance products............................ 4.02% 3.30% 3.06%
Commercial finance products.......................... 1.20 1.06 1.04
Total........................................ 2.86% 2.41% 2.35%
Total dollars delinquent..................... $1,537.6 $1,195.6 $1,211.0
Net Credit Losses to ANR
Consumer finance products............................ 2.63% 2.85% 3.45%
Commercial finance products.......................... 0.50 0.34 0.27
Total........................................ 1.83% 1.94% 2.43%
Total dollars................................ $ 908.0 $ 882.0 $1,107.8
</TABLE>

The increase in consumer delinquency levels from 1997 to 1999 is primarily
due to higher delinquencies levels in the home equity portfolio.

The decrease in net credit loss rates in 1999 and 1998 reflects the shift
in product mix towards more secured portfolios caused by the aforementioned
credit card sale in the second quarter of 1998. Secured portfolios typically
have lower loss rates than unsecured portfolios. Commercial delinquency and net
credit loss levels increased in 1999 and 1998 primarily due to higher losses in
the truck and truck trailer receivables portfolios.

Insurance Benefits Paid or Provided

Insurance benefits paid or provided were $148.4 million in 1999, $144.0
million in 1998 and $142.1 million in 1997. Benefits paid or provided are
influenced by the amount of insurance in force, underwriting standards, loss
experience, term of coverage and product mix.

Provision for Income Taxes

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

PROVISION FOR INCOME TAXES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------
1999 1998 1997
------------------ ------------------ ------------------
EFFECTIVE EFFECTIVE EFFECTIVE
AMOUNT TAX RATE AMOUNT TAX RATE AMOUNT TAX RATE
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. statutory rate................. $602.1 35.0% $538.0 35.0% $497.0 35.0%
State income taxes................ 25.6 1.5 20.7 1.4 22.3 1.6
Non-deductible goodwill........... 6.9 0.4 6.1 0.4 6.0 0.4
Other............................. (18.7) (1.1) (1.8) (0.2) (3.3) (0.2)
------ ---- ------ ---- ------ ----
Provision for income taxes.......... $615.9 35.8% $563.0 36.6% $522.0 36.8%
====== ==== ====== ==== ====== ====
</TABLE>

The decline in the effective tax rate in 1999 compared to 1998 and 1997 is
primarily due to an increase in tax exempt investment income.

19
<PAGE> 20

FINANCIAL CONDITION

Net Finance Receivables

The net changes in net finance receivables in 1999 and 1998 were as
follows:

CHANGE IN NET FINANCE RECEIVABLES

<TABLE>
<CAPTION>
AT DECEMBER 31
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Net finance receivables..................................... $49,766.7 $46,038.5
Increase (decrease)....................................... 3,728.2 (1,816.0)
% change.................................................. 8.1% (3.8)%
</TABLE>

The increase in net finance receivables in 1999 compared to 1998 was
primarily due to the acquisition of Avco Financial Services, Inc. in January
1999 as well as internal growth. The increase was offset somewhat by the sales
of approximately $1.7 billion in private label credit card receivables and 128
Avco branches, comprising approximately $520 million in net finance receivables.
See Notes 3 and 6 to the consolidated financial statement for more information
on these transactions.

Debt

Total outstanding debt was $49.5 billion and $51.0 billion at December 31,
1999 and 1998, respectively. Such amounts of debt reflect a decrease of $1.5
billion (3.0%) in 1999. The decrease in 1999 was primarily a result of a
reduction in the level of funding provided to the Company's affiliates and the
fourth quarter 1999 home equity portfolio securitization. At December 31, 1999
and 1998, short-term debt, including the current portion of long-term debt, as a
percent of total debt was 43% and 49%, respectively. The current portion of
long-term debt at December 31, 1999 and 1998 was $6.7 billion and $6.6 billion,
respectively.

Stockholders' Equity

Stockholders' equity increased to $9.3 billion in 1999 from $6.8 billion in
1998. On December 31, 1999, First Capital contributed AWCC to the Company in a
transaction that was accounted for in a manner similar to a pooling of
interests. Accordingly, the consolidated statement of changes in stockholders'
equity has been restated in prior years to reflect the transaction as if it
occurred on the earliest date presented. In each year, the increase was
principally the result of net earnings during the period and a $1.9 billion
capital contribution of certain Avco domestic assets in 1999 (see Note 3 to the
consolidated financial statements) partially offset by dividends. Stockholders'
equity was also adjusted in 1999 and 1998 by net unrealized losses of $59.5
million and $14.5 million, respectively, related to investments in
available-for-sale securities, and by unrealized gains of $41.8 million and $9.4
million in 1999 and 1998, respectively, related to foreign exchange adjustments.

LIQUIDITY/CAPITAL RESOURCES

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

The Company's principal sources of cash are proceeds from the issuance of
short-term and long-term debt and cash provided from the Company's operations
and asset securitizations. While First Capital has made periodic capital
contributions to the Company in the past, no assurance can be made with respect
to future capital contributions by First Capital to the Company. Nevertheless,
management believes that the Company has available sufficient liquidity, from a
combination of cash provided from operations, external borrowings and asset
securitizations to support its operations.

20
<PAGE> 21

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

At December 31, 1999, the Company had short and long-term debt outstanding
of $14.7 billion and $34.8 billion, respectively. Short-term debt principally
consists of commercial paper issued by the Company and represents the Company's
primary source of short-term liquidity. Long-term debt principally consists of
senior unsecured long-term debt issued publicly and privately by the Company in
the United States and abroad. During the years ended 1999 and 1998, the Company
raised debt aggregating $8.7 billion and $11.8 billion, respectively, through
public and private offerings.

Substantial additional liquidity is available to the Company's operations
through established credit facilities in support of its net commercial paper
program. Such credit facilities provide a means of refinancing its maturing
short-term obligations as needed. At December 31, 1999, these credit facilities
were allocated to provide 75% coverage of the Company's recurring commercial
paper borrowings. In addition, the Company has access to other sources of
liquidity such as asset securitizations. Up to this point, the Company's
securitization transactions have been limited to the home equity asset class.

The Company has entered into various support agreements on behalf of its
foreign affiliates. Under these support agreements, the Company has either
guaranteed specific issues such as an affiliates' debt or agreed to supervise
operations in a responsible manner and to provide additional support on the
lender's reasonable request. See Notes 2, 16 and 17 to the Company's
consolidated financial statements for a further description of these borrowings
and currency hedging activities.

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

YEAR 2000 COMPLIANCE

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

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

The transition from 1999 to 2000 was closely monitored to assure any
unforeseen problems were quickly resolved. No significant Year 2000 Compliance
related problems were identified. The Company will continue monitoring through
the first quarter of 2000 to assure any problem that may occur is quickly
identified and resolved.

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

21
<PAGE> 22

service provider, utility or other entity may have a material adverse financial
or operational effect on the Company. The Company has not yet experienced any
such failure.

From the inception of the Year 2000 readiness project through December 31,
1999 the Company incurred and expensed approximately $27 million for incremental
costs primarily related to third party vendors, outside contractors and
additional staff dedicated to the Year 2000 readiness project. The Company
expects that it will incur additional future incremental costs related to the
project of approximately $2 million. These incremental costs do not include
existing resources allocated to the project effort. The Company's Year 2000
project is expected to continue through March 2000. The first quarter of the
Year 2000 effort is specifically designed to monitor all Year 2000 transition
activities.

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

The following is a summary of the factors the Company believes important
and that could cause actual results to differ from the Company's expectations.
The Company is publishing these factors pursuant to the 1995 Act. Such factors
should not be construed as exhaustive or as an admission regarding the adequacy
of disclosure made by the Company prior to the effective date of the 1995 Act.
Readers should understand that many factors govern whether any forward-looking
statement will be or can be achieved. Any one of those factors could cause
actual results to differ materially from those projected. No assurance is or can
be given that any important factor set forth below will be realized in a manner
so as to allow the Company to achieve the desired or projected results. The
words "believe," "expect," "anticipate," "intend," "aim," "will" and similar
words identify forward-looking statements. The Company cautions readers that the
following important factors, among others, could affect the Company's actual
results and could cause the Company's actual consolidated results to differ
materially from those expressed in any forward-looking statements made by or on
behalf of the Company.

- Rapid changes in interest rates, limiting the Company's ability to
generate new finance receivables and decreasing the Company's net
interest margins.

22
<PAGE> 23

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

- Rapid changes in receivable prepayment rates.

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

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

- Changes in governmental regulation affecting the Company's ability to
conduct business, the manner in which it conducts business or the level
of product pricing.

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

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

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

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

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

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

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

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

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

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

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

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

The risk management discussion and the estimated amounts generated from the
analysis that follows are forward-looking statements of market risk assuming
certain adverse market conditions occur. Actual results in the future may differ
materially from these projected results due to changes in the Company's product
and debt mix and developments in the global financial markets. The analytical
methods used by the Company to assess and mitigate these risks should not be
considered projections of future events or operating performance.

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

23
<PAGE> 24

Interest Rate Risk

Interest rate risk is measured and controlled through the use of static gap
analysis and financial forecasting, both of which incorporate assumptions about
future events. The Company's gap position is defined as the sum of floating rate
asset balances and scheduled principal payments on fixed rate assets, less the
sum of floating rate liability balances and scheduled principal payments on
fixed rate liabilities. The Company measures its gap position at various time
horizons, ranging from three months to five years and includes off-balance sheet
income exposures in this measurement. At December 31, 1999, 1998 and 1997 the
one-year gap was a positive 11%, 9%, and 8%, respectively. A positive one-year
gap indicates that a greater percentage of assets than liabilities will reprice
within a one-year time frame.

The Company also uses a simulation model to evaluate the impact on earnings
under a variety of scenarios. These scenarios may include a change in the
absolute level of interest rates, prepayments, interest rate spread
relationships, loan rates and floors, state and national usury ceilings, and
changes in the volumes and rates of various asset and liability categories. For
an immediate 1% increase in rates, projected annual after-tax earnings on assets
would have increased by approximately 2%, 2%, and less than 1% at December 31,
1999, 1998, and 1997 respectively. An immediate 1% rise in interest rates is a
hypothetical rate scenario, used to calibrate risk, and does not currently
represent the Company's view of future market developments.

For purposes of the United States Securities and Exchange Commission
disclosure requirements, the Company has also performed an enterprise-wide value
at risk ("VAR") analysis of the Company's on and off-balance sheet financial
assets and liabilities and their exposure to changes in interest rates. The VAR
was calculated using an historical simulation risk model to calculate changes in
earnings due to changes in interest rates on all significant on- and off-balance
sheet exposures on a managed basis. The simulation generates monthly interest
rate scenarios over a forecast horizon of 12 months. The VAR analysis calculates
the potential after-tax earnings at risk associated from changes in interest
rates, with a 95% confidence level (as required under applicable United States
Securities and Exchange Commission rules) over this forward 12-month period. The
model assumes interest rates are normally distributed and draws volatilities
from various market sources. At December 31, 1999, 1998, and 1997 interest rate
movements would affect annual after-tax earnings by approximately $8 million,
$10 million and $10 million, respectively, as calculated under the VAR
methodology. This interest rate VAR averaged $10 million in 1999 and $15 million
in 1998.

Foreign Currency Risk

Following the AWCC contribution described in Note 1 to the consolidated
financial statements, the Company is exposed to foreign currency risk from
changes in the value of underlying assets and liabilities of its non-United
States Dollar denominated foreign investments. The Company has employed a
variety of risk management tools such as borrowing and lending in local
currencies and converting offshore funding to U.S. Dollars. The Company has also
performed a VAR analysis on the Company's exposure to changes in foreign
currency exchange rates. The VAR is calculated using an historical simulation
model to calculate changes in earnings from foreign currency risk on all
significant on and off-balance sheet exposures. The simulation generates foreign
currency exchange rate scenarios and volatilities over a 12-month horizon and
calculates the potential after-tax earnings at risk associated with foreign
currency fluctuations, with a 95% confidence level (as required under applicable
United States Securities and Exchange Commission rules). The model assumes
currency prices are normally distributed and draws volatility and cross currency
correlation data from JP Morgan Risk Metrics(TM) for the Company's only material
currency exposure, the Japanese Yen. At December 31, 1999 and 1998 currency
volatility would affect annual after-tax earnings by approximately $39 million
and $28 million, respectively, as calculated under the VAR methodology. This
currency rate VAR averaged $25 million in 1999 and $19 million in 1998. There
was no significant foreign currency risk in 1997 due to limited foreign currency
transactions.

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

24
<PAGE> 25

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Associates Corporation of North America

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

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

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

/s/ ERNST & YOUNG LLP

Dallas, Texas
February 4, 2000

25
<PAGE> 26

ASSOCIATES CORPORATION OF NORTH AMERICA

CONSOLIDATED STATEMENT OF EARNINGS
(IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUE
Finance charges........................................... $5,911.2 $5,841.5 $6,428.5
Insurance premiums........................................ 371.3 383.9 370.1
Investment and other income............................... 1,246.3 931.4 352.5
-------- -------- --------
7,528.8 7,156.8 7,151.1
EXPENSES
Interest expense.......................................... 2,948.0 2,862.8 2,550.8
Operating expenses........................................ 1,768.8 1,663.4 1,842.5
Provision for losses on finance receivables............... 943.2 949.4 1,195.6
Insurance benefits paid or provided....................... 148.4 144.0 142.1
-------- -------- --------
5,808.4 5,619.6 5,731.0
-------- -------- --------
EARNINGS BEFORE PROVISION FOR INCOME TAXES.................. 1,720.4 1,537.2 1,420.1
PROVISION FOR INCOME TAXES.................................. 615.9 563.0 522.0
-------- -------- --------
NET EARNINGS................................................ $1,104.5 $ 974.2 $ 898.1
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

26
<PAGE> 27

ASSOCIATES CORPORATION OF NORTH AMERICA

CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH AND CASH EQUIVALENTS................................... $ 333.3 $ 2,720.4
INVESTMENTS IN DEBT AND EQUITY SECURITIES................... 2,666.9 1,865.9
FINANCE RECEIVABLES, net of unearned finance income,
allowance for credit losses and insurance policy and
claims reserves........................................... 47,517.5 43,895.8
NOTES RECEIVABLE FROM RELATED PARTIES....................... 5,975.4 9,564.8
OTHER ASSETS................................................ 3,687.0 1,652.7
--------- ---------
Total assets...................................... $60,180.1 $59,699.6
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE
Commercial Paper.......................................... $13,672.9 $17,157.2
Bank Loans................................................ 990.7 1,070.7
ACCOUNTS PAYABLE AND ACCRUALS............................... 1,398.9 1,851.1
LONG-TERM DEBT
Senior Notes.............................................. 34,413.1 32,380.2
Subordinated and Capital Notes............................ 425.2 425.3
--------- ---------
34,838.3 32,805.5
STOCKHOLDERS' EQUITY
Class B Common Stock, $100 par value, 2,000,000 shares
authorized, 1,000,000 shares issued and outstanding.... 100.0 100.0
Common Stock, no par value, 5,000 shares authorized, 260
shares issued and outstanding, at stated value......... 47.0 47.0
Paid-in Capital........................................... 3,587.1 1,701.3
Retained Earnings......................................... 5,563.6 4,967.5
Accumulated Other Comprehensive Loss...................... (18.4) (0.7)
--------- ---------
Total stockholders' equity........................ 9,279.3 6,815.1
--------- ---------
Total liabilities and stockholders' equity........ $60,180.1 $59,699.6
========= =========
</TABLE>

See notes to consolidated financial statements.

27
<PAGE> 28

ASSOCIATES CORPORATION OF NORTH AMERICA

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN MILLIONS)

ACCUMULATED
OTHER
COMPREHENSIVE TOTAL
COMMON PAID-IN RETAINED INCOME STOCKHOLDERS'
STOCK CAPITAL EARNINGS (LOSS) EQUITY
------ -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1996......................... $147.0 $1,646.2 $3,325.2 $ (0.4) $5,118.0
Comprehensive income
Net earnings......................... 898.1 898.1
Other comprehensive income, net of
tax................................ 4.8 4.8
-------- ------ --------
Total comprehensive income...... 898.1 4.8 902.9
Contributions from Parent............... 55.1 55.1
------ -------- -------- ------ --------
DECEMBER 31, 1997......................... 147.0 1,701.3 4,223.3 4.4 6,076.0
Comprehensive income
Net earnings......................... 974.2 974.2
Other comprehensive loss, net of
tax................................ (5.1) (5.1)
-------- ------ --------
Total comprehensive income...... 974.2 (5.1) 969.1
Cash dividends on common stock.......... (230.0) (230.0)
------ -------- -------- ------ --------
DECEMBER 31, 1998......................... 147.0 1,701.3 4,967.5 (0.7) 6,815.1
Comprehensive income
Net earnings......................... 1,104.5 1,104.5
Other comprehensive loss, net of
tax................................ (17.7) (17.7)
-------- ------ --------
Total comprehensive income...... 1,104.5 (17.7) 1,086.8
Contribution from parent................ 1,885.8 1,885.8
Cash dividends on common stock.......... (508.4) (508.4)
------ -------- -------- ------ --------
DECEMBER 31, 1999......................... $147.0 $3,587.1 $5,563.6 $(18.4) $9,279.3
====== ======== ======== ====== ========
</TABLE>

See notes to consolidated financial statements.

28
<PAGE> 29

ASSOCIATES CORPORATION OF NORTH AMERICA

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net earnings........................................... $ 1,104.5 $ 974.2 $ 898.1
Adjustments to reconcile net earnings for non-cash and
other operating activities:
Provision for losses on finance receivables....... 943.2 949.4 1,195.6
Depreciation and amortization..................... 258.5 239.2 268.2
Increase in insurance policy and claims
reserves....................................... 77.0 1.3 69.4
Deferred income taxes............................. 51.1 60.2 17.5
Purchases of trading securities available for
sale, net...................................... -- -- (117.7)
(Decrease) increase in accounts payable and
accruals....................................... (632.8) 836.2 (102.6)
Net gain on sale of assets and other.............. (36.5) (3.6) (3.1)
---------- ---------- ----------
Net cash provided from operating activities.... 1,765.0 3,056.9 2,225.4
---------- ---------- ----------
Cash Flows from Investing Activities
Finance receivables originated or purchased............ (43,540.6) (39,433.0) (42,796.6)
Finance receivables liquidated......................... 39,615.0 39,652.8 35,890.9
Finance receivables sold............................... 2,610.2 234.9 --
Purchases of available-for-sale securities............. (1,042.8) (2,246.9) (253.3)
Sales and maturities of available-for-sale
securities.......................................... 601.5 1,514.2 271.9
Increase in notes receivable from related parties and
other assets........................................ (397.3) (7,644.2) (2,091.5)
---------- ---------- ----------
Net cash used for investing activities......... (2,154.0) (7,922.2) (8,978.6)
---------- ---------- ----------
Cash Flows from Financing Activities
Issuance of long-term debt............................. 8,672.8 11,760.7 7,366.7
Retirement of long-term debt........................... (6,640.0) (4,190.5) (3,085.5)
(Decrease) increase in notes payable................... (3,564.3) (158.7) 2,485.0
Cash dividends......................................... (508.4) (230.0) --
Cash contributions from parent......................... -- -- 3.4
---------- ---------- ----------
Net cash (used for) provided from financing
activities................................... (2,039.9) 7,181.5 6,769.6
---------- ---------- ----------
Effect of foreign currency translation adjustment on
cash................................................... 41.8 9.4 --
---------- ---------- ----------
(Decrease) increase in cash and cash equivalents......... (2,387.1) 2,325.6 16.4
Cash and cash equivalents at beginning of year........... 2,720.4 394.8 378.4
---------- ---------- ----------
Cash and cash equivalents at end of year................. $ 333.3 $ 2,720.4 $ 394.8
========== ========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest............................................ $ 2,968.3 $ 2,895.5 $ 2,512.2
Income taxes........................................ 580.6 484.1 558.2
Noncash investing activities:
Contribution of Associates World Capital
Corporation....................................... 268.3 -- --
Contribution and purchase of Avco Financial
Services, Inc. assets............................. 6,153.1 -- --
Sale of finance receivables participation interests
to First Capital.................................. 1,732.6 5,196.7 --
</TABLE>

See notes to consolidated financial statements.

29
<PAGE> 30

ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY

Associates Corporation of North America ("Associates" or the "Company"), a
Delaware corporation, is a wholly-owned subsidiary and the principal U.S.-based
operating unit of Associates First Capital Corporation ("First Capital"). The
Company is a leading diversified financial services organization providing
finance, leasing, insurance and related services to individual consumers and
businesses in the United States and Puerto Rico. All of the outstanding common
stock of Associates is owned by First Capital. All shares of Class B common
stock are owned by Associates International Holding Corporation, a wholly-owned
subsidiary of First Capital. Class B common stock is redeemable only at the
option of the issuer.

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

On December 31, 1999, First Capital contributed its wholly-owned
subsidiary, Associates World Capital Corporation ("AWCC"), to the Company. The
net assets of AWCC were $268 million on the date of the contribution. AWCC,
through its principal operating subsidiary Associates First Capital B.V., issues
unsecured debt which is used to fund certain international consumer and
commercial finance operations of First Capital. AWCC also has a participation
interest in the earnings of an affiliate. The consolidated financial statements
of the Company have been restated to reflect the results of this contribution in
a manner similar to a pooling of interests. Upon consummation of the
contribution, these consolidated financial statements became the historical
consolidated financial statements of the Company. AWCC's contribution to the
Company increased revenues by $253.8 million and $57.5 million in 1999 and 1998,
respectively, and increased net income by $110.0 million and $22.2 million in
1999 and 1998, respectively. The contribution had no effect on revenues and
decreased net income by $4.5 million in 1997.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies:

Basis of Presentation and Consolidation

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

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

Revenue Recognition

Finance charges on receivables are recognized as revenue using the interest
(actuarial) method. Premiums and discounts on purchased receivables are
considered as yield adjustments. The unamortized balance is included in finance
receivables and the associated amortization is included in finance charge
revenue. Finance charge accruals are generally suspended on accounts when they
become 60 days contractually delinquent. The accrual is resumed when the loan
becomes contractually current. At
30
<PAGE> 31
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1999 and 1998, net finance receivables on which revenue was not
accrued approximated $1.4 billion and $1.1 billion, respectively. The interest
income that would have been recorded in 1999 and 1998 if these nonaccruing
receivables had been current was approximately $38 million and $24 million,
respectively.

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

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

Advertising Costs

Advertising costs are expensed as incurred. The advertising costs for 1999,
1998 and 1997 were $72.6 million, $95.2 million and $124.4 million,
respectively.

Receivables Sold with Servicing Retained

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

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

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

The securitization related securities are accounted for under Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". Because such assets can be contractually prepaid or
otherwise settled in such a way that the holder would not recover all of its
recorded investment, the assets are classified as available-for-sale investments
and measured at fair value. Any
31
<PAGE> 32
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

unrealized holdings gains or losses are reported, net of income tax effects, as
a component of accumulated other comprehensive income in the consolidated
balance sheet until realized. On a quarterly basis, the Company assesses the
carrying value of its securitization related securities for impairment. If a
decline in fair value is deemed other than temporary, the securities are
adjusted to their fair value through a charge to operations.

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

Finance Receivables

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

Allowance for Losses on Finance Receivables

Although the allowance for losses on finance receivables reflected in the
Company's consolidated balance sheet at December 31, 1999 is considered adequate
by the Company's management, there can be no assurance that this allowance will
prove to be adequate over time to cover ultimate losses in connection with the
Company's finance receivables. This allowance may prove to be inadequate due to
unanticipated adverse changes in the economy or discrete events adversely
affecting specific customers or industries. The Company's results of operations
and financial condition could be materially adversely affected to the extent
that the Company's allowance is insufficient to cover such changes or events.
32
<PAGE> 33
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Insurance Reserves

The reserves for future benefits and refunds upon cancellation of credit
life and health insurance and property and casualty insurance are provided for
in the unearned premium reserve for each class of insurance. In addition,
reserves for reported claims on credit accident and health insurance are
established based on standard morbidity tables used in the insurance business
for such purposes. Claim reserves for reported property and casualty insurance
claims are based on estimates of costs and expenses to settle each claim.
Additional amounts of reserves, based on prior experience and insurance in
force, are provided for each class of insurance for claims which have been
incurred but not reported as of the balance sheet date.

Intangible Assets

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

Foreign Currency

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

Income Taxes

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

Cash and Cash Equivalents

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

Segment Reporting

In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131 ("SFAS 131") Disclosures about Segments of an Enterprise and Related
Information. SFAS 131 supersedes Statement of Financial Accounting Standards No.
14, Financial Reporting for Segments of a Business Enterprise, replacing the
"industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments. Pursuant to the provisions of SFAS 131, no
segment disclosures are required because the Company is not managed on a segment
basis.

33
<PAGE> 34
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Derivative Financial Instruments

The Company uses derivative financial instruments for the purpose of
hedging exposures as part of its risk management program and generally holds all
derivatives for purposes other than trading. Deferral (hedge) accounting is
applied only if the derivative reduces the risk of the underlying hedged item
and is designated at inception as a hedge with respect to the underlying hedged
item. Additionally, the derivative must result in cash flows that are expected
to be inversely correlated to those of the underlying hedged item. Such
instruments to date have been limited to currency swap, interest rate swap and
treasury lock agreements and treasury futures and option contracts. See Note 16
to the consolidated financial statements for additional information related to
derivative financial instruments.

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

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

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

Recent Accounting Pronouncements

NOTE 3 -- SIGNIFICANT 1999 TRANSACTIONS

On January 6, 1999, First Capital purchased the assets and assumed the
liabilities of Avco Financial Services, Inc. ("Avco"). During the first quarter
of 1999, First Capital transferred the domestic and Puerto Rico consumer finance
operations of Avco to the Company. This transfer was in the form of a $1.9
billion capital contribution of certain Avco domestic assets, and the $4.3
billion sale, at book value, of substantially all of Avco's remaining domestic
and Puerto Rico net assets to the Company. The sale was financed through a
reduction on the Company's outstanding notes receivable from First Capital.
Included in these transactions, net of the assets subsequently sold as described
below, was approximately $3.6 billion of consumer net finance receivables, $1.5
billion of goodwill and $411 million of other intangible assets.

In March 1999, the Company sold 128 consumer finance branches, acquired
from Avco, for approximately $640 million to Commercial Credit Corporation, a
subsidiary of Citigroup, Inc. The operating results of these branches from the
date they were transferred to the Company from First Capital (January 31, 1999)
through the date of sale were included in investment and other income and were
not significant.

The unaudited pro forma combined revenues and net earnings of the Company
were approximately $7.7 billion and $1.0 billion, for the year-ended December
31, 1998. Pro forma results for 1999 are not

34
<PAGE> 35
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

Pending Acquisition

The Company entered into a continuous asset purchase and sale agreement
under which the Company purchased from Arcadia approximately $500 million of
retail installment sales contracts in November and December 1999. In the event
of a termination of the merger agreement between First Capital and Arcadia,
approximately $200 million of these receivables may be repurchased by Arcadia.
Additionally, the Company purchased approximately $350 million of retail
installment sales contracts in January, February and March 2000.

NOTE 4 -- COMPREHENSIVE INCOME (LOSS)

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

<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Foreign currency translation adjustments.................... $ 51.2 $ 9.4 $ --
Net unrealized (loss) gain on available-for-sale
securities................................................ (69.6) (10.1) 4.4
------ ------ -----
Accumulated other comprehensive income (loss)............. $(18.4) $ (0.7) $ 4.4
====== ====== =====
</TABLE>

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-----------------------------------
TAX
BEFORE TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT
---------- --------- ----------
<S> <C> <C> <C>
Foreign currency translation adjustments............. $ 65.1 $(23.3) $ 41.8
Unrealized losses on available-for-sale securities:
Unrealized holding losses arising during the
period.......................................... (95.9) 34.3 (61.6)
Less: reclassification for gains realized in net
income.......................................... 3.3 (1.2) 2.1
------ ------ ------
Net unrealized losses...................... (92.6) 33.1 (59.5)
------ ------ ------
Other comprehensive income (loss).................. $(27.5) $ 9.8 $(17.7)
====== ====== ======
</TABLE>

35
<PAGE> 36
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-----------------------------------
TAX
BEFORE TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT
---------- --------- ----------
<S> <C> <C> <C>
Foreign currency translation adjustments............. $ 14.8 $ (5.4) $ 9.4
Unrealized losses on available-for-sale securities:
Unrealized holding losses arising during the
period.......................................... (29.4) 10.8 (18.6)
Less: reclassification for gains realized in net
income.......................................... 6.5 (2.4) 4.1
------ ------ ------
Net unrealized losses...................... (22.9) 8.4 (14.5)
------ ------ ------
Other comprehensive income (loss).................. $ (8.1) $ 3.0 $ (5.1)
====== ====== ======
</TABLE>

NOTE 5 -- INVESTMENTS IN DEBT AND EQUITY SECURITIES

Available-for-Sale Securities

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

During 1999 and 1998, gross realized gains and losses on sales amounted to
$54.9 million and $15.6 million, and $26.0 million and $2.4 million,
respectively. Unrealized gains or losses are reported as a component of
stockholders' equity, net of tax.

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

<TABLE>
<CAPTION>
1999
-----------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED HOLDING HOLDING MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Retained securitization interests........... $ 454.5 $ -- $ -- $ 454.5
Preferred stock............................. 708.3 13.5 (93.6) 628.2
Municipal bonds............................. 249.9 3.0 (4.0) 248.9
Other....................................... 36.7 -- -- 36.7
Insurance subsidiaries
Mortgage-backed........................... 370.7 0.1 (11.5) 359.3
Municipal obligations..................... 208.1 -- (16.1) 192.0
Corporate obligations..................... 307.7 -- (7.1) 300.6
Preferred stock........................... 125.5 0.1 (11.7) 113.9
U.S. Government obligations............... 184.4 -- (7.4) 177.0
Other..................................... 133.6 -- (4.6) 129.0
-------- ----- ------- --------
Total available-for-sale
securities...................... $2,779.4 $16.7 $(156.0) $2,640.1
======== ===== ======= ========
</TABLE>

36
<PAGE> 37
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1998
-----------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED HOLDING HOLDING MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Preferred stock............................. $ 718.7 $ 2.4 $(28.7) $ 692.4
Other....................................... 0.7 -- -- 0.7
Insurance subsidiaries
Mortgage-backed........................... 414.5 3.7 (0.6) 417.6
Municipal obligations..................... 190.0 2.9 -- 192.9
Corporate obligations..................... 150.1 1.4 (0.4) 151.1
Preferred stock........................... 115.6 0.8 (0.6) 115.8
U.S. Government obligations............... 83.1 0.9 (1.0) 83.0
Other..................................... 191.2 0.8 (0.4) 191.6
-------- ----- ------ --------
Total available-for-sale
securities...................... $1,863.9 $12.9 $(31.7) $1,845.1
======== ===== ====== ========
</TABLE>

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

<TABLE>
<CAPTION>
1999
---------------------
ESTIMATED
AMORTIZED MARKET
COST VALUE
--------- ---------
<S> <C> <C>
Due in one year or less..................................... $ 21.7 $ 24.1
Due after one year through five years....................... 390.8 382.7
Due after five years through ten years...................... 353.9 338.1
Due after ten years......................................... 709.3 683.1
-------- --------
Subtotal.................................................. 1,475.7 1,428.0
Equity securities........................................... 849.2 757.6
Retained securitization interests........................... 454.5 454.5
-------- --------
Total............................................. $2,779.4 $2,640.1
======== ========
</TABLE>

Trading Securities

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

37
<PAGE> 38
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- FINANCE RECEIVABLES

Composition of Net Finance Receivables

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

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Home equity(1).............................................. $21,800.3 $20,435.8
Truck and truck trailer..................................... 11,832.7 10,038.0
Personal lending and retail sales finance................... 7,905.2 6,566.2
Equipment................................................... 5,398.2 4,882.1
Auto fleet leasing.......................................... 1,509.5 1,471.4
Credit card(2).............................................. 54.6 1,398.0
Manufactured housing(3)..................................... 23.7 20.7
Warehouse lending and other(4).............................. 1,242.5 1,226.3
--------- ---------
Finance receivables, net of unearned finance income ("net
finance receivables")(5)............................... 49,766.7 46,038.5
Allowance for losses on finance receivables................. (1,408.4) (1,378.9)
Insurance policy and claims reserves........................ (840.8) (763.8)
--------- ---------
Finance receivables, net of unearned finance income,
allowance for losses and insurance policy and claims
reserves............................................... $47,517.5 $43,895.8
========= =========
</TABLE>

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

(1) In 1999, the Company securitized and sold approximately $2.4 billion of home
equity lending receivables and sold an $80 million home equity portfolio. A
net gain of approximately $30 million was recorded on these transactions.

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

(5) Unearned finance income was approximately $4.0 billion and $3.5 billion at
December 31, 1999 and 1998, respectively.

Contractual Maturities of Net Finance Receivables

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

<TABLE>
<CAPTION>
YEAR DUE TOTAL
- -------- ---------
<S> <C>
2000........................................................ $11,972.1
2001........................................................ 7,702.5
2002........................................................ 5,671.4
2003........................................................ 3,789.1
2004 and thereafter......................................... 20,631.6
---------
$49,766.7
=========
</TABLE>

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

38
<PAGE> 39
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Direct Financing Leases

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

<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1999 1998
--------- --------
<S> <C> <C>
Minimum lease rentals....................................... $ 6,762.5 $6,336.4
Unearned finance income..................................... (1,048.8) (941.9)
--------- --------
Net investment in direct financing leases................... $ 5,713.7 $5,394.5
========= ========
</TABLE>

Future net minimum lease rentals on direct financing leases for each of the
years succeeding December 31, 1999 are as follows (in millions):
2000 -- $1,671.9; 2001 -- $1,179.6; 2002 -- $1,064.4; 2003 -- $905.6;
2004 -- $468.1 and 2005 and thereafter -- $424.1.

Dispersion of Finance Receivables

The Company has geographically dispersed finance receivables. The Company's
total receivables were dispersed at December 31, 1999 as follows: 11% in
California, 9% in Texas, 7% in Florida, 5% in North Carolina, and no other
individual state had more than 5%.

NOTE 7 -- ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of period...................... $ 1,378.9 $ 1,661.9 $ 1,371.4
Provision for losses.............................. 943.2 949.4 1,195.6
Recoveries on receivables charged off............. 154.4 150.5 190.5
Losses sustained.................................. (1,062.4) (1,032.5) (1,298.3)
Reserves of receivables sold(1)................... (153.4) (359.4) --
Reserves of acquired businesses and other......... 147.7 9.0 202.7
--------- --------- ---------
Balance at end of period............................ $ 1,408.4 $ 1,378.9 $ 1,661.9
========= ========= =========
</TABLE>

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

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

NOTE 8 -- NOTES RECEIVABLE FROM RELATED PARTIES AND OTHER RELATED PARTY
TRANSACTIONS

Notes receivable from related parties include advances provided by the
Company to First Capital and certain affiliates. These notes are unsecured
demand notes and generally bear interest at a floating rate. The weighted
average interest rate at December 31, 1999 was 8.34%. In April 1998, a
subsidiary of the Company entered into an agreement whereby the Company made an
investment in an affiliate in exchange for a participation interest in the
affiliate's earnings. The initial investment is recorded in notes receivable
from related parties and the participation income is included in investment and
other income. During the years ended December 31, 1999, 1998 and 1997 income on
notes receivable from related parties was approximately $772.0 million, $572.6
million and $23.4 million respectively.

As described in Note 6 to the consolidated financial statements, in 1999,
the Company sold to First Capital, at book value, approximately $1.7 billion of
the Company's participation interest in First Capital's private label
receivables. The sale was financed by a note between the Company and First
Capital. These receivables were securitized and sold by First Capital. The
proceeds were used to pay down the loan between First Capital and the Company.

39
<PAGE> 40
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company provides certain services of an administrative nature, use of
certain tangible and intangible assets including trademarks, guarantees of debt
support agreements and related interest, and other management services to
certain of its foreign affiliates. Services and usage are charged to the
affiliates based on the nature of the service. Fees for financial accommodations
range from 0.25% to 2.00% of the average outstanding debt guaranteed. Management
believes such charges reflect the market value for such services, usage and
guarantees. The amounts paid or accrued under these arrangements for the years
ended December 31, 1999, 1998 and 1997 were $84.5 million, $59.2 million and
$48.9 million, respectively.

At December 31, 1999 and 1998, the Company was a guarantor on debt and
related accrued interest of its affiliate in Canada amounting to $4.0 billion
and $2.7 billion, respectively.

The Company receives a fee for services it provides to First Capital.
During the years ended December 31, 1999, 1998 and 1997, the Company received
$25.1 million, $25.3 million and $15.0 million, respectively in fees for these
services.

At December 31, 1999 and 1998, the Company's current income taxes
receivable from First Capital amounted to $114 million and $14 million,
respectively.

In April 1998, the Company sold, at book value, approximately $5.2 billion
of the Company's participation interest in the U.S. bankcard credit card
receivables of First Capital. The sale was financed by a note between the
Company and First Capital. Immediately subsequent to the sale, First Capital
securitized and sold, at book value, substantially all of its U.S. bankcard
credit card receivables to a master trust. First Capital received $2.0 billion
in proceeds from the transaction and retained a $3.2 billion certificated
interest in the master trust. The proceeds were used to pay down the loan
between First Capital and the Company.

In March 1998, approximately $650 million of equipment finance receivables
were sold, at book value, to First Capital. No gain or loss was recorded on the
sale.

At December 31, 1999, 1998 and 1997, net finance receivables included
participations in credit card receivables owned or originated by ANB, an
affiliate of the Company. The balances of these receivables were $54.6 million,
$1.4 billion and $7.3 billion at December 31, 1999, 1998 and 1997, respectively.

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

NOTE 9 -- OTHER ASSETS

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

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Goodwill, net(1)............................................ $1,727.5 $ 331.5
Notes and other receivables................................. 503.0 396.2
Other intangible assets..................................... 385.0 --
Collateral held for resale.................................. 303.9 229.9
Property and equipment...................................... 296.2 238.7
Relocation client advances.................................. 185.4 171.8
Other....................................................... 286.0 284.6
-------- --------
Total other assets................................ $3,687.0 $1,652.7
======== ========
</TABLE>

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

(1) Net of accumulated amortization of $218.3 million and $158.9 million at
December 31, 1999 and 1998, respectively.

40
<PAGE> 41
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- CREDIT FACILITIES

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

<TABLE>
<CAPTION>
FACILITY
AMOUNTS(1)
----------
<S> <C>
Lines of credit............................................. $ 4,272.8
Syndicated credit facilities................................ 7,955.0
---------
Total............................................. $12,227.8
=========
</TABLE>

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

(1) Included in these amounts are $210 million and $2.2 billion of lines of
credit and syndicated credit facilities, respectively, that are available to
either First Capital or to the Company. The Company would not be responsible
for any borrowing by First Capital thereunder.

Lines of credit and syndicated credit facilities may be withdrawn only
under certain standard conditions, including failure to pay principal or
interest when due, breach of representations, warranties or covenants, default
on other debt, or bankruptcy or other insolvency-type proceedings. The Company
principally pays fees for the availability of its credit facilities.

Limitation on Minimum Tangible Net Worth

A restriction contained in certain syndicated credit facilities requires
the Company to maintain a minimum tangible net worth, as defined, of $2.5
billion. At December 31, 1999, the Company's tangible net worth, as defined in
the syndicated credit facilities, was approximately $7.6 billion.

NOTE 11 -- NOTES PAYABLE

Commercial paper notes are issued by Associates in the minimum amount of
$100,000 with terms from one to 270 days. Bank loan terms range from three to 18
days. Information pertaining to the Company's commercial paper notes and bank
loans is set forth below for the periods indicated (dollar amounts in millions):

<TABLE>
<CAPTION>
COMMERCIAL BANK
PAPER NOTES LOANS
----------- --------
<S> <C> <C>
Ending balance at December 31, 1999......................... $13,672.9 $ 990.7
Weighted average interest rate at December 31, 1999......... 5.68% 4.92%
Ending balance at December 31, 1998......................... 17,157.2 1,070.7
Weighted average interest rate at December 31, 1998......... 5.14% 6.05%
</TABLE>

41
<PAGE> 42
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12 -- LONG-TERM DEBT

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

<TABLE>
<CAPTION>
1999 1999
INTEREST WEIGHTED-
RATE AVERAGE MATURITIES
RANGE RATE THROUGH 1999 1998
------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Senior Notes:
Domestic........................ 5.25 - 11.40% 6.11% 2037 $33,262.0 $32,380.2
Foreign......................... 0.22 - 1.50% 0.79% 2004 1,151.1 --
--------- ---------
Total senior notes...... 34,413.1 32,380.2
--------- ---------
Subordinated and Capital Notes:
Subordinated.................... 6.88 - 8.15% 7.25% 2009 425.0 425.0
Capital......................... 4.68 - 9.00% 6.73% 2002 0.2 0.3
--------- ---------
Total subordinated and
capital notes......... 425.2 425.3
--------- ---------
Total long-term debt.... $34,838.3 $32,805.5
========= =========
</TABLE>

The weighted average interest rate for total long-term debt was 5.95% at
December 31, 1999 and 6.30% at December 31, 1998.

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

Long-term borrowing maturities during the next five years, including the
current portion of notes payable after one year are: 2000, $6,667.0 million;
2001, $5,979.0 million; 2002, $6,515.0 million; 2003, $5,048.1 million; 2004,
$2,790.2 million and 2005 and thereafter, $7,839.0 million. Certain debt issues
are subject to put or call redemption provisions whereby repayment may be prior
to the maturity date. As applicable, the amount of the option premium received
by the Company is deferred and amortized over the expected life of the debt
obligation.

42
<PAGE> 43
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13 -- INCOME TAXES

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

<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
------- ----- ------
<S> <C> <C> <C>
Year Ended December 31, 1999
Current................................................... $527.3 $37.5 $564.8
Deferred.................................................. 49.3 1.8 51.1
------ ----- ------
$576.6 $39.3 $615.9
====== ===== ======
Year Ended December 31, 1998
Current................................................... $470.9 $31.9 $502.8
Deferred.................................................. 60.2 -- 60.2
------ ----- ------
$531.1 $31.9 $563.0
====== ===== ======
Year Ended December 31, 1997
Current................................................... $470.2 $34.3 $504.5
Deferred.................................................. 17.5 -- 17.5
------ ----- ------
$487.7 $34.3 $522.0
====== ===== ======
</TABLE>

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

<TABLE>
<CAPTION>
1999 1998
--------- -------
<S> <C> <C>
Deferred tax assets:
Provision for losses on finance receivables and other..... $ 1,140.0 $ 707.9
Post retirement and other employee benefits............... 97.9 66.2
--------- -------
1,237.9 774.1
Deferred tax liabilities:
Leasing transactions...................................... (626.3) (512.8)
Finance revenue and other................................. (445.9) (177.0)
--------- -------
(1,072.2) (689.8)
--------- -------
Net deferred tax asset................................. $ 165.7 $ 84.3
========= =======
</TABLE>

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

43
<PAGE> 44
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<CAPTION>
% OF PRETAX INCOME
YEAR ENDED DECEMBER 31
-----------------------
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Statutory tax rate.......................................... 35.0% 35.0% 35.0%
State tax rate.............................................. 1.5 1.4 1.6
Non-deductible goodwill..................................... 0.4 0.4 0.4
Other....................................................... (1.1) (0.2) (0.2)
------ ---- ----
Effective tax rate........................................ 35.8% 36.6% 36.8%
====== ==== ====
</TABLE>

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

NOTE 14 -- LEASE COMMITMENTS

Leases on the Company's branch and operating center facilities are
primarily short-term and generally provide for renewal options not exceeding the
initial term. Total rent expense for the years ended December 31, 1999, 1998 and
1997 was $102.4 million, $94.7 million, and $91.9 million, respectively. Minimum
rental commitments as of December 31, 1999 for all noncancelable leases
(primarily office leases) for the years ending December 31, 2000, 2001, 2002,
2003 and 2004 are $77.5 million, $63.4 million, $29.8 million, $17.1 million and
$7.8 million, respectively, and $1.3 million thereafter.

NOTE 15 -- EMPLOYEE BENEFITS

Pension and Other Post Retirement Benefits

The Company participates in various qualified and nonqualified pension and
other post retirement benefit plans (the "Plan" or "Plans") sponsored by First
Capital, which together cover substantially all United States-based employees
who meet certain eligibility requirements. The benefits of such plans can be
modified or terminated at the discretion of First Capital. The health care plans
are contributory, with participants' contributions adjusted annually; the life
insurance plans are also contributory.

44
<PAGE> 45
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------- -----------------
1999 1998 1999 1998
------- ------ ------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year........ $ 562.8 $492.7 $ 123.4 $ 129.8
Service cost................................... 36.5 24.7 9.0 5.9
Interest cost.................................. 37.5 32.7 10.2 7.4
Plan participants' contributions............... -- -- 0.4 0.2
Plan amendment................................. (1.2) -- (18.3) --
Acquisition.................................... -- -- 32.5 --
Actuarial (gains)/losses....................... (88.7) 24.6 (20.6) (16.7)
Benefits paid.................................. (15.1) (11.9) (4.5) (3.2)
------- ------ ------- -------
Benefit obligation at end of year...... $ 531.8 $562.8 $ 132.1 $ 123.4
======= ====== ======= =======
Change in plan assets:
Fair value of plan assets at beginning of
year........................................ $ 538.6 $473.5 $ -- $ --
Actual return on plan assets................... 101.2 75.8 -- --
Employer contribution.......................... 29.9 1.2 4.1 3.0
Plan participants' contributions............... -- -- 0.4 0.2
Benefits paid.................................. (15.1) (11.9) (4.5) (3.2)
------- ------ ------- -------
Fair value of plan assets at end of
year................................. $ 654.6 $538.6 $ -- $ --
======= ====== ======= =======
Funded status.................................. $ 122.8 $(24.2) $(132.1) $(123.4)
Unrecognized net transition liability.......... 1.4 1.7 -- --
Unrecognized net actuarial (gain)/loss......... (137.8) 13.8 (27.4) (6.7)
Unrecognized prior service cost................ -- 1.5 (17.7) (0.9)
------- ------ ------- -------
Net amount recognized.................. $ (13.6) $ (7.2) $(177.2) $(131.0)
======= ====== ======= =======
Amounts recognized in the consolidated balance
sheet:
Prepaid benefit cost........................... $ 25.4 $ 25.4 $ -- $ --
Accrued benefit liability...................... (46.0) (41.6) (177.2) (131.0)
Intangible asset............................... 7.0 9.0 -- --
------- ------ ------- -------
Net amount recognized.................. $ (13.6) $ (7.2) $(177.2) $(131.0)
======= ====== ======= =======
Weighted-average assumptions as of December 31:
Discount rate.................................. 7.75% 6.50% 7.75% 6.50%
Expected return on plan assets................. 9.00% 9.00% --% --%
Rate of compensation increase.................. 5.00% 5.00% --% --%
</TABLE>

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

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

45
<PAGE> 46
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

For the pension plans with accumulated benefit obligations in excess of
plan assets, the projected benefit obligation and accumulated benefit obligation
were $54.9 million and $40.8 million, respectively, as of December 31, 1999 and
$53.5 million and $41.6 million, respectively as of December 31, 1998. The
assets of these plans had no fair value as of December 31, 1999 and 1998.

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

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

Associates Savings and Profit-Sharing Plan

The Company participates in a defined contribution plan sponsored by First
Capital that covers substantially all United States-based employees who meet
certain eligibility requirements, is intended to provide assistance in
accumulating personal savings for retirement and is designed to qualify for
favorable tax treatment under Sections 401(a) and 401(k) of the United States
Internal Revenue Code of 1986, as amended. For the years ended December 31,
1999, 1998 and 1997, the Company's pre-tax contributions to the plan were $32.6
million, $26.8 million and $21.9 million, respectively. Among other options, the
plan provides as an investment option the Associates Stock Fund which invests
principally in First Capital's Class A Common Stock.

Associates Discounted Employee Stock Purchase Plan

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

INCENTIVE COMPENSATION PROGRAMS

The Company participates in compensation plans covering certain officers
and employees.

Incentive Compensation Plan and Long-Term Performance Plan

The Company participates in the Incentive Compensation Plan (the "ICP"),
sponsored by First Capital, which beginning in 1997 has provided for corporate
annual performance pay bonuses, in addition to other

46
<PAGE> 47
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

Deferred Compensation Plan

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

Stock-Based Compensation Plans

The ICP also includes an equity compensation plan, formerly known as the
Long-Term Equity Compensation Plan, which was established in 1996 and amended
and merged into the ICP effective January 1, 1997. In conjunction with the ICP,
employees may receive nonqualified or incentive stock options, stock
appreciation rights, restricted stock, performance units or performance shares.
Through December 31, 1999, First Capital had only issued non-qualified stock
options and restricted stock under the ICP.

Accounting for Stock-Based Compensation Plans -- First Capital has elected
to apply Accounting Principles Board Opinion 25 ("APB 25") rather than the
optional provisions of Statement of Financial Accounting Standards No. 123
("SFAS 123") in accounting for its stock-based compensation plans. Had the
compensation cost of First Capital's stock-based compensation plans been
determined based on the optional provisions of SFAS 123, in the years ended
December 31, 1999, 1998 and 1997 the Company's net income would have been $1,065
million, $956 million and $890 million respectively. The fair value of stock
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1999, 1998 and 1997:
risk-free interest rates of 4.72%, 5.59%, and 6.24%, respectively; dividend
yields of 0.52%, 0.58%, and 0.51%, respectively; expected stock volatility of
34.83%, 21.28%, and 22.00%, respectively; and a weighted-average expected life
of the options of 4 years.

NOTE 16 -- COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

The Company grants revolving lines of credit to certain of its credit card
and other revolving customers. At December 31, 1999, the unused portion of these
lines aggregated $50.9 billion.

The Company also grants lines of credit to certain dealers of trucks,
construction equipment and manufactured housing. At December 31, 1999, the
unused portion of these lines aggregated $235.9 million.

47
<PAGE> 48
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company wrote put options in 1999 which requires it to purchase, upon
request of the holders, securities issued in certain securitization
transactions. In September 1999, the Company wrote a put option in conjunction
with a First Capital manufactured housing finance receivable securitization
transaction which allows the $2 billion related trust securities to be put back
to the Company at par annually beginning in October 2000. The Company received
approximately $10 million from First Capital for the fair value of the put
option. In addition, the Company wrote "put options" which require it to
purchase, upon request of the holders, securities issued in its home equity
securitization transaction. These put options include: a put option, exercisable
at any time after June 15, 2000, with respect to an aggregate of up to $1
billion principal amount of notes secured by home equity loan receivables, only
to the extent the securitization trust cannot meet its obligation under a
separate put option by the trust, which is exercisable at any time after March
15, 2000 and a put option, exercisable at any time after June 15, 2000, with
respect to an aggregate of up to approximately $1 billion of notes secured by
home equity loan receivables only to the extent the securitization trust cannot
meet its obligation under a separate put option issued by the trust. In each
case, if exercised, the Company will be obligated to purchase the certificates
or notes at par plus accrued interest. The Company has recorded liabilities
totaling approximately $23 million in connection with these options. Subsequent
to their initial issuance, such options are marked to market with the
fluctuation being reflected in the statement of earnings.

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

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

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

Foreign currency swap agreements are generally held for purposes other than
trading and have been designated for accounting purposes as hedges of specific
foreign currency exposures under certain debt obligations. Under these
agreements, the Company and the agreement counterparties are obligated to
exchange foreign currencies at varying times over the next four years. The
aggregate notional amount of these agreements at December 31, 1999 and 1998 was
$5.3 billion and $3.5 billion, respectively. The fair value of such agreements
at December 31, 1999 and December 31, 1998 would have been a liability of $250.9
million and $94.4 million, respectively.

Interest rate swap agreements are held for purposes other than trading and
are used by the Company to hedge the effect of interest rate movements on
existing debt. The aggregate notional amount of interest rate

48
<PAGE> 49
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

swap agreements at December 31, 1999 was $7.5 billion. The fair value of such
agreements at December 31, 1999 would have been a liability of $53.6 million.
These agreements mature on varying dates over the next 19 years. The aggregate
notional amount of interest rate swap agreements at December 31, 1998 was $3.3
billion. The fair value of such agreements at December 31, 1998 would have been
a liability of 59.2 million.

Treasury futures and option contracts are used to minimize fluctuations in
the value of preferred stock investments and are held for purposes other than
trading. The aggregate notional amount of futures and option contracts at
December 31, 1999 and 1998 was $536.2 million and $711.4 million, respectively.
The fair value of these contracts would have been an asset of $12.4 million and
a liability of $5.0 million at December 31, 1999 and December 31, 1998,
respectively. Such contracts mature on varying dates through 2000.

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

NOTE 18 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------
1999 1998
---------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents(1)............. $ 333.3 $ 333.3 $ 2,720.4 $ 2,720.4
Investment securities(2)................. 2,666.9 2666.9 1,865.9 1,865.9
Net finance receivables(3)............... 49,766.7 51,879.8 46,038.5 48,309.4
Notes payable(1)
Commercial paper....................... 13,672.9 13,672.9 17,157.2 17,157.2
Bank loans............................. 990.7 990.7 1,070.7 1,070.7
Long-term debt(4)........................ 34,838.3 34,290.3 32,805.5 34,047.5
</TABLE>

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

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

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

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

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

49
<PAGE> 50
ASSOCIATES CORPORATION OF NORTH AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

NOTE 19 -- UNAUDITED QUARTERLY FINANCIAL DATA

The following table sets forth the unaudited quarterly results of
operations (in millions):

<TABLE>
<CAPTION>
1999
-------------------------------------------
FOURTH THIRD SECOND FIRST
QUARTER(1) QUARTER QUARTER QUARTER
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Finance charges.............................. $1,480.7 $1,456.5 $1,456.5 $1,517.5
======== ======== ======== ========
Interest expense............................. $ 768.3 $ 736.7 $ 722.7 $ 720.3
======== ======== ======== ========
Earnings before provision for income taxes... $ 435.0 $ 444.2 $ 434.5 $ 406.7
Provision for income taxes................... 153.0 153.4 163.6 145.9
-------- -------- -------- --------
Net earnings................................. $ 282.0 $ 290.8 $ 270.9 $ 260.8
======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
1998
-----------------------------------------
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Finance charges.............................. $1,404.9 $1,388.6 $1,375.8 $1,672.2
======== ======== ======== ========
Interest expense............................. $ 733.3 $ 722.9 $ 712.6 $ 694.0
======== ======== ======== ========
Earnings before provision for income taxes... $ 396.2 $ 393.7 $ 382.1 $ 365.2
Provision for income taxes................... 145.8 145.8 136.3 135.1
-------- -------- -------- --------
Net earnings................................. $ 250.4 $ 247.9 $ 245.8 $ 230.1
======== ======== ======== ========
</TABLE>

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

(1) During the fourth quarter of 1999, the Company finalized its purchase
accounting related to the Avco acquisition which had the effect of
increasing net income by approximately $19 million.

50
<PAGE> 51

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

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

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

ITEM 11. EXECUTIVE COMPENSATION.

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by Items 10-13 has been omitted in accordance with
General Instruction I.(2)(c) to Form 10-K.

PART IV

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

(a) Financial Statements

(1)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.................. 25
Consolidated Statement of Earnings for the years
ended December 31,
1999, 1998 and 1997.......................... 26
Consolidated Balance Sheet at December 31, 1999
and 1998...................................... 27
Consolidated Statement of Changes in
Stockholders' Equity
for the years ended December 31, 1999, 1998
and 1997...................................... 28
Consolidated Statement of Cash Flows for the
years ended December 31,
1999, 1998 and 1997.......................... 29
Notes to consolidated financial statements...... 30
</TABLE>

<TABLE>
<S> <C>
(2) The financial statement schedules required by Regulation S-X
are either not applicable or are included in the information
provided in the notes to the consolidated financial
statements which are filed as part of this report.
</TABLE>

(b) Reports on Form 8-K

During the quarter ended December 31, 1999, Associates filed a Current
Report on Form 8-K dated October 14, 1999 (related to the release of third
quarter earnings).

<TABLE>
<S> <C>
(3) -- (1) Certificate of Incorporation. Incorporated by
reference to Exhibit 3(a) to the Company's Form 10-K for
the fiscal year ended October 31, 1986.
-- (2) By-laws.
(4) -- Instruments with respect to issues of long-term debt have
not been filed as exhibits to this annual report on Form
10-K as the authorized principal amount of any one of
such issues does not exceed 10% of the total assets of
the registrant and its consolidated subsidiaries.
Registrant agrees to furnish to the Commission a copy of
each such instrument upon its request.
</TABLE>

51
<PAGE> 52

<TABLE>
<S> <C>
(12) -- Computation of Ratio of Earnings to Fixed Charges.
(21) -- Subsidiaries of the registrant. Omitted in accordance with General Instruction I.(2)(b)
to Form 10-K.
(23) -- Consent of Independent Auditors.
(24) -- Powers of Attorney.
(27) -- Financial Data Schedule.
</TABLE>

52
<PAGE> 53

SIGNATURES

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

ASSOCIATES CORPORATION OF NORTH AMERICA

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

March 9, 2000

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

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

/s/ ROY A. GUTHRIE Senior Executive Vice March 9, 2000
- ----------------------------------------------------- President, Principal
(Roy A. Guthrie) Financial Officer and
Director

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

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

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

53
<PAGE> 54

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
(3) -- (1) Certificate of Incorporation. Incorporated by
reference to Exhibit 3(a) to the Company's Form 10-K for the
fiscal year ended October 31, 1986.
-- (2) By-laws.
(4) -- Instruments with respect to issues of long-term debt have
not been filed as exhibits to this annual report on Form
10-K as the authorized principal amount of any one of
such issues does not exceed 10% of the total assets of
the registrant and its consolidated subsidiaries.
Registrant agrees to furnish to the Commission a copy of
each such instrument upon its request.
(12) -- Computation of Ratio of Earnings to Fixed Charges.
(21) -- Subsidiaries of the registrant. Omitted in accordance
with General Instruction I.(2)(b) to Form 10-K.
(23) -- Consent of Independent Auditors.
(24) -- Powers of Attorney.
(27) -- Financial Data Schedule.
</TABLE>

<PAGE> 1
EXHIBIT 3(2)

BY-LAWS
OF
ASSOCIATES CORPORATION OF NORTH AMERICA
(DELAWARE)

ARTICLE I

STOCKHOLDERS

Section 1. PLACE OF MEETING: Meetings of the stockholders (whether annual or
special) may be held at such place, within or without the State of Delaware, as
the board of directors shall from time to time designate, provided, however, in
the absence of such designation, meetings shall be held at the principal office
of the company in Irving, Texas.

Section 2. ANNUAL MEETING: The annual meeting of stockholders shall be held at
such time as may from time to time be fixed by resolution of the board of
directors. Should said day be a Saturday, Sunday or legal holiday, such annual
meeting shall be held on the preceding regular business day. If, for any reason,
the annual meeting be not held at the time aforesaid, the directors shall fix
another date for such meeting.

Section 3. NOTICE OF ANNUAL MEETING: The secretary shall mail, in the manner
provided in Section 2 of Article V of these by-laws, or shall deliver, a written
or printed notice of each annual meeting to each stockholder of record entitled
to vote thereat, at least ten (10) days before the date of such meeting.

Section 4. PURPOSE OF ANNUAL MEETING: Annual meetings of stockholders shall be
held for the purpose of receiving the reports of officers, electing directors
and transacting such other business as may be properly presented thereat.

Section 5. SPECIAL MEETINGS: Special Meetings of the stockholders may be held at
any time on call of the chairman of the board of directors, or of a vice
chairman of the board of directors, or of the board of directors, or of the
president, or of the stockholders holding not less than one-fourth (1/4) of the
outstanding shares entitled, by the Certificate of Incorporation and by the
General Corporation Law of the State of Delaware, to vote on the business
proposed to be transacted thereat.

Section 6. NOTICE OF SPECIAL MEETINGS: The person or persons calling a special
meeting, or the secretary at their direction, shall mail, in the manner provided
in Section 2 of Article V of these by-laws, or shall deliver, a written or
printed notice thereof to each holder of outstanding shares entitled, by the
Certificate of Incorporation and by the General Corporation Law of the State of
Delaware, to vote on the business proposed to be transacted at such meeting, at
least ten (10) days before the date of such meeting. Such notice shall specify
by whom such meeting was called and the time and place thereof and the purpose
or purposes for which such meeting was called.

Section 7. WAIVER OF NOTICE: Any stockholder may waive, in writing, notice of
any meeting of stockholders. Presence of a stockholder, in person or by proxy,
at any meeting of stockholders, and participation in such meeting, shall
constitute a waiver of notice thereof on the part of such stockholder.

Section 8. QUORUM: A majority of the shares of issued and outstanding capital
stock entitled, by the Certificate of Incorporation and by the General
Corporation Law of the State of Delaware, to vote on the business proposed to be
transacted at such meeting represented by the holders of record thereof, in
person or by proxy, shall constitute a quorum for the transaction of business.

Section 9. VOTING RIGHTS: Shares which have been transferred on the books of the
company after the record date of such meeting fixed by the board of directors,
or, if no such record date is fixed, within ten (10) days next preceding the
date of the meeting, shall not be entitled to vote at

<PAGE> 2
such meeting.

At all meetings of the holders of common stock, each share of stock
shall be entitled to one (1) vote.

Section 10. PROXIES: Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by proxy executed in writing by the
stockholder or any authorized attorney in fact. All proxies shall be delivered
to the secretary at or before the time of such meeting. No proxy shall be valid
after eleven (11) months from the date of its execution unless a longer time is
expressly provided therein.

Section 11. ORDER OF BUSINESS: The order of business at the annual meeting and,
so far as practical, at all other meetings shall be as follows:

1. Determination of shares present.
2. Reading and disposal of any unapproved minutes.
3. Reports of officers and committees.
4. Election of directors.
5. Unfinished business.
6. New business.

ARTICLE II

DIRECTORS

Section 1. NUMBER AND ELECTION: The number of directors of this company shall be
not less than one (1) nor more than twenty-five (25). Hereafter, the number of
directors shall be such number between one (1) and twenty-five (25), inclusive,
as may be elected from time to time by resolution of the board of directors
adopted by the vote of a majority of the then number of directors, or by
resolution of the stockholders adopted by the vote of a majority of the shares
entitled to vote thereon. Each director shall be elected each year by a majority
vote of the stockholders present in person or by proxy at the annual meeting of
stockholders and shall hold office until his successor is elected and qualified
or until his earlier death, resignation or removal. Any vacancy occurring in the
board of directors caused by death, resignation, increase in number of directors
or otherwise may be filled by a majority vote of the remaining members of the
board, and any director so elected shall hold office until the next annual
meeting of stockholders and until his successor is elected and qualified.

Section 2. PLACE OF MEETING: Meetings of the board of directors may be held at
such place, either within or without the State of Delaware, as may from time to
time be designated by the chairman of the board of directors, or by a vice
chairman of the board of directors, or by the president, or by resolution of the
board of directors or as may be specified in the call of any meeting. In the
absence of any such designation, the meetings shall be held at the principal
office of the company in Irving, Texas.

Section 3. REGULAR MEETINGS: Regular meetings of the board of directors shall be
held immediately after each annual meeting of stockholders and at such other
times as may from time to time be fixed by resolution of the board of directors.
Notice need not be given of regular meetings of the board of directors.

Section 4. SPECIAL MEETINGS: Special meetings of the board of directors may be
held at any time on the call of the chairman of the board of directors, or of a
vice chairman of the board of directors, or of the president, or of the board of
directors, or of the executive committee. Special meetings may be held at any
time or place without notice if all the directors are present or if those not
present waive notice of the meeting in writing.

2
<PAGE> 3

Section 5. NOTICE OF SPECIAL MEETINGS: The person or persons calling a special
meeting, or the secretary, at their discretion, shall do so by oral, telegraphic
or written notice duly delivered to each director not less than one day before
such meeting. Notice of any special meeting need not specify the purpose
thereof.

Section 6. WAIVER OF NOTICE: Any director may waive, in writing, notice of any
meeting of directors. The presence of a director at any meeting of the board and
his participation in such meeting shall constitute a waiver of notice thereof on
the part of such director.

Section 7. QUORUM: A majority of the duly elected and qualified directors then
holding such positions shall constitute a quorum for the transaction of
business.

Section 8. COMPENSATION OF DIRECTORS: Each director who is not an officer or
employee of this company or of the parent company of this company or of any
affiliate of either shall (1) be paid a fee of Twelve Thousand Five Hundred
Dollars ($12,500.00) per annum, (2) be paid a fee of One Thousand Two Hundred
Fifty Dollars ($1,250.00) per meeting of the board of directors attended, (3) be
paid a fee of Five Hundred Dollars ($500.00) per meeting of committees of the
board of directors attended, and (4) be reimbursed for travel expenses incurred
in attending any meetings held outside the county of his residence.

Section 9. ORDER OF BUSINESS: The regular order of business of the meetings of
directors, so far as practical, shall be as follows:

1. Reading and disposal of unapproved minutes.
2. Reports of officers and committees.
3. Unfinished business.
4. New business.

Section 10. EXECUTIVE COMMITTEE: The board of directors may, by resolution
adopted by a majority of the whole board, designate three (3) or more of their
number to constitute an executive committee, which committee shall have and
exercise all of the authority of the board of directors in the management of the
company, including but not limited to the power and authority to declare regular
or special dividends and to authorize the issuance of stock. The committee shall
appoint a secretary who need not be a member of the committee. He shall keep
minutes of all meetings which minutes shall be read at the following meeting of
the board of directors. The committee shall from time to time make such rules as
it deems proper for the convening and conducting of its meetings.

Section 11. OTHER COMMITTEES: The board of directors may, by resolution adopted
by a majority of the whole board, designate from time to time such standing and
special committees as may be necessary or desirable to manage the affairs of the
company, fix the number of members thereof, and specify the duties thereof.

Section 12. TEMPORARY COMMITTEE MEMBERS: In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to serve on such
committee until the next regular meeting of the board of directors.

ARTICLE III

OFFICERS

Section 1. OFFICERS: The Officers of the Company shall include a Chairman of the
Board of Directors and may include one or more Vice Chairmen of the Board of
Directors, each of whom shall be chosen from among the directors, a President
and a Secretary, each of whom shall be elected by the Board of Directors to hold
office until his or her successor shall have been chosen and shall have
qualified. The Chairman of the Board of Directors or the President may elect or
appoint one or more Senior Executive Vice Presidents, one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Treasurer, a Comptroller, a General Counsel, one

3
<PAGE> 4

or more Assistant Vice Presidents, one or more Assistant Treasurers, one or more
Assistant Comptrollers, one or more Assistant General Counsels, one or more
Assistant Secretaries, and the Chairman of the Board of Directors or President
may elect or appoint such other officers as such officer may deem necessary, or
desirable, each of whom shall have such authority, shall perform such duties and
shall hold office for such term as may be prescribed by the Board of Directors
from time to time. Any person may hold at one time more than one office,
excepting that the duties of the President and Secretary shall not be performed
by one person.

Section 2. ELECTION: At the first meeting after their election the directors
shall elect annually the officers enumerated in Section 1 of this Article to
hold office until the regular meeting of directors following the next annual
meeting of the stockholders and until others are elected and shall have
qualified in their stead, excepting as in this Article otherwise provided.

Section 3. APPOINTMENT: The chairman of the board or the president may, from
time to time, designate and appoint one or more senior executive vice
presidents, one or more executive vice presidents, one or more senior vice
presidents, one or more vice president, a treasurer, a comptroller, a general
counsel, one or more assistant vice presidents, one or more assistant
treasurers, one or more assistant comptrollers, one or more assistant general
counsels, one or more assistant secretaries; the senior executive vice
presidents may elect or appoint executive vice presidents and other subordinated
officers; and the chairman of the board or president may elect or appoint such
other officers as such officer may deem necessary, or desirable, each of whom
shall have such authority, shall perform such duties and shall hold office until
the regular meeting of the board of directors following the next annual meeting
of the stockholders, excepting as in this Article otherwise provided.

Section 4. CHAIRMAN OF THE BOARD OF DIRECTORS: The chairman of the board of
directors shall be a director. He shall preside at all meetings of stockholders
and at all meetings of the directors and of the executive committee thereof. As
chief executive officer he shall have general supervision of the affairs of the
company. He is charged with the responsibility for the prudential affairs of the
company and for the maintenance of harmony and accord and may at his discretion
discharge subordinate officers, employees, clerks and agents under his
supervision, excepting officers who are also directors, and appoint their
successors who shall hold office until the next annual meeting of directors. He
shall also perform all such other duties as are incidental to his office or
properly required of him by the board of directors.

Section 5. VICE CHAIRMAN OF THE BOARD OF DIRECTORS: Each vice chairman of the
board of directors shall be a director and shall be assigned specific areas of
responsibility by the chairman of the board of directors. He shall have general
supervision of those affairs of the corporation designated by the chairman for
his attention and may employ and discharge subordinate officers, employees,
clerks and agents under his supervision, excepting officers who are also
directors. He shall perform such duties as are incidental to his office or
properly required of him by the chairman of the board of directors.

Section 6. PRESIDENT: The president shall be a director. In the absence of the
chairman of the board of directors he shall preside at all meetings of
stockholders and at meetings of the board of directors. As chief operating
officer the president shall have general supervision of the affairs of the
corporation designated by the chairman for his attention and may employ and
discharge subordinate officers, employees, clerks and agents under his
supervision, excepting officers who are also directors. He shall perform all
such duties as are incidental to his office or properly required of him by the
chairman of the board of directors.

Section 7. VICE PRESIDENTS: Each vice president shall have general supervision
of those affairs of the company designated for his attention by the chairman of
the board of directors and such other officer to whom he is directly responsible
and may employ and discharge subordinate officers, employees, clerks and agents
under his supervision. Each vice president shall perform all such duties as are
incidental to his office or properly required of him by the chairman of the
board of directors and such other officer or officers to whom he is directly
responsible.

4
<PAGE> 5
Section 8. SECRETARY: The secretary shall keep full and accurate minutes of the
meetings of stockholders and of directors in the proper record book of the
company provided therefor, give due notice of all annual meetings of
stockholders and of all special meetings of stockholders and directors on proper
call therefor being filed with him. He shall have custody of the seal of the
company and shall perform all such duties as are incidental to his office or
properly required of him by the chairman of the board of directors and such
other officer or officers to whom he is directly responsible.

Section 9. TREASURER: The treasurer shall perform all such duties as are
incidental to his office or properly required of him by the chairman of the
board of directors and such other officer or officers to whom he is directly
responsible.

Section 10. COMPTROLLER: The comptroller shall keep and maintain the books of
account of the company in such manner that they fairly present the financial
condition of the company and its subsidiaries. The comptroller shall perform all
such duties as are incidental to his office or properly required of him by the
chairman of the board of directors and such other officer or officers to whom he
is directly responsible.

Section 11. GENERAL COUNSEL: The general counsel shall have general supervision
of the legal affairs and litigation of the company. He shall perform all such
duties as are incidental to this office or are properly required of him by the
chairman of the board of directors and such other officer or officers to whom he
is directly responsible.

Section 12. ASSISTANT VICE PRESIDENTS; ASSISTANT SECRETARIES; ASSISTANT
TREASURERS AND OTHER SUBORDINATE OFFICERS: Each assistant vice president,
assistant secretary, assistant treasurer and other subordinate officers shall
perform such duties as may be incidental to his office or properly required of
him by the chairman of the board and such other officer or officers to whom he
is directly responsible.

Section 13. VACANCIES: A vacancy in any office filled by election of the board
of directors existing at the time of any meeting of the board of directors or of
the executive committee of the board of directors may be filled by the board of
directors or by the executive committee of the board of directors by the
election of a new officer who shall hold office, subject to the provisions of
this Article, until the regular meeting of directors following the next annual
meeting of stockholders and until his successor is elected.

Section 14. REMOVAL OR DISCHARGE: Any officer may be removed or discharged by
the chairman of the board of directors at any time excepting an officer who is
also a director. Any officer who is a director may be discharged at any time by
the board of directors.

ARTICLE IV

CAPITAL STOCK

Section 1. CERTIFICATE OF STOCK: Each stockholder of the company whose stock has
been paid in full shall be entitled to a certificate or certificates showing the
amount of stock of the company standing on the books in his or her name. Each
certificate of stock shall be numbered and bear the manual or facsimile
signatures of the chairman of the board of directors, a vice chairman of the
board of directors, the president, or vice president and secretary or assistant
secretary.

Section 2. FORM OF CERTIFICATE: The form of stock certificates shall be as
prescribed from time to time by resolution of the board of directors.

Section 3. RECORD HOLDER OF SHARES: The company shall be entitled to treat the
holder of record of any share or shares as the holder in fact thereof, and
accordingly shall not be bound to recognize any equitable or other claims to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the General
Corporation Law of the State of Delaware. The company shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as

5
<PAGE> 6

such owner.

Section 4. LOST STOCK CERTIFICATE: In case of loss or destruction of a
certificate of stock, a new certificate shall be issued upon satisfactory proof
of such loss or destruction and the giving of security by bond, or the giving of
security otherwise satisfactory to the board of directors, the chairman of the
board of directors, a vice chairman of the board of directors, the executive
committee or the president.

ARTICLE V
MISCELLANEOUS

Section 1. FISCAL YEAR: The fiscal year of the company shall be the calendar
year.

Section 2. MAILING OF NOTICES: Mailing of notices to stockholders or directors
shall be by depositing the same in a post office or letter box in a postpaid
sealed wrapper, addressed to such stockholder or director at his, her or its
address, as the same appears on the books of the company. Such notice shall be
deemed to be given at the time when the same shall be thus mailed.

Section 3. CORPORATE SEAL: The corporate seal of the company shall be in such
form as the board of directors shall from time to time prescribe.

ARTICLE VI

AMENDMENTS

These by-laws may be amended or repealed at any meeting of the board of
directors by a vote of a majority of all members of the board of directors then
elected and qualified; provided, however, that such power, having been conferred
upon the board of directors, shall not divest the stockholders of the power to
adopt, amend, or repeal by-laws.

<PAGE> 1
EXHIBIT 12

ASSOCIATES CORPORATION OF NORTH AMERICA

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar Amounts In Millions)

<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fixed Charges (a)
Interest expense ............. $ 2,948.0 $ 2,862.8 $ 2,550.8 $ 2,209.4 $ 1,979.8
Implicit interest in rent .... 13.6 13.7 13.3 12.9 11.4
---------- ---------- ---------- ---------- ----------
Total fixed charges ..... $ 2,961.6 $ 2,876.5 $ 2,564.1 $ 2,222.3 $ 1,991.2
========== ========== ========== ========== ==========

Earnings (b) ...................... $ 1,720.4 $ 1,537.2 $ 1,420.1 $ 1,302.4 $ 1,121.4
Fixed charges ..................... 2,961.6 2,876.5 2,564.1 2,222.3 1,991.2
---------- ---------- ---------- ---------- ----------
Earnings, as defined ......... $ 4,682.0 $ 4,413.7 $ 3,984.2 $ 3,524.7 $ 3,112.6
========== ========== ========== ========== ==========
Ratio of Earnings to Fixed Charges 1.58 1.53 1.55 1.59 1.56
========== ========== ========== ========== ==========
</TABLE>

- ----------

(a) For purposes of such computation, the term "fixed charges" represents
interest expense and a portion of rentals representative of an implicit
interest factor for such rentals.

(b) For purposes of such computation, the term "earnings" represents earnings
before provision for income taxes and cumulative effect of changes in
accounting principles, plus fixed charges.

<PAGE> 1
EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 333-62861) of our report dated February 4, 2000, with
respect to the consolidated financial statements of Associates Corporation of
North America included in the Annual Report (Form 10-K) for the year ended
December 31, 1999.

/s/ ERNST & YOUNG LLP

Dallas, Texas
March 9, 2000

<PAGE> 1
EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
a director of ASSOCIATES CORPORATION OF NORTH AMERICA (the "Company"), has made,
constituted and appointed and by these presents does hereby, make constitute and
appoint ROY A. GUTHRIE, KEITH W. HUGHES, FREDERIC C. LISKOW, CHESTER D.
LONGENECKER and JOHN F. STILLO, and each of them, his true and lawful attorneys,
for him and in the name, place and stead, and in his office and capacity as
aforesaid, to sign and file the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, and any and all amendments thereto and any
and all other documents to be signed and filed with the Securities and Exchange
Commission in connection therewith, hereby granting to said ROY A. GUTHRIE,
KEITH W. HUGHES, FREDERIC C. LISKOW, CHESTER D. LONGENECKER and JOHN F. STILLO,
and each of them, full power and authority to do and perform each and every act
and that whatsoever requisite and necessary to be done in the premises, as
fully, to all intents and purposes, as he might or could do if personally
present, hereby ratifying and confirming in all respects of all that said ROY A.
GUTHRIE, KEITH W. HUGHES, FREDERIC C. LISKOW, CHESTER D. LONGENECKER and JOHN F.
STILLO, or any of them, as said attorneys, may or shall lawfully do or cause to
be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has subscribed his or her
name this 24th day of February, 2000.

Signature: /s/ KEITH W. HUGHES
--------------------------------
Name: Keith W. Hughes
Title: Chairman of the Board, Principal
Executive Officer and Director

Signature: /s/ ROY A. GUTHRIE
--------------------------------
Name: Roy A. Guthrie
Title: Director, Senior Executive Vice
President and Chief Financial
Officer

Signature: /s/ JOHN F. STILLO
--------------------------------
Name: John F. Stillo
Title: Executive Vice President,
Comptroller and Principal
Accounting Officer

<ARTICLE> 5
<LEGEND>
0 MEANS NOT APPLICABLE OR NOT SEPARATELY DISCLOSED. THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S AUDITED CONSOLIDATED
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND THE YEAR THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 333
<SECURITIES> 2,667
<RECEIVABLES> 49,767
<ALLOWANCES> 1,408
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 296
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,180
<CURRENT-LIABILITIES> 0
<BONDS> 49,502
0
0
<COMMON> 147
<OTHER-SE> 9,132
<TOTAL-LIABILITY-AND-EQUITY> 60,180
<SALES> 7,528
<TOTAL-REVENUES> 7,528
<CGS> 0
<TOTAL-COSTS> 5,808
<OTHER-EXPENSES> 1,917
<LOSS-PROVISION> 943
<INTEREST-EXPENSE> 2,948
<INCOME-PRETAX> 1,720
<INCOME-TAX> 616
<INCOME-CONTINUING> 1,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,104
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>