ASSOCIATES FIRST CAPITAL CORP, 10-K, 2000-03-30

ASSOCIATES FIRST CAPITAL CORP
10-K, 2000-03-30
PERSONAL CREDIT INSTITUTIONS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 2-44197

ASSOCIATES FIRST CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 06-0876639
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
250 EAST CARPENTER FREEWAY 75062-2729
IRVING, TEXAS (Zip Code)
(Address of principal executive offices)
</TABLE>

Registrant's Telephone Number, including area code
972-652-4000

Securities Registered Pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ---------------------
<S> <C>
Class A Common Stock, New York Stock Exchange
par value $0.01 per share
</TABLE>

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

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the most recent New York Stock Exchange Composite
Transaction closing price of the Class A Common Stock ($19.625 per share), which
occurred on March 27, 2000, was $9,822,814,822. For purposes of this
computation, all officers, directors, and 5% beneficial owners of the registrant
are deemed to be affiliates. Such determination should not be deemed an
admission that such officers, directors, and beneficial owners are, in fact,
affiliates of the registrant. At March 27, 2000, 728,338,437 shares of the
Company's Class A Common Stock, par value $0.01 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE*

<TABLE>
<CAPTION>
DOCUMENT WHERE INCORPORATED
-------- ------------------
<S> <C>
Proxy Statement for 2000 Part III (Items 10, 11, 12 and 13)
Annual Meeting of Stockholders
</TABLE>

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* As stated under various Items of this Report, only certain specified portions
of such document are incorporated by reference herein.
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PART I

ITEM 1. BUSINESS.

COMPANY OVERVIEW

Associates First Capital Corporation ("First Capital" or the "Company"), a
Delaware corporation, is a leading, diversified financial services organization
providing finance, leasing, insurance and related services to individual
consumers and businesses in the United States and internationally. As successor
to Associates Investment Company, founded in 1918, First Capital had 2,771
offices worldwide and employed approximately 32,500 persons at December 31,
1999. Corporate headquarters are located in Irving, Texas.

For the year ended December 31, 1999, First Capital had total managed
revenues of $13.3 billion and net earnings of $1.5 billion. At December 31,
1999, managed finance receivables were $84.4 billion, total managed assets were
$95.1 billion and stockholders' equity was $9.8 billion.

The Company's finance receivables are geographically dispersed. At December
31, 1999, approximately 81% of total managed receivables were dispersed across
the United States with 9% in California, 7% in Texas and 6% in Florida; no more
than 4% in any other state. The remaining 19% of total managed receivables were
dispersed across 13 foreign countries, with 9% in Japan and no more than 5% in
any other foreign country.

The Company significantly expanded its consumer finance operations with the
acquisition of the assets of Avco Financial Services, Inc. (See "-- Significant
1999 Transactions"). This acquisition added over 2 million customers, over 1,200
branches at the time of the acquisition, and expanded the Company's present
geographic coverage to include Ireland, Spain, France, Sweden, Hong Kong, and
India.

SIGNIFICANT 1999 TRANSACTIONS

During 1999, First Capital completed several significant strategic
acquisitions and dispositions. Set forth below is a summary of the most
significant.

Significant 1999 Acquisitions:

- Avco Financial Services, Inc. ("Avco")

- Shell Oil and British Petroleum Private Label Credit Card Programs

- Newcourt Credit Group's Canadian and United Kingdom fleet leasing
operations ("Newcourt")

Significant 1999 Dispositions:

- 128 U.S. consumer finance branches acquired from Avco

- Associates recreational vehicle finance operations (Fleetwood Credit
Corporation)

- 41 consumer finance branches located in Canada (28 of which were former
Avco branches)

- The Australia and New Zealand operations acquired from Avco

- The SPS Network Transaction Services electronic transaction processing
services operation acquired in 1998.

- Balboa Life and Casualty Insurance Companies ("Balboa") which comprised
Avco's non-affiliate insurance business

The Avco acquisition was the largest in Company history and is described in
more detail below. The other acquisitions listed above are described in more
detail in the "-- Reportable Segments" and "-- Product Information" sections and
in Note 3 to the consolidated financial statements.

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Acquisition of Avco Financial Services, Inc.

On January 6, 1999, the Company purchased the assets and assumed the
liabilities of Avco. Avco, formerly a subsidiary of Textron Inc., was a global,
diversified financial services company with approximately $9 billion in assets,
8,000 employees, over 1,200 branches and over 2 million customers at the time of
the acquisition. Avco's product offerings included home equity lending, retail
sales finance and consumer loans, equipment, inventory and vendor finance, and
credit and collateral-related insurance. Prior to the acquisition, Avco had the
fourth largest U.S. consumer finance branch network and operations in Canada,
the United Kingdom, Puerto Rico, Australia, Hong Kong, France, Sweden, Spain,
New Zealand, Ireland and India.

As described in Note 3 to the consolidated financial statements, during
1999 the Company sold Avco's operations in Australia and New Zealand, as well as
156 former Avco branches (128 domestic and 28 Canadian) and Avco's non-affiliate
insurance business, Balboa Life and Casualty Insurance Companies. These sales
were initiated pursuant to the Company's acquisition, integration and capital
planning activities.

During the first two quarters of 1999, the Company consolidated certain
headquarters activities in the United States, the United Kingdom and Canada,
resulting in a reduction in the Company's workforce. In the United States,
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. Internationally, the Company closed its United Kingdom headquarters
in Slough, England and consolidated functions into the existing Avco facilities
in Reading, England. In addition, the Company closed its Canadian consumer
finance headquarters in Toronto, Ontario and consolidated these functions into
Avco's Canadian headquarters in London, Ontario. Certain other facilities
including the Avco Technology Center in Costa Mesa and Avco's Denver Purchasing
Center were also closed during 1999.

Pending Acquisitions

In December 1999, the Company announced an agreement to enter into an agent
bank partnership with KeyCorp, under which the companies will jointly manage
KeyCorp's credit card program. On January 31, 2000, the Company acquired
KeyCorp's credit card portfolio of approximately $1.3 billion in receivables and
nearly 600,000 active VISA(R) and MasterCard(R) accounts. In addition, the
Company acquired the rights to market credit card related products to KeyCorp's
more than 3 million customers through approximately 900 KeyCorp branches.

In November 1999, the Company 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 also
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 the Company 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.

In August 1999, the Company announced an agreement to acquire and manage
the proprietary credit card program of CITGO Petroleum Corporation. The
transaction closed in March 2000 and the Company acquired approximately $130
million in receivables under this agreement.

REPORTABLE SEGMENTS

The Company is organized into five primary business units: U.S. credit
card, U.S. consumer branch, U.S. home equity, commercial and international
finance. The U.S. consumer branch and U.S. home equity business units are
aggregated into one reportable U.S. consumer finance segment due to their
similar operating characteristics. The Company's corporate activities include,
among others, managing the operations of its domestic and foreign subsidiaries,
accessing the global debt, securitization and capital markets and managing the
mix of businesses in its portfolio. The Company fully allocates its corporate
activities to its business segments primarily based upon managed receivables. In
1999, these allocations included gains or losses on

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business dispositions and assets sold and securitized as set forth in Notes 3
and 7 to the consolidated financial statements. For additional information about
specific products and services offered by the Company, see the "-- Product
Information" section.

Some of the information disclosed in this section is presented on a Managed
Basis. Unless specifically identified as "managed" or "Managed Basis", the
financial information contained herein is presented on a basis consistent with
the amounts reported in the historical financial statements on an "Owned Basis".
See the "Management's Discussion and Analysis-Managed Basis Reporting" section
for more information on Managed Basis reporting. In addition, prior year amounts
presented have been restated, as necessary, to conform to the current year
presentation.

U.S. CREDIT CARD SEGMENT

The Company's U.S. credit card segment offers private label retail credit
card and revolving programs ("Private Label Cards") and VISA(R) and
Mastercard(R) retail bankcard credit card products ("Retail Bankcards") to
customers throughout the United States. Various credit-related and other
insurance products are also provided, including credit life, credit accident and
health, accidental death and dismemberment, involuntary unemployment and
personal property insurance. In addition, the U.S. credit card segment provides
emergency roadside assistance and auto club services.

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. The Company's credit card receivables
typically bear variable interest rates tied to movements in the prime lending
rate.

The Private Label Card business consists of customized revolving credit
programs for oil and retail companies. The Company's retail Private Label Card
program includes Radio Shack, Gateway, Goodyear, Staples, Office Depot and
Office Max, among others. The Company's oil Private Label program includes
Texaco, Amoco, Shell Oil and British Petroleum. The Shell Oil and British
Petroleum credit card programs were acquired during 1999, establishing the
Company as the leading provider of oil company credit cards in the United
States. In August 1999, the Company announced an agreement to acquire and manage
the proprietary credit card program of CITGO Petroleum Corporation. This
transaction closed in March 2000.

Retail Bankcards are issued across a wide spectrum of customers with
interest rates based on customer credit profiles. Bankcard operations were
expanded through the December 1998 agent bank agreement with Washington Mutual
Bank, FA. As mentioned below, in January 2000 the Company acquired the bankcard
portfolio from KeyCorp and entered into an ongoing agent bank partnership.

The following table shows certain information regarding the Company's U.S.
credit card segment:

U.S. CREDIT CARD

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
--------------------------------------------
1999 1998 1997
------------ ----------- -----------
(DOLLARS IN MILLIONS, ON A MANAGED BASIS(1))
<S> <C> <C> <C>
Total revenue..................................... $ 2,542.3 $1,968.9 $1,659.2
Net interest margin............................... 1,737.9 1,377.8 1,163.0
Net losses........................................ 721.4 623.3 573.9
60+days delinquency(2)............................ 4.21% 4.79% 3.99%
Segment earnings.................................. $ 441.1 $ 299.8 $ 199.7
Finance receivables............................... 10,928.3 9,622.0 7,839.3
</TABLE>

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(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
section for more information on Managed Basis reporting.

(2) As a percentage of gross managed receivables.

Customers. The Company's U.S. credit card segment customers are primarily
consumers who span a wide range of income levels and credit histories. The
Company uses a proprietary credit scoring model to

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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) and credit history. In addition, the U.S. credit card
segment serves business customers principally through its private label
products.

Delivery of Products and Services. The Company distributes its U.S. credit
card products through three subsidiaries, Hurley State Bank ("HSB"), Associates
National Bank (Delaware) ("ANB") and Associates Capital Bank, Inc. ("ACB").
Through these subsidiaries, the Company offers a number of Private Label and
Retail Bankcards directly to the public and through co-operative marketing
programs with other companies.

Private Label Cards are distributed through seven centralized operating
centers that provide marketing support for the merchant relationship, as well as
credit collection and card holder services. Retail Bankcards are distributed
through one centralized operating center that provides credit and collection
services, cardholder services and marketing support. A shared utility group
provides cardholder fulfillment services, including credit card embossing.
Emergency roadside assistance and autoclub services are provided through
centralized support facilities in Dallas, Texas and Gray, Tennessee.

Acquisitions. During 1999, the Company further strengthened its leadership
position in the oil private label credit card market through the acquisitions of
the Shell Oil and British Petroleum Private Label Cards programs. Approximately
three million new active customer accounts and approximately $400 million in
receivables were added through these acquisitions. Additionally, in August 1999
the Company announced an agreement to acquire approximately $130 million in
receivables from CITGO Petroleum Corporation and to manage its proprietary
credit card program. This transaction closed in March 2000. In December 1999,
the Company announced an agreement to acquire KeyCorp's retail bankcard
portfolio and jointly manage KeyCorp's credit card program. The transaction
closed on January 31, 2000. In addition, the Company acquired the rights to
market credit card related products to KeyCorp's more than 3 million customers
through approximately 900 KeyCorp branches.

U.S. CONSUMER FINANCE SEGMENT

The Company's U.S. consumer finance segment offers a variety of consumer
finance and insurance products and services to customers throughout the United
States (excluding Hawaii and Puerto Rico, which are included in the
international finance segment). Finance products and services offered by this
segment include home equity loans, personal loans, automobile financing and
retail sales finance. In addition, the Company, through certain subsidiaries and
third parties, makes available various credit-related and other insurance
products to its U.S. consumer finance customers, including credit life, credit
accident and health, involuntary unemployment, personal property insurance and
other non-credit products.

The following table shows certain information regarding the Company's U.S.
consumer finance segment:

U.S. CONSUMER FINANCE

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
----------------------------------------------
1999 1998 1997
------------ -------------- ------------
(DOLLARS IN MILLIONS, ON A MANAGED BASIS(1))
<S> <C> <C> <C>
Total revenue................................... $ 4,442.2 $ 3,828.7 $ 3,633.6
Net interest margin............................. 2,266.7 2,080.8 2,056.3
Net losses...................................... 765.2 615.7 514.8
60+days delinquency(2).......................... 3.77% 3.22% 2.73%
Segment earnings................................ $ 688.7 $ 655.9 $ 665.6
Finance receivables............................. 31,566.8 26,810.5 23,985.0
</TABLE>

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(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
section for more information on Managed Basis reporting.

(2) As a percentage of gross managed receivables.

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Customers. The Company's U.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.

Delivery of Products and Services. The Company distributes its U.S.
consumer finance and insurance products through branch offices and centralized
consumer lending operations as described below:

Branch System. At December 31, 1999, the Company's U.S. consumer finance
branch system consisted of approximately 1,081 geographically dispersed offices
with locations in the continental United States. These locations operate under
four different nameplates -- Associates Financial Services, TranSouth Financial,
First Family Financial Services and Kentucky Finance. In addition, the U.S. home
equity branch system consisted of 257 direct sales offices. All former Avco
branches are now operating under the Associates Financial Services nameplate.
Products distributed include direct origination of home equity loans, personal
loans, automobile finance and retail sales finance.

Centralized 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.

Avco Acquisition. On January 6, 1999, the Company completed the acquisition
of Avco. Avco's domestic finance receivables included in the U.S. consumer
finance segment were approximately $3.7 billion at December 31, 1998. These
receivables primarily consisted of home equity and personal loans and retail
installment contracts. The Company subsequently sold 128 branches which included
approximately $525 million of finance receivables. The acquisition of Avco
solidified the Company's market position in the domestic consumer finance sector
by increasing the Company's customer base at the time of the acquisition by over
2 million customers and adding over 4,000 dealers and merchant agreements. For
additional information regarding the Avco acquisition, see the "-- Company
Overview" section and Note 3 to the consolidated financial statements.

COMMERCIAL SEGMENT

The Company's commercial segment offers a variety of commercial finance and
insurance products to customers in the United States and Canada. Finance
products and services offered by this segment in the United States and Canada
include retail and wholesale financing and leasing products and services for
heavy-duty (Class 8) and medium-duty (Classes 3 through 7) trucks and truck
trailers and construction, material handling and other industrial and
communications equipment. The Company engages in a number of other commercial
activities, including auto fleet leasing and fleet management services,
government guaranteed lending, employee relocation services, truck trailer
rental services, warehouse lending and public finance.

The Company, through certain subsidiaries and third parties, also makes
available various credit-related and other insurance products to its commercial
segment customers and other customers, including commercial auto and dealers'
open lot physical damage, credit life and motor truck cargo insurance, and
commercial and public auto liability insurance. The Company also offers
specialty lines including general liability, directors and officers and errors
and omission insurance, and personal lines including homeowner and recreational
vehicle insurance.

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The Company has a centralized warehouse lending operation, which is
conducted through First Collateral Services, Inc. ("FCS"). FCS provides
short-term financing, secured by real estate mortgages, to mortgage companies
and other mortgage lenders.

COMMERCIAL

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
----------------------------------------------
1999 1998 1997
------------ ------------ ------------
(DOLLARS IN MILLIONS, ON A MANAGED BASIS(1))
<S> <C> <C> <C>
Total revenue(2)................................ $ 3,285.2 $ 2,591.7 $ 2,152.9
Net interest margin............................. 1,028.4 1,008.1 875.7
Net losses(3)................................... 245.8 111.3 67.3
60+days delinquency(3)(4)....................... 1.26% 1.21% 1.02%
Segment earnings(2)............................. $ 506.9 $ 510.5 $ 439.7
Finance receivables(3).......................... 27,948.6 26,469.6 22,304.2
</TABLE>

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(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
section for more information on Managed Basis reporting.

(2) Includes the revenues and earnings of the Company's non-affiliate insurance
operations of $504.7 million and $35.3 million, respectively in 1999. The
non affiliate insurance operations had no effect on net interest margin.

(3) As described in Note 22 to the consolidated financial statements, in January
2000 the Company announced its decision to discontinue the origination of
manufactured housing financing products. In addition, the Company sold its
recreational vehicle business in March, 1999. Net losses, on a pro forma
basis, excluding the impact of manufactured housing and recreational vehicle
operations would have been $104.8 million, $53.7 million and $36.4 million
for the years ended December 31, 1999, 1998 and 1997, respectively. 60+days
delinquency, on a pro forma basis, excluding the impact of manufactured
housing and recreational vehicle operations would have been 1.16%, 1.03% and
1.04% for the years ended December 31, 1999, 1998 and 1997, respectively.
Finance receivables, on a pro forma basis, excluding the manufactured
housing and recreational vehicle operations would have been $22.5 billion,
$19.2 billion and $17.1 billion at December 31, 1999, 1998 and 1997,
respectively.

(4) As a percentage of gross managed receivables.

Delivery of Products and Services. The Company distributes its commercial
finance and insurance products through branch and regional offices and
centralized commercial lending, leasing and service operations and general and
independent insurance agents, brokers and program administrators described
below:

Branch System. The Company provides truck and truck trailer financing,
equipment financing and leasing services, manufactured housing financing and
related insurance through 85 branch offices in the United States and Canada.
Additionally, approximately 300 salespeople regularly contact truck and truck
trailer dealers, construction equipment dealers and manufactured home retailers
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. In addition, insurance products are offered through
approximately 5,500 general and independent agents and brokers.

Centralized Lending, Leasing and Services. The Company utilizes ten
centralized operations to distribute lending, leasing and fee-based products and
services. The auto fleet leasing and fleet management services operation is
directed through Associates Fleet Services. Additionally, centralized operations
are used to provide material handling and industrial and communications
equipment products, employee relocation services and small business lending
programs.

Discontinuation of Manufactured Housing Loan Origination Activities. In
January 2000, the Company announced its decision to discontinue the origination
of retail installment and wholesale financing products for the manufactured
housing sector. The Company's decision follows disappointing operating results
and the unfavorable outlook for the sector. The Company closed substantially all
of its sales purchase offices in February 2000 and will close its regional loan
origination centers in the second quarter of 2000. The Company will service the
liquidation of the existing receivables through its centralized service facility
in Knoxville, Tennessee. The Company will limit its origination activities to
support of its contractual arrangements and loss mitigation initiatives. See
Note 22 to the consolidated financial statements.

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Sale of Recreational Vehicle Finance Business. Through March 1999, the
Company offered various recreational vehicle financing products. As described in
Note 3 to the consolidated financial statements, in March 1999 the Company sold
its recreational vehicle finance operation to NationsBank, N.A., a unit of
BankAmerica Corporation.

INTERNATIONAL FINANCE SEGMENT

The Company's international finance segment offers a variety of consumer
finance products and services to customers in Japan, Canada, the United Kingdom,
Puerto Rico, Sweden, Hong Kong, Spain, India, Mexico, Taiwan, Ireland and Costa
Rica. Commercial financing products are also offered in the United Kingdom, Hong
Kong, Puerto Rico, France, Mexico, Japan, India and Spain. Commercial finance
products offered in Canada are managed by the Company's commercial segment, and
are included in the commercial segment results. The Company, through certain
subsidiaries and other third parties, also offers various credit-related and
other insurance products to its customers, including credit life, credit
accident and health, accidental death and dismemberment, involuntary
unemployment and personal property insurance. The characteristics of the
international finance segment's customers are similar to those of their
counterparts in the U.S. consumer finance, U.S. credit card and commercial
segments.

In January 1999, the Company acquired the operations of Avco, expanding its
presence in Canada, the United Kingdom and Puerto Rico. Through the acquisition,
the Company also entered new markets in Sweden, Hong Kong, Spain, France, India,
Ireland, Australia and New Zealand. In June 1999, the Company completed the sale
of its Australia and New Zealand operations.

The following table shows certain information regarding the Company's
international finance segment:

INTERNATIONAL FINANCE

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
--------------------------------------------
1999 1998 1997
------------ ----------- -----------
(DOLLARS IN MILLIONS, ON A MANAGED BASIS(1))
<S> <C> <C> <C>
Total revenue..................................... $ 2,981.3 $1,640.2 $1,024.8
Net interest margin............................... 2,191.4 1,278.1 791.0
Net losses........................................ 483.7 215.7 94.0
60+days delinquency(2)............................ 2.60% 2.58% 1.93%
Segment earnings.................................. $ 740.2 $ 474.3 $ 335.0
Finance receivables............................... 13,971.0 8,462.2 4,278.0
</TABLE>

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(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
section for more information on Managed Basis reporting.

(2) As a percentage of gross managed receivables.

Delivery of Products and Services. The Company delivers international
finance products and services through approximately 1,300 consumer and
commercial branches and 25 centralized facilities. The Company's international
locations employ operational policies, practices and disciplines similar to
those of the Company's other segments but give appropriate consideration to
local laws and customs. Set forth below is a description of the Company's
international delivery systems at December 31, 1999.

- Japan. The Company operates 675 consumer branches, 10 centralized
consumer and credit card facilities and one commercial operation in Japan.
In addition, the Company offers consumer loans through 178 automated loan
machines ("ALMs"). These operations are principally conducted by AIC
Corporation ("AIC") and DIC Finance Co., Ltd., ("DIC"). Products offered by
AIC and DIC include home equity and personal loans, MasterCard(R) credit
cards, retail sales finance contracts and commercial transportation and
construction and industrial equipment financing.

- Canada. The Company operates 318 consumer finance branches and five
centralized consumer finance lending operations through which the Company
purchases retail sales finance contracts and makes personal and home equity
loans. Commercial finance products are also offered in Canada, but are

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managed by the Company's commercial finance operations. Accordingly,
Canada's commercial operations are included in the operations of the
commercial segment.

- United Kingdom. The Company operates 112 consumer and commercial
branches and three centralized lending and credit facilities through which
home equity and personal loans, credit cards, purchased consumer retail
sales finance contracts and commercial transportation and construction
equipment financing products are offered. In 1999, the consumer and
commercial operations expanded through the acquisition of Avco.

- Other International Operations. The Company has 83 branches in
Puerto Rico; 51 in Mexico; 11 in Spain; 10 in France; eight in Hong Kong;
seven in India; seven in Ireland; five in Costa Rica, two in Taiwan and one
in Sweden through which various consumer and commercial finance products
are provided. In February 2000, the Company discontinued loan originations
in Costa Rica. Accordingly, the Company consolidated its branch operations
into two offices which will liquidate the existing receivables portfolio.
Also, in January 2000, the Company expanded its international operations
into Norway.

PRODUCT INFORMATION

This section provides additional information about the products and
services offered by the Company. This information is provided on a Company-wide
product line basis. For information about the Company's reportable business
segments including selected segment financial information, product delivery
systems and customers see the "-- U.S. Credit Card Segment", "-- U.S. Consumer
Finance Segment", "-- Commercial Segment" and "-- International Finance Segment"
sections.

The following table shows certain information with respect to the Company's
managed receivables outstanding by product (in millions):

MANAGED RECEIVABLES OUTSTANDING(1)

<TABLE>
<CAPTION>
AT DECEMBER 31
---------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Home Equity........................... $27,480.3 $22,622.3 $18,796.0 $16,691.4 $14,316.3
Personal Lending/Retail Sales
Finance............................. 16,012.4 11,459.2 8,731.6 7,425.1 6,225.1
Truck and Truck Trailer............... 13,130.3 10,783.6 9,688.9 8,598.3 7,724.0
Credit Card........................... 11,733.6 10,296.8 8,323.7 6,023.8 4,984.6
Equipment............................. 6,977.3 6,114.0 5,300.5 4,571.8 3,781.7
Manufactured Housing(2)............... 5,494.8 5,193.5 3,526.9 2,547.5 2,049.3
Recreational Vehicles(3).............. -- 2,036.9 1,665.4 1,315.6 --
Auto Fleet Leasing.................... 2,070.1 1,589.7 1,551.1 1,090.8 330.8
Other Financial Services.............. 1,515.9 1,268.3 822.4 358.5 290.7
--------- --------- --------- --------- ---------
Total(4).................... $84,414.7 $71,364.3 $58,406.5 $48,622.8 $39,702.5
========= ========= ========= ========= =========
</TABLE>

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

(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
section for more information on Managed Basis reporting.
(2) As described in Note 22 to the consolidated financial statements, in January
2000, the Company announced its intention to discontinue its manufactured
housing loan origination activities.
(3) In March 1999 the Company sold its recreational vehicle finance business to
NationsBank, N.A., a unit of BankAmerica Corporation. See Note 3 to the
consolidated financial statements.
(4) Excluding manufactured housing and recreational vehicle receivables,
proforma managed receivables from ongoing operations would have been $78.9
billion, $64.1 billion, $53.2 billion, $44.8 billion and $37.7 billion at
December 31, 1999, 1998, 1997, 1996 and 1995, 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.

8
<PAGE> 10

Home equity loans have maturities of up to 360 months. Fixed rates were
charged on approximately 93% of home equity managed receivables outstanding at
December 31, 1999. Home equity loans may be secured by either first or second
mortgages. At December 31, 1999, approximately 76% of the aggregate net
outstanding balance of home equity lending receivables was secured by first
mortgages.

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, 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 upon
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 72 months.

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. Truck and truck trailer customers are principally located in the
United States and, to a lesser extent, in Canada and other countries.

The Company provides retail financing and leasing 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 and leasing
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 throughout the United States and, to a lesser extent,
Canada. Generally, such loans are short-term with variable (prime rate based)
rates and are secured by inventory.

9
<PAGE> 11

Credit Card Receivables. Credit card receivables consist primarily of
VISA(R) and MasterCard(R) bankcards and private label credit cards which are
marketed to the public directly and through co-operative marketing programs with
other companies. Bankcards are issued across a wide spectrum of customers with
interest rates based on customer credit profiles. Bankcard operations were
expanded through the December 1998 agent bank agreement with Washington Mutual
Bank, FA. In addition, in December 1999, the Company announced an agreement to
acquire the bankcard operations from KeyCorp and enter into an ongoing agent
bank partnership. The KeyCorp transaction closed on January 31, 2000. Combined
these relationships give the Company rights to market credit card products to
approximately 9 million customers through approximately 2,000 branches.

The private label credit card business consists of customized revolving
credit programs for retail and oil companies. The Company's retail Private Label
Card program includes Radio Shack, Gateway, Goodyear, Staples, Office Depot and
Office Max, among others. The Company's private label oil program includes
Texaco, Amoco, Shell Oil and British Petroleum. The Shell Oil and British
Petroleum credit card programs were acquired during 1999, establishing the
Company as the leading provider of oil company credit cards in the United
States. In August 1999, the Company announced an agreement to acquire and manage
the proprietary credit card program of CITGO Petroleum Corporation. In March
2000, the Company acquired approximately $130 million in receivables under this
agreement. The Company's private label relationships include approximately 38
million oil and retail customers and approximately 82,000 oil and retail
outlets. These relationships allow the Company to leverage the oil and retail
companies' brand names in order to cross sell related products and services to
these customers.

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, aircraft, communications and turf
maintenance equipment and golf cars in the United States, Canada, the United
Kingdom, Puerto Rico and France and to a lesser extent in other countries.
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.

Discontinuation of Manufactured Housing Loan Origination Activities. As
described in Note 22 to the consolidated financial statements, in January 2000,
the Company announced that it would discontinue its manufactured housing retail
installment loan origination operations. The Company will limit its origination
activities to support its contractual arrangements and loss mitigation
activities. Prior to this announcement, the Company purchased manufactured
housing retail installment contracts originated by retail dealers and provided
wholesale financing to approved manufactured housing dealers. In addition,
commercial business

10
<PAGE> 12

loans were offered to certain manufactured housing dealers to provide capital to
build new retail sales centers, update existing facilities or expand into
community parks.

Auto Fleet Leasing. The Company believes it is one of the leading providers
of auto fleet leasing and management services for corporations in the United
States, Canada and the United Kingdom with auto and light truck fleets of
generally 100 or more vehicles. These operations were expanded substantially in
June 1999 through the acquisition of Newcourt Credit Group's Canadian and U.K.
fleet management operations. 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.

Other Financial Services. 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. Historically the Company has
offered various credit and non-credit insurance products to its finance
customers through its consumer and commercial finance product delivery systems.
The Company expanded its insurance products and delivery systems through the
acquisitions of The Northland Company ("Northland") in December 1998 and Avco in
January 1999, as described below. Consumer related insurance products include
credit life, credit accident and health, accidental death and dismemberment,
involuntary unemployment and personal property insurance. Commercial related
insurance products offered 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.

11
<PAGE> 13

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(2) 1998 1997 1996 1995
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Written Premium
Credit life, accident and other
related............................. $ 384.9 $290.1 $307.1 $282.2 $240.6
Physical damage........................ 351.2 197.8 210.3 186.2 180.3
Other casualty and liability........... 436.6 103.7 91.3 75.9 69.6
-------- ------ ------ ------ ------
Total.......................... $1,172.7 $591.6 $608.7 $544.3 $490.5
======== ====== ====== ====== ======
Premium Revenue(3)
Credit life, accident and other
related............................. $ 306.6 $210.6 $201.4 $183.8 $164.8
Physical damage........................ 344.8 171.2 152.9 155.1 148.5
Other casualty and liability........... 404.3 89.7 66.4 63.2 57.3
-------- ------ ------ ------ ------
Total.......................... $1,055.7 $471.5 $420.7 $402.1 $370.6
======== ====== ====== ====== ======
Investment Income........................ $ 198.9 $ 98.5 $ 82.6 $ 71.7 $ 68.5
======== ====== ====== ====== ======
Benefits Paid or Provided................ $ 447.0 $158.1 $145.7 $148.2 $142.5
======== ====== ====== ====== ======
</TABLE>

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

(1) This table does not reflect any direct or indirect expenses that may be
associated with the Company's insurance operations. The Company markets its
insurance products through its consumer and commercial distribution systems
and, accordingly, does not allocate overhead and related expenses to its
insurance operations. This table also does not include the non-affiliate
insurance operations of Balboa, which were sold in 1999.

(2) The increase in the 1999 Net Written Premium and Premium Revenue relates
primarily to the acquisition of Northland and the affiliate insurance
operations of Avco.

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

As described below, the Company enhanced existing lines of insurance
products through the December 1998 acquisition of Northland and the January 1999
acquisition of Avco. The acquisition of Northland in December 1998 did not have
a significant impact on 1998 operating results.

Northland. The addition of Northland increased the Company's property and
casualty insurance business and enhanced the Company's existing lines of
insurance products. Northland operates through approximately 5,500 general
agents, independent agents and brokers. Historically, the Company has sold
credit-related insurance, mainly to customers of its consumer finance and
commercial finance operations. Northland's insurance products, which include
commercial auto (predominantly trucking), excess and surplus lines and
non-standard auto, complemented the Company's insurance business and
significantly expand its distribution capability. Nearly half of Northland's
writings are in lines of businesses the Company serves extensively through its
commercial finance operations. Northland completed its 13th consecutive year of
underwriting profit in 1999 with a combined ratio of 92.7. Northland and its
subsidiaries operate in 50 states and the District of Columbia and have
approximately 750 employees at their St. Paul, Minnesota headquarters and a
subsidiary in Scottsdale, Arizona. Northland is rated A+ (Superior) by A.M.
Best.

Avco. The acquisition of Avco included the operations of Balboa Casualty
and Life Insurance Companies. Balboa operated both affiliate and non-affiliate
insurance businesses. In November 1999, the Company sold its Balboa's
non-affiliate insurance business to Countrywide Insurance Group, Inc. The Balboa
acquisition significantly expanded the affiliate insurance business of the
Company's U.S. and international operations. Affiliate insurance relates to
insurance products distributed through the finance affiliates. Avco offered
insurance products to consumers and businesses in the United States, Canada and
the United Kingdom through its affiliated finance operations, as well as to
non-credit related customers. See Note 3 to the

12
<PAGE> 14

consolidated financial statements and the "-- Company Overview" section for more
information on the Avco acquisition and related dispositions.

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. As set forth below, the Company's policy generally
provides for charge-off of various types of accounts on a contractual basis.
Consumer direct and other installment and credit card receivables are charged to
the allowance for losses when they become 180 days contractually delinquent. All
other finance receivables are charged to the allowance for losses when any of
the following conditions occur: (i) the related security has been converted or
destroyed; (ii) the related security has been repossessed and sold or held for
sale for one year; or (iii) the related security has not been repossessed and
the receivable has become contractually delinquent for one year. A contractually
delinquent account is one on which the customer has not made payments as
contractually agreed. Finance charge accruals are 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.

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>
OWNED BASIS
Allowance for Losses Amount (in millions)....... $ 2,174.4 $ 1,978.7 $ 1,949.9 $ 1,563.1 $ 1,268.6
Allowance for Losses to Net Finance
Receivables................................... 3.16% 3.25% 3.53% 3.36% 3.20%
Allowance for Losses to Net Credit Losses(1).... 1.50x 1.74x 1.59x 1.77x 2.03x
</TABLE>

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

(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
managed 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
in some markets 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

13
<PAGE> 15

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.

U.S. Credit Card. Competition in the credit card industry has been intense
over the last several years. Large money-center banks have been seeking to
expand their credit card units through, among other things, aggressive pricing,
marketing and acquisitions. In addition, many non-bank competitors specialize in
certain growth strategies, such as partnership and database marketing. The
Company addresses these competitive pressures by focusing on targeted segments
of the domestic consumer market, co-branding relationships and its private label
credit card programs.

U.S. Consumer Finance. Traditional competitors in the U.S. consumer finance
segment 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, which is
primarily 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.

Commercial. In its commercial segment, 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, use 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.

International Finance. The competitors of the Company in the international
finance segment include those types of business entities which have
traditionally competed in the local and international markets. Competition
varies on the basis of product and local jurisdiction, with commercial banks,
credit card issuers, finance companies and vendors frequently constituting an
established source of competition. The Company's experience indicates that
primary competitive factors in its international markets vary from market to
market but may include product quality, customer service, risk management and
capital resources.

Insurance. The Company also competes with international, national and
regional insurance companies, as well as self-insurance programs and captive
insurers, to provide its credit related and non-credit related insurance
products. 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 is subject to regulation in most of the countries in which it
has operations, and is often required to obtain governmental licensing or
approval before commencing business. The Company's opera-

14
<PAGE> 16

tions in the United States are subject to extensive state and federal regulation
including, but not limited to, the following federal statutes and regulations:
The Consumer Credit Protection 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.

U.S. Credit Card. HSB is regulated by the FDIC and the South Dakota
Department of Commerce and Regulation -- Banking Division. ANB is under the
supervision of, and subject to examination by, the Office of the Comptroller of
the Currency ("OCC"). ANB's charter limits its activities to credit card
operations. In addition, ANB is subject to the rules and regulations of the
FDIC. ACB (formerly Associates Investment Corporation) is regulated by the FDIC
and the Utah Department of Financial Institutions. HSB, ANB and ACB are subject
to regulation relating to capital adequacy, leverage, loans, deposits, consumer
protection, community reinvestment, the payment of dividends, transactions with
affiliates and other aspects of operations.

In addition, 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 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.

U.S. Consumer Finance. These segments 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 in the United States have usury
laws which limit interest rates. Federal legislation in the United States
preempts state interest rate ceilings on first mortgage loans and state laws
which restrict various types of alternative home equity receivables, except in
those states which have specifically opted out of such preemption.

The Company is subject to the TILA and Regulation Z promulgated thereunder
in the United States. The TILA requires, among other things, disclosure of
pertinent elements of consumer credit transactions, including the finance
charges and the comparative costs of credit expressed in terms of an annual
percentage rate. The TILA disclosure requirements are designed to provide
consumers with uniform, understandable information with respect to the terms and
conditions of loans and credit transactions in order to enable them to compare
credit terms. The TILA also guarantees consumers a three-day right to cancel
certain credit transactions, including purchase money loan 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.

15
<PAGE> 17

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 covers 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.

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.

Commercial. 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. In the United States the Company is also required to comply with
certain provisions of the ECOA which are applicable to commercial loans.

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

International Finance. The international segment of the Company's finance
business is subject to diverse regulatory frameworks. Regulatory qualifications,
licensing procedures, interest rates, lending practices and regulatory reporting
requirements vary substantially from jurisdiction to jurisdiction.

In December 1999, the Japanese Government enacted legislation effective
June 1, 2000, which reduces the maximum allowable rate for all new loans and
borrowings, after the effective date, which financial institutions may charge
from 40.004% to 29.2%. As of December 31, 1999, approximately half of the
Company's consumer loans in Japan were below the newly enacted rate ceiling of
29.2%. While the legislation will have the effect of decreasing the maximum rate
of interest the Company may charge on new loans and borrowings, the Company
believes that the change will not have a material adverse impact on the
Company's operations. The Company is reviewing its products and services in
Japan as well as distribution channels, new products, and expense attributes to
minimize any impact of the rate change. Based on previous experiences, the
Company believes the decreases in the interest rate ceiling will result in
industry consolidation, creating opportunities for portfolio or business
acquisitions in Japan.

Insurance. The domestic and foreign operations of the Company are subject
to detailed regulation and supervision in each state or other jurisdiction in
which they conduct insurance related 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.

Ownership Limitations. Due to the nature of the Company's business and the
various countries in which certain of the Company's businesses are domiciled,
the acquisition of its equity securities beyond certain percentage levels may
not be permitted without regulatory approval. U.S. Federal and state banking
laws and state insurance regulations may limit ownership of the Company's equity
securities by certain entities. In addition, regulations of various governing
bodies in foreign countries where the Company or a subsidiary conducts business
also may limit an entity or affiliated entity's interest in the Company. The
information set forth herein is not meant to be complete, and any person or
entity investing in the Company should consult their own legal counsel regarding
such investment.

16
<PAGE> 18

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 2,771 offices worldwide. The Company owns its administrative headquarters in
Irving, Texas, consisting of approximately 550,000 square feet, and a
centralized processing center also located in Irving, Texas, consisting of
approximately 440,000 square feet.

ITEM 3. LEGAL PROCEEDINGS.

Various legal actions 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 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.

None.

17
<PAGE> 19

PART II

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

The Class A Common Stock of the Company is listed on the New York Stock
Exchange under the symbol AFS. The high and low sales prices for the Class A
Common Stock and the dividends paid per share of the Class A Common Stock for
each of the quarterly periods indicated were as follows:

<TABLE>
<CAPTION>
CLASS A COMMON STOCK PRICE PER SHARE(1)
---------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
1999
High..................................... 47 1/2 49 43 7/8 39 13/16
Low...................................... 36 7/16 38 1/2 33 11/16 26 3/16
Dividends per share of Class A Common
Stock and Class B Common Stock......... $0.055 $0.055 $0.055 $0.065
1998
High..................................... 41 5/16 42 3/4 43 3/8 43 11/16
Low...................................... 32 7/8 35 11/16 28 3/32 22 21/32
Dividends per share of Class A Common
Stock and Class B Common Stock(2)...... $0.050 $0.050 $0.050 $0.055
1997
High..................................... 26 5/16 29 11/16 33 1/8 36 9/32
Low...................................... 21 1/4 21 1/16 27 5/8 29 3/8
Dividends per share of Class A Common
Stock and Class B Common Stock......... $0.050 $0.050 $0.050 $0.050
</TABLE>

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

(1) Prices reflect composite exchange transactions. Prices and dividends are
adjusted to give retroactive recognition to a two-for-one split distributed
in the form of a dividend (the "Split") of the Company's Class A Common
Stock on December 23, 1998. One additional common share was issued on
December 23, 1998 for every common share held by stockholders of record as
of the close of business on December 9, 1998. The Split-adjusted initial
public offering price on May 8, 1996 would have been $14.50 per share.

(2) On April 7, 1998 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 the
shares of the Company's Class A Common Stock and, correspondingly no
dividends were paid on Class B Common Stock after such date.

As of March 27, 2000, stockholders of record of the Company included
approximately 187,367 holders of the Class A Common Stock. See Note 1 of the
consolidated financial statements regarding Ford's Spin-Off of its interest in
the Company.

The Company relies primarily on dividends and other intercompany fees from
its subsidiaries for the payment of dividends to holders of its Class A Common
Stock. Historically, the terms of certain agreements governing outstanding
indebtedness of Associates Corporation of North America ("Associates"), First
Capital's principal operating subsidiary, contain certain limitations on the
payment of dividends and certain other transfers of funds to the Company. The
Company's banking subsidiaries, HSB, ANB and ACB, and the Company's insurance
subsidiaries may pay dividends and make certain other transfers of funds to the
Company only up to amounts permitted by applicable banking and insurance
regulations, respectively, and the repatriation of funds from the Company's
foreign subsidiaries may be subject to withholding taxes or other restrictions.

The Company issued 340,668 and 115,000 restricted shares of Class A Common
Stock in 1999 and 1998, respectively. The Company awarded these shares to
certain employees contingent on their continued employment with the Company.
Such shares vest on the fifth anniversary of the date of issuance. The Company
believes the issuance of the above shares of common stock was exempt from the
registration requirements of the Securities Act of 1933 (the "Act") pursuant to
Section 4(2) of the Act.

18
<PAGE> 20

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. The information contained herein is presented on
a basis consistent with amounts reported in the historical financial statements
on an Owned Basis and 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, except per share information):

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Results of Operations
Total revenue.................... $12,131.2 $ 9,376.8 $ 8,278.6 $ 7,098.2 $ 6,107.2
Finance charge revenue........... 9,106.4 7,910.4 7,560.2 6,481.0 5,560.8
Interest expense................. 3,906.5 3,196.7 2,775.2 2,456.0 2,177.9
Net interest margin.............. 5,199.9 4,713.7 4,785.0 4,025.0 3,382.9
Operating expenses............... 3,894.4 2,798.0 2,339.6 2,002.9 1,754.7
Provision for losses............. 1,506.4 1,283.5 1,378.1 1,086.5 834.0
Insurance benefits paid.......... 447.0 158.1 145.7 148.2 142.5
Earnings before provision for
income taxes.................. 2,376.9 1,940.5 1,640.0 1,404.6 1,198.1
Provision for income taxes....... 886.5 717.0 608.3 547.6 475.0
Net earnings..................... 1,490.4 1,223.5 1,031.7 857.0 723.1
Basic earnings per share(1)...... 2.05 1.76 1.49 1.24 1.04
Diluted earnings per share(1).... 2.04 1.75 1.48 1.23 1.04
Balance Sheet Data
Finance receivables, net of
unearned finance income....... $68,817.1 $60,939.0 $55,215.6 $46,512.9 $39,702.5
Allowance for losses............. 2,174.4 1,978.7 1,949.9 1,563.1 1,268.6
Total assets..................... 82,956.8 75,175.4 57,232.7 48,268.4 41,303.9
Short-term debt (notes
payable)...................... 27,253.4 25,709.8 20,970.6 17,075.2 13,747.3
Long-term debt(2)................ 41,404.0 37,596.7 28,228.0 24,029.5 21,372.6
Stockholders' equity............. 9,800.5 8,526.5 6,268.6 5,437.5 4,801.1
Stockholders' equity per
share(1)(3)................... 13.46 11.72 9.05 7.84 6.92
Selected Data and Ratios
Total debt to equity(4).......... 7.0:1 7.4:1 7.8:1 7.5:1 7.2:1
Total debt to tangible
equity(4)(5).................. 11.3:1 9.5:1 9.5:1 9.7:1 9.9:1
Return on average assets(6)...... 1.78% 1.90% 1.95% 1.89% 1.89%
Return on average equity(6)...... 16.28 17.94 17.78 18.31 15.66
Return on average adjusted
equity(6)(7).................. 18.03 20.30 21.10 22.86 20.26
Allowance for losses to net
finance receivables........... 3.16 3.25 3.53 3.36 3.20
Allowance for losses to net
credit losses(8).............. 1.50x 1.74x 1.59x 1.77x 2.03x
Number of employees................ 32,486 28,662 22,582 18,984 16,647
Number of branch offices
Domestic......................... 1,470 1,478 1,568 1,634 1,543
International.................... 1,301 1,044 697 499 404
--------- --------- --------- --------- ---------
Total.................... 2,771 2,522 2,265 2,133 1,947
========= ========= ========= ========= =========
</TABLE>

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

(1) Per share information has been adjusted to give retroactive recognition to
the December 23, 1998 stock dividend described in Note 20 to the
consolidated financial statements.
(2) Includes current portion of long-term debt.
(3) Based on the basic shares outstanding for each year.
(4) Calculated net of short term investments.

19
<PAGE> 21

(5) Tangible equity is calculated as stockholders' equity minus goodwill as set
forth in Note 9 to the consolidated financial statements. Total debt to
tangible equity as adjusted on a pro forma basis to reflect the treatment as
equity of a $500 million debt security issued in July 1999, would have been
10.40:1 at December 31, 1999.

(6) During the first quarter of 1996, the Company paid a dividend to Ford
totaling $1.85 billion, of which $1.75 billion was in the form of an
intercompany interest bearing note. The Company repaid the $1.75 billion
intercompany note with Ford during the second quarter of 1996 and received
$1.85 billion as a result of the initial public offering. The amounts
presented for 1996 include the effect of these transactions. Excluding the
impact of these transactions, the Company's return on average assets, on
average equity and on average adjusted equity for the year ended December
31, 1996 would have been 1.93%, 17.09% and 20.94%, respectively.

(7) Excludes the push-down goodwill created by Ford's acquisition of foreign
affiliates of the Company in 1989.

(8) 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).

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

GENERAL

The Company is a leading diversified finance organization, which provides
finance, leasing, insurance and related services to individual consumers and
businesses. 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").

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.

MANAGED BASIS REPORTING

The discussion that follows includes amounts reported in the historical
financial statements ("Owned Basis") adjusted on a pro forma basis to include
certain effects of receivables held for securitization and receivables sold with
servicing retained ("Managed Basis"). On an Owned Basis, the net earnings on the
Company's retained securitization interests and receivables held for
securitization, as well as gains from subsequent sales in revolving
securitization structures, are included in servicing related income in the
consolidated statement of earnings. On a pro forma Managed Basis, these earnings
are reclassified and presented as if the receivables had neither been held for
securitization nor sold. The initial gains recorded on securitization
transactions are recorded in investment and other income on both an Owned and
Managed Basis. Management believes the discussion of pro forma Managed Basis
information is useful in evaluating the Company's operating performance.

20
<PAGE> 22

The following table contains selected pro forma Managed Basis financial
information (in millions):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Finance charges............................................. $11,483.0 $ 9,215.0 $ 7,832.2
Insurance premiums.......................................... 1,055.7 471.5 420.7
Investment and other income................................. 712.3 343.0 217.6
--------- --------- ---------
Total revenue............................................. 13,251.0 10,029.5 8,470.5
--------- --------- ---------
Interest expense............................................ 4,258.6 3,470.2 2,946.2
Operating expenses.......................................... 3,894.4 2,798.0 2,339.6
Provision for losses........................................ 2,274.1 1,662.7 1,399.0
Insurance benefits paid or provided......................... 447.0 158.1 145.7
--------- --------- ---------
Total expenses............................................ 10,874.1 8,089.0 6,830.5
--------- --------- ---------
Earnings before provision for income taxes.................. 2,376.9 1,940.5 1,640.0
Provision for income taxes.................................. 886.5 717.0 608.3
--------- --------- ---------
Net earnings................................................ $ 1,490.4 $ 1,223.5 $ 1,031.7
========= ========= =========
Net Finance Receivables
End of period............................................. $84,414.7 $71,364.3 $58,406.5
Average................................................... $79,088.6 $64,505.8 $53,899.7

Total Assets
End of period............................................. $95,088.0 $80,878.3 $60,154.8
Average................................................... $89,575.4 $68,836.8 $55,364.3
</TABLE>

RESULTS OF OPERATIONS

Summary of Results of Operations

The following table summarizes the Company's net 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.................. $2,376.9 $1,940.5 $1,640.0
Net earnings................................................ 1,490.4 1,223.5 1,031.7
Change in net earnings
Amount.................................................... $ 266.9 $ 191.8 $ 174.7
Percent................................................... 21.8% 18.6% 20.4%
Basic earnings per share.................................... $ 2.05 $ 1.76 $ 1.49
Diluted earnings per share.................................. 2.04 1.75 1.48
Return on average
Managed assets............................................ 1.66% 1.78% 1.86%
Equity.................................................... 16.28 17.94 17.78
Adjusted equity........................................... 18.03 20.30 21.10
</TABLE>

Earnings before provision for income taxes and net earnings increased in
each of the years ended December 31, 1999, 1998 and 1997. The principal factors
that influenced the changes in the Company's net earnings are described in the
sections that follow.

Management believes that the overall business factors and trends affecting
the profitability of the foreign subsidiaries are primarily the same as those
affecting the Company taken as a whole. Any business factors that are
significant and unique to international operations are discussed in this
section. See also the discussion of the impact of foreign currency and
regulatory related risks in the "-- Market Risk" section, the discussion in

21
<PAGE> 23

the "-- Competition" and "-- Regulation" sections, and in Note 17 to the
consolidated financial statements. As illustrated in Note 18 to the consolidated
financial statements, the Company derived approximately 31%, 24% and 20% of its
earnings before provision for income taxes in 1999, 1998 and 1997, respectively,
from its international finance segment.

Net Interest Margin -- Managed Basis

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

NET INTEREST MARGIN -- MANAGED BASIS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------------------
1999 1998 1997
---------------------- ---------------------- ----------------------
SEGMENT AMOUNT % OF AMR(1) AMOUNT % OF AMR(1) AMOUNT % OF AMR(1)
- ------- -------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Credit Card............... $1,737.9 17.18% $1,377.8 17.27% $1,163.0 15.02%
U.S. Consumer Finance.......... 2,266.7 7.43 2,080.8 8.14 2,056.3 9.19
Commercial..................... 1,028.4 3.91 1,008.1 4.14 875.7 4.40
International Finance.......... 2,191.4 18.04 1,278.1 19.36 791.0 20.50
-------- -------- --------
Total Company........ $7,224.4 9.13% $5,744.8 8.91% $4,886.0 9.06%
======== ======== ========
</TABLE>

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

(1) Expressed as a percentage of Average Managed Receivables ("AMR") of the
respective segment for the period.

The Company's total Managed Basis net interest margin increased on a dollar
basis in each segment in 1999 and 1998, primarily due to growth in average
managed finance receivables. The 1999 acquisition of Avco and the 1998
acquisitions of Associates Commerce Solutions Inc. ("ACS") (formerly SPS Payment
Systems Inc.), DIC Finance Co. Ltd, and Beneficial Canada Holdings, Inc.
("Beneficial Canada") contributed to the growth. Managed Basis net interest
margin expressed as a percentage of average managed receivables outstanding
("interest margin ratio") during 1999 increased primarily due to a slight shift
in product mix toward more unsecured receivables. Unsecured receivables
generally have a higher net interest margin than secured finance products.

The U.S. credit card segment increase in net interest margin on a dollar
basis in 1998 and 1999 was due primarily to the growth in average managed
receivables outstanding during both years. The increase in the interest margin
ratio in 1999 and 1998 compared to 1997 was primarily due to pricing initiatives
implemented during 1998 that effectively increased the amount of fee income
generated from these receivables.

The interest margin ratio for the U.S. consumer finance segment declined in
1999 as compared to 1998 and 1997 primarily as a result of a decline in finance
charge rates and a shift in product mix toward receivables secured by real
estate. Receivables secured by real estate generally have lower finance charge
rates than the other unsecured receivables offered by this segment, resulting in
a lower net interest margin.

A general decline in finance charge rates, due primarily to competitive
pressures, caused the decreases in the interest margin ratio for the commercial
segment during 1999 as compared to 1998 and 1997. The effect of this decline on
the 1999 ratio was somewhat offset by the impact of the Company's sale of the
recreational vehicle operations during the first quarter of 1999. Recreational
vehicle receivables generally had lower finance charge rates and interest margin
ratios than the other receivable products offered by the commercial segment.

The interest margin ratio for the international finance segment declined in
1999 as compared to 1998 and 1997, primarily as a result of the 1999 acquisition
of Avco and the 1998 acquisition of Beneficial Canada. The interest margin ratio
for the international finance segment is influenced by the higher margins in
Japan. With the acquisitions of Avco and Beneficial Canada, the amount of
receivables in Japan as a percent of total international finance receivables
declined and, accordingly, the impact of Japan's higher interest margin ratio on
the total international finance segment declined resulting in a lower average
interest margin ratio for the segment in 1999 and 1998. See discussion of the
impact of the June 2000 change in Japan's usury laws in the "-- Regulation"
section of Item 1.

22
<PAGE> 24

Finance Charges -- Managed Basis

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

FINANCE CHARGES -- MANAGED BASIS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Finance Charge Revenue...................................... $11,483.0 $9,215.0 $7,832.2
Yield(1).................................................... 14.51% 14.29% 14.53%
</TABLE>

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

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

Finance charge revenue increased, on a dollar basis, primarily due to the
growth in the average managed finance receivables during each period. 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. A
changing interest rate environment, changes in product mix and increased
competition were the primary causes of the movements in finance charge yield
from 1997 to 1999.

Interest Expense -- Managed Basis

Total dollars of Managed Basis interest expense increased in each of the
three years ended 1999. In each year, the increase was principally due to higher
average outstanding managed debt as a result of the Company's growth in managed
finance receivables. The increase in Managed Basis interest expense as a result
of growth 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 $1,055.7 million, $471.5 million, and $420.7
million for the years ended December 31, 1999, 1998 and 1997, respectively.
Insurance premium revenue, which is earned over the coverage term, increased
$584.2 million (123.9 %) in 1999, $50.8 million (12.1%) in 1998, and $18.6
million (4.6%) in 1997. The insurance operation is engaged in underwriting
credit-related and other specialized insurance products for finance customers.
Therefore, a significant portion of insurance sales, and resulting revenue, are
largely dependent on finance business activities and volume. The increase in
insurance revenue in each of the years was principally caused by increased sales
of insurance products associated with the increase in managed receivables
outstanding, the December 1998 acquisition of The Northland Company and the
January 1999 acquisition of the insurance operations of Avco Financial Services,
Inc. See Note 3 to the consolidated financial statements for more information
about these acquisitions.

Investment and Other Income -- Managed Basis

Managed Basis investment and other income for the years ended December 31,
1999, 1998 and 1997 was $712.3 million, $343.0 million and $217.6 million,
respectively. Managed Basis investment and other income primarily is derived
from fee-based businesses, such as employee relocation services, emergency
roadside assistance and auto club services, real estate title and appraisal
fees, trailer rental income, portfolio income and investment gains and losses.
Gains and losses on asset securitizations transactions and on sales and
dispositions of assets held for sale are also included in investment and other
income.

The increase in investment and other income in 1999 was primarily due to
(i) increased investment income of approximately $100 million on the insurance
portfolios principally due to the Northland and Avco acquisitions, (ii) net
gains of approximately $100 million on the securitization and sale of
receivables during 1999, (iii) approximately $117 million in income generated
from certain businesses and assets sold during 1999 and (iv) growth in the
Company's fee based businesses. The net operating results of business units and

23
<PAGE> 25

branches held for sale were recorded in investment and other income. No such
businesses were held for sale during 1998 or 1997. See Notes 3 and 7 to the
consolidated financial statements.

The increase in investment and other income from 1997 to 1998 was
principally due to higher investment income due to the growth in the Company's
investment portfolio and growth in fee-based businesses.

Operating Expenses

Operating expenses, on an Owned and Managed Basis, were as follows (dollars
in millions):

OPERATING EXPENSES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
AMOUNT % AMR AMOUNT % AMR AMOUNT % AMR
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaries and Benefits................... $1,700.2 2.15% $1,290.1 2.00% $1,110.5 2.06%
Occupancy and Supplies.................. 456.4 0.58 329.1 0.51 288.9 0.54
Data Processing and Communications...... 416.8 0.53 297.3 0.46 251.9 0.47
Advertising............................. 272.2 0.34 215.4 0.33 176.8 0.33
Other................................... 1,048.8 1.32 666.1 1.04 511.5 0.94
-------- ---- -------- ---- -------- ----
Total......................... $3,894.4 4.92% $2,798.0 4.34% $2,339.6 4.34%
======== ==== ======== ==== ======== ====
Managed Basis Efficiency Ratio.......... 45.6% 43.7% 43.5%
==== ==== ====
</TABLE>

Total operating expenses on a dollar basis increased from 1997 to 1999,
principally due to increased levels of business volume and outstanding
receivables in each of the years. As a percentage of average managed
receivables, total operating expenses increased from 1998 to 1999 and remained
flat from 1997 to 1998. In addition, the Company's total Managed Basis operating
efficiency, as measured by the ratio of total operating expenses to Managed
Basis revenues net of Managed Basis interest expense and insurance benefits paid
or provided (the "Efficiency Ratio") increased from 1997 to 1999. The increase
in other expenses included approximately $140 million in goodwill and other
intangible asset amortization, approximately $105 million in new business
expense and approximately $35 million in Avco related integration costs.
Furthermore, a slight shift in business mix toward more fee based business
caused by the acquisitions of The Northland Company and ACS during the fourth
quarter of 1998 also contributed to the overall increase. The Efficiency Ratio
has declined during each quarter of 1999 and in the fourth quarter 1999 reached
the pre-Avco acquisition level.

Allowance for Losses -- Owned Basis

24
<PAGE> 26

payments as contractually agreed. Finance charge accruals are suspended 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.
At December 31, 1999 and 1998, net finance receivables on which revenue was not
being accrued approximated $1.9 billion and $1.5 billion, respectively. The
interest income that would have been recorded if these nonaccruing receivables
had been current was approximately $51 million in 1999 and $34 million in 1998.

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.............................. $ 1,978.7 $ 1,949.9 $ 1,563.1
Provision for losses...................................... 1,506.4 1,283.5 1,378.1

Recoveries on receivables charged off..................... 268.8 237.7 224.9
Losses sustained.......................................... (1,717.1) (1,424.6) (1,454.0)
--------- --------- ---------
Net credit loss experience........................ (1,448.3) (1,186.9) (1,229.1)
--------- --------- ---------
Reserves of receivables sold or held for
securitization(1)...................................... (214.0) (334.7) --
Reserves of acquired businesses and other................. 351.6 266.9 237.8
--------- --------- ---------
Balance at End of Period.................................... $ 2,174.4 $ 1,978.7 $ 1,949.9
========= ========= =========
Allowance for Losses to Net Finance Receivables............. 3.16% 3.25% 3.53%
Loss Coverage Ratio(2)...................................... 1.50x 1.74x 1.59x
</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
in both 1999 and 1998, principally due to the securitization and sale of credit
card receivables. The 1999 and 1998 securitization transactions described in
Note 7 to the consolidated financial statements contributed to a general shift
in product mix on an owned basis from 1997 to 1999 towards more secured
portfolios. Secured portfolios generally have lower loss rates and therefore
lower allowance requirements than unsecured portfolios.

Management believes the allowance for losses at December 31, 1999 is
sufficient to provide for 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 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.

25
<PAGE> 27

Net Credit Losses and Contractual Delinquency

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

MANAGED BASIS CONTRACTUAL DELINQUENCY AND NET CREDIT LOSSES

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
------------------------------
SEGMENT 1999 1998 1997
- ------- -------- -------- --------
<S> <C> <C> <C>
60+Days Contractual Delinquency(1)
U.S. Credit Card.......................................... 4.21% 4.79% 3.99%
U.S. Consumer Finance..................................... 3.77 3.22 2.73
Commercial(2)............................................. 1.26 1.21 1.02
International Finance..................................... 2.60 2.58 1.93
Total............................................. 2.77% 2.57% 2.15%
Total dollars delinquent.......................... $2,478.7 $1,951.9 $1,355.1
Net Credit Losses to AMR
U.S. Credit Card.......................................... 7.13% 7.81% 7.41%
U.S. Consumer Finance..................................... 2.51 2.41 2.30
Commercial(2)............................................. 0.93 0.46 0.34
International Finance..................................... 3.98 3.27 2.44
Total............................................. 2.80% 2.43% 2.32%
Total dollars..................................... $2,216.1 $1,566.0 $1,250.0
</TABLE>

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

(1) As a percentage of gross managed receivables

(2) Commercial segment 60+days delinquency, on a pro forma basis, excluding the
impact of manufactured housing and recreational vehicle operations would
have been 1.16%, 1.03% and 1.04% for the years ended December 31, 1999, 1998
and 1997, respectively. Commercial segment managed net losses to average
managed receivables, on a pro forma basis, excluding the impact of
manufactured housing and recreational vehicle operations would have been
0.50%, 0.30% and 0.24% for the years ended December 31, 1999, 1998 and 1997,
respectively.

Managed basis contractual delinquencies and net credit losses on a dollar
basis increased in 1999 and 1998 primarily as a result of the growth in finance
receivables. As a percentage of AMR, managed basis contractual delinquencies and
net credit losses increased in 1999 and 1998 primarily as a result of the shift
in product mix toward more unsecured receivables. Unsecured receivables
generally have higher losses and delinquencies.

The U.S. credit card segment managed basis net credit losses to AMR
declined in 1999 compared to 1998 primarily because of decreasing loss levels in
private label portfolios. The increase in 1998 compared to 1997 was primarily
due to generally higher loss rates caused by the increase in consumer bankruptcy
levels during 1998.

The U.S. consumer finance segment managed basis contractual delinquencies
and net credit losses to AMR increased from 1998 to 1999 primarily as a result
of the Avco acquisition. This caused a shift in product mix toward more
unsecured receivables and higher losses in the home equity receivables
portfolio. From 1997 to 1998, the primary factor in the increase of contractual
delinquencies and net losses to AMR was higher consumer bankruptcy levels.

The commercial segment managed net credit losses to AMR increased in each
comparable period primarily due to higher losses in the retail manufactured
housing portfolio. In January 2000, the Company announced plans to discontinue
the origination of retail installment and wholesale financing products for the
manufactured housing sector. See Note 22 to the consolidated financial
statements.

The international finance segment managed contractual delinquencies and net
credit losses to AMR increased in each comparable period. The increases were
primarily the result of the first quarter 1999 acquisition of Avco, the first
quarter 1998 acquisition of Beneficial Canada and the second quarter 1998

26
<PAGE> 28

acquisition of DIC Finance Co. Ltd. These acquisitions resulted in a shift in
the segment product mix toward more unsecured portfolios. Unsecured portfolios
typically have higher losses than secured portfolios. Rising bankruptcy levels
also contributed to the increase in 1998.

Insurance Benefits Paid or Provided

Insurance benefits paid or provided were $447.0 million in 1999, $158.1 in
1998 and $145.7 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. Benefits paid or provided increased in 1999 as compared to 1998
and 1997, primarily as a result of more insurance in force resulting from the
acquisitions of Northland in December 1998 and Avco in January 1999.

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
TAX TAX TAX
AMOUNT RATE AMOUNT RATE AMOUNT RATE
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. statutory rate...................... $831.9 35.0% $679.2 35.0% $574.0 35.0%
State income taxes..................... 26.9 1.1 27.1 1.4 22.6 1.4
Non-deductible goodwill................ 26.2 1.1 17.9 0.9 6.1 0.4
Other.................................. 1.5 0.1 (7.2) (0.3) 5.6 0.3
------ ---- ------ ---- ------ ----
Provision for income taxes............... $886.5 37.3% $717.0 37.0% $608.3 37.1%
====== ==== ====== ==== ====== ====
</TABLE>

The effective tax rate decreased in 1998 principally due to an increase in
the utilization of foreign tax credits available to the Company. The available
foreign tax credits primarily related to estimated taxes paid or accrued by the
Company on its Japan-based earnings. In addition, the Company was allocated
foreign tax credits under a tax sharing agreement with Ford in 1998 and 1997.

The effective tax rate increase in 1999 compared to 1998 and 1997 is due to
an increase in non-deductible goodwill due primarily to the 1998 acquisitions of
the stock of Beneficial Canada and Northland.

The reduction in the effective state income tax rate in 1999 compared to
1998 and 1997 is attributable to an increase in foreign earnings as a percentage
of total Company earnings.

27
<PAGE> 29

FINANCIAL CONDITION

Growth in Managed Finance Receivables

The Company experienced growth in managed finance receivables in 1999 and
1998 as follows (dollars in millions):

GROWTH IN MANAGED FINANCE RECEIVABLES

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
---------------------------------------------------------
1999 1998
--------------------------- ---------------------------
INCREASE FROM INCREASE FROM
PRIOR YEAR PRIOR YEAR
--------------- ---------------
SEGMENT BALANCE AMOUNT % BALANCE AMOUNT %
- ------- --------- --------- --- --------- --------- ---
<S> <C> <C> <C> <C> <C> <C>
U.S. Credit Card Finance............... $10,928.3 $ 1,306.3 14 $ 9,622.0 $ 1,782.7 23
U.S. Consumer Finance.................. 31,566.8 4,756.3 18 26,810.5 2,825.5 12
Commercial(1).......................... 27,948.6 1,479.0 6 26,469.6 4,165.4 19
International Finance.................. 13,971.0 5,508.8 65 8,462.2 4,184.2 98
--------- --------- --------- ---------
Total Managed Receivables.... $84,414.7 $13,050.4 18 $71,364.3 $12,957.8 22
========= ========= ========= =========
</TABLE>

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

(1) Excluding manufactured housing and recreational vehicle receivables, the
managed receivables, dollar increase from prior year and percentage increase
from prior year would have been $22.5 billion, $3.2 billion and 17%, and
$19.2 billion, $2.1 billion and 12% for December 31, 1999 and 1998,
respectively.

The growth in managed receivables was primarily due to the January 6, 1999
acquisition of Avco. Internal managed receivable growth for 1999 adjusted for
announced acquisitions and dispositions was 44%. Had the Avco acquisition closed
at the end of 1998, internal managed receivable growth adjusted for announced
acquisitions and dispositions in 1999 would have been approximately 90%.

Debt

Total outstanding debt was $68.7 billion and $63.3 billion at December 31,
1999 and 1998, respectively. Such amounts of debt reflect net increases of $5.4
billion (8.5%) in 1999 and $14.1 billion (28.7%) in 1998. In both years, the
increase was primarily a result of the growth in net finance receivables. At
December 31, 1999 and 1998, short-term debt, including the current portion of
long-term debt, as a percent of total debt was 52% for both years. The current
portion of long-term debt at December 31, 1999 and 1998 was $8.8 billion and
$7.7 billion, respectively.

Stockholders' Equity

Stockholders' equity increased to $9.8 billion in 1999 from $8.5 billion in
1998. This increase was primarily due to 1999 net earnings and an unrealized
foreign currency gain of $31.7 million. This increase in stockholders' equity
was partially offset in 1999 by dividends paid of $167.5 million and unrealized
loss on securities of $93.8 million. The effects of foreign currency movements
were partially offset through the Company's use of derivative financial
instruments as described in Note 17 to the consolidated financial statements.

Liquidity/Capital Resources

Through its asset and liability management function, the Company maintains
a disciplined approach to the management of liquidity, capital, interest rate
risk and foreign exchange 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 and long-term debt, cash provided from the Company's operations and asset
securitizations. Management believes the Company

28
<PAGE> 30

has available sufficient liquidity, from a combination of cash provided from
operations, external borrowings and asset securitizations to support its
operations.

A principal strength of the Company is its ability to access the global
debt and capital 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 manages 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 domestic operations are
principally funded through domestic and international borrowings and asset
securitizations. The Company's foreign subsidiaries are principally funded
through private and public debt borrowings in the transactional currency and
fully hedged intercompany borrowings.

At December 31, 1999 and 1998, the Company had short- and long-term debt
outstanding of $68.7 billion and $63.3 billion, respectively. Short-term debt
principally consists of commercial paper 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's
principal operating subsidiary, Associates Corporation of North America, in the
United States and abroad, and to a lesser extent, private and public borrowings
made by the Company's foreign subsidiaries. During the years ended December 31,
1999 and 1998, the Company raised term debt aggregating $9.9 billion and $13.3
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 short-term
borrowings. 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 at least 75% coverage of the Company's recurring
commercial paper borrowings and utilized uncommitted lines of credit. See Note
10 to the consolidated financial statements.

The Company has access to other sources of liquidity such as the issuance
of alternative forms of capital, the issuance of common and preferred stock and
the increased use of asset securitization. The Company's securitization
transactions up to this point have included the manufactured housing, home
equity and credit card asset-backed classes. The Company has additional asset
classes in its portfolio which can be securitized, including asset classes
within its foreign operations.

The Company has entered into various support agreements on behalf of its
foreign subsidiaries. Under these support agreements, the Company has either
guaranteed specific issues of such subsidiaries' debt or agreed to supervise
operations in a responsible manner and to provide additional support on a
lender's reasonable request. See Notes 10, 11 and 17 to the 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

29
<PAGE> 31

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 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 $31 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

30
<PAGE> 32

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, which may (i) limit the Company's
ability to generate new finance receivables (ii) decrease the Company's
net interest margins and (iii) adversely affect the valuation of the
Company's interest sensitive assets.

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

- Decline in the values of collateral securing customer obligations
resulting in increased 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.

- The decline in stock price adversely affecting the Company's ability to
access the equity markets.

- Changes in any domestic or foreign governmental regulation affecting the
Company's ability to declare and pay dividends, conduct business, the
manner in which it conducts business or the level of 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
proposed products or services.

- Adverse results in litigation matters and governmental 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 and monetary fluctuations, foreign currency
exchange rate fluctuations and changes in tax rates or tax laws.

- Changes in generally accepted 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

31
<PAGE> 33

debt mix and developments in the global financial markets. The analytical
methods used by the Company to assess and mitigate these risks should not be
considered projections of future events or operating performance.

The Company is exposed to a variety of market risks, including the effects
of movements in interest rates and foreign currency. Interest rate and foreign
exchange rate exposures are monitored and managed by the Company as an integral
part of its overall risk management program. The principal goal of the Company's
risk management program is to reduce the potential impact of interest rate and
foreign exchange exposures on the Company's financial position and operating
performance. The Company utilizes derivative instruments, including foreign
currency forward exchange agreements and currency swaps as well as interest rate
swap and treasury lock agreements, as part of its overall risk management
program. See Notes 2 and 17 to 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.

Interest Rate Risk -- Managed Basis

Beginning in 1999, the Company began measuring interest rate risk on a
Managed Basis including both on- and off-balance sheet assets and liabilities.
Accordingly, certain prior period interest rate risk measures have been restated
to conform to the current year presentation. 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, all on a
Managed Basis. The Company measures its gap position at various time horizons,
ranging from three months to five years. At December 31, 1999, 1998 and 1997,
the one-year gap was a negative 5%, and a positive 3% 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 managed asset and liability
categories. For an immediate 1% increase in rates, projected annual after-tax
earnings on managed assets would have declined by 3.5% at December 31, 1999 and
less than 1% at December 31, 1998 and 1997. 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 Managed 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 with 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 $60 million, $19 million
and $11 million, respectively, as calculated under the VAR methodology. This
interest rate VAR averaged $23 million in 1999 and $17 million in 1998. The
primary reason for the 1999 increase in the results of the simulation model and
the VAR is attributed to an increase in the mix of floating rate debt at the end
of 1999.

Foreign Currency Risk

The Company is exposed to foreign currency risk from changes in the value
of underlying assets and liabilities of its non-United States dollar denominated
foreign investments. The Company has employed a variety of risk management tools
such as borrowing and lending in local currencies, converting offshore

32
<PAGE> 34

funding to US Dollars, as well as using derivative instruments to hedge its
investment in foreign subsidiaries. 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 three
material currency exposures, Japanese Yen, Canadian Dollars and British Pounds
Sterling. At December 31, 1999, 1998 and 1997 currency volatility would affect
annual after-tax earnings by approximately $4 million, $11 million and $4
million, respectively, as calculated under the VAR methodology. This currency
rate VAR averaged $1 million in 1999 and $3 million in 1998.

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's parameters. Therefore, such models do not substitute for the experience
or judgment of management to adjust positions and revise strategies as deemed
necessary.

33
<PAGE> 35

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Associates First Capital Corporation

We have audited the accompanying consolidated balance sheets 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
First Capital Corporation 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.

ERNST & YOUNG LLP

Dallas, Texas
January 27, 2000

34
<PAGE> 36

ASSOCIATES FIRST CAPITAL CORPORATION

CONSOLIDATED STATEMENT OF EARNINGS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
REVENUE
Finance charges........................................... $ 9,106.4 $7,910.4 $7,560.2
Servicing related income.................................. 1,256.8 651.9 80.1
Insurance premiums........................................ 1,055.7 471.5 420.7
Investment and other income............................... 712.3 343.0 217.6
--------- -------- --------
12,131.2 9,376.8 8,278.6
EXPENSES
Interest expense.......................................... 3,906.5 3,196.7 2,775.2
Operating expenses........................................ 3,894.4 2,798.0 2,339.6
Provision for losses on finance receivables............... 1,506.4 1,283.5 1,378.1
Insurance benefits paid or provided....................... 447.0 158.1 145.7
--------- -------- --------
9,754.3 7,436.3 6,638.6
--------- -------- --------
EARNINGS BEFORE PROVISION FOR INCOME TAXES.................. 2,376.9 1,940.5 1,640.0
PROVISION FOR INCOME TAXES.................................. 886.5 717.0 608.3
--------- -------- --------
NET EARNINGS................................................ $ 1,490.4 $1,223.5 $1,031.7
========= ======== ========
NET EARNINGS PER SHARE
Basic..................................................... $ 2.05 $ 1.76 $ 1.49
========= ======== ========
Diluted................................................... $ 2.04 $ 1.75 $ 1.48
========= ======== ========
</TABLE>

See notes to consolidated financial statements.

35
<PAGE> 37

ASSOCIATES FIRST CAPITAL CORPORATION

CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH AND CASH EQUIVALENTS................................... $ 1,026.3 $ 4,665.6
INVESTMENTS IN DEBT AND EQUITY SECURITIES................... 7,176.5 6,678.7
FINANCE RECEIVABLES, net of unearned finance income,
allowance for credit losses and insurance policy and
claims reserves........................................... 65,656.8 57,496.4
OTHER ASSETS................................................ 9,097.2 6,334.7
--------- ---------
Total assets...................................... $82,956.8 $75,175.4
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE, unsecured short-term
Commercial Paper.......................................... $25,991.9 $24,144.3
Bank Loans................................................ 1,261.5 1,565.5
ACCOUNTS PAYABLE AND ACCRUALS............................... 4,498.9 3,342.4
LONG-TERM DEBT
Senior Notes.............................................. 40,978.8 37,171.4
Subordinated and Capital Notes............................ 425.2 425.3
--------- ---------
41,404.0 37,596.7
STOCKHOLDERS' EQUITY
Series A Junior Participating Preferred Stock, $0.01 par
value, 734,500 shares authorized, no shares issued or
outstanding............................................ -- --
Class A Common Stock, $0.01 par value, 1,150,000,000
shares authorized, and 728,747,443 and 728,228,488
shares issued in 1999 and 1998, respectively........... 7.3 7.3
Class B Common Stock, $0.01 par value, 144,118,820 shares
authorized, no shares issued or outstanding............ -- --
Paid-in Capital........................................... 5,282.1 5,273.7
Retained Earnings......................................... 4,501.8 3,178.9
Accumulated Other Comprehensive Income.................... 44.7 106.8
Less 597,785 and 980,314 shares of Class A Common Stock
held at cost in Treasury in 1999 and 1998,
respectively........................................... (35.4) (40.2)
--------- ---------
Total stockholders' equity........................ 9,800.5 8,526.5
--------- ---------
Total liabilities and stockholders' equity........ $82,956.8 $75,175.4
========= =========
</TABLE>

See notes to consolidated financial statements.

36
<PAGE> 38

ASSOCIATES FIRST CAPITAL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS INCOME STOCK EQUITY
------ -------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996................... $3.5 $4,007.5 $1,204.3 $222.2 $ -- $5,437.5
Comprehensive income
Net earnings.................... 1,031.7 1,031.7
Other comprehensive loss, net of
tax........................... (49.6) (49.6)
-------- ------ --------
Total comprehensive
income................... 1,031.7 (49.6) 982.1
Cash dividends on Common Stock
($0.20 per share)............... (138.6) (138.6)
Treasury stock and other.......... (2.9) (9.5) (12.4)
---- -------- -------- ------ ------ --------
DECEMBER 31, 1997................... 3.5 4,004.6 2,097.4 172.6 (9.5) 6,268.6
Comprehensive income
Net earnings.................... 1,223.5 1,223.5
Other comprehensive loss, net of
tax........................... (65.8) (65.8)
-------- ------ --------
Total comprehensive
income................... 1,223.5 (65.8) 1,157.7
Sale of Class A Common Stock...... 0.2 1,266.5 1,266.7
Cash dividends on Common Stock
($0.205 per share).............. (142.0) (142.0)
Stock dividend.................... 3.6 (3.6) --
Treasury stock and other.......... 6.2 (30.7) (24.5)
---- -------- -------- ------ ------ --------
DECEMBER 31, 1998................... 7.3 5,273.7 3,178.9 106.8 (40.2) 8,526.5
Comprehensive income
Net Earnings.................... 1,490.4 1,490.4
Other comprehensive loss, net of
tax........................... (62.1) (62.1)
-------- ------ --------
Total comprehensive
income................... 1,490.4 (62.1) 1,428.3
Cash dividends on Common Stock
($0.23 per share)............... (167.5) (167.5)
Treasury stock and other.......... 8.4 4.8 13.2
---- -------- -------- ------ ------ --------
DECEMBER 31, 1999................... $7.3 $5,282.1 $4,501.8 $ 44.7 $(35.4) $9,800.5
==== ======== ======== ====== ====== ========
</TABLE>

See notes to consolidated financial statements.

37
<PAGE> 39

ASSOCIATES FIRST CAPITAL CORPORATION

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........................................... $ 1,490.4 $ 1,223.5 $ 1,031.7
Adjustments to reconcile net earnings for non-cash and
other operating activities:
Provision for losses on finance receivables......... 1,506.4 1,283.5 1,378.1
Amortization of goodwill and other intangible
assets............................................ 234.0 92.9 51.6
Depreciation and other amortization................. 278.0 247.1 271.0
Increase in insurance policy and claims reserves.... 131.7 2.5 70.7
Purchases of trading securities, net of sales and
maturities........................................ -- (0.3) (117.7)
(Decrease) increase in accounts payable and
accruals.......................................... (1,207.1) 78.6 21.6
Deferred income taxes............................... 173.3 28.2 (31.8)
Net gains on sale of assets and other............... (155.2) (3.6) (3.0)
---------- ---------- ----------
Net cash provided from operating activities.... 2,451.5 2,952.4 2,672.2
---------- ---------- ----------

Cash Flows from Investing Activities
Finance receivables originated or purchased............ (64,840.7) (55,346.9) (52,136.8)
Finance receivables liquidated......................... 55,705.9 44,118.2 40,715.6
Proceeds from securitizations and sales of finance
receivables......................................... 7,285.7 3,559.8 1,345.9
Sale of finance businesses and branches................ 2,216.8 -- --
Acquisitions of other finance businesses, net.......... (4,170.5) (2,692.4) (39.7)
Purchases of available-for-sale securities............. (2,503.5) (2,212.1) (319.3)
Sales and maturities of available-for-sale
securities.......................................... 1,497.6 1,482.3 301.9
Increase in other assets............................... (925.9) (807.4) (794.3)
---------- ---------- ----------
Net cash used for investing activities......... (5,734.6) (11,898.5) (10,926.7)
---------- ---------- ----------

Cash Flows from Financing Activities
Issuance of long-term debt............................. 9,892.7 13,266.1 8,183.5
Retirement of long-term debt........................... (9,015.7) (5,048.7) (3,773.3)
(Decrease) increase in notes payable................... (1,279.3) 3,966.0 3,903.1
Cash dividends......................................... (167.5) (142.0) (138.6)
Sale of Class A Common Stock........................... -- 1,266.7 --
Treasury stock and other............................... 22.4 (17.0) (12.4)
---------- ---------- ----------
Net cash (used for) provided from financing
activities................................... (547.4) 13,291.1 8,162.3
Effect of foreign currency translation adjustment on
cash................................................... 191.2 (112.6) 78.5
---------- ---------- ----------
(Decrease) increase in cash and cash equivalents......... (3,639.3) 4,232.4 (13.7)
Cash and cash equivalents at beginning of year........... 4,665.6 433.2 446.9
---------- ---------- ----------
Cash and cash equivalents at end of year................. $ 1,026.3 $ 4,665.6 $ 433.2
========== ========== ==========
Cash paid for:
Interest............................................... $ 3,889.4 $ 3,208.9 $ 2,741.5
========== ========== ==========
Income taxes........................................... $ 641.1 $ 584.6 $ 712.2
========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

38
<PAGE> 40

ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY

Associates First Capital Corporation ("First Capital" or the "Company"), a
Delaware corporation, is a leading diversified financial services organization
providing finance, leasing, insurance and related services to individual
consumers and businesses in the United States and internationally.

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, the Company made an initial public offering of 67 million shares
of its Class A Common Stock representing a 19.3% interest in the Company. 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 the Company's Class A Common Stock. Effective with
this distribution, First Capital was no longer a subsidiary of Ford and became a
fully independent company.

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 when the accounts
become 60 days contractually delinquent. The accrual is resumed when the loan
becomes contractually current. At December 31, 1999 and 1998, net finance
receivables on which revenue was not being accrued approximated $1.9 billion and
$1.5 billion, respectively. The interest income that would have been recorded in
1999 and 1998 if these nonaccruing receivables had been current was
approximately $51 million and $34 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.

39
<PAGE> 41
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Advertising Costs

Advertising costs are expensed as incurred. The advertising costs for 1999,
1998 and 1997 were $272 million, $215 million and $177 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 and each subsequent sale for revolving receivable
arrangements. Initial gains on securitization transactions are recorded in the
consolidated statement of earnings as investment and other income. The income
earned on securitization related securities retained by the Company, including
the recognition of the yield on such securities as well as subsequent sales for
revolving receivable arrangements, is recorded in the consolidated statement of
earnings as servicing related 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. Significant changes in
these assumptions could impact the recorded value of retained securitization
interests.

The securitization related securities are accounted for under Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Marketable 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 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.

40
<PAGE> 42
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Finance Receivables

Receivables 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

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

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.

Insurance Reserves

The reserves for future benefits and refunds upon cancellation of credit
life and health insurance and property and casualty insurance for the affiliate
insurance business are provided for in the unearned premium reserve for each
class of insurance. Affiliate insurance relates to insurance products
distributed through the finance affiliates. The Company classifies its
affiliated insurance reserves as a component of finance receivables because the
related policy benefits are generally included in the financed receivable
balance as shown in Note 7. The reserves for future benefits and refunds upon
cancellation of credit life and health insurance and property and casualty
insurance for the non-affiliate insurance business are provided for in accounts
payable and accruals for each class of insurance. In addition, reserves for
reported claims on credit accident and health
41
<PAGE> 43
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 using the
straight-line method over periods not exceeding forty years. Other intangible
assets, which are made up primarily of customer lists, operating agreements,
trademarks and credit card customer relationships 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 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 foreign subsidiaries are translated at the rate
of exchange in effect on the balance sheet date; income and expenses are
translated at the average rate of exchange prevailing during the year. The
related balance sheet translation adjustments are reflected in the stockholders'
equity section of the consolidated balance sheet while the impact of foreign
currency changes on income and expense items are included in earnings.

Foreign currency transactions resulted in net gains of approximately $3.2
million and $3.0 million during the years ended December 31, 1999 and 1998,
respectively, and a net loss of approximately $2.1 million during the year ended
December 31, 1997.

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. SFAS 131 also requires disclosures about products
and services, geographic areas, and major customers. The adoption of SFAS 131
did not affect results of operations or financial position of the Company, but
did affect the disclosure of segment information as illustrated in Note 18.

42
<PAGE> 44
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Derivative Financial Instruments

The Company uses derivative financial instruments for the purpose of
hedging specific exposures as part of its risk management program and generally
holds derivatives for purposes other than trading. Deferral (hedge) accounting
is applied only if the derivative reduces the risk of the underlying hedged item
and is designated at inception as a hedge with respect to the underlying hedged
item. Additionally, the derivative must result in cash flows that are expected
to be inversely correlated to those of the underlying hedged item. Such
instruments to date have been limited to foreign currency forward exchange,
currency swap, interest rate swap and treasury lock agreements. See Note 17 for
additional information related to derivative financial instruments.

Forward currency exchange agreements are used to hedge the Company's net
investment in Japan. Accordingly, unrealized translation gains and losses on
these agreements are recorded, net of tax, as a separate component of
accumulated other comprehensive income. The economic discount on such agreements
is recognized over the agreement life on a straight-line basis as an adjustment
to interest expense.

Foreign currency swap and interest rate swap agreements are used to hedge
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 asset securitization
transactions or debt issuances of the Company. Accordingly, the differential
paid or received by the Company on maturity of a treasury lock agreement is
recognized as an adjustment to interest expense over the term of the underlying
financing transaction.

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

Recent Accounting Pronouncements

NOTE 3 -- SIGNIFICANT ACQUISITIONS AND DISPOSITIONS

1999 Significant Acquisitions

In June 1999, the Company acquired the Newcourt Credit Group automotive
fleet management business. The transaction included Newcourt Fleet Services,
which operates in Canada, and Newcourt Automotive Services Limited, which
operates in the United Kingdom. The fair market value of the total assets
acquired was approximately $460 million.

In February 1999, the Company acquired the Shell Oil Proprietary Credit
Card program. The fair market value of the private label credit card receivables
acquired was approximately $260 million.

43
<PAGE> 45
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On January 6, 1999, the Company purchased the assets and assumed the
liabilities of Avco Financial Services, Inc. ("Avco") for $3.9 billion. Prior to
the acquisition, Avco, formerly a subsidiary of Textron Inc., was a global,
diversified financial services company with approximately $9 billion in assets.
Founded in 1927, Avco's product offerings included home equity lending, retail
sales finance and consumer loans, equipment, inventory and vendor finance, and
credit and collateral-related insurance. At the date of acquisition, Avco had
operations in the U.S., Canada, Puerto Rico, Australia, the United Kingdom, New
Zealand, France, Hong Kong, Spain, Ireland, India and Sweden. All intangibles
resulting from this transaction, primarily consisting of goodwill, customer
lists and trademarks, are being amortized using the straight-line method. As
described in the "Significant Dispositions" section that follows, certain of
these operations were subsequently sold by First Capital. The Company assumed
from Avco approximately $7.5 billion in debt and, after giving effect for the
sale of these operations, acquired approximately $6.0 billion in finance
receivables, $2.1 billion in goodwill and $690 million in other intangible
assets. In 1999 the Company expensed approximately $100 million in Avco related
goodwill and other intangible asset amortization and approximately $35 million
in Avco related integration costs. In addition, the Company established an
integration plan that identified the activities that would not be continued
after the acquisition and the cost of exiting those activities. Those costs
primarily consisted of severance costs and related expenses, lease termination
costs and other contractual liabilities. The total amount of the integration
cost reserve was approximately $146 million at the date of the Avco acquisition.
At December 31, 1999, the remaining integration reserve balance was
approximately $44 million. This amount was primarily comprised of unpaid lease
termination costs.

1998 Significant Acquisitions

In December 1998, the Company acquired The Northland Company ("Northland")
for approximately $660 million. Based in St. Paul, Minnesota, Northland provides
insurance products through Jupiter Holdings, Inc. and mortgage banking, real
estate management brokerage and related services through various other
subsidiaries. The Company acquired the insurance related business of Northland
only. Northland divested its other businesses prior to acquisition.

In October 1998, the Company purchased substantially all of the assets of
SPS Transaction Services, Inc. ("SPS"), including its wholly-owned subsidiaries,
SPS Payment Systems Inc. and Hurley State Bank. In addition, the Company
purchased certain receivables managed by SPS that were owned by an affiliate of
SPS, Mountain West Financial Corporation. The total purchase price was
approximately $1.4 billion. SPS processes credit card transactions, administers
consumer private-label credit card programs, processes commercial accounts
receivable and handles inbound telemarketing services. The Company completed
this transaction in October 1998, which added approximately $2.1 billion in
managed credit card receivables.

In April 1998, the Company acquired DIC Finance Co. Ltd., a consumer
finance company based in Japan. The fair market value of total assets acquired
and liabilities assumed was approximately $1.9 billion and $1.3 billion,
respectively.

In February 1998, the Company acquired Beneficial Canada Holdings
Incorporated, the Canadian consumer finance subsidiary of Beneficial
Corporation. The fair market value of total assets acquired and liabilities
assumed was approximately $1.0 billion and $716 million, respectively.

All of the transactions described above were accounted for as purchases,
and as such, the results of these operations are included in the consolidated
results of the Company from the respective acquisition dates.

The unaudited pro forma combined revenues, net earnings and net earnings
per basic and diluted share of the Company including the above transactions were
approximately $12.2 billion, $1.5 billion, $2.04 and $2.03, respectively, for
the year ended December 31, 1999 and $11.8 billion, $1.2 billion, $1.71 and
$1.70, respectively, for the year ended December 31, 1998. These unaudited pro
forma results include the historical

44
<PAGE> 46
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operating results of the significant 1999 and 1998 acquisitions and dispositions
related to these acquisitions and assume that these transactions occurred at the
beginning of each applicable period. Certain adjustments, including additional
common shares outstanding and 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 Acquisitions

In December 1999, the Company announced an agreement to enter into an agent
bank partnership with KeyCorp, under which the companies will jointly manage
KeyCorp's credit card program. Under the terms of the agreement, First Capital
also will acquire KeyCorp's credit card portfolio of approximately $1.3 billion
in receivables and nearly 600,000 active VISA(R) and MasterCard(R) accounts. The
transaction closed on January 31, 2000 (unaudited) and will be accounted for as
a purchase.

In November 1999, the Company 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 approximately $500 million of retail installment
sales contracts in November and December 1999. In the event of a termination of
the merger between the Company 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 (unaudited).

In August 1999, the Company announced an agreement to acquire and manage
the proprietary credit card program of CITGO Petroleum Corporation. The
transaction closed in March 2000 (unaudited) and the Company acquired
approximately $130 million in receivables.

Significant Dispositions

In November 1999, the Company closed the sale of its Balboa Life and
Casualty Insurance Group ("Balboa") to a subsidiary of Countrywide Credit
Industries, Inc. for approximately $425 million. First Capital acquired Balboa
when it purchased Avco Financial Services, Inc. in January 1999.

In July 1999, the Company sold the Network Transaction Services unit of its
Associates Commerce Solutions, Inc. subsidiary (formerly SPS Payment Systems,
Inc.) to Alliance Data Systems, a leading provider of electronic transaction
processing services for approximately $169 million.

In June 1999, the Company sold its Avco consumer and commercial finance
operations in Australia and New Zealand, which were acquired in the Avco
transaction, to General Electric Capital Corporation, a subsidiary of General
Electric Company, for approximately $493 million.

In June 1999, the Company sold 41 of its Canadian consumer branches to
Commercial Credit Corporation CCC Limited, a subsidiary of Citigroup, Inc., for
approximately $155 million. All of these branches were acquired from Avco in
January 1999.

In March 1999, the Company sold Fleetwood Credit Corporation, its
recreational vehicle financing subsidiary, to NationsBank, N.A., a unit of
BankAmerica Corporation for approximately $227 million.

45
<PAGE> 47
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In March 1999, the Company sold 128 domestic consumer finance branches to
Commercial Credit Corporation, a subsidiary of Citigroup, Inc., for
approximately $640 million. All of these branches were acquired from Avco in
January 1999.

The operating income recorded on the above dispositions was included in
investment and other income from January 1, 1999 through the date of the related
sale. The operating income and any related net gains or losses on the above
dispositions recorded in investment and other income during 1999 was
approximately $117 million.

NOTE 4 -- EARNINGS PER SHARE

Earnings per share on a basic and diluted basis is calculated as follows
(in millions, except per share amounts and adjusted for the stock dividend
described in Note 20):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Basic net earnings per share:
Net earnings......................................... $1,490.4 $1,223.5 $1,031.7
Weighted average shares outstanding.................. 728.1 695.8 693.0
$ 2.05 $ 1.76 $ 1.49
======== ======== ========
Diluted net earnings per share:
Net earnings......................................... $1,490.4 $1,223.5 $1,031.7
Weighted average shares outstanding plus assumed
conversions....................................... 731.5 699.9 695.9
$ 2.04 $ 1.75 $ 1.48
======== ======== ========
Calculation of weighted average shares outstanding plus
assumed conversions:
Weighted average shares outstanding.................. 728.1 695.8 693.0
Effect of dilutive securities options(1)............. 3.4 4.1 2.9
-------- -------- --------
731.5 699.9 695.9
======== ======== ========
</TABLE>

(1) At December 31, 1999, 12,251,465 outstanding stock options were not included
in the computation of 1999 diluted net earnings per share because these
options' exercise price was greater than the average market price of common
shares outstanding.

NOTE 5 -- 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 for
the years ended 1999, 1998 and 1997 is reported in the Company's consolidated
statement of changes in stockholders' equity. Total

46
<PAGE> 48
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accumulated other comprehensive income is reported in the Company's consolidated
balance sheet. The components of accumulated other comprehensive income, net of
tax, are as follows (in millions):

<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Foreign currency translation adjustments.................. $ 148.8 $117.1 $168.2
Net unrealized (loss) gain on available-for-sale
securities.............................................. (104.1) (10.3) 4.4
------- ------ ------
Accumulated other comprehensive income.................. $ 44.7 $106.8 $172.6
======= ====== ======
</TABLE>

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
---------------------------------------
BEFORE TAX TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT
---------- ------------- ----------
<S> <C> <C> <C>
Foreign currency translation adjustments.......... $ 50.6 $(18.9) $ 31.7
Unrealized losses on available-for-sale
securities:
Unrealized holding losses arising during the
period....................................... (140.7) 50.4 (90.3)
Less: reclassification for gains realized in net
income....................................... (5.5) 2.0 (3.5)
------- ------ ------
Net unrealized losses................... (146.2) 52.4 (93.8)
------- ------ ------
Other comprehensive income (loss)............... $ (95.6) $ 33.5 $(62.1)
======= ====== ======
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------------
BEFORE TAX TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT
---------- ------------- ----------
<S> <C> <C> <C>
Foreign currency translation adjustments.......... $ (81.1) $ 30.0 $ (51.1)
Unrealized losses on available-for-sale
securities:
Unrealized holding losses arising during the
period....................................... (23.4) 8.6 (14.8)
Less: reclassification for losses realized in
net income................................... 0.2 (0.1) 0.1
------- ------- -------
Net unrealized losses................... (23.2) 8.5 (14.7)
------- ------- -------
Other comprehensive income (loss)............... $(104.3) $ 38.5 $ (65.8)
======= ======= =======
</TABLE>

NOTE 6 -- INVESTMENTS IN DEBT AND EQUITY SECURITIES

Available-for-Sale Securities

Available-for-sale securities consist of retained securitization interests
(as described in Notes 2 and 7), bonds, notes and preferred stock and other
equity securities. As applicable, 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, gross realized gains and losses on sales of investments in
debt and equity securities amounted to $6.3 million and $11.4 million,
respectively. During 1998, gross realized gains and losses on sales of
investments in debt and equity securities amounted to $26.0 million and $2.4
million, respectively. Unrealized gains or losses are reported as a component of
accumulated other comprehensive income, net of tax. During the fourth quarter of
1999, the Company wrote down its retained interests in certain manufactured
housing transactions by approximately $26 million. This write down represented a
permanent impairment in the value of these investments. Accordingly, the loss
resulting from this write down was recorded in investment and other income.

47
<PAGE> 49
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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........... $4,040.7 $ -- $ (25.9) $4,014.8
Preferred stock............................. 708.3 13.5 (93.6) 628.2
Municipal bonds............................. 250.1 3.0 (4.1) 249.0
Other....................................... 33.0 -- -- 33.0
Insurance Subsidiaries
Mortgage-backed........................... 602.1 0.1 (15.9) 586.3
Municipal obligations..................... 417.1 0.1 (23.6) 393.6
Corporate obligations..................... 573.4 0.1 (17.9) 555.6
Preferred stock........................... 200.9 1.1 (16.2) 185.8
U.S. government obligations............... 317.9 0.2 (10.3) 307.8
Other equity securities................... 5.2 1.0 (0.3) 5.9
Other..................................... 194.4 0.4 (5.1) 189.7
-------- ----- ------- --------
Total available-for-sale
securities...................... $7,343.1 $19.5 $(212.9) $7,149.7
======== ===== ======= ========
</TABLE>

<TABLE>
<CAPTION>
1998
-----------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED HOLDING HOLDING MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Retained securitization interests........... $4,016.8 $ 0.9 $ -- $4,017.7
Preferred stock............................. 718.7 2.4 (28.7) 692.4
Other....................................... 2.5 -- -- 2.5
Insurance Subsidiaries
Mortgage-backed........................... 567.9 3.7 (0.6) 571.0
Municipal obligations..................... 431.3 2.9 -- 434.2
Corporate obligations..................... 338.7 1.5 (1.0) 339.2
Preferred stock........................... 149.9 0.8 (0.6) 150.1
U.S. government obligations............... 108.9 0.9 (1.0) 108.8
Other equity securities................... 105.9 -- -- 105.9
Other..................................... 235.4 1.1 (0.4) 236.1
-------- ----- ------- --------
Total available-for-sale
securities...................... $6,676.0 $14.2 $ (32.3) $6,657.9
======== ===== ======= ========
</TABLE>

48
<PAGE> 50
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The amortized cost and estimated market value of available-for-sale
securities at December 31, 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..................................... $ 112.9 $ 115.1
Due in one year through five years.......................... 638.3 625.3
Due after five years through ten years...................... 642.1 615.2
Due after ten years......................................... 977.7 942.4
-------- --------
Subtotal............................................... 2,371.0 2,298.0
Retained securitization interests........................... 4,040.7 4,014.8
Equity securities........................................... 931.4 836.9
-------- --------
Total............................................. $7,343.1 $7,149.7
======== ========
</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.

NOTE 7 -- 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................................................. $25,015.0 $22,458.2
Personal lending and retail sales finance................... 16,012.4 11,459.2
Truck and truck trailer..................................... 13,130.3 10,783.6
Equipment................................................... 6,977.3 6,114.0
Credit card................................................. 2,247.1 3,138.1
Auto fleet leasing.......................................... 2,070.1 1,589.7
Manufactured housing(1)..................................... 1,849.0 3,648.2
Recreational vehicles(2).................................... -- 479.7
Warehouse lending and other(3).............................. 1,515.9 1,268.3
--------- ---------
Finance receivables, net of unearned finance income ("net
finance receivables")(4)............................... 68,817.1 60,939.0
Allowance for losses on finance receivables................. (2,174.4) (1,978.7)
Insurance policy and claims reserves(5)..................... (985.9) (1,463.9)
--------- ---------
Finance receivables, net of unearned finance income,
allowance for losses and insurance policy and claims
reserves............................................... $65,656.8 $57,496.4
========= =========
</TABLE>

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

(1) As described in Note 22, in January 2000, the Company announced its
intention to discontinue its manufactured housing loan origination
operations.

49
<PAGE> 51
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(2) As described in Note 3, the Company sold its recreational vehicle finance
business in March 1999.

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

(4) Unearned finance income was approximately $4.7 billion and $4.0 billion at
December 31, 1999 and 1998, respectively.

(5) At December 31, 1998, insurance policy and claims reserves included
approximately $678 million of non-affiliate insurance reserves. The December
31, 1999 balance only includes affiliate insurance reserves: non-affiliate
insurance reserves of approximately $721 million are included in accounts
payable and accruals.

Securitizations and Sales of Finance Receivables

During 1999 approximately $1.6 billion of the Company's private label
credit card receivables were securitized and sold to a master trust.
Additionally, approximately $2.3 billion of the Company's investment in the
Bankcard securitization master trust formed in 1998 was sold during 1999. The
Company received $3.2 billion in proceeds from these transactions, of which $2.6
billion was in the fourth quarter, and retained securitization interests in the
master trust of approximately $770 million.

During the fourth quarter of 1999, the Company securitized and sold
approximately $2.4 billion of home equity receivables. The Company received
approximately $2.0 billion in proceeds from this transaction and retained
approximately $460 million in interests in the securitization trusts. Also
during the fourth quarter of 1999, the Company sold a home equity receivables
portfolio of approximately $80 million.

During the third quarter of 1999, approximately $2.5 billion of the
Company's manufactured housing receivables were securitized and sold to a trust.
The Company received $2.0 billion in proceeds from this transaction and retained
$500 million in interests in the trust.

During the fourth quarter of 1998, approximately $1.8 billion of the
Company's private label credit card receivables were securitized and sold to a
master trust. The Company received $1.3 billion in proceeds from the transaction
and retained a $0.5 billion certificated interest in the master trust.

During the second quarter of 1998, approximately $5.2 billion of the
Company's U.S. bankcard credit card receivables were securitized and sold to a
master trust. The Company received $2.0 billion in proceeds from the transaction
and retained a $3.2 billion certificated interest in the master trust.

During the first quarter of 1998, approximately $235 million of home equity
lending receivables were also securitized and sold by the Company.

During 1997, the Company securitized and sold approximately $800 million of
manufactured housing, retail finance receivables and approximately $533 million
of recreational vehicle retail finance receivables, respectively.

In the aggregate, the Company recorded a net gain of approximately $100
million in 1999 on the above transactions, of which approximately $68 million
was recorded in the fourth quarter. No significant net gain or loss was recorded
in the 1998 or 1997 securitization transactions.

In each of these transactions, the Company retained servicing
responsibilities for the receivables sold. The retained securitization
interests, as described in Notes 2 and 6, are classified as available-for-sale
investment securities on the consolidated balance sheet.

50
<PAGE> 52
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The table below summarizes the significant assumptions used to value the
Company's retained securitization interests at December 31, 1999:

<TABLE>
<CAPTION>
CREDIT HOME EQUITY MANUFACTURED
CARD LENDING HOUSING
------ ----------- ------------
<S> <C> <C> <C>
Weighted average discount rate(1)........................... 12% 10% 11%
Projected prepayment rate................................... n/m 20-30% 10-12%
Projected loss rate(2)...................................... 8-10% 8% 9-12%
</TABLE>

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

(1) Represents the weighted average discount rate used to value the retained
interest components which include interest only strips and subordinated and
other retained interests.

(2) Loss rates are annualized and exclude recoveries for credit card and
cumulative for home equity and manufactured housing.

The above assumptions are consistent with those used to determine the
initial retained interest valuation and the gains on 1999 securitization
transactions. In addition to the assumptions noted above, the Company utilized
certain transaction structures that included written put options to the
investors. These put options had the impact of reducing the securitization gains
recognized in 1999 by approximately $23 million. See Note 16 for additional
information.

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........................................................ $15,889.9
2001........................................................ 10,609.7
2002........................................................ 8,072.5
2003........................................................ 6,436.5
2004 and thereafter......................................... 27,808.5
---------
$68,817.1
=========
</TABLE>

It is the Company's experience that a substantial portion of the 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.

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....................................... $ 7,766.4 $ 6,841.8
Unearned finance income..................................... (1,143.5) (1,016.0)
--------- ---------
Net investment in direct financing leases................... $ 6,622.9 $ 5,825.8
========= =========
</TABLE>

51
<PAGE> 53
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future net minimum lease rentals on direct financing leases for each of the
years succeeding December 31, 1999 are as follows (in millions):
2000 -- $1,884.9; 2001 -- $1,333.9; 2002 -- $1,231.1; 2003 -- $1,111.4;
2004 -- $619.1 and 2005 and thereafter -- $442.5.

Dispersion of Finance Receivables

The Company has geographically dispersed finance receivables. At December
31, 1999, approximately 77% of the Company's Owned Basis total receivables were
dispersed across the United States, and the remaining 23% were in foreign
countries. Of the total receivables, 11% were in Japan, 8% in California, 6% in
Canada, 6% in Texas and 5% in Florida; no other individual state or foreign
country had more than 4%.

NOTE 8 -- 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...................... $ 1,978.7 $ 1,949.9 $ 1,563.1
Provision for losses.............................. 1,506.4 1,283.5 1,378.1
Recoveries on receivables charged off............. 268.8 237.7 224.9
Losses sustained.................................. (1,717.1) (1,424.6) (1,454.0)
Reserves of receivables sold or held for
securitization(1).............................. (214.0) (334.7) --
Reserves of acquired businesses and other......... 351.6 266.9 237.8
--------- --------- ---------
Balance at end of period............................ $ 2,174.4 $ 1,978.7 $ 1,949.9
========= ========= =========
</TABLE>

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

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

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............................................... $3,747.8 $1,890.4
Notes and other receivables................................. 1,877.9 1,172.9
Other intangible assets, net................................ 1,579.4 929.8
Property and equipment...................................... 662.2 608.7
Collateral held for resale.................................. 431.7 297.4
Relocation client advances.................................. 185.4 171.8
Finance receivables held for sale or securitization, net.... 153.0 812.2
Other....................................................... 459.8 451.5
-------- --------
Total............................................. $9,097.2 $6,334.7
======== ========
</TABLE>

Reductions as a result of goodwill amortization were $128.8 million and
$67.1 million for 1999 and 1998, respectively. Reductions as a result of other
intangible asset amortization were $105.2 million and $25.8 million for 1999 and
1998, respectively. Goodwill and other intangible assets are net of accumulated
amortization of $644.3 million and $396.0 million at December 31, 1999 and 1998,
respectively, and related deferred tax liabilities. Other changes in the amount
of goodwill were principally due to changes in foreign exchange rates which
impact the translation of foreign currency denominated goodwill recorded on the
books of the Company's international subsidiaries.

52
<PAGE> 54
ASSOCIATES FIRST CAPITAL CORPORATION

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>
Domestic
Lines of credit........................................... $ 4,272.8
Syndicated credit facilities.............................. 14,455.0
---------
Total domestic.................................... 18,727.8
Foreign
Lines of credit........................................... 45.0
Syndicated credit facilities.............................. 2,821.1
---------
Total foreign..................................... 2,866.1
---------
Total domestic and foreign........................ $21,593.9
=========
</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 Associates Corporation of North America.

Lines of credit and syndicated credit facilities may be withdrawn only
under certain standard conditions, including, as to the credit facilities
identified above, 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. As to the credit facilities of the foreign
operations, in addition to the foregoing standard conditions, certain facilities
contain provisions which prohibit withdrawals as a result of any material
adverse changes in the financial conditions of such operations. The Company
principally pays fees for the availability of its credit facilities. These
credit facilities are used to support commercial paper borrowings and utilized
uncommitted lines of credit.

Limitation on Minimum Tangible Net Worth

Restrictions defined in certain syndicated credit facilities require 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 $6.1 billion.

NOTE 11 -- NOTES PAYABLE

Commercial paper notes are issued by the Company in the minimum amount of
$100,000 with terms generally from one to 270 days. Bank loan terms range from
one to 365 days. Information pertaining to the Company's commercial paper notes
and bank loans is set forth below for the periods indicated (dollar amounts in
millions):

<TABLE>
<CAPTION>
COMMERCIAL BANK
PAPER NOTES LOANS
----------- --------
<S> <C> <C>
Domestic Notes Payable
Ending balance at December 31, 1999....................... $18,991.0 $ 990.7
Weighted average interest rate at December 31, 1999....... 5.62% 4.92%
Ending balance at December 31, 1998....................... $20,578.6 $1,070.7
Weighted average interest rate at December 31, 1998....... 5.18% 6.05%
</TABLE>

53
<PAGE> 55
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
COMMERCIAL BANK
PAPER NOTES LOANS
----------- --------
<S> <C> <C>
Foreign Notes Payable
Ending balance at December 31, 1999....................... $ 7,000.9 $ 270.8
Weighted average interest rate at December 31, 1999....... 5.58% 4.01%
Ending balance at December 31, 1998....................... $ 3,565.7 $ 494.8
Weighted average interest rate at December 31, 1998....... 5.28% 4.29%
Total Notes Payable
Ending balance at December 31, 1999....................... $25,991.9 $1,261.5
Weighted average interest rate at December 31, 1999....... 5.61% 4.72%
Ending balance at December 31, 1998....................... $24,144.3 $1,565.5
Weighted average interest rate at December 31, 1998....... 5.20% 5.49%
</TABLE>

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:
Notes......................... 5.25% - 11.40% 6.10% 2037 $34,128.5 $32,585.2
Investment notes.............. 6.10% - 7.37% 7.37% 2001 50.9 104.3
--------- ---------
34,179.4 32,689.5
--------- ---------
Foreign:
Japan......................... 1.23% - 8.00% 2.57% 2004 2,062.2 2,346.6
All other foreign............. 0.22% - 32.00% 5.04% 2004 4,737.2 2,135.3
--------- ---------
6,799.4 4,481.9
--------- ---------
Total senior notes....... 40,978.8 37,171.4
--------- ---------
Subordinated and Capital Notes:
Domestic:
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 debt notes..... 425.2 425.3
--------- ---------
Total long-term debt..... $41,404.0 $37,596.7
========= =========
</TABLE>

The weighted average interest rate for total long-term debt was 5.82% at
December 31, 1999 and 6.12% at December 31, 1998.

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

In 1997, the Company issued a $500 million senior note to a trust which in
turn issued $500 million in trust securities to institutional investors. The
trust securities and senior notes mature in September 2000.

54
<PAGE> 56
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Long-term borrowing maturities during the next five years, including the
current portion of notes payable after one year are: 2000, $8,758.9 million;
2001, $7,313.2 million; 2002, $7,943.5 million; 2003, $5,815.1 million; 2004,
$3,514.4 million and 2005 and thereafter, $8,058.9 million. Certain debt issues
are subject to put or call redemption provisions whereby repayment may be
required 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.

NOTE 13 -- INCOME TAXES

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

<TABLE>
<CAPTION>
UNITED STATES
---------------
FEDERAL STATE FOREIGN TOTAL
------- ----- ------- ------
<S> <C> <C> <C> <C>
Year Ended December 31, 1999
Current........................................... $438.8 $38.0 $236.4 $713.2
Deferred.......................................... 90.8 3.3 79.2 173.3
------ ----- ------ ------
$529.6 $41.3 $315.6 $886.5
====== ===== ====== ======
Year Ended December 31, 1998
Current........................................... $463.2 $41.7 $183.9 $688.8
Deferred.......................................... 22.1 -- 6.1 28.2
------ ----- ------ ------
$485.3 $41.7 $190.0 $717.0
====== ===== ====== ======
Year Ended December 31, 1997
Current........................................... $443.5 $34.8 $161.8 $640.1
Deferred.......................................... (14.5) -- (17.3) (31.8)
------ ----- ------ ------
$429.0 $34.8 $144.5 $608.3
====== ===== ====== ======
</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..... $1,439.2 $1,040.3
Foreign tax credits....................................... 87.7 27.9
Postretirement and other employee benefits................ 112.4 66.4
-------- --------
1,639.3 1,134.6
Deferred tax liabilities:
Leasing transactions...................................... (579.0) (513.6)
Goodwill.................................................. (373.6) (269.0)
Finance revenue and other................................. (563.0) (223.6)
-------- --------
(1,515.6) (1,006.2)
-------- --------
Net deferred tax asset................................. $ 123.7 $ 128.4
======== ========
</TABLE>

Prior to the Spin-Off in April 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.

55
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ASSOCIATES FIRST CAPITAL CORPORATION

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.............................................. 1.1 1.4 1.4
Non-deductible goodwill..................................... 1.1 0.9 0.4
Other....................................................... 0.1 (0.3) 0.3
---- ---- ----
Effective tax rate........................................ 37.3% 37.0% 37.1%
==== ==== ====
</TABLE>

Effective with the April 1998 Spin-Off, Ford and the Company entered into
an amended and restated tax sharing agreement which, among other matters,
required the Company 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 $198.5 million, $145.2 million, and $123.8 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 $108.8 million, $81.9 million, $57.6 million, $37.4 million
and $44.9 million, respectively, and $45.1 million thereafter.

NOTE 15 -- EMPLOYEE BENEFITS

Pension and Other Post-Retirement Benefits

The Company sponsors various qualified and non-qualified pension plans,
which together cover substantially all United States-based employees who meet
certain eligibility requirements. The Company also provides certain
post-retirement benefits through unfunded plans. These benefits are currently
provided to substantially all United States-based employees who meet certain
eligibility requirements. The benefits of such plans can be modified or
terminated at the discretion of the Company. The health care plans are
contributory, with participants' contributions adjusted annually; the life
insurance plans are also contributory.

The funded status of these 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
======= ====== ======= =======
</TABLE>

56
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ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------- -----------------
1999 1998 1999 1998
------- ------ ------- -------
<S> <C> <C> <C> <C>
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 contributions................................ 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 obligation................ 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.

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

57
<PAGE> 59
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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- 1-PERCENTAGE-
POINT 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>

The Company also sponsors two qualified pension plans, which cover
substantially all of the employees of its Japan operations who meet certain
eligibility requirements. For the year ended December 31, 1999 the Company's net
periodic benefit cost of these plans was $4.7 million. As of December 31, 1999
the total benefit obligation and fair value of plan assets was $26.7 million and
$28.3 million respectively.

Associates Savings and Profit-Sharing Plan

The Company sponsors a defined contribution plan that covers substantially
all United States-based employees who meet certain eligibility requirements, is
intended to provide assistance in accumulating personal savings for retirement
and is designed to qualify for favorable tax treatment under Sections 401(a) and
401(k) of the United States Internal Revenue Code of 1986, as amended. For the
years ended December 31, 1999, 1998 and 1997, the Company's pre-tax
contributions to the plan were $43.7 million, $32.4 million and $25.6 million,
respectively. Among other options, the plan provides as an investment option the
Associates Stock Fund which invests principally in the Company's Class A Common
Stock.

Associates Discounted Employee Stock Purchase Plan

The Company sponsors a discounted employee stock purchase plan which,
beginning in 1999, allows employees to purchase Class A Common Stock of the
Company 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 sponsors the following compensation plans covering certain
officers and employees:

Incentive Compensation Plan and Long-Term Performance Plan

The Company sponsors the Incentive Compensation Plan (the "ICP"), which
beginning in 1997 has provided for corporate annual performance pay bonuses, in
addition to other types of compensation. The bonuses are paid out of one of two
pools. The size of each bonus pool is determined based, 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 ending
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.

58
<PAGE> 60
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred Compensation Plan

The Company sponsors 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. The Company had no
outstanding grants under any other stock-based compensation plan prior to 1996.
The ICP allows the Company to issue to eligible employees awards of up to
41,598,536 shares of its Class A Common Stock ("Common Stock"). In addition to
awards of corporate annual performance pay, awards may be made as nonqualified
or incentive stock options, stock appreciation rights, restricted stock,
performance units or performance shares. Through December 31, 1999, the Company
had only issued non-qualified stock options and restricted stock under the ICP.

Stock Options -- Stock options have contractual terms of 10 years and an
exercise price equal to the fair market value of the stock underlying the option
at grant. Options generally vest at 33.33% each year beginning on the first
anniversary of the date of grant. A summary of the activity of option grants by
the Company under the ICP for the years ended December 31, 1999, 1998 and 1997
is presented below.

<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- --------------------------- --------------------------
WEIGHTED-AVG. WEIGHTED-AVG. WEIGHTED-AVG.
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
---------- -------------- ---------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year... 12,938,752 $26.17 8,389,702 $18.31 4,748,880 $14.54
Granted.......................... 7,767,630 42.27 6,503,140 35.37 4,772,050 21.80
Exercised........................ (1,294,758) 22.05 (1,083,794) 18.18 (433,208) 15.05
Forfeited........................ (1,215,557) 38.25 (870,296) 29.02 (698,020) 18.48
---------- ---------- ---------
Outstanding at end of year......... 18,196,067 32.55 12,938,752 26.17 8,389,702 18.31
========== ========== =========
Options exercisable at year end.... 6,253,629 22.82 3,206,324 17.28 1,040,838 14.55
Weighted-average fair value of
options granted during the
year............................. 13.83 8.90 5.62
</TABLE>

The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

<TABLE>
<CAPTION>
ASSUMPTIONS 1999 1998 1997
- ----------- ----- ----- -----
<S> <C> <C> <C>
Expected Term in years...................................... 4.00 4.00 4.00
Expected Volatility......................................... 34.83% 21.28% 22.00%
Expected Dividend Yield..................................... 0.52% 0.58% 0.51%
Risk-Free Interest Rate..................................... 4.72% 5.59% 6.24%
</TABLE>

59
<PAGE> 61
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The weighted average remaining life and weighted average exercise price for
total options outstanding and exercisable options outstanding at December 31,
1999 is summarized below:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------ OPTIONS EXERCISABLE
WEIGHTED-AVG. --------------------------
RANGE OF REMAINING WEIGHTED-AVG. WEIGHTED-AVG.
EXERCISE PRICES OPTIONS LIFE EXERCISE PRICE OPTIONS EXERCISE PRICE
- --------------- ---------- ------------- -------------- --------- --------------
(YEARS)
<S> <C> <C> <C> <C> <C>
$14.50 to $24.50....... 5,770,402 6.70 $18.20 4,425,157 $17.73
27.63 to 35.31....... 5,260,756 8.04 35.12 1,762,419 35.00
37.50 to 44.69....... 7,164,909 9.01 42.23 66,053 38.50
---------- ---------
14.50 to 44.69....... 18,196,067 8.00 32.55 6,253,629 22.82
========== ====== =========
</TABLE>

Restricted Stock -- Under the ICP, in 1999, 1998 and 1997 the Company
issued 340,668, 115,000 and 84,000 respective shares of restricted Common Stock
to employees. At December 31, 1999, 789,988 were outstanding. Restrictions
generally will not lapse until the fifth anniversary of the date of issuance.

Deemed Investment in Stock -- Prior to 1996, the Company sponsored a
long-term cash incentive plan, the Phantom Stock Appreciation Right Plan (The
"PSAR Plan"). The Company terminated the PSAR Plan as of December 1995 and
extinguished, principally by cash payment, all outstanding phantom stock
appreciation rights ("PSAR"). A PSAR granted under the PSAR Plan entitled the
holder to receive a specified amount of cash upon the exercise of the PSAR. Upon
termination of the PSAR Plan, certain officers of the Company were required to
defer a portion of the amount payable in satisfaction of the termination of the
PSAR Plan. The amounts deferred are administered in accordance with the terms of
the Equity Deferral Plan (the "EDP"), sponsored by the Company.

In 1999, 1998 and 1997 under the EDP, the Company credited PSAR amounts
deferred by selected employees to unfunded accounts that are deemed to be
invested in shares of Common Stock, which amounts are then deemed to be
reinvested in Common Stock. Approximately 1,129, 1,160 and 1,720 deemed shares
were issued during 1999, 1998 and 1997, respectively, and related to the
reinvestment of dividends. On December 31, 1999, the EDP was merged into the DCP
and the PSAR amounts were reinvested in the DCP. At December 31, 1999, there
were no PSAR amounts outstanding.

Accounting for Stock-Based Compensation Plans -- The Company has elected to
apply Accounting Principles Board Opinion 25 ("APB 25") rather than the optional
provisions of Statement of Financial Accounting Standards No. 123 ("SFAS 123")
in accounting for its stock-based compensation plans. Had the compensation cost
of the Company's stock-based compensation plans been determined based on the
optional provisions of SFAS 123, in the years ended December 31, 1999, 1998 and
1997 the Company's net income, basic earnings per share and diluted earnings per
share would have been $1,451 million, $1,204 million and $1,023 million; $1.99,
$1.73 and $1.48; and $1.98, $1.72 and $1.47, respectively.

All share, per share, option and fair value amounts, as applicable, in this
Note have been adjusted to reflect the Stock Dividend described in Note 20.

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 $56.1 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 $865 million.

60
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ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

To broaden its investor base and improve execution in connection with its
asset securitization program, the Company wrote "put options" which require it
to purchase, upon request of the holders, securities issued in four
securitization transactions. These put options include: a put option,
exercisable any time after February 17, 2000, with respect to an aggregate of up
to $500 million principal amounts of certificates backed by credit card
receivables; a put option, exercisable in October of each year beginning in
October 2000, with respect to an aggregate of up to approximately $2 billion
principal amount of certificates backed by manufactured housing contract
receivables; a put option, exercisable at any time after June 15, 2000, with
respect to an aggregate of up to approximately $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 foreign currency forward exchange,
currency swap, interest rate swap, treasury lock agreements, municipal bond
futures and treasury futures and option contracts.

Foreign currency forward exchange agreements are generally held for
purposes other than trading and have been designated for accounting purposes as
hedges of certain of the Company's foreign currency denominated net investments.
Under these agreements, the Company is obligated to deliver specific foreign

61
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ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

currencies in exchange for United States dollars at varying times over the next
five years. The aggregate notional amount of these agreements at December 31,
1999 and 1998 was $2.8 billion and $2.5 billion, respectively. The fair value of
such agreements at December 31, 1999 and 1998 would have been a liability of
$389.0 million and $134.4 million, respectively.

Foreign currency swap agreements are 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 counter parties are obligated to exchange specific
foreign currencies at varying times over the next four years. The aggregate
notional amount of these agreements at December 31, 1999 and 1998 was $5.9
billion and $4.4 billion, respectively. The fair value of such agreements at
December 31, 1999 and 1998 would have been a liability of $307.9 million and
$118.5 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 swap agreements at
December 31, 1999 was $9.2 billion. The fair value of such agreements at
December 31, 1999 would have been a liability of $46.7 million. These agreements
mature on varying dates over the next 19 years. In addition, treasury lock
agreements were used by the Company at December 31, 1998 to hedge the effect of
interest rate movements on anticipated debt issuances. The aggregate notional
amount of interest rate swap and treasury lock agreements at December 31, 1998
was $4.3 billion. The fair value of such agreements at December 31, 1998 would
have been a liability of $81.3 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 $720.6 million, respectively.
The fair value of these contracts would have been an asset of $12.4 million and
a liability of $5.2 million at December 31, 1999 and 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 municipal bond futures 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 -- BUSINESS SEGMENT INFORMATION

Reportable Segment Overview

U.S. Credit Card

The U.S. credit card finance segment offers bankcard, private label credit
card and related insurance products to customers throughout the United States.

62
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ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

U.S. Consumer Finance

The U.S. consumer finance reportable segment includes the Company's U.S.
consumer branch and U.S. home equity lending business units. These business
units have been aggregated into one reportable segment because they have similar
operating characteristics. Finance products and services offered by this segment
include home equity loans, personal loans, automobile financing, retail sales
finance and related insurance products in the United States (excluding Hawaii
and Puerto Rico, which are included in the international finance segment).

Commercial

The commercial segment is principally engaged in the financing and leasing
of transportation, industrial and communication equipment, auto fleet leasing
and fleet management services, manufactured housing financing, warehouse
lending, government guaranteed lending, municipal finance, employee relocation
services and insurance products in the United States and Canada.

International Finance

The international finance segment is primarily engaged in consumer lending,
and to a lesser extent, credit card and commercial lending activities and
related insurance products in Japan, Canada, the United Kingdom, Puerto Rico,
Hawaii, Sweden, Hong Kong, Spain, France, India, Mexico, Taiwan, Ireland and
Costa Rica.

Measurement

The Company allocates resources to and evaluates the performance of its
segments primarily based on total revenue, net interest margin, segment earnings
and managed finance receivables adjusted to include the impact of receivables
either held for sale or sold with servicing retained ("Managed Basis"). The
table below presents this Managed Basis information for each reportable segment
(in millions):

<TABLE>
<CAPTION>
U.S. U.S.
CREDIT CONSUMER INTERNATIONAL TOTAL
CARD FINANCE COMMERCIAL(1) FINANCE COMPANY
--------- ---------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended or at December 31, 1999
Total revenue........................ $ 2,542.3 $ 4,442.2 $ 3,285.2 $ 2,981.3 $13,251.0
Net interest margin.................. 1,737.9 2,266.7 1,028.4 2,191.4 7,224.4
Segment earnings..................... 441.1 688.7 506.9 740.2 2,376.9
Finance receivables.................. 10,928.3 31,566.8 27,948.6 13,971.0 84,414.7
Year Ended or at December 31, 1998
Total revenue........................ $ 1,968.9 $ 3,828.7 $ 2,591.7 $ 1,640.2 $10,029.5
Net interest margin.................. 1,377.8 2,080.8 1,008.1 1,278.1 5,744.8
Segment earnings..................... 299.8 655.9 510.5 474.3 1,940.5
Finance receivables.................. 9,622.0 26,810.5 26,469.6 8,462.2 71,364.3
Year Ended or at December 31, 1997
Total revenue........................ $ 1,659.2 $ 3,633.6 $ 2,152.9 $ 1,024.8 $ 8,470.5
Net interest margin.................. 1,163.0 2,056.3 875.7 791.0 4,886.0
Segment earnings..................... 199.7 665.6 439.7 335.0 1,640.0
Finance receivables.................. 7,839.3 23,985.0 22,304.2 4,278.0 58,406.5
</TABLE>

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

(1) 1999 total revenue and earnings include the results of the non-affiliate
insurance operations of $504.7 million and $35.3 million, respectively. The
non-affiliate insurance operations had no affect on net margin.

63
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ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Reconciliation of Segment and Consolidated Information

A reconciliation of total Company revenue, net interest margin and net
finance receivables as of and for the years ended December 31, 1999, 1998 and
1997 to the related consolidated totals is as follows (in millions):

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ---------
<S> <C> <C> <C>
Total Revenue
Total Company Managed Basis revenue............. $ 13,251.0 $ 10,029.5 $ 8,470.5
Managed Basis adjustments....................... (1,119.8) (652.7) (191.9)
---------- ---------- ---------
Consolidated revenue.................... $ 12,131.2 $ 9,376.8 $ 8,278.6
========== ========== =========
Net Interest Margin
Total Company Managed Basis net interest
margin....................................... $ 7,224.4 $ 5,744.8 $ 4,886.0
Managed Basis adjustments....................... (2,024.5) (1,031.1) (101.0)
---------- ---------- ---------
Consolidated net interest margin........ $ 5,199.9 $ 4,713.7 $ 4,785.0
========== ========== =========
Finance Receivables
Total Company Managed Basis finance
receivables.................................. $ 84,414.7 $ 71,364.3 $58,406.5
Managed Basis adjustments....................... (15,597.6) (10,425.3) (3,190.9)
---------- ---------- ---------
Consolidated net finance receivables.... $ 68,817.1 $ 60,939.0 $55,215.6
========== ========== =========
</TABLE>

Segment earnings and consolidated earnings before income taxes are equal;
therefore, no reconciliation is presented.

Information About Geographic Areas

The following is finance charge information by geographic area as of and
for the years ended December 31, 1999, 1998 and 1997 (in millions):

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Finance charges
United States........................................ $6,361.0 $6,305.8 $6,563.4
Japan................................................ 1,628.5 1,042.7 696.1
Canada............................................... 553.8 256.5 94.7
United Kingdom....................................... 470.6 215.6 146.0
All other............................................ 92.5 89.8 60.0
-------- -------- --------
Consolidated finance charges................. $9,106.4 $7,910.4 $7,560.2
======== ======== ========
</TABLE>

Information About Products and Services

The Company manages its product and service offering primarily through
these reportable segments. Therefore, pursuant to the provisions of SFAS 131, no
enterprise-wide disclosures of information about products and services are
necessary.

Information About Major Customers

The Company has no customer that represents greater than 10% of total
revenue.

64
<PAGE> 66
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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>
1999 1998
---------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents(1)............. $ 1,026.3 $ 1,026.3 $ 4,665.6 $ 4,665.6
Investment securities(2)................. 7,176.5 7,176.5 6,678.7 6,678.7
Net finance receivables(3)............... 68,817.1 72,740.7 60,939.0 64,770.2
Notes payable(1)
Commercial paper....................... 25,991.9 25,991.9 24,144.3 24,144.3
Bank Loans............................. 1,261.5 1,261.5 1,565.5 1,565.5
Long-term debt(4)........................ 41,404.0 40,961.9 37,596.7 38,904.2
</TABLE>

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

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

(2) Estimated market values of investment securities are based on quoted market
prices. 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.

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

NOTE 20 -- STOCK DIVIDEND

On October 6, 1998 the Company announced a two-for-one split of the
Company's Class A Common Stock to be distributed in the form of a dividend (the
"Stock Dividend"). One additional common share was issued on December 23, 1998
for every common share held by stockholders of record as of the close of
business on December 9, 1998. All per share and related weighted average share
amounts in this report have been restated to reflect the Stock Dividend.

NOTE 21 -- TRANSACTIONS AND BALANCES WITH RELATED PARTIES

The Company paid cash dividends to Ford of $25.6 million and $111.8 million
during the years ended December 31, 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.

65
<PAGE> 67
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Prior to the Spin-Off, the Company paid fees for certain administrative
services provided by its Ford-affiliated parent. Such fees were $2.3 million and
$8.0 million for the years ended December 31, 1998 and 1997, respectively.

NOTE 22 -- SUBSEQUENT EVENT (UNAUDITED)

In January 2000, the Company announced its intention to discontinue the
loan origination operations of its Associates Housing Finance ("AHF") unit. AHF
originates and services loans for manufactured homes. As a result, the Company
plans to take a special pre-tax charge against first quarter 2000 earnings of
approximately $112 million. This charge will cover exit costs, including
severance, noncancellable contractual obligations and related costs, as well as
a provision for increased losses on the disposition of repossessions and
fair-value adjustments of related assets. The Company closed substantially all
of its sales purchase offices in February 2000 and will close its regional loan
origination centers in the second quarter of 2000. The Company will service the
liquidation of the existing receivables through its centralized service facility
in Knoxville, Tennessee. The Company will limit its origination activities to
support of its contractual arrangements and loss mitigation activities.

NOTE 23 -- UNAUDITED QUARTERLY FINANCIAL DATA

The following table sets forth the unaudited quarterly results of
operations (in millions, except earnings per share):

<TABLE>
<CAPTION>
1999
-----------------------------------------
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Finance charges.............................. $2,318.8 $2,241.6 $2,262.1 $2,283.9
======== ======== ======== ========
Interest expense............................. $ 988.7 $ 992.5 $ 965.3 $ 960.0
======== ======== ======== ========
Earnings before provision for income taxes... $ 646.4 $ 618.6 $ 573.0 $ 538.9
Provision for income taxes................... 237.7 231.8 214.9 202.1
-------- -------- -------- --------
Net earnings................................. $ 408.7 $ 386.8 $ 358.1 $ 336.8
======== ======== ======== ========
Net earnings per share
Basic...................................... $ 0.56 $ 0.53 $ 0.49 $ 0.46
======== ======== ======== ========
Diluted.................................... $ 0.56 $ 0.53 $ 0.49 $ 0.46
======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
1998
-----------------------------------------
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Finance charges.............................. $2,053.0 $1,930.6 $1,881.8 $2,045.0
======== ======== ======== ========
Interest expense............................. $ 846.6 $ 807.3 $ 785.5 $ 757.3
======== ======== ======== ========
Earnings before provision for income taxes... $ 525.1 $ 504.5 $ 464.9 $ 446.0
Provision for income taxes................... 193.1 186.9 172.0 165.0
-------- -------- -------- --------
Net earnings................................. $ 332.0 $ 317.6 $ 292.9 $ 281.0
======== ======== ======== ========
Net earnings per share
Basic...................................... $ 0.47 $ 0.46 $ 0.42 $ 0.41
======== ======== ======== ========
Diluted.................................... $ 0.47 $ 0.46 $ 0.42 $ 0.40
======== ======== ======== ========
</TABLE>

66
<PAGE> 68
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 24 -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)

Condensed unconsolidated financial information of First Capital as of or
for the years ended December 31, 1999, 1998 and 1997 was as follows (in
millions):

CONDENSED STATEMENT OF EARNINGS
(IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenue
Interest and other income............................ $ 448.5 $ 217.1 $ 58.8
Dividends from subsidiaries.......................... 658.7 231.9 52.5
-------- -------- --------
1,107.2 449.0 111.3
Expenses
Interest expense..................................... 701.7 128.6 44.4
Operating expenses................................... 97.4 47.3 34.9
Provision for losses on finance receivables.......... 6.5 2.9 --
-------- -------- --------
805.6 178.8 79.3
-------- -------- --------
Income before credit for federal income taxes and
equity in undistributed earnings of subsidiaries..... 301.6 270.2 32.0
Tax benefit............................................ 237.2 36.7 40.2
-------- -------- --------
Earnings before equity in undistributed earnings of
subsidiaries......................................... 538.8 306.9 72.2
Equity in undistributed earnings of subsidiaries, net
of tax............................................... 951.6 916.6 959.5
-------- -------- --------
Net earnings........................................... $1,490.4 $1,223.5 $1,031.7
======== ======== ========
</TABLE>

See notes to condensed financial information.

67
<PAGE> 69
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED BALANCE SHEET
(IN MILLIONS)

<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Assets
Investment in subsidiaries................................ $13,665.8 $10,158.2
Finance receivables, net of unearned income and allowance
for credit losses...................................... 668.8 662.4
Advances to subsidiaries, eliminated in consolidation, and
other.................................................. 7,238.8 4,299.1
--------- ---------
Total assets...................................... $21,573.4 $15,119.7
========= =========
Liabilities and Stockholders' Equity
Accounts payable and accruals............................. $ 759.6 $ 310.7
Short-term notes payable.................................. 9,625.9 5,473.2
Long-term debt............................................ 1,387.4 809.3
Stockholders' equity...................................... 9,800.5 8,526.5
--------- ---------
Total liabilities and stockholders' equity........ $21,573.4 $15,119.7
========= =========
</TABLE>

The estimated fair value of notes payable and long-term debt at December
31, 1999 and 1998 was $11,003.1 million and $6,268.1 million, respectively. Fair
values were estimated by discounting expected cash flows at discount rates
currently available to the Company for debt with similar terms and remaining
maturities.

See notes to condensed financial information.

68
<PAGE> 70
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED STATEMENT OF CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net earnings.............................................. $ 1,490.4 $ 1,223.5 $ 1,031.7
Adjustments to net earnings for non-cash items:
Provision for losses on finance receivables............ 6.5 2.9 --
Depreciation and amortization.......................... 10.5 0.4 --
Increase (decrease) in accounts payable and accruals... 263.0 123.5 (12.9)
Equity in undistributed earnings of subsidiaries....... (951.6) (916.6) (959.5)
--------- --------- ---------
Net cash provided from operating activities............ 818.8 433.7 59.3
--------- --------- ---------
Cash Flows from Investing Activities
Finance receivables originated or purchased............... (584.3) (1,207.3) --
Finance receivables liquidated............................ 571.4 542.0 --
Acquisition of other finance businesses, net.............. (4,170.5) (1,767.4) --
Sale of other finance businesses.......................... 2,162.8 -- --
Cash dividends from subsidiaries.......................... 658.7 231.9 52.5
Increase in investments in and advances to subsidiaries... (3,647.2) (3,011.1) (717.6)
(Increase) decrease in other assets....................... (495.1) (370.8) 1.2
--------- --------- ---------
Net cash used for investing activities................. (5,504.2) (5,582.7) (663.9)
--------- --------- ---------
Cash Flows from Financing Activities
Increase in notes payable and long-term debt.............. 5,805.7 4,345.0 891.6
Retirement of long-term debt.............................. (1,074.9) (115.1) (214.0)
Sale of Class A Common Stock.............................. -- 1,266.7 --
Cash dividends............................................ (167.5) (142.0) (138.6)
Treasury stock and other.................................. 22.4 (17.0) (12.4)
--------- --------- ---------
Net cash provided from financing activities............ 4,585.7 5,337.6 526.6
Effect of foreign currency translation adjustments on
cash...................................................... 191.2 (112.6) 78.5
--------- --------- ---------
Increase in cash and cash equivalents....................... 91.5 76.0 0.5
Cash and cash equivalents at beginning of year.............. 77.2 1.2 0.7
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 168.7 $ 77.2 $ 1.2
========= ========= =========
</TABLE>

See notes to condensed financial information.

69
<PAGE> 71
ASSOCIATES FIRST CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTES TO CONDENSED FINANCIAL INFORMATION:

(1) The ability of the Company's subsidiaries to transfer funds to the
Company in the form of cash dividends is restricted pursuant to the terms of
certain debt agreements entered into by the Company's principal domestic
operating subsidiary, Associates Corporation of North America. See Note 10 for a
summary of the most significant of these restrictions.

(2) Notes payable and long-term debt bear interest at rates from 5.50% to
8.87%. The estimated maturities of the notes outstanding, at December 31, 1999,
during subsequent years were as follows (in millions):

<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
2000........................................................ $ 727.0
2001........................................................ 260.4
2002........................................................ 200.0
2003........................................................ --
2004........................................................ --
Thereafter.................................................. 200.0
--------
Total....................................................... $1,387.4
========
</TABLE>

(3) Effective January 1, 1999, First Capital entered into a tax sharing
agreement with certain of its subsidiaries included in First Capital's
consolidated return, which requires an allocation of the consolidated tax
liability among these subsidiaries.

70
<PAGE> 72

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.

The information called for by Item 10 is incorporated by reference from the
information under the caption "Election of Directors" and "Executive Officers
and Compensation" in the Company's Proxy Statement for its 2000 annual meeting
of stockholders.

ITEM 11. EXECUTIVE COMPENSATION.

The information called for by Item 11 is incorporated by reference from the
information under the caption "Executive Officers and Compensation" in the
Company's Proxy Statement for its 2000 annual meeting of stockholders.

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

The information called for by Item 12 is incorporated by reference from the
information under the caption "Security Ownership" in the Company's Proxy
Statement for its 2000 annual meeting of stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information called for by Item 13 is incorporated by reference from the
information under the caption "Certain Relationships and Related Transactions"
in the Company's Proxy Statement for its 2000 annual meeting of stockholders.

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............... 34
Consolidated Statement of Earnings for the
years ended December 31, 1999, 1998 and
1997.......................................... 35
Consolidated Balance Sheet at December 31,
1999 and 1998................................. 36
Consolidated Statement of Changes in
Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997.............. 37
Consolidated Statement of Cash Flows for the
years ended December 31, 1999, 1998 and
1997.......................................... 38
Notes to consolidated financial statements... 39
</TABLE>

(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.

71
<PAGE> 73

(b) Reports on Form 8-K

During the quarter ended December 31, 1999, First Capital filed Current
Reports on Form 8-K dated October 12, 1999 (announcing 3rd quarter 1999
earnings); November 15, 1999 (announcing a definitive agreement to
acquire Arcadia Financial Ltd.); and December 16, 1999 (announcing the
naming of Michael C. Lenora as head of its International Operations,
replacing Wilfred Y. Horie).

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
3.1 -- Restated Certificate of Incorporation. (3.1)*
3.2 -- By-laws.
4.1 -- 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.
4.2 -- Rights Agreement dated as of April 13, 1998, between the
Company and First Chicago Trust Company of New York as
Rights Agent. (4)**
10.1 -- Form of Employment Agreement.
10.2 -- The Company's Deferred Compensation Plan. (4)***
10.3 -- The Company's Incentive Compensation Plan. (10.8)****
10.4 -- The Company's Long-Term Performance Plan. (10.12)*
10.5 -- The Company's Supplemental Retirement Income Plan.
(10.16)*
10.6 -- The Company's Excess Benefits Plan. (10.17)*
10.7 -- Form of Company's Incentive Compensation Plan Stock
Option Award Agreement.
10.8 -- Form of Restricted Stock Award Agreement. (10.23)****
12. -- Computation of Ratio of Earnings to Fixed Charges.
21. -- Subsidiaries of the Registrant.
23. -- Consent of Independent Auditors.
24. -- Powers of Attorney.
27. -- Financial Data Schedule.
</TABLE>

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

* Incorporated by reference to the exhibit listed in parentheses contained
in the Company's registration statement on Form S-1 filed with the
Securities and Exchange Commission on February 8, 1996.

** Incorporated by reference to the Company's Current Report on Form 8-K as
filed with the Commission on April 13, 1998.

*** Incorporated by reference to the exhibit listed in parentheses contained in
the Company's Registration Statement on Form S-8 as filed with the
Commission on March 31, 1998.

**** Incorporated by reference to the exhibit listed in parentheses contained in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997.

72
<PAGE> 74

SIGNATURES

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

ASSOCIATES FIRST CAPITAL CORPORATION

By /s/ ROY A. GUTHRIE
--------------------------------------
Roy A. Guthrie
Senior Executive Vice President,
Principal Financial Officer and
Director
March 28, 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
(Keith W. Hughes) Officer and Director

/s/ J. CARTER BACOT* Director
- -----------------------------------------------------
(J. Carter Bacot)

/s/ ERIC S. DOBKIN* Director
- -----------------------------------------------------
(Eric S. Dobkin)

/s/ WILLIAM M. ISAAC* Director
- -----------------------------------------------------
(William M. Isaac)

/s/ JUDY JOLLEY MOHRAZ* Director
- -----------------------------------------------------
(Judy Jolley Mohraz)

/s/ H. JAMES TOFFEY, JR.* Director
- -----------------------------------------------------
(H. James Toffey, Jr.)

/s/ KENNETH WHIPPLE* Director
- -----------------------------------------------------
(Kenneth Whipple)

/s/ ROY A. GUTHRIE Senior Executive Vice
- ----------------------------------------------------- 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

March 28, 2000
<PAGE> 75

INDEX TO EXHIBITS

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

* Incorporated by reference to the exhibit listed in parentheses contained
in the Company's registration statement on Form S-1 filed with the
Securities and Exchange Commission on February 8, 1996.

** Incorporated by reference to the Company's Current Report on Form 8-K as
filed with the Commission on April 13, 1998.

*** Incorporated by reference to the exhibit listed in parentheses contained in
the Company's Registration Statement on Form S-8 as filed with the
Commission on March 31, 1998.

**** Incorporated by reference to the exhibit listed in parentheses contained in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997.

<PAGE> 1

EXHIBIT 3.2

BY-LAWS
OF
ASSOCIATES FIRST CAPITAL CORPORATION
(THE "COMPANY")

ADOPTED APRIL 30, 1996
AS AMENDED SEPTEMBER 25, 1996
AS AMENDED MARCH 2, 1998
AS AMENDED FEBRUARY 24, 2000

ARTICLE I.

OFFICES

The registered office of the Company shall be in the City of Wilmington,
County of New Castle, State of Delaware. The Company may also have one or more
offices at such other places, either inside or outside of the State of Delaware,
as the Board of Directors may from time to time determine or as the business of
the Company may require. The books and records of the Company may be kept
(subject to the provisions of the laws of the State of Delaware) at any place,
either inside or outside of the State of Delaware, as from time to time may be
determined by the Board of Directors.

ARTICLE II.

STOCKHOLDERS

SECTION 1. PLACE OF MEETING.

Meetings of stockholders (whether annual or special) shall be held at such
place, either inside or outside of the State of Delaware, as the Board of
Directors shall from time to time determine.

SECTION 2. ANNUAL MEETING.

The annual meeting of stockholders shall be held on the last Thursday of
May of each year or at such other time as shall be determined by the Board of
Directors. Should said day be a 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. SPECIAL MEETINGS.

Unless otherwise prescribed by law or by the Company's Restated Certificate
of Incorporation, as amended from time to time (the "Charter"), special meetings
of stockholders may be held at any time on call of the Chairman of the Board of
Directors, a Vice Chairman of the Board of Directors, the President, or, at the
request in writing of a majority of the Board of Directors, any officer. Such
request shall state the purpose or purposes of the proposed meeting.

SECTION 4. NOTICE OF MEETINGS.

Except as otherwise provided by law, at least ten (10) days' notice of
stockholders' meetings stating the time and place and the objects thereof shall
be given by the Chairman of the Board of Directors, a Vice Chairman of the Board
of Directors, the President, the Secretary or an Assistant Secretary to each
stockholder of record having voting power in respect of the business to be
transacted thereat. Subject to Section 5 of this Article II, no business other
than that stated in the notice shall be transacted at any meeting.

SECTION 5. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.

(A) Annual Meetings of Stockholders.

<PAGE> 2

(1) Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders may be
made at an annual meeting of stockholders (a) pursuant to the
Company's notice of meeting delivered pursuant to Section 4 of this
Article II, (b) by or at the direction of the Board of Directors or
(c) by any stockholder of the Company who is entitled to vote at the
meeting, who complied with the notice procedures set forth in
paragraphs (A)(2) and (A)(3) of this Section 5 and who was a
stockholder of record at the time such notice is delivered to the
Secretary of the Company.

(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Section 5, the stockholder must have given timely
notice thereof in writing to the Secretary of the Company and such
business must be a proper subject for stockholder action under the
General Corporation Law of the State of Delaware. To be timely, a
stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Company not less than sixty (60)
days nor more than ninety (90) days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is advanced by more than
thirty (30) days or delayed by more than sixty (60) days from such
anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the ninetieth day prior to such annual
meeting and not later than the close of business on the later of the
sixtieth day prior to such annual meeting or the tenth day following
the day on which public announcement of the date of such meeting is
first made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that
is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting, the reasons
for conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made; and (c) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Company's books, and of such
beneficial owner and (ii) the class and number of shares of the
Company which are owned beneficially and of record by such stockholder
and such beneficial owner.

(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Section 5 to the contrary, in the event that the number
of directors to be elected to the Board of Directors is increased and
there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors
made by the Company at least seventy (70) days prior to the first
anniversary of the preceding year's annual meeting, a stockholders's
notice required by this Section 5 shall also be considered timely, but
only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal
executive offices of the Company not later than the close of business
on the tenth day following the day on which such public announcement
is first made by the Company.

(B) Special Meetings of Stockholders. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the Company's notice of meeting pursuant to Section 4 of
this Article II. Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the Company's notice of meeting (a) by or at the direction
of the Board of Directors or (b) by any stockholder of the Company who is
entitled to vote at the meeting, who complies with the notice procedures set
forth in this Section 5 and who is a stockholder of record at the time such
notice is delivered to the Secretary of the Company. Nominations by stockholders
of persons for election to the Board of Directors may be made at such a special
meeting of stockholders if the stockholder's notice required by paragraph (A)(2)
of this Section 5 shall be delivered to the Secretary at the principal executive
offices of the Company not earlier than the ninetieth day prior to such special
meeting and not later than the close of business on the later of the sixtieth
day prior to such special meeting or the tenth day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.

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(1) Only persons who are nominated in accordance with the procedures
set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the
procedures set forth in this Section 5. Except as otherwise provided
by law, the Charter or these By-laws, the chairman of the meeting
shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in
accordance with this Section 5 and, if any proposed nomination or
business is not in compliance with this Section 5, to declare that
such defective proposal or nomination shall be disregarded.

(2) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Company with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 5, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 5. Nothing in this Section 5
shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Company's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.

SECTION 6. QUORUM.

At any meeting of stockholders, the number of shares the holders of which
shall be present or represented by proxy in order to constitute a quorum for,
and the votes that shall be necessary for, the transaction of any business shall
be as expressly provided in Article 4 of the Charter. At any meeting of
stockholders at which a quorum is not present, the person serving as chairman of
the meeting or the holders of shares entitled to cast a majority of all of the
votes which could be cast at such meeting by the holders of outstanding shares
of stock of the Company who are present in person or by proxy and who are
entitled to vote on every matter that is to be voted on without regard to class
at such meeting may adjourn the meeting from time to time.

SECTION 7. ORGANIZATION AND CONDUCT OF BUSINESS.

The Chairman of the Board of Directors shall act as chairman of meetings of
the stockholders. The Board of Directors may designate any other officer or
director of the Company to act as chairman of any meeting in the absence of the
Chairman of the Board of Directors, and the Board of Directors may further
provide for determining who shall act as chairman of any stockholders' meeting
in the absence of the Chairman of the Board of Directors and such designee. The
person serving as chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of discussion as seem to him or her in
order.

The Secretary of the Company shall act as secretary of all meetings of the
stockholders, but in the absence of the Secretary the presiding officer may
appoint any other person to act as secretary of any meeting.

SECTION 8. PROXIES AND VOTING.

At any meeting of stockholders, every stockholder entitled to vote may vote
in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.

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All voting, including on the election of directors but excepting where
otherwise required by law, may be a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.

SECTION 9. STOCK LISTS.

A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.

The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.

SECTION 10. RATIFICATION.

Any transaction questioned in any stockholders' derivative suit, or any
other suit to enforce alleged rights of the Company or any of its stockholders,
on the ground of lack of authority, defective or irregular execution, adverse
interest of any director, officer or stockholder, nondisclosure, miscomputation
or the application of improper principles or practices of accounting may be
approved, ratified and confirmed before or after judgment by the Board of
Directors or by the holders of the Company's Class A Common Stock, par value
$.01 per share ("Class A Common Stock") and the holders of the Company's Class B
Common Stock, par value $.01 per share ("Class B Common Stock") voting as
provided in paragraph (g) of Article 4 of the Charter, and, if so approved,
ratified or confirmed, shall have the same force and effect as if the questioned
transaction had been originally duly authorized, and said approval, ratification
or confirmation shall be binding upon the Company and all of its stockholders
and shall constitute a bar to any claim or execution of any judgment in respect
of such questioned transaction.

SECTION 11. INSPECTORS OF ELECTION.

The Board of Directors may, and to the extent required by law, shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting, decide upon the qualification of voters, count the votes, decide
the results and make a written report thereof in accordance with the General
Corporation Law of the State of Delaware. The Board of Directors may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting may, and to the extent
required by law, shall, appoint one or more inspectors to act at the meeting.

Each inspector, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. Every vote
taken by ballots hall be counted by an inspector or inspectors appointed by the
chairman of the meeting.

ARTICLE III.

BOARD OF DIRECTORS

SECTION 1. NUMBER, TERM OF OFFICE AND ELIGIBILITY.

Subject to any rights of holders of Preferred Stock to elect additional
directors under specified circumstances, as provided in Article 5 of the
Charter, the number of directors of the Company shall be fixed from time to time
exclusively by resolution of the Board of Directors adopted by the affirmative
vote of directors constituting not less than a majority of the total number of
directors that the Company would have it there were no vacancies on the
Company's

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Board of Directors, but shall consist of not more than twelve (12) nor less than
three (3) directors. Each director shall be elected annually by ballot by the
holders of Class A Common Stock and the holders of Class B Common Stock voting
as provided in paragraph (g) of Article 4 of the Charter at the annual meeting
of stockholders, to serve until his or her successor shall have been elected and
shall have qualified, except as provided in this Section 1. No person may be
elected or re-elected a director of the Company if at the time of his or her
election or re-election he or she shall have attained the age of seventy-five
years, and the term of any director who shall have attained such age while
serving as a director shall terminate as of the time of the first annual meeting
of stockholders following his or her seventieth birthday; provided, however,
that the Board of Directors by resolution may waive such age limitation in any
year and from year to year with respect to any director or directors. Subject to
any rights of holders of Preferred Stock, and unless the Board of Directors
otherwise determines, any vacancy occurring in the Board of Directors caused by
death, resignation, increase in number of directors or otherwise may be filled
by the affirmative vote of a majority of the remaining members of the Board of
Directors, though less than a quorum, or by a sole remaining director, and
except as otherwise provided by law, any such vacancy may not be filled by the
stockholders of the Company, and any director so elected shall hold office until
the next election of directors and until his or her successor is duly elected
and qualified, or until his or her earlier death, resignation or removal.

SECTION 2. MEETINGS.

Meetings of the Board of Directors may be held at such place, either inside
or outside of the State of Delaware, as may from time to time be designated by
the Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the President or 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.

An annual meeting of the Board of Directors shall be held on the same day
as, and as soon as practicable following the annual meeting of stockholders or
at such other time or place as shall be determined by the Board of Directors at
its regular meeting next preceding said annual meeting of stockholders. Regular
meetings of the Board of Directors shall be held on the last Thursday of
February, May, August and November of each year or at such other time as shall
be determined by the Board of Directors. Should said day be a legal holiday,
such regular meeting shall be held on the next Thursday that is not a legal
holiday.

Special meetings of the Board of Directors may be held at any time on the
call of the Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the President or the Board of Directors. 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.

SECTION 3. NOTICE OF MEETINGS.

The Secretary or an Assistant Secretary shall give notice of the time and
place of meetings of the Board of Directors (excepting the annual meeting of
directors) by (i) mailing or sending via courier such notice not later than
during the second day preceding the day on which such meeting is to be held, or
(ii) by (a) sending a facsimile transmission or other form of electronic
communication containing such notice or (b) delivering such notice personally or
by telephone, in each case, not later than during the first day preceding the
day on which such meeting is to be held to each director. Unless otherwise
stated in the notice thereof any and all business may be transacted at any
meeting.

SECTION 4. QUORUM AND ORGANIZATION OF MEETINGS.

One-third of the total number of members of the Board of Directors as
constituted from time to time, but in no event less than three, shall constitute
a quorum for the transaction of business; but if at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn the meeting from time to time, and the meeting may be held as
adjourned without further notice or waiver. Except as otherwise provided by law
or by the Charter or these By-laws, a majority of the directors present at any
duly constituted meeting may decide any question brought before such meeting.

Meetings shall be presided over by the Chairman of the Board of Directors
or, in his or her absence, by such other person as the Board of Directors may
designate or the members present may select.

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SECTION 5. POWERS.

In addition to the powers and authorities by these By-laws expressly
conferred upon them, the Board of Directors shall have and may exercise all such
powers of the Company and do all such lawful acts and things that are not by
statute, the Charter or these By-laws directed or required to be exercised or
done by the stockholders. Without prejudice to or limitation of such general
powers and any other powers conferred by statute, the Charter or these By- laws,
the Board of Directors shall have the following powers:

(1) To determine, subject to the requirements of law and of paragraph
(c)(2) of Article 4 of the Charter, what, if any, dividends shall be declared
and paid to the stockholders out of net profits, current or accumulated, or out
of surplus or other assets of the Company available for dividends.

(2) To fix, and from time to time to vary, the amount of working capital of
the Company, and to set aside from time to time out of net profits, current or
accumulated, or surplus of the Company such amount or amounts as they in their
discretion may deem necessary and proper as, or as a safeguard to the
maintenance of working capital, as a reserve for contingencies, as a reserve for
repairs, maintenance, or rehabilitation, as a reserve for revaluation of profits
of the Company or for such other proper purpose as may in the opinion of the
directors be in the best interests of the Company, and in their sole discretion
to abolish or modify any such provision for working capital or any such reserve,
and to credit the amount thereof to net profits, current or accumulated, or to
the surplus of the Company.

(3) To purchase, or otherwise acquire for the Company, any business,
property, rights or privileges which the Company may at the time be authorized
to acquire, at such price or consideration and generally on such terms and
conditions as they think fit; and at their discretion to pay therefor either
wholly or partly in money, stock, bonds, debentures or other securities of the
Company.

(4) To create, make and issue mortgages, bonds, deeds of trust, trust
agreements or negotiable or transferable instruments or securities, secured by
mortgage or otherwise, and to do every other act and thing necessary to effect
the same.

(5) To appoint any person or corporation to accept and hold in trust for
the Company any property belonging to the Company, or in which it is interested,
or for any other purpose, and to execute such deeds and do all things requisite
in relation to any such trust.

(6) To remove any officer of the Company with or without cause, and from
time to time to devolve the powers and duties of any officer upon any other
person for the time being.

(7) To confer upon any officer of the Company the power to appoint, remove
and suspend subordinate officers, agents and employees.

(8) To determine who shall be authorized on the Company's behalf, either
generally or specifically, to make and sign bills, notes, acceptances,
endorsements, checks, releases, receipts, contracts, conveyances, and all other
written instruments executed on behalf of the Company.

(9) To make and change regulations, not inconsistent with these By-laws,
for the management of the Company's business and affairs.

(10) To adopt and, unless otherwise provided therein, to amend and repeal,
from time to time, bonus and supplemental compensation plans for employees
(including employees who are officers or directors) of the Company or any
subsidiary. Power to construe, interpret, administer, modify or suspend any such
plan shall be vested in the Board of directors or a committee thereof.

(11) To adopt a retirement plan, or plans, for the purpose of making
retirement payments to employees

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(including employees who are officers or directors) of the Company or of any
subsidiary thereof; and to adopt a group insurance plan, or plans, for the
purpose of enabling employees (including employees who are officers or
directors) of the Company or of any subsidiary thereof to acquire insurance
protection; any such retirement plan or insurance plan, unless otherwise
provided therein, shall be subject to amendment or revocation by the Board of
Directors.

(12) To delegate any of the powers of the Board of Directors in the course
of the business of the Company to any officer, employee or agent, and to appoint
any person the agent of the Company, with such powers (including the power to
subdelegate) and upon such terms as the Board of Directors may think fit.

SECTION 6. RELIANCE UPON BOOKS, REPORTS AND RECORDS.

Each director, each member of any committee designated by the Board of
Directors and each officer, in the performance of his or her duties, shall be
fully protected in relying in good faith upon such information, opinions,
reports or statements presented to the Company by any of its officers or
employees, or by committees of the Board of Directors, or by any other person,
as to matters such director, member or officer, as the case may be, reasonably
believes are within such person's professional or expert competence and who has
been selected with reasonable care by the Board of Directors or by any such
committee, or in relying in good faith upon other records of the Company.

SECTION 7. COMPENSATION OF DIRECTORS.

Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, services as members of committees of the Board of
Directors; provided, however, that nothing herein contained shall be construed
to preclude any director from serving the Company in any other capacity and
receiving compensation therefor.

SECTION 8. MEETINGS BY MEANS OF CONFERENCE TELEPHONE.

Unless otherwise provided by the Charter or these By-laws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee by means of
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 8 shall constitute presence in person at such
meeting.

ARTICLE IV.

COMMITTEES

SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.

There are hereby established as committees of the Board of Directors an
Audit Committee, a Compensation Committee and a Nominating Committee, each of
which shall have the powers and functions set forth in Sections 2, 3 and 4
hereof, respectively, and such additional powers as may be delegated to it by
the Board of Directors. The Board of Directors may from time to time establish
additional standing committees or special committees of the Board of Directors,
each of which shall have such powers and functions as may be delegated to it by
the Board of Directors. The Board of Directors may abolish any committee
established by or pursuant to this Section 1 as it may deem advisable. Each such
committee shall consist of two or more directors, the exact number being
determined from time to time by the Board of Directors. Designations of the
chairman and members of each such committee, and, if desired, a vice chairman
and alternates for members, shall be made by the Board of Directors. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member. Each committee shall have a secretary who shall be designated by its
chairman. A vice chairman

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of a committee shall act as the chairman of the committee in the absence or
disability of the chairman.

SECTION 2. AUDIT COMMITTEE.

The Audit Committee shall select and engage, on behalf of the Company,
independent public accountants to (1) audit the books of account and other
corporate records of the Company and (2) perform such other duties as the Audit
Committee may from time to time prescribe. The Audit Committee shall transmit
financial statements certified by such independent public accountants to the
Board of Directors after the close of each fiscal year. The selection of
independent public accountants for each fiscal year shall be made in advance of
the annual meeting of stockholders in such fiscal year and shall be submitted
for ratification or rejection at such meeting. The Audit Committee shall confer
with such accountants and review and approve the scope of the audit of the books
of account and other corporate records of the Company. The Audit Committee shall
have the power to confer with and direct the officers of the Company to the
extent necessary to review the internal controls, accounting practices,
financial structure and financial reporting of the Company. From time to time
the Audit Committee shall report to and advise the Board of Directors concerning
the results of its consultation and review and such other matters relating to
the internal controls, accounting practices, financial structure and financial
reporting of the Company as the Audit Committee believes merit review by the
Board of Directors. The Audit Committee also shall perform such other functions
and exercise such other powers as may be delegated to it from time to time by
the Board of Directors.

SECTION 3. COMPENSATION COMMITTEE.

The Compensation Committee shall fix from time to time the compensation of
members of the Board of Directors who are officers or employees of the Company
and of all members of the Management Committee of the Company who are officers
or employees of the Company. The Compensation Committee shall also perform such
functions as may be delegated to it under the provisions of any bonus,
supplemental compensation, special compensation or stock option plan of the
Company.

SECTION 4. NOMINATING COMMITTEE.

The Nominating Committee from time to time shall consider and make
recommendations to the Board of Directors with respect to nominations or
elections of directors and officers of the Company and the appointments of such
other employees of the Company as shall be referred to the Nominating Committee.

The Nominating Committee from time to time shall consider the size and
composition of the Board of Directors and make recommendations to the Board of
Directors with respect to such matters. Prior to the annual meeting of
stockholders each year, and prior to any special meeting of stockholders at
which a director is to be elected, the Nominating Committee shall recommend to
the Board of Directors persons proposed to constitute the nominees whose
election at such meeting will be recommended by the Board of Directors.

The authority vested in the Nominating Committee by this Section 4 shall
not derogate from the power of individual members of the Board of Directors to
recommend or place in nomination persons other than those recommended by the
Nominating Committee.

The Nominating Committee also shall perform such other functions and
exercise such other powers as may be delegated to it from time to time by the
Board of Directors.

SECTION 5. OTHER COMMITTEES.

The Board of Directors, or any committee, officer or employee of the
Company may establish additional standing committees or special committees to
serve in an advisory capacity or in such other capacities as may be permitted by
law, the Charter and these By-laws. The members of any such committee need not
be members of the Board of Directors. Any committee established pursuant to this
Section 5 may be abolished by the Board of Directors or by the person or body by
whom it was established as he, she or it may deem advisable. Each such committee
shall consist of two or more members, the exact number being determined from
time to time by such person or body.

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Designations of members of each such committee and, if desired, alternates for
members, shall be made by such person or body, at whose will all such members
and alternates shall serve. The chairman of each such committee shall be
designated by such person or body. Each such committee shall have a secretary
who shall be designated by the chairman.

SECTION 6. RULES AND PROCEDURES.

Each committee may fix its own rules and procedures and shall meet at such
times and places as may be provided by such rules, by resolution of the
committee or by call of the chairman or vice chairman. Notice of meeting of each
committee, other than of regular meetings provided for by its rules or
resolutions, shall be given to committee members. The presence of one-third of
its members, but not less than two, shall constitute a quorum of any committee,
and all questions shall be decided by a majority vote of the members present at
the meeting. All action taken at each committee meeting shall be recorded in
minutes of the meeting.

SECTION 7. APPLICATION OF ARTICLE.

Whenever any provision of any other document relating to any committee of
the Company named therein shall be in conflict with any provision of this
Article IV, the provisions of this Article IV shall govern, except that if such
other document shall have been approved by the stockholders, voting as provided
in the Charter, or by the Board of Directors, the provisions of such other
document shall govern.

ARTICLE V.

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 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. CHAIRMAN OF THE BOARD OF DIRECTORS.

The Chairman of the Board of Directors shall be the Chief Executive Officer
of the Company. Subject to the provisions of these By-laws and to the direction
of the Board of Directors, he or she shall have ultimate authority for decisions
relating to the general management and control of the affairs and business of
the Company and shall perform all other duties and exercise all other powers
commonly incident to the position of Chief Executive Officer or which are or
from time to time may be delegated to him or her by the Board of Directors, or
which are or may at any time be authorized or required by law. He or she shall
preside at all meetings of the Board of Directors. He or she may redelegate from
time to time and to the full extent permitted by law, in writing, to officers or
employees of the Company any or all of such duties and powers, and any such
redelegation may be either general or specific. Whenever he or she so shall
delegate any of his or her authority, he or she shall file a copy of the
redelegation with the Secretary of the Company.

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SECTION 3. VICE CHAIRMEN OF THE BOARD OF DIRECTORS.

Subject to the provisions of these By-laws and to the direction of the
Board of Directors and of the Chief Executive Officer, the Vice Chairmen of the
Board of Directors shall have such powers and shall perform such duties as from
time to time may be delegated to them by the Board of Directors or by the Chief
Executive Officer, or which are or may at any time be authorized or required by
law.

SECTION 4. PRESIDENT.

Subject to the provisions of these By-laws and to the direction of the
Board of Directors and of the Chief Executive Officer, the President shall have
such powers and shall perform such duties as from time to time may be delegated
to him or her by the Board of Directors or by the Chief Executive Officer, or
which are or may at any time be authorized or required by law.

SECTION 5. SENIOR EXECUTIVE VICE PRESIDENTS, EXECUTIVE VICE PRESIDENTS, SENIOR
VICE PRESIDENTS AND VICE PRESIDENTS.

Each of the Senior Executive Vice Presidents, each of the Executive Vice
Presidents, each of the Senior Vice Presidents and each of the other Vice
Presidents shall have such powers and shall perform such duties as may be
delegated to him or her by the Board of Directors, the Chairman of the Board of
Directors, the President or such other officer or officers to whom he or she is
directly responsible.

SECTION 6. TREASURER AND ASSISTANT TREASURER.

The Treasurer, subject to the direction of the Board of Directors, shall
have the care and custody of all funds and securities of the Company which may
come into his or her hands. When necessary or proper he or she shall endorse on
behalf of the Company, for collection, checks, notes and other obligations, and
shall deposit all funds of the Company in such banks or other depositaries as
may be designated by the Board of Directors or by such officers or employees as
may be authorized by the Board of Directors so to designate. He or she shall
perform all acts incident to the office of Treasurer, subject to the control of
the Board of Directors and such other officer or officers to whom he or she is
directly responsible. He or she may be required to give a bond for the faithful
discharge of his or her duties, in such sum and upon such conditions as the
Board of Directors may require.

At the request and direction of the Treasurer or, in the case of his or her
absence or inability to act, any Assistant Treasurer may act in his or her
place. In the case of the death of the Treasurer, or in the case of his or her
absence or inability to act without having designated an Assistant Treasurer to
act temporarily in his or her place, the Assistant Treasurer so to perform the
duties of the Treasurer shall be designated by the Chairman of the Board of
Directors, a Vice Chairman of the Board of Directors, the President or an
Executive Vice President.

SECTION 7. SECRETARY AND ASSISTANT SECRETARY.

The Secretary shall keep full and accurate minutes of the meetings of the
stockholders and of the Board of Directors in the proper record book of the
Company provided therefor, and, when required, the minutes of meetings of the
committees, and shall be responsible for the custody of all such minutes.
Subject to the direction of the Board of Directors, the Secretary shall have
custody of the stock ledgers and documents of the Company. He or she shall have
custody of the corporate seal of the Company and shall affix and attest such
seal to any instrument whose execution under seal shall have been duly
authorized. He or she shall give due notice of meetings and, subject to the
direction of the Board of Directors, shall perform all other duties commonly
incident to his or her office or as properly required of him or her by the
Chairman of the Board of Directors and such other officer or officers to whom he
or she is directly responsible and shall enjoy all other powers commonly
incident to his or her office.

At the request and direction of the Secretary or, in the case of his or her
absence or inability to act, any Assistant Secretary may act in his or her
place. In the case of the death of the Secretary, or in the case of his or her
absence or inability to act without having designated an Assistant Secretary to
act temporarily in his or her place, the Assistant Secretary or other person so
to perform the duties of the Secretary shall be designated by the Chairman of
the Board of Directors, a Vice Chairman of the Board of Directors, the President
or an Executive Vice President.

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<PAGE> 11

SECTION 8. ASSISTANT VICE PRESIDENTS AND OTHER OFFICERS.

Each assistant vice president and other officers shall perform such duties
commonly incident to his or her office or as properly required of him or her by
the Chairman of the Board of Directors and such other officer or officers to
whom he or she is directly responsible.

SECTION 9. GENERAL COUNSEL.

The General Counsel shall have general supervision of all matters of a
legal nature concerning the Company. He or she shall perform all such duties
commonly incident to his or her office or as properly required of him or her by
the Chairman of the Board of Directors and such other officer or officers to
whom he or she 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 have such powers and shall perform
such duties as may be delegated to him or her by the Board of Directors, the
Chairman of the Board of Directors, the President or the appropriate Executive
Vice President, Senior Vice President or Vice President or such other officer or
officers to whom he or she is directly responsible.

SECTION 11. SALARIES.

Salaries of officers, agents or employees shall be fixed from time to time
by the Board of Directors or by such committee or committees, or person or
persons, if any, to whom such power shall have been delegated by the Board of
Directors. An employment contract, whether with an officer, agent or employee,
if expressly approved or specifically authorized by the Board of Directors, may
fix a term of employment thereunder; and such contract, if so approved or
authorized, shall be valid and binding upon the Company in accordance with the
terms thereof, provided that this provision shall not limit or restrict in any
way the right of the Company at any time to remove from office, discharge or
terminate the employment of any such officer, agent or employee prior to the
expiration of the term of employment under any such contract.

SECTION 12. VACANCIES.

A vacancy in any office filled by election of the Board of Directors may be
filled by the Board of Directors by the election of a new officer who shall hold
office, subject to the provisions of this Article V, until the regular meeting
of the directors following the next annual meeting of the stockholders and until
his or her successor is elected.

SECTION 13. 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 also is a director may be discharged at any time by the Board of Directors.

ARTICLE VI.

RESIGNATIONS

Any director, officer or agent of the Company, or any member of any
committee, may resign at any time by giving written notice to the Board of
Directors, the Chairman of the Board of Directors, a Vice Chairman of the Board
of Directors, the President or the Secretary of the Company. Any such
resignation shall take effect at the time specified therein, or if the time be
not specified therein, then upon receipt thereof. The acceptance of such
resignation shall not be necessary to make it effective.

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<PAGE> 12

ARTICLE VII.

CAPITAL STOCK - DIVIDENDS - SEAL

SECTION 1. CERTIFICATES OF SHARES.

The certificates for shares of the capital stock of the Company shall be in
such form, not inconsistent with the Charter, as shall be approved by the Board
of Directors. The certificates shall be numbered and signed by the Chairman of
the Board of Directors, a Vice Chairman of the Board of Directors, the
President, an Executive Vice President, a Senior Vice President or a Vice
President, and also by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary. Any and all signatures may be facsimiles.

All certificates shall bear the name of the persons owning the shares
represented thereby, shall state the number of shares represented by such
certificate and the date of issue; and such information shall be entered in the
Company's original stock ledger.

SECTION 2. ADDRESSES OF STOCKHOLDERS.

It shall be the duty of every stockholder to notify the Company of his or
her post office address and of any change therein. The latest address furnished
by each stockholder shall be entered on the original stock ledger of the Company
and the latest address appearing on such original stock ledger shall be deemed
conclusively to be the post office address and the last-known post office
address of such stockholder. If any stockholder shall fail to notify the Company
of his or her post office address, it shall be sufficient to send corporate
notices to such stockholder at the address, if any, understood by the Secretary
to be his or her post office address, or in the absence of such address, to such
stockholder, at the General Post Office in the City of Wilmington, State of
Delaware.

SECTION 3. LOST, DESTROYED OR STOLEN CERTIFICATE.

Any person claiming a stock certificate in lieu of one lost, destroyed or
stolen, shall give the Company an affidavit as to his, her or its ownership of
the certificate and of the facts which go to prove that it has been lost,
destroyed or stolen. If required by the Board of Directors, he, she or it also
shall give the Company a bond, in such form as may be approved by the Board of
Directors, sufficient to indemnify the Company against any claim that may be
made against it on account of the alleged loss of the certificate or the
issuance of a new certificate. A new certificate shall be issued upon receipt of
such an affidavit and, if required, upon the giving of such a bond.

SECTION 4. RECORD OF 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 such owner.

SECTION 5. RECORD DATE.

In order that the Company may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders, or to receive payment of any
dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock (other than
conversions or exchanges pursuant to Article 4 of the Charter) or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of

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<PAGE> 13

rights or to exercise any rights of change, conversion or exchange of stock
(other than conversions or exchanges pursuant to Article 4 of the Charter) or
for any other purpose, the record date shall be at the close of business on the
day on which the Board of Directors adopts a resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

If stockholders are entitled to consent to corporate action in writing
without a meeting in accordance with the General Corporation Law of the State of
Delaware and the Charter, in order that the Company may determine the
stockholders entitled to so consent, the Board of Directors may fix a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall be
not more than ten (10) days after the date upon which the resolution fixing the
record date is adopted and no record date has been fixed by the Board of
Directors and if no prior action by the Board of Directors is required by the
General Corporation Law of the State of Delaware, the record date shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Company in the manner prescribed by
Article 12 of the Charter. If stockholders are entitled to consent to corporate
action in writing without a meeting in accordance with the General Corporation
Law of the State of Delaware and the Charter, and no record date has been fixed
by the Board of Directors and prior action by the Board of Directors is required
by the General Corporation Law of the State of Delaware with respect to the
proposed action by written consent of the stockholders, the record date for
determining stockholders entitled to consent to corporate action in writing
shall be at the close of business on the day on which the Board of Directors
adopts the resolution taking such prior action.

SECTION 6. REGULATIONS.

The Board of Directors shall have power and authority to make all such
rules and regulations not inconsistent with any of the provisions of Article 4
of the Charter, as it may deem expedient, concerning the issue, transfer and
registration of certificates for shares of the stock of the Company.

SECTION 7. CORPORATE SEAL.

The corporate seal shall be in such form as shall from time to time be
approved by the Board of Directors. If and when so authorized by the Board of
Directors, a duplicate of the seal may be kept and used by the Secretary or
Treasurer or by any Assistant Secretary or Assistant Treasurer.

ARTICLE VIII.

EXECUTIVE OF CONTRACTS AND OTHER DOCUMENTS

SECTION 1. CONTRACTS, ETC.

Except as otherwise prescribed in these By-laws, such officers, employees
or agents of the Company as shall be specified by the Board of Directors shall
sign, in the name and on behalf of the Company, all deeds, bonds, contracts,
mortgages and other instruments or documents, the execution of which shall be
authorized by the Board of Directors; and such authority may be general or
confined to specific instances. Except as so authorized by the Board of
Directors, no officer, agent or employee of the Company shall have power or
authority to bind the Company by any contract or engagement or to pledge,
mortgage, sell or otherwise dispose of its credit or any of its property or to
render it pecuniarily liable for any purpose or in any amount.

SECTION 2. CHECKS, DRAFTS, ETC.

Except as otherwise provided in these By-laws, all checks, drafts, notes,
bonds, bills of exchange or other

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<PAGE> 14

orders, instruments or obligations for the payment of money shall be signed by
such officer or officers, employee or employees, or agent or agents, as the
Board of Directors shall by resolution direct. The Board of Directors may, in
its discretion, also provide by resolution for the countersignature or
registration of any or all such orders, instruments or obligations for the
payment of money.

ARTICLE IX.

FISCAL YEAR

The fiscal year of the Company shall begin the first day of January in each
year.

ARTICLE X.

MISCELLANEOUS

SECTION 1. ORIGINAL STOCK LEDGER.

As used in these By-laws and in the Charter, the words "original stock
ledger" shall mean the record maintained by the Secretary of the Company of the
name and address of each of the holders of shares of any class of stock of the
Company, and the number of shares and the numbers of the certificates for such
shares held by each of them, taking into account transfers at the time made by
and recorded on the transfer sheets of each of the Transfer Agents of the
Company although such transfers may not have been posted in the record
maintained by the Secretary.

SECTION 2. NOTICES AND WAIVERS THEREOF.

Whenever any notice whatever is required by these By-laws, the Charter or
any of the laws of the State of Delaware to be given to any stockholder,
director or officer, such notice, except as otherwise provided by the laws of
the State of Delaware, may be given personally or by telephone or be given by
facsimile transmission or other form of electronic communication, addressed to
such stockholder at the address set forth as provided in Section 2 of Article
VII of these By-laws, or to such director or officer at his or her Company
location, if any, or at such address as appears on the books of the Company, or
the notice may be given in writing by depositing the same in a post office, or
in a regularly maintained letter box, or by sending it via courier in a
postpaid, sealed wrapper addressed to such stockholder at the address set forth
in Section 2 of Article VII of these By-laws, or to such director or officer at
his or her Company location, if any, or such address as appears on the books of
the Company.

Any notice given by facsimile transmission or other form of electronic
communication shall be deemed to have been given when it shall have been
transmitted. Any notice given by mail or courier shall be deemed to have been
given when it shall have been mailed or delivered to the courier.

A waiver of any such notice in writing, including by facsimile
transmission, signed or dispatched by the person entitled to such notice or by
his or her duly authorized attorney, whether before or after the time stated
therein, shall be deemed equivalent to the notice required to be given, and the
presence at any meeting of any person entitled to notice thereof shall be deemed
a waiver of such notice as to such person.

SECTION 3. VOTING UPON STOCKS.

The Board of Directors (whose authorization in this connection shall be
necessary in all cases) may from time to time appoint an attorney or attorneys
or agent or agents of the Company, or may at any time or from time to time
authorize the Chairman of the Board of Directors, any Vice Chairman of the Board
of Directors, the President, any Senior Executive Vice President, any Executive
Vice President, any Senior Vice President, any Vice President, the Treasurer or
the Secretary to appoint an attorney or attorneys or agent or agents of the
Company, in the name and on behalf of the Company, to cast the votes which the
Company may be entitled to cast as a stockholder or otherwise in any other
corporation or association, any of the stock or securities of which may be held
by the Company, at meetings of the holders of the stock or other securities of
such other corporation or association, or to consent in writing to any

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<PAGE> 15

action by any such other corporation or association and the Board of Directors
or any aforesaid officer so authorized may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and the
Board of Directors or any aforesaid officer so authorized may from time to time
authorize the execution and delivery, on behalf of the Company and under its
corporate seal, or otherwise, of such written proxies, consents, waivers or
other instruments as may be deemed necessary or proper in the premises.

ARTICLE XI.

AMENDMENTS

These By-laws may be altered, amended or repealed at any meeting of the
Board of Directors or of the stockholders, provided that notice of such
alteration, amendment or repeal be contained in the notice of such meeting of
the Board of Directors or stockholders (subject, in the case of meetings of
stockholders, to the provisions of Article II of these By-laws), as the case may
be. All such amendments must be approved by the affirmative vote of the holders
of at least 75% of the total voting power of all classes of outstanding capital
stock, voting together as a single class (if effected by action of the
stockholders), or by the affirmative vote of directors constituting not less
than a majority of the total number of directors that the Company would have if
there were no vacancies on the Company's Board of Directors (if effected by
action of the Board of Directors).

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<PAGE> 1
EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT, effective as of _______________, 1999 (the
"Agreement") between ASSOCIATES CORPORATION OF NORTH AMERICA (A Texas
Corporation), a corporation existing under the laws of the State of Texas (the
"Company"), and Executive (the "Executive"),

WITNESSETH:

WHEREAS, the Company and the Executive desire to enter into an
agreement relating to the employment of the Executive;

NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:

1. EMPLOYMENT

1.1. Effective as of _________________, 1999 (the "Effective Date"),
the Executive hereby agrees to serve, upon the terms and conditions herein
contained, as an executive of the Company, which is the management company for
Associates First Capital Corporation ("AFCC") and its controlled group of
corporations. The Executive shall have such duties as the Board of Directors of
AFCC, or its delegee, may determine.

1.2. Unless automatically renewed, the Agreement and the term of
employment hereunder shall commence on the Effective Date and, subject to the
terms hereof, shall terminate on the day immediately prior to the third
anniversary of such date. This Agreement and the three-year term of employment
shall automatically renew on the first day of each calendar month following the
Effective Date, unless either party provides written notice of non-renewal prior
to the first day of each such month. The original three-year term and any
renewals thereof are referred to as the "Employment Term."

1.3. During the Executive's employment hereunder, the Executive shall
devote the Executive's best efforts and substantially all of the Executive's
time and services during normal business hours (subject to vacations, sick leave
and other absences in accordance with the policies of the Company as in effect
from time to time for other

<PAGE> 2

senior executives of the Company who are of a comparable status to the
Executive) to the business and affairs of the Company.

2. SALARY

2.1. During the Executive's employment hereunder, the Executive shall
be entitled to receive an annual base salary of at least $Salary, payable in
accordance with the Company's payroll policy as in effect from time to time.
Such base salary shall include any salary reduction contributions on behalf of
the Executive to (a) any plan sponsored by the Company or any of its affiliates
that includes a cash-or- deferred arrangement under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"), (b) any other plan of
deferred compensation sponsored by the Company or any of its affiliates, (c) any
"cafeteria plan" under Code Section 125 that is sponsored by the Company or any
of its affiliates, or (d) any other policy, plan, program or arrangement of the
Company or any of its affiliates pursuant to which the Executive has agreed to a
salary reduction contribution.

2.2. The Company may, in its sole discretion, increase the Executive's
annual base salary.

3. INCENTIVE COMPENSATION

During the Executive's employment hereunder, the Executive shall be
entitled to participate in any incentive, profit-sharing, bonus, stock option or
similar or comparable policy, plan, program or arrangement applicable generally
to other senior executives of the Company who are of a comparable status to the
Executive, subject to the terms and conditions of any such policy, plan, program
or arrangement, as such policy, plan, program or arrangement may now exist or
may be adopted or amended hereafter by the Company or any of its affiliates, as
applicable. In the event that a Change in Control occurs during the Employment
Term, then for the calendar year in which the Change in Control occurs and for
each subsequent full calendar year that remains in the Employment Term and
throughout which the Executive remains employed by the Company, the Executive
shall receive (a) an award of corporate annual performance pay ("CAPP") under
the Associates First Capital Corporation Incentive Compensation Plan (or any
predecessor or successor plan) (the "ICP") in an amount at least equal to 80% of
the norm award calculated for the Executive for the year, and (b) an award of

<PAGE> 3

long-term performance pay ("LTPP") under the Associates First Capital
Corporation Long-Term Performance Plan (or any successor plan) in an amount at
least equal to 80% of the norm award calculated for the Executive for the year.
For purposes of the immediately preceding sentence, the Executive's "norm award"
for any year shall be calculated in accordance with the Company's normal
administrative procedures, as in effect immediately prior to the Change in
Control, for determining CAPP and LTPP norm awards. Any bonuses, including CAPP
and LTPP awards, payable pursuant to this Section 3 shall be payable to the
Executive at the same time and in the same manner as such bonuses are generally
payable to other executives of the Company and subject to the terms and
conditions of the applicable policy, plan, program or arrangement.

4. EXECUTIVE BENEFITS

During the Executive's employment hereunder, the Executive shall be
entitled to participate in and receive benefits under any and all employee
retirement income, welfare benefit and fringe benefit policies, plans, programs
or arrangements applicable generally to the Company's employees or generally to
other senior executives of the Company who are of a comparable status to the
Executive, subject to the terms and conditions of any such policies, plans,
programs or arrangements, as such policies, plans, programs or arrangements may
now exist or may be adopted or amended hereafter by the Company or AFCC, as
applicable.

5. EXPENSES

During the Executive's employment hereunder, the Executive is
authorized to incur, and shall be reimbursed for all, reasonable expenses for
promoting the business of the Company and its affiliates, including expenses for
travel and similar items, in accordance with the policies of the Company as in
effect from time to time for other senior executives of the Company who are of a
comparable status to the Executive.

6. TERMINATION

6.1. The Company may terminate the Executive's employment hereunder at
any time, with or without Cause. As used herein, the term "Cause" shall be
limited to (a) action by the Executive involving willful malfeasance, (b) the
Executive's

<PAGE> 4

unreasonable neglect or refusal to perform the executive duties assigned to the
Executive pursuant to this Agreement, (c) the Executive's being convicted of a
felony, (d) the Executive's engaging in any activity that is directly or
indirectly in competition with the Company or any affiliate or in any activity
that is inimical to the best interests of the Company or any affiliate, or (e)
the Executive's violation of Company policy covering standards of corporate
conduct. Notwithstanding anything to the contrary in this Agreement, if the
Company terminates the Executive's employment with Cause, all of the Company's
obligations under this Agreement shall cease, and this Agreement shall
terminate, on the effective date of the Executive's termination of employment.

6.2. The Executive may terminate employment hereunder at any time by
written notice to the Company. If the Executive terminates employment hereunder
for any reason whatsoever, including without limitation by retirement, all of
the Company's obligations under the Agreement shall cease, to the extent
permitted by applicable law and other than pursuant to a policy, plan, program
or arrangement provided to the Executive in accordance with Section 4 hereof, as
of the effective date of the termination of the Executive's employment;
provided, however, that the Executive's termination of employment with the
Company as a result of an event constituting Constructive Termination shall not
be considered a termination by the Executive under this Section 6.2. In the
event that the Executive's employment hereunder terminates due to the
Executive's becoming Totally Disabled or due to the Executive's death, the
Company's obligation under this Agreement shall be determined in accordance with
Section 7 hereof.

6.3. In the event that either the Company terminates the Executive's
employment hereunder without Cause or, within the period beginning six months
prior to and ending 15 months after a Change in Control (the "Window Period"),
the Executive terminates employment as a result of an event constituting
Constructive Termination, the Executive shall be entitled, in lieu of any other
compensation or benefits provided for under this Agreement (to the extent
permitted by applicable law and other than pursuant to a policy, plan, program
or arrangement provided to the Executive in accordance with Section 4 hereof):

(a) to receive a lump-sum cash payment in an amount equal
to (i) two times the sum of the Executive's
then-current annual base salary and an amount equal
to the average of the CAPP (or, if applicable,

<PAGE> 5

other annual bonus) awards paid to the Executive by
the Company for each of the three calendar years
immediately preceding the year of termination of the
Executive's employment (or, if the Executive has not
been employed by the Company or one of its affiliates
for at least three calendar years immediately
preceding the year of termination, for such years as
the Executive has been employed by the Company or one
of its affiliates immediately preceding the year of
termination; provided, however, that if the Executive
is terminated prior to receiving any CAPP or other
annual bonus award from the Company, any CAPP or
other annual bonus award guaranteed to such Executive
pursuant to the Executive's engagement letter with
the Company shall be taken into account for purposes
of this Section 6.3), plus (ii) a pro rata amount,
based on the portion of the current performance year
preceding termination, equal to the average of the
CAPP (or, if applicable, other annual bonus) and LTPP
awards paid to the Executive by the Company for each
of the three calendar years immediately preceding the
year of termination of the Executive's employment
(or, if the Executive has not been employed by the
Company or one of its affiliates for at least three
calendar years immediately preceding the year of
termination, for such years as the Executive has been
employed by the Company or one of its affiliates
immediately preceding the year of termination;
provided, however, that if the Executive is
terminated prior to receiving any CAPP (or other
annual bonus) or LTPP awards from the Company, any
CAPP (or other annual bonus) and LTPP awards
guaranteed to such Executive pursuant to his
engagement letter with the Company shall be taken
into account for purposes of this Section 6.3);

(b) to be vested in full as of the termination date in
any outstanding stock options granted under the ICP
and to have all restrictions lapse as of the
termination date on any restricted stock awarded to
the Executive under the ICP; and

<PAGE> 6

(c) to continue to receive, for two years from the date
of termination of the Executive's employment
hereunder, at the Company's expense, life insurance
and medical, dental, disability and other welfare
benefits at least comparable to those provided by the
Company to the Executive, and in which the Executive
is enrolled, on the date of termination of the
Executive's employment hereunder (the "Company
Welfare Benefits"), provided that such Company
Welfare Benefits shall cease if the Executive obtains
other employment with benefits that are similar in
the aggregate to the Company Welfare Benefits.

To the extent permitted by applicable provisions of the Code as then in
effect, the Company shall treat the value of premiums for the Company Welfare
Benefits as taxable income to the Executive for each year during which the
Company provides such Company Welfare Benefits to the Executive pursuant to
Section 6.3(c). Notwithstanding the foregoing, with respect to the Executive's
continued coverage under any plans subject to the continued coverage
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), the Executive's "qualifying event" for purposes of COBRA shall be the
date of termination of the Executive's employment with the Company. Any
termination payments hereunder shall not be taken into account for purposes of
any retirement plan or other benefit plan sponsored by the Company or any of its
affiliates, except as otherwise expressly required by any such plan or
applicable law. The Company may withhold from any amounts payable under this
Agreement all federal, state, city or other taxes as the Company is required to
withhold pursuant to any law or government regulation or ruling.

6.4. Notwithstanding any other provision, the right of the Executive to
any compensation or benefits provided for under this Agreement shall cease (to
the extent permitted by applicable law) if the Board of Directors of the Company
(or, in the event that the Executive is a member of the Board of Directors of
the Company, the Board of Directors of AFCC) determines that the Executive has
violated Sections 8.2 or 8.3 hereof, or has engaged in any activity that is
inimical to the best interests of the Company or any of its affiliates.

6.5. For purposes of this Agreement, a "Change in Control" shall have
occurred if at any time during the Employment Term any of the following events
shall occur:

<PAGE> 7

(a) AFCC is merged, consolidated or reorganized into or
with another corporation or other legal person, and
as a result of such merger, consolidation or
reorganization into or with another corporation or
another legal person, less than a majority of the
combined voting power of the then-outstanding
securities of such corporation or person immediately
after such transaction are held in the aggregate by
the holders of Voting Stock (as that term is
hereafter defined) of AFCC immediately prior to such
transaction;

(b) AFCC sells or otherwise transfers all or
substantially all of its assets to any other
corporation or other legal person, and as a result of
such sale or transfer, less than a majority of the
combined voting power of the then-outstanding voting
securities of such corporation or person are held in
the aggregate by the holders of Voting Stock of AFCC
immediately prior to such sale or transfer;

(c) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"), disclosing
that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) or the Exchange
Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the
Exchange Act) of securities representing 20% or more
of the combined voting power of the then-outstanding
securities of AFCC entitled to vote generally in the
election of Directors of AFCC ("Voting Stock");

(d) AFCC files a report or proxy statement with the
Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or
Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of
AFCC has or may have occurred or will or may occur in
the future pursuant to any then-existing contract or
transaction; or

<PAGE> 8

(e) If during any period of two consecutive years
individuals who at the beginning of any such period
constituted the Directors of AFCC cease for any
reason to constitute at least a majority thereof
unless the election, or the nomination for election
by AFCC's stockholders, of each Director of AFCC
first elected during such period was approved by a
vote of at least two-thirds of the Directors of AFCC
(or, in the case of a nomination for election, by a
vote of at least two-thirds of the members of the
Nominating Committee of the Board of Directors of
AFCC) then still in office who were Directors of AFCC
at the beginning of any such period.

Notwithstanding the foregoing provisions of Section 6.5(c) or (d)
hereof, unless otherwise determined in a specific case by a majority vote of the
Board of Directors of AFCC, a "Change in Control" shall not be deemed to have
occurred for purposes of this Agreement solely because AFCC, an entity in which
AFCC directly or indirectly beneficially owns 50% or more of the voting
securities of such entity, any employee stock ownership plan or any other
employee benefit plan of AFCC or any of its affiliates either files or becomes
obligated to file a report or a proxy statement under or in response to Schedule
13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form
or report or item therein) under the Exchange Act, disclosing beneficial
ownership by it of shares of voting securities of AFCC, whether in excess of 20%
or otherwise, or because AFCC reports that a change in control of AFCC has or
may have occurred or will or may occur in the future by reason of such
beneficial ownership.

6.6. If a Change in Control occurs during the Employment Term, then as
of the date of such Change in Control, (a) the Executive shall be vested in full
in any outstanding stock options granted under the ICP, (b) all restrictions
shall lapse on any restricted stock awarded to the Executive under the ICP, (c)
the Executive's rights and interests shall be vested in full and nonforfeitable
in any accounts or benefits payable under any of the Company's nonqualified
plans in which the Executive participates or has participated prior to the
Change in Control, and (d) the Company shall fund a trust, subject to the claims
of creditors of the Company and its affiliates, with sufficient funds to
guarantee payment of all benefits payable to the Executive under any of the

<PAGE> 9

Company's nonqualified plans in which the Executive participates or has
participated prior to the Change in Control.

6.7. For purposes of this Agreement, the occurrence of any of the
following events shall be considered to constitute "Constructive Termination,"
unless such event is expressly consented to in advance in writing by the
Executive:

(a) The assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirement), authority, duties or
responsibilities, or any other action that results in
a substantial diminution in such position, authority,
duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied
by the Company promptly after receipt of notice
thereof given by the Executive;

(b) Any failure to (i) continue to provide the Executive
with the opportunity to participate, on terms
substantially comparable in the aggregate to those in
effect immediately prior to the Window Period, in
substantially the same incentive compensation,
employee retirement income, welfare benefit and
fringe benefit policies, plans, programs and
arrangements in which the Executive was participating
(or entitled to participate pursuant to Sections 3
and 4 hereof) immediately prior to the Window Period,
or their equivalent, except to the extent any such
failure to continue to provide any of the above is
applicable generally to all of the Company's
employees, or (ii) provide the Executive with the
incentive compensation, employee retirement income,
welfare benefit and fringe benefit policies, plans,
programs and arrangements (or their equivalent) as in
effect from time to time for other senior executives
of the Company who are of a comparable status to the
Executive;

(c) A substantial reduction, without good business
reasons, of the facilities and perquisites available
to the Executive immediately prior to such reduction;
or

<PAGE> 10

(d) A relocation of the Executive's principal location of
work to any location that is more than 50 miles from
the location of such principal location of work
immediately prior to such relocation.

6.8. In the event that it shall be determined (as hereinafter provided)
that any payment or distribution by the Company pursuant to this Agreement to or
for the benefit of the Executive (determined without regard to any additional
payments required under this Section 6.8) (a "Payment") would be subject to the
excise tax imposed by Code Section 4999 (or any successor provision thereto) or
to any similar tax imposed by state or local law, or to any interest or
penalties with respect to such excise tax (such tax or taxes, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall pay to the Executive an additional amount
(a "Gross-Up Payment") such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payment.

6.9. Subject to the provisions of Section 6.10, all determinations
required to be made under Section 6.8, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether and when
a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by a nationally recognized firm of certified public accountants (the
"Accounting Firm") selected by the Company in its sole discretion. The Company
and the Executive shall each provide the Accounting Firm access to and copies of
any books, records and documents in the possession of the Company or the
Executive, as the case may be, reasonably requested by the Accounting Firm and
otherwise cooperate with the Accounting Firm in connection with the preparation
and issuance of the determination contemplated by Section 6.8 and this Section
6.9. The Accounting Firm shall submit its determination and detailed supporting
calculations both to the Company and to the Executive within 15 business days
after the effective date of termination of the Executive's employment hereunder,
if applicable, or at such earlier time as may be requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
If the Accounting Firm determines that any Excise Tax is payable by the
Executive, the Company shall pay the required Gross-Up Payment to the Executive
within five

<PAGE> 11

business days after receipt of such determination and calculations. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall, at the same time as it makes such determination, furnish the Executive
with an opinion that the Executive has substantial authority not to report any
Excise Tax on the Executive's federal, state, local income or other tax return.
Any determination by the Accounting Firm as to the amount of the Gross-Up
Payment shall be binding upon the Company and the Executive. As a result of
possible uncertainty in the application of Code Section 4999 (or any successor
provision thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments will not have
been made by the Company that should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to Section
6.10 hereof and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred, and the Company shall promptly pay any such Underpayment to
or for the benefit of the Executive within five business days after the
Company's receipt of the Accounting Firm's determination and calculations.

6.10. The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as promptly
as practicable but no later than 10 business days after the Executive actually
receives notice of such claim and the Executive shall further apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known by the Executive). The
Executive shall not pay such claim prior to the earlier of (a) the expiration of
the 30-calendar-day period following the date on which the Executive gives such
notice to the Company and (b) the date that any payment of amount with respect
to such claim is due. If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:

(i) provide the Company with any written records or documents
in the Executive's possession relating to such claim as such records or
documents are reasonably requested by the Company;

<PAGE> 12

(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;

(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and

(iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section 6.10, the Company shall control all proceedings taken in connection with
the contest of any claim contemplated by this Section 6.10 and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at the
Executive's own cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
the tax claimed and sue for a refund, the Company shall advance the amount of
such payment to the Executive on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however, that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
any such contested claim shall be limited to issues with respect to which a
Gross-Up Payment

<PAGE> 13

would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

6.11. The federal, state and local income or other tax returns filed by
the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Tax and, at the request of the Company, provide to the Company true and
correct copies (with any amendments) of the Executive's federal income tax
return as filed with the Internal Revenue Service and corresponding state and
local tax returns, if relevant, as filed with the applicable taxing authority,
and such other documents reasonably requested by the Company, evidencing such
payment. If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five business days of such determination pay to the
Company the amount of such reduction. If, after the receipt by the Executive of
an amount advanced by the Company pursuant to Section 6.8 or 6.10 hereof, the
Executive receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 6.10
hereof) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereof after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 6.8 or 6.10 hereof, a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial or refund
prior to the expiration of 30 calendar days after such determination, then such
advance shall be forgiven and shall not be required to be repaid, and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid pursuant to Section 6.8.

7. DISABILITY OR DEATH

7.1. In the event that the Executive becomes Totally Disabled during
the Executive's employment hereunder, (a) the Executive's employment with the
Company shall be deemed to have terminated employment with the Company effective
as of the first date on which the Executive is determined to be Totally
Disabled, and (b) in lieu of

<PAGE> 14

any other compensation or benefits provided for under this Agreement (to the
extent permitted by applicable law and other than pursuant to a policy, plan,
program or arrangement provided to the Executive in accordance with Section 4
hereof), the Executive shall receive on or about the first day of each calendar
month, beginning with the first calendar month immediately following the date on
which the Executive is first determined to be Totally Disabled and continuing
for five additional months (a total of six months), a cash payment equal to the
Executive's monthly base salary (determined as of the date on which the
Executive is first determined to be Totally Disabled) plus one-twelfth of the
average of the CAPP (or, if applicable, other annual bonus) awards paid to the
Executive by the Company for each of the three calendar years immediately
preceding the year in which the Executive is first determined to be Totally
Disabled (or, if the Executive has not been employed by the Company or one of
its affiliates for at least three calendar years immediately preceding the year
in which the Executive is first determined to be Totally Disabled, for such
years as the Executive has been employed by the Company or one of its affiliates
immediately preceding the year in which the Executive is first determined to be
Totally Disabled; provided, however, that if the Executive is determined to be
Totally Disabled prior to receiving any CAPP or other annual bonus award from
the Company, any CAPP or other annual bonus award guaranteed to such Executive
pursuant to the Executive's engagement letter with the Company shall be taken
into account for purposes of this Section 7.1), less any amounts received
through any disability or salary continuation plan provided pursuant to Section
4 hereof. For purposes of this Agreement, the Executive shall be considered to
be "Totally Disabled" as of such date as the Executive is determined to have a
physical or mental impairment that prevents the Executive from performing the
duties of the Executive's regular job.

7.2. In the event that the Executive dies while employed hereunder, the
Executive's beneficiary (or beneficiaries) shall receive, in lieu of any other
compensation or benefits provided for under this Agreement (to the extent
permitted by applicable law and other than pursuant to a policy, plan, program
or arrangement provided to the Executive in accordance with Section 4 hereof),
the Executive's beneficiary or beneficiaries shall receive within 30 days of the
date of the Executive's death a lump-sum cash payment equal to the Executive's
annual base salary (determined as of the date of the Executive's death) plus the
average of the CAPP (or, if applicable, other annual bonus) awards paid to the
Executive by the Company for each of the three calendar years immediately
preceding the year in which the Executive

<PAGE> 15

dies (or, if the Executive has not been employed by the Company or one of its
affiliates for at least three calendar years immediately preceding the year in
which the Executive dies, for such years as the Executive has been employed by
the Company or one of its affiliates immediately preceding the year of death;
provided, however, that if the Executive dies prior to receiving any CAPP (or
other annual bonus) award from the Company, any CAPP or other annual bonus award
guaranteed to such Executive pursuant to the Executive's engagement letter with
the Company shall be taken into account for purposes of this Section 7.2). The
Executive may designate, at any time and from time to time, a beneficiary or
beneficiaries, in such form as specified by the Company, to receive the payment
provided for herein, provided that any designation or change of a prior
designation must be received in writing by the Company prior to the Executive's
death and provided, further, that if no such designation is received by the
Company prior to the Executive's death, the Executive's beneficiary shall be
deemed to be the Executive's estate.

8. RESTRICTIVE COVENANTS

8.1. The Executive agrees to execute and deliver from time to time the
Company's standard confidentiality, conflict of interest and proprietary
information agreements.

8.2. The Executive and the Executive's agents shall not, during the
24-month period following any termination of employment hereunder, or in
contemplation of termination of employment, induce, entice or solicit any
employee of the Company or its affiliates, to leave employment with the Company
or its affiliates.

8.3. If the Executive receives benefits or compensation of any kind
from the Company pursuant to Section 6.3, the Executive will not, either
directly or indirectly, for a 24-month period following termination of
employment with the Company, compete with the Company in any manner or capacity
(e.g., as an employee, advisor, principal, agent, partner, officer or director)
in any phase of any business which the Company or any of its affiliates conduct
during the Employment Term. The obligations of this covenant not to compete
("Covenant") shall apply to any geographic area in which the Company and its
affiliates have engaged in business during the Employment Term. The Executive
agrees and acknowledges that it would be difficult to fully compensate the
Company for the damages resulting from a breach of this Covenant, and that the

<PAGE> 16

Company will, therefore, be entitled to temporary and permanent injunctive
relief in the event of any actual or threatened breach. Such relief may be
granted without the necessity of proving actual damages, but this provision does
not diminish the Company's right to recover damages in addition to injunctive
relief.

9. NOTICE

For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or
permitted to be given hereunder, shall be in writing, and shall be deemed to
have been duly given when hand-delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express or UPS,
addressed to the Company (to the attention of its General Counsel) at its
principal executive offices and to the Executive at the Executive's principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of changes of address
shall be effective only upon receipt.

10. SEPARABILITY

If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such provision shall be modified, to the
extent practical, consistent with the intent of the parties, in order to render
it enforceable, but such invalidity or unenforceability shall not affect the
remaining provisions hereof, which shall remain in full force and effect.

11. ASSIGNMENT

11.1. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would have been required to perform if no such succession had taken
place. This Agreement shall be binding upon

<PAGE> 17

and inure to the benefit of the Company and any successor to the Company,
including without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but
shall not otherwise be assignable, transferable or delegable by the Company.

11.2. This Agreement shall inure to the benefit of , and be enforceable
by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.

11.3. This Agreement is personal in nature, and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 11.1 and

11.4. Without limiting the generality or effect of the foregoing, the
Executive's right to receive payments hereunder shall not be assignable,
transferable or delegable, whether by pledge, creation of a security interest,
or otherwise, other than by a transfer by the Executive's will or by the laws of
descent and distribution; and, in the event of any attempted assignment or
transfer contrary to this Section 11.3, the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.

12. ENTIRE AGREEMENT; AMENDMENT

This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties hereto with respect to the subject matter hereof
and contains all of the covenants and agreements between the parties with
respect to such subject matter. Each party to this Agreement acknowledges that
no representations, inducements, promises or other agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf of any party,
pertaining to the subject matter hereof, which are not embodied herein, and that
no other agreement, statement, or promise pertaining to the subject matter
hereof that is not contained in this Agreement shall be valid or binding on
either party. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by the Executive and the Company. No waiver by either party

<PAGE> 18

hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. Unless otherwise noted, references to
"Sections" are to sections of this Agreement. The captions used in this
Agreement are designed for convenient reference only and are not to be used for
the purpose of interpreting any provision of this Agreement.

13. DISPUTE RESOLUTION.

13.1. Any dispute between the Executive and the Company under this
Agreement shall be resolved (except as provided otherwise in this Section 13)
through binding arbitration conducted by the American Arbitration Association,
pursuant to the American Arbitration Association Employment Arbitration rules,
or other mutually agreeable arbitration service or rules. The arbitrator shall
be selected by mutual agreement, through alternative strikes from a designated
list, or as required by the American Arbitration Association. The arbitrator
shall be duly licensed to practice law in the State of Texas and shall have
experience in employment law arbitration. All proceedings shall be conducted in
the City of Dallas, State of Texas, unless otherwise agreed by all parties.

13.2. The arbitrator shall permit reasonable pre-hearing discovery of
facts, to the extent necessary to establish a claim or a defense to a claim,
subject to supervision by the arbitrator. Each party shall be entitled to
present evidence and argument to the arbitrator. Each party shall have the right
to be represented by legal counsel of the party's choosing. The arbitrator shall
have the right only to interpret and apply the provisions of this Agreement and
may not change any of its provisions. The arbitrator does not have authority (a)
to render a decision that contains a reversible error of state or federal law,
or (b) to apply a cause of action or remedy not otherwise provided for under
applicable state or federal law. The arbitrator shall be required to state in a
written opinion all facts and conclusions of law relied upon to support the
decision rendered and shall give written notice to the parties of the decision
and furnish each party a signed copy of such decision. The determination of the
arbitrator shall be conclusive and binding upon the parties, and judgment upon
the same may be entered in any court having jurisdiction thereof. The parties
shall resolve any dispute over the enforceability of an award through
declaratory relief to be disposed of through motion

<PAGE> 19
proceedings in the applicable court of law. Either party may move for dismissal
through summary judgment in accordance with the Federal Rules of Civil Procedure
and the standard of proof under federal law for a motion for summary judgment.
The expenses of arbitration, including reasonable expenses of legal counsel
retained by the Executive in connection with such arbitration, shall be borne by
the Company.

13.3. Notwithstanding the foregoing, the Company shall not be required
to seek or participate in arbitration regarding any breach of the Executive's
obligations pursuant to Sections 8.2 or 8.3 hereof, but may pursue its remedies
for such breach in a court of competent jurisdiction in the City of Dallas,
State of Texas.

14. GOVERNING LAW

This Agreement shall be construed, interpreted and governed in
accordance with the laws of Texas.

IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of ________________, 1999.

-----------------------------------
(Executive)

ASSOCIATES CORPORATION OF
NORTH AMERICA (A Texas
Corporation)

By:
--------------------------------
Michael E. McGill
Executive Vice President

<PAGE> 1
EXHIBIT 10.7

ASSOCIATES FIRST CAPITAL CORPORATION
INCENTIVE COMPENSATION PLAN
STOCK OPTION AWARD AGREEMENT - 2000

You have been selected to become a Participant in the Associates First Capital
Corporation Incentive Compensation Plan (the "Plan") for 2000, through this
grant of a nonqualified stock option (the "Stock Option" or "Option") as
specified below:

PARTICIPANT:
------------------------------------------------
ADDRESS:
---------------------------------------------------

---------------------------------------------------
OPTION NO.:
----------------------------
DATE OF GRANT:
-------------------------
NUMBER OF SHARES COVERED BY THIS AGREEMENT:
-----------------
OPTION PRICE:
--------------------------
DATE OF EXPIRATION:
--------------------

Except as hereinafter provided, you may exercise this Option in accordance with
the following vesting schedule:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Percentage Number of Shares Available Cumulative Number of Shares
Date Exercisable for Purchase as of this Date* Available for Purchase*
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
33 1/3% ______________ Shares ______________ Shares

66 2/3% ______________ Shares ______________ Shares**

100% ______________ Shares ______________ Shares**
- ------------------------------------------------------------------------------------------------
</TABLE>

THIS AGREEMENT, effective as of the Date of Grant set forth above, represents
the grant of an Option to purchase shares of the Class A Common Stock ("Shares")
of Associates First Capital Corporation, a Delaware corporation (the "Company"),
to the Participant named above, pursuant to the provisions of the Plan.

- --------

* Number of Shares may reflect rounding to extent necessary to avoid
fractional Shares.

** Numbers listed assume no exercise has yet occurred under this Option.

<PAGE> 2

The Plan provides a description of certain terms and conditions governing the
Option. In the event of any inconsistency between the terms of this Agreement
and the terms of the Plan, the Plan's terms shall completely supersede and
replace the conflicting terms of this Agreement. All capitalized terms shall
have the meanings ascribed to them in the Plan, unless specifically set forth
otherwise herein. The parties hereto agree as follows:

1. GRANT OF STOCK OPTION. The Participant is hereby granted an Option to
purchase the number of Shares set forth above, at the stated Option
Price (as set forth on page 1 of this Agreement), which is 100 percent
of the Fair Market Value of a Share on the Date of Grant, in the manner
and subject to the applicable terms and conditions of the Plan and this
Agreement.

2. EXERCISE OF STOCK OPTION. Except as otherwise provided in this
Agreement, the Participant may exercise this Option as provided in
Section 3 of this Agreement and according to the vesting schedule set
forth on page 1 of this Agreement, provided that no exercise may occur
prior to the end of one (1) year following the Date of Grant or
subsequent to the close of business on the Date of Expiration (as set
forth on page 1 of this Agreement).

This Option may be exercised in whole or in part, but not for less than
25 Shares at any one time, unless fewer than 25 Shares then remain
subject to the Option, and the Option is then being exercised as to all
such remaining Shares. The Option may be exercised only for full
Shares; no Option is exercisable for fractional Shares.

3. PROCEDURE FOR EXERCISE OF OPTION. Exercise of this Option may be
initiated on any business day by delivery of a notice of exercise (on
such form as may be specified and provided by the Company or its
designee) (the "Notice of Exercise") to the Company or its designee, or
by such other method as the Company specifies. The Company may at any
time change the time and/or manner in which the Option may be
exercised. Further, the Company reserves the right to limit the manner
in which the Option may be exercised at any time, and from time to
time, for Participants in a given country to facilitate or ensure
compliance with local law or for reasons of administrative ease.

(a) Payment of Option Price: The Option Price shall be payable (i)
in cash in the form of currency or check or other cash
equivalent acceptable to the Company; (ii) by tendering
previously acquired, nonforfeitable, nonrestricted Shares
(provided that any Shares so tendered must have been owned by
the Participant for at least six months prior to their
tender); or (iii) by a combination of the foregoing methods.
The requirement of payment in cash may be satisfied through a
"cashless exercise" as described in Section 3(b).

(b) Cashless Exercise: A Participant may direct, through the
Company's designee or in such other manner as the Company may
specify from time to time, a broker that is a member of the
National Association of Securities Dealers, Inc. to sell a
sufficient number of the Shares being purchased pursuant to
the exercise so that the net proceeds of the sale transaction
will at least equal the aggregate Option Price, plus interest
(if any) at the applicable federal rate (as "applicable
federal rate" is defined in Section 1274 of the Code) for the
period from the date of exercise to the date of payment, and
to deliver the aggregate Option Price, plus such interest (if
any), to the Company not later than the date on which the sale
transaction will settle in the

<PAGE> 3

ordinary course of business (such a broker-assisted
transaction to be referred to herein as a "cashless
exercise").

(c) Share Price: Any Share purchased (and sold, in the case of a
cashless exercise) pursuant to exercise of the Option shall be
valued on the basis of such Share's Fair Market Value as of
the date on which exercise of the Option is completed (or, if
exercise of the Option is completed over a period of more than
one day, on the basis of the average Fair Market Value during
such period). Any Share tendered by the Participant in payment
of all or any part of the Option Price shall be valued on the
basis of such Share's Fair Market Value as of the date on
which such Share is exchanged in order to effectuate exercise
of the Option.

(d) Delivery to Participant: As soon as practicable following the
date on which the purchase (and sale, in the case of a
cashless exercise) of Shares pursuant to the Option will
settle in the ordinary course of business, the Company shall
cause, in accordance with the Participant's election and in
any case net of transaction fees (if any) and tax withholding
(if applicable pursuant to Section 3(e)), the following to
occur:

(i) Certificates for the Shares purchased to be delivered
to the Participant;

(ii) The number of Shares purchased to be credited to a
brokerage account specified by the Participant on the
Notice of Exercise; or

(iii) In the event of a cashless exercise, any proceeds of
the sale transaction remaining after delivery to the
Company of the aggregate Option Price (plus any
interest, as described in Section 3(b)) to be
delivered to the Participant in the manner specified
by the Participant on the Notice of Exercise.

If a Participant elects either (i) or (ii), to the extent such
Participant has elected a cashless exercise of the Option, the
number of Shares subject to this Section 3(d) shall be only
the number of Shares remaining after the sale transaction
described in Section 3(b).

(e) Withholding: If the Company or a Company Subsidiary (as
hereinafter defined) is required by law to withhold any
federal, state, national, provincial or other tax, pension or
insurance withholding obligations imposed by any governmental
authority under applicable law in connection with exercise of
an Option, the Participant shall either (i) pay such taxes, in
addition to the Option Price, in conjunction with electing
exercise of the Option or (ii) elect either (A) to have such
taxes withheld from any cash payment of proceeds pursuant to a
cashless exercise or (B) to satisfy all or any part of any
such withholding obligation by surrendering to the Company or
the Company Subsidiary (either directly or through their
respective designees) a portion of the Shares issued or
transferred to the Participant pursuant to exercise of the
Option. To the extent that a Participant elects to meet any
withholding obligation by surrendering Shares, the Shares so
surrendered shall be credited against any such withholding
obligation at the Fair Market Value per Share on the date of
such surrender; provided, however, if the Participant is
subject to Section 16 of the Exchange Act, such election shall
be subject to approval by the Committee if such

<PAGE> 4

approval is then required by Rule 16b-3 of the General Rules
and Regulations promulgated under the Exchange Act. All
withholding elections shall be irrevocable. The term "Company
Subsidiary" when used herein shall mean any corporation a
majority of the voting stock of which is owned directly or
indirectly by the Company.

4. TERMINATION OF EMPLOYMENT.

(a) By Retirement, Disability or death: In the event of a
Participant's termination of employment due to Retirement,
Disability or death ("Retirement" and "Disability" as
hereinafter defined), the Option shall continue in effect and
shall become fully vested and exercisable during the
applicable periods in accordance with the provisions hereof.
For purposes of this Agreement, termination of a Participant's
employment due to "Retirement" shall mean a voluntary
termination of a Participant's employment with the Company or
a Company Subsidiary on or after such date as the Participant
is eligible to commence pension payments under the Company's
defined benefit pension plan (excluding any payment of
benefits attributable to a prior employer's plan) or, if
applicable, separate pension plan sponsored by the Company or
a Company Subsidiary or other pension benefit plan as may be
required under applicable law in effect in any jurisdiction
outside the United States, in each case as such plan is then
in effect. The term "Disability" when used herein shall mean a
Participant's complete and total disability as determined
under the Company's long-term disability plan or, if
applicable, separate similar plan in effect or as may be
required under applicable law in any jurisdiction outside the
United States, in each case as such plan is in effect at the
time of such determination. In the event of the Participant's
death prior to exercise of this Option in whole, the
beneficiary designated or deemed to be designated pursuant to
Section 8 hereof or, if such beneficiary is an estate, the
executor or administrator of the estate or the person or
persons to whom the Option shall have been validly transferred
by the executor or the administrator pursuant to will or the
laws of descent and distribution, shall have the right to
exercise the Option, when vested, in accordance with the
provisions hereof.

(b) By termination for Cause or resignation: In the event of the
resignation of employment by the Participant or termination of
the Participant's employment by the Company or a Company
Subsidiary for Cause (as hereinafter defined), the Option
shall be forfeited effective as of the date of such
resignation or termination, and the Participant's right to
exercise this Option shall cease. For purposes of this
Agreement, a termination by the Company or a Company
Subsidiary for "Cause" shall mean a termination resulting from
(a) action by the Participant involving willful malfeasance,
(b) the Participant's unreasonable neglect or refusal to
perform such Participant's duties for the Company, Company
Subsidiary or any of their affiliates, (c) the Participant
being convicted of a felony, (d) the Participant engaging in
any activity that is directly or indirectly in competition
with the Company, Company Subsidiary or any of their
affiliates or in any activity that is inimical to the best
interests of the Company, Company Subsidiary or any of their
affiliates, or (e) the Participant's violation of Company
policy covering standards of corporate conduct. If the Company
or a Company Subsidiary terminates the Participant's
employment for

<PAGE> 5

Cause, all of the Company's obligations under this Agreement
shall thereupon cease and terminate.

(c) By termination other than for Cause: In the event of a
termination of the Participant's employment for reasons other
than Retirement, Disability, death, termination by the Company
or Company Subsidiary for Cause or resignation, the portion of
the Option that is vested as of the date of termination of
employment may be exercised to the extent permitted under the
provisions hereof until the earlier of (i) the Date of
Expiration (as set forth on page 1 of this Agreement) or (ii)
the close of business on the 90th day following the date of
termination of employment. No other rights under this
Agreement shall continue in effect or continue to accrue from
the date of termination forward.

5. EFFECT OF COMPETITIVE ACTIVITY OR INIMICAL CONDUCT.

(a) Anything contained herein to the contrary notwithstanding, the
right of the Participant to exercise the Option shall remain
effective only if, during the entire period from the Date of
Grant (as set forth on page 1 of this Agreement) to the date
of such exercise, the Participant shall have earned the Option
by refraining from engaging in any activity that is directly
or indirectly in competition with any activity of the Company
or any Company Subsidiary or any of their affiliates.

(b) In the event of the Participant's nonfulfillment of the
condition set forth in Section 5(a), the Participant's right
to exercise such Option shall cease; provided, however, that
the nonfulfillment of such condition may at any time be waived
by the Committee upon its determination, in its sole judgment,
that there shall not have been and will not be any substantial
adverse effect upon the Company or any Company Subsidiary or
any of their affiliates by reason of the nonfulfillment of
such condition.

(c) The right of the Participant to exercise the Option shall
cease on and as of the date on which it has been determined by
the Committee that the Participant at any time acted in a
manner inimical to the best interests of the Company or any
Company Subsidiary or any of their affiliates. Conduct that
constitutes engaging in an activity that is directly or
indirectly in competition with any activity of the Company or
any Company Subsidiary or any of their affiliates shall be
governed by Sections 5(a) and 5(b) and shall not be subject to
any determination under this Section 5(c).

6. RESTRICTIONS ON EXERCISE AND TRANSFER. This Option (a) shall be
exercisable during the Participant's lifetime only by the Participant
or, in the event of the Participant's legal incapacity, by the
Participant's legal guardian or representative acting in a fiduciary
capacity on behalf of the Participant under applicable law and court
supervision, if legally required, and (b) may not be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution.

7. RECAPITALIZATION. In the event of any change in capitalization of the
Company (such as a stock split, stock dividend or combination of
shares), corporate transaction (such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or

<PAGE> 6

property of the Company), reorganization (whether or not such
reorganization comes within the definition of such term in Code Section
368) or partial or complete liquidation of the Company, an adjustment
may be made in the number and class of Shares subject to this Option,
as well as the Option Price, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to reflect such
change in capitalization, corporate transaction, reorganization or
partial or complete liquidation.

8. BENEFICIARY DESIGNATION. The Participant may designate a beneficiary or
beneficiaries (who may be named contingently or successively) who, in
the event of the Participant's death prior to exercise of this Option
in whole, shall be entitled to exercise any unexercised portion of the
Option. Any such beneficiary designation shall be made by the
Participant in writing (on the appropriate form as provided by the
Company or a Company Subsidiary) and shall automatically revoke all
prior designations by the Participant. The Participant may, at any time
and from time to time, change or revoke such designation. A beneficiary
designation, or revocation of a prior beneficiary designation, shall be
effective only if it is signed by the Participant and received by the
Company or a Company Subsidiary prior to the Participant's death. If
the Participant does not designate a beneficiary or all beneficiaries
die prior to exercise of any unexercised portion of the Option, the
Participant's estate shall be deemed to be the beneficiary. If a
beneficiary dies after having exercised at least a portion of the
Option, the beneficiary's estate shall be deemed to be the beneficiary
of any remaining unexercised portion of the Option.

9. RIGHTS AS A STOCKHOLDER. The Participant shall have no rights as a
stockholder of the Company with respect to the Shares subject to this
Agreement until such time as the Option Price has been paid and the
Shares have been issued and delivered to him or her.

10. NO RIGHT OF EMPLOYMENT. The grant of the Option to the Participant does
not create a right to continued employment with the Company or any
Company Subsidiary. Nothing in this Agreement shall interfere with or
limit in any way the right of the Company or a Company Subsidiary to
terminate the employment of the Participant at any time, with or
without reason; nor shall anything in this Agreement be deemed to
create or confer upon the Participant or any other individual any
rights to employment of any kind or nature whatsoever for any period of
time or at any particular rate of compensation, including, without
limitation, any right to continue in the employ of the Company or any
Company Subsidiary.

11. COMPLIANCE WITH LAW. The Company shall make reasonable efforts to
comply with all applicable federal, state, national and provincial
securities laws or other securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Option shall
not be exercisable if the exercise thereof would result in a violation
of any such law. The Committee may impose such restrictions, including
restrictions on transferability, on any Shares acquired pursuant to the
exercise of this Option as the Committee may deem advisable under any
of the aforementioned securities laws or other requirements, including,
without limitation, restrictions of any securities exchange or market
upon which such Shares are then listed and/or traded.

12. DATA PROTECTION. By executing this Agreement, the Participant consents
to the Company or the Company Subsidiary that directly employs the
Participant and any agent or independent

<PAGE> 7

contractor appointed by the Company to administer the Stock Option
Awards under the Plan and this Agreement to obtain and maintain any
personal information from the Participant's employer, and to disclose
and transfer such information to each other and/or third parties as may
be required, whether locally or abroad, for the effective
administration of the Stock Option Awards. Neither the Company, the
Company Subsidiary nor any agent or independent contractor shall be
liable for any loss or damage, whether direct or indirect or
consequential, incurred by the Participant and arising from the use of
such personal information as authorized herein.

13. MISCELLANEOUS.

(a) This Agreement and the rights of the Participant hereunder are
subject to all the terms and conditions of the Plan, as the
same may be amended from time to time, as well as to such
rules and regulations as the Committee may adopt for
administration of the Plan. It is expressly understood that
the Committee is authorized to administer, construe and make
all determinations necessary or appropriate to the
administration of the Plan and this Agreement, all of which
shall be binding upon the Participant.

(b) Pursuant to the terms of the Plan, (i) the Board may at any
time, and from time to time, in its sole discretion alter,
amend, suspend or terminate the Plan in whole or in part for
any reason or for no reason, and (ii) the Committee may make
adjustments to this Option and Agreement in recognition of
unusual or nonrecurring events affecting the Company or the
financial statements of the Company and/or changes in
applicable laws, regulations or accounting principles whenever
the Committee determines that such adjustments are
appropriate; provided, however, that no alteration, amendment,
suspension or termination of the Plan shall adversely affect
in any material way the Participant's vested rights under this
Agreement without the written consent of the Participant.
Notwithstanding the foregoing, the Committee may modify,
without the Participant's consent, this Option and Agreement
to recognize differences in local law, tax policy or custom if
the Participant is a foreign national or employed outside the
United States.

(c) The Participant agrees to take all steps necessary to comply
with all applicable provisions of federal, state, national and
provincial securities law and other securities laws in
exercising his or her rights under this Agreement.

(d) This Agreement shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required.

(e) All obligations of the Company under the Plan and this
Agreement, with respect to this Option, shall be binding on
any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.

<PAGE> 8

(f) To the extent not preempted by United States federal law or
other comparable law, this Agreement shall be construed in
accordance with and governed by the laws of the State of
Texas.

(g) The grant of the Option to the Participant is completely
discretionary in nature and is not to be considered part of
any Participant's salary or compensation for purposes of
calculating any severance, resignation, redundancy, end of
service payments, bonuses, long-term service awards, pension
or retirement benefits, or similar payments except as
otherwise required under local law. Neither the Participant
nor any other individual shall have any right to be selected
to receive a grant under the Plan or, having been so selected,
to be selected to receive a future grant; nor shall anything
in this Agreement create or confer, or be deemed to create or
confer, upon any Employee or other individual any such right.

IN WITNESS WHEREOF, this Agreement is executed effective as of the Date of
Grant.

ASSOCIATES FIRST CAPITAL CORPORATION

By:
----------------------------------
Michael E. McGill,
Executive Vice President

The undersigned Participant hereby acknowledges receipt of this Agreement and
accepts the Option subject to the applicable terms and conditions set forth
herein and in the Plan.

Participant's Signature: Date:
------------------------------------- -------------

Note: Please sign the Agreement, make a copy for your records, and return the
original to:

Compensation Committee
c/o John W. Lee
Associates First Capital Corporation
P.O. Box 660237
Dallas, TX 75266-0237

<PAGE> 1
EXHIBIT 12

ASSOCIATES FIRST CAPITAL CORPORATION

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> <C>
Fixed Charges (a)
Interest expense ............. $3,906.5 $3,196.7 $2,775.2 $2,456.0 $2,177.9
Implicit interest in rent .... 30.0 22.9 20.3 17.1 13.8
-------- -------- -------- -------- --------
Total fixed charges ..... $3,936.5 $3,219.6 $2,795.5 $2,473.1 $2,191.7
======== ======== ======== ======== ========

Earnings (b) ...................... $2,376.9 $1,940.5 $1,640.0 $1,404.6 $1,198.1
Fixed charges ..................... 3,936.5 3,219.6 2,795.5 2,473.1 2,191.7
-------- -------- -------- -------- --------
Earnings, as defined ......... $6,313.4 $5,160.1 $4,435.5 $3,877.7 $3,389.8
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 1.60 1.60 1.59 1.57 1.55
======== ======== ======== ======== ========
</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 21

Subsidiaries

<TABLE>
<CAPTION>
Incorporation
Name ----------------------------------------------
Jurisdiction Country
---------------------- -----------------------
<S> <C> <C>
Associates First Capital Corporation Delaware United States
Associates Financial Services (Asia) Limited Hong Kong Hong Kong
ERA Master Limited Hong Kong Hong Kong
ACONA B.V. Netherlands Netherlands
Associates Financial Corporation Limited England & Wales United Kingdom
Associates Capital Corporation plc England & Wales United Kingdom
ACC Locavia SA France France
ACC Locavia SAS France France
EXMAT France France
Prestige Property Co. Limited Guernsey, C.I. Guernsey, C.I.
Steeple Finance Limited Jersey, C.I. Jersey, C.I.
ACC Print Limited England & Wales United Kingdom
Associates Capital (Guernsey) Limited Guernsey, C.I. United Kingdom
Associates Commercial Corporation Limited United Kingdom United Kingdom
Associates Fleet Services (Ltd) Newcourt United Kingdom United Kingdom
Associates (Isle of Man) Limited England United Kingdom
Autoclub International Limited England & Wales United Kingdom
Associates Relocation Management Company Europe Limited United Kingdom United Kingdom
Avco Group Limited United Kingdom United Kingdom
AFS (Pension Trustees) Limited United Kingdom United Kingdom
Avco Trust Plc United Kingdom United Kingdom
Associates Capital (Jersey) Limited Jersey, C.I. United Kingdom
Medens (Jersey) Limited Jersey, C.I. United Kingdom
</TABLE>

Page 1
<PAGE> 2

<TABLE>
<CAPTION>
Incorporation
Name ----------------------------------------------
Jurisdiction Country
---------------------- -----------------------
<S> <C> <C>
Steeple Finance (Guernsey) Limited Guernsey, C.I. Guernsey, C.I.
Everyday Finance Limited Ireland Ireland
Castle Loss Adjusters Limited United Kingdom United Kingdom
ACC Leasing Limited United Kingdom United Kingdom
Associates leasing Limited United Kingdom United Kingdom
Associates Mortgage Corporation Limited England & Wales United Kingdom
Avco Capital Limited United Kingdom United Kingdom
Avco Financial Services Limited United Kingdom United Kingdom
Avco Financial Services (U.K.) Limited United Kingdom United Kingdom
Avco Funding Limited United Kingdom United Kingdom
Avco Leasing Limited United Kingdom United Kingdom
Avco Limited United Kingdom United Kingdom
CEF Limited England & Wales United Kingdom
CMA ComCap Limited United Kingdom United Kingdom
CMA Invest Limited United Kingdom United Kingdom
CMA (UK) Limited United Kingdom United Kingdom
ComCap Business Systems Limited United Kingdom United Kingdom
ComCap Group Services Limited United Kingdom United Kingdom
ComCap Motor Acceptances Limited United Kingdom United Kingdom
ComCap plc United Kingdom United Kingdom
ComCap UK Limited United Kingdom United Kingdom
Commercial Finance Capital plc United Kingdom United Kingdom
Advanced Machining Systems Ltd. United Kingdom United Kingdom
Commercial Finance (Eng.) Limited United Kingdom United Kingdom
Impress Graphics Equipment Ltd. United Kingdom United Kingdom
Print Skills Holdings Limited United Kingdom United Kingdom
Computer Capital International Limited United Kingdom United Kingdom
Construction Equipment Finance Limited England & Wales United Kingdom
Construction Machinery Finance Limited England & Wales United Kingdom
Medens Trust Limited England & Wales United Kingdom
Red Dragon Securities Limited United Kingdom United Kingdom
Wessex Finance Corporation Limited England United Kingdom
Cumberland Insurance Company Limited Scotland United Kingdom
Cumberland Life Assurance Co. Limited England & Wales United Kingdom
Avco Financial Services Limited Hong Kong Hong Kong
Hallmark General Insurance Company Limited Hong Kong Hong Kong
Avco Financial Services Ltd. New Zealand New Zealand
AIC Associates Canada Holdings, Inc. Ontario Canada
AIC Corporation Japan Japan
AIC Credit Card Services, Inc. Japan Japan
Nissen Co., Ltd. Japan Japan
Associates Capital Corporation of Canada Canada Canada
177463 Canada Inc. Canada Canada
Associates Commercial Corporation of Canada Ltd. Ontario Canada
Associates Capital Limited Ontario Canada
Insurex Canada, Inc. Alberta Canada
Payplan Canada, Inc. Canada Canada
</TABLE>

Page 2
<PAGE> 3

<TABLE>
<CAPTION>
Incorporation
Name ----------------------------------------------
Jurisdiction Country
---------------------- -----------------------
<S> <C> <C>
Teletech Financial Corporation Canada Canada
The Associates Corporation Delaware United States
Associates Financial Services of Canada Ltd. Canada Canada
1113612 Ontario Inc. Ontario Canada
177462 Canada Inc. Canada Canada
2659158 Canada Inc. Canada Canada
Associates Financial Services of Canada East Company Nova Scotia Canada
London and Midland General Insurance Company Canada-Federal Canada
Provincial Trust Company Canada-Federal Canada
Associates Mortgage Corporation Ontario Canada
1140186 Ontario Inc. Ontario Canada
Associates Mortgage East Corporation Nova Scotia Canada
Associates Leasing (Canada) Ltd. Ontario Canada
VT Finance (Canada) Inc. Ontario Canada
Avco Financial Services of Hawaii, Inc. Hawaii United States
Avco Financial Services One, Inc. Hawaii United States
Associates Corporation of North America Delaware United States
Associates Corporation of North America (A Texas Corporation) Texas United States
AFC Securities Inc. Delaware United States
Associates Capital Investments, L.L.C. Delaware United States
Associates Commercial Corporation of Delaware Delaware United States
Associates Credit Services, Inc. Delaware United States
Associates Capital Bank, Inc. Utah United States
Associates Insurance Group, Inc. Delaware United States
Associates Life Insurance Group, Inc. Delaware United States
Associates Financial Life Insurance Company Tennessee United States
Associates Insurance Company Indiana United States
Commercial Guaranty Insurance Company Delaware United States
Capco General Agency, Inc. Illinois United States
Capco General Agency, Inc. New York United States
Capco General Agency, Inc. Virginia United States
AFSC General Agency, Inc. Texas United States
Associates Financial Life Insurance Company of Texas Texas United States
Associates Real Estate Financial Services Company, Inc. Delaware United States
Associates Relocation Management Company, Inc. Colorado United States
Associates Relocation Management Company of Texas Texas United States
Associates First Capital Mortgage Corporation Delaware United States
Corporate America Realty, Inc. New Jersey United States
Associates World Capital Corporation Delaware United States
Associates World Credit Corporation Delaware United States
Associates First Capital BV Netherlands Netherlands
</TABLE>

Page 4
<PAGE> 4

<TABLE>
<CAPTION>
Incorporation
Name ----------------------------------------------
Jurisdiction Country
---------------------- -----------------------
<S> <C> <C>
The Associates Payroll Management Service Company, Inc. Delaware United States
Financial Reassurance Company, Ltd. Bermuda Bermuda
Associates Financial Services Company of Puerto Rico, Inc. Puerto Rico United States
Associates Commercial Corporation of Puerto Rico Puerto Rico United States
Associates Finance, Inc. Puerto Rico United States
Associates Financial Services Company, Inc. Puerto Rico United States
Associates Time Plan, Inc. Puerto Rico United States
Avco Financial Services of Puerto Rico, Inc. Delaware United States
Avco Financial Services of San Sebastian, Inc. Puerto Rico United States
Avco Financial Services of San Juan, Inc. Puerto Rico United States
Avco Financial Services of Santurce, Inc. Puerto Rico United States
Associates Investment Company Delaware United States
Associates Diversified Services, Inc. Delaware United States
Associates Financial Services Company, Inc. Delaware United States
AFSC Agency of Alabama, Inc. Alabama United States
Associates Financial Services Company, Inc. Alabama United States
Associates Financial Services Company of Alabama, Inc. Alabama United States
AFSC Agency, Inc. Arizona United States
AFSC Agency, Inc. Arkansas United States
AFSC Agency, Inc. California United States
Associates Financial Services Company of California, Inc. California United States
A.R.C. Escrow Co. California United States
Dove Escrow Co. California United States
Northwest Escrow Company Colorado United States
Associates Financial Services Company of Connecticut, Inc. Connecticut United States
Avco Financial Services of Connecticut, Inc. Connecticut United States
Associates Financial Services of America, Inc. Connecticut United States
AFSC Agency, Inc. Delaware United States
Associates Lloyds Insurance Company Texas United States
Associates Consumer Finance Company Delaware United States
Associates Consumers Money Order, Inc. Delaware United States
Associates Financial Services Company of Texas, Inc. Delaware United States
EnTerra Settlement Services, Inc. Delaware United States
EnTerra Settlement Services of Texas, Inc. Texas United States
RentMart Rent to Own, Inc. Delaware United States
Signal Credit Corporation Delaware United States
Signal Finance Mortgage Company, Inc. Delaware United States
Associates Financial Services Company of Florida, Inc. Florida United States
Associates Financial Services of America, Inc. Florida United States
Southern Escrow Company Florida United States
</TABLE>

Page 5
<PAGE> 5

<TABLE>
<CAPTION>
Incorporation
Name ----------------------------------------------
Jurisdiction Country
---------------------- -----------------------
<S> <C> <C>
Associates Financial Services Corporation Georgia United States
Associates Financial Services of America, Inc. Georgia United States
First Family Home Equity, Inc. Georgia United States
First Family Financial Services Management Corp. Georgia United States
First Family Financial Services, Inc. Alabama United States
First Family Financial Services, Inc. Florida United States
First Family Home Equity, Inc. Florida United States
First Family Financial Services of Georgia, Inc. Georgia United States
First Family Financial Services, Inc. Indiana United States
First Family Financial Services, Inc. Louisiana United States
First Family Financial Services, Inc. Mississippi United States
First Family Financial Services, Inc. South Carolina United States
First Family Financial Services, Inc. Tennessee United States
AFSC Agency, Inc. Hawaii United States
Associates Financial Services Company of Hawaii, Inc. Hawaii United States
AFSC Agency, Inc. Idaho United States
Associates Finance, Inc. Illinois United States
Northern Insurance Agency, Inc. Illinois United States
AFSC Insurance Company, Inc. Indiana United States
Associates Auto Club Services, Inc. Indiana United States
Associates Auto Club Services International, Inc. Delaware United States
Associates Autoclub, S. de R.L. de C.V. Mexico Mexico
Associates Auto Club Services Company Nova Scotia Canada
United States Auto Club, Motoring Division, Inc. Indiana United States
Associates Financial Services Company of Tennessee, Inc. Indiana United States
Watchguard Registration Services, Inc. Indiana United States
Associates Finance, Inc. Iowa United States
AFSC Agency, Inc. Kentucky United States
Associates Financial Services Company of Kentucky, Inc. Kentucky United States
Associates Mortgage Company Kentucky United States
Kentucky Finance Co., Inc. Kentucky United States
Capital Insurance Agency, Inc. Kentucky United States
First Insurance Agency, Inc. Kentucky United States
Kentucky Finance, Inc. Kentucky United States
Kentucky Finance Equity Services, Inc. Kentucky United States
Third Insurance Agency, Inc. Kentucky United States
Second Insurance Agency, Inc. Missouri United States
KFC Mortgage Loans, Inc. Virginia United States
Kentucky Finance, Inc. West Virginia United States
AFSC Agency, Inc. Louisiana United States
Associates Financial Services Company of Maine, Inc. Maine United States
Allied Financial Services Insurance Agency, Inc. Massachusetts United States
Associates Financial Services Company of Massachusetts, Inc.. Massachusetts United States
Associates Financial Services of America, Inc. Massachusetts United States
</TABLE>

Page 6
<PAGE> 6

<TABLE>
<CAPTION>
Incorporation
Name ----------------------------------------------
Jurisdiction Country
---------------------- -----------------------
<S> <C> <C>
Capco General Agency, Inc. Michigan United States
Associates Industrial Loan Company Minnesota United States
AFSC Agency, Inc. Mississippi United States
Associates Financial Services Company of Missouri, Inc. Missouri United States
Associates Financial Services of America, Inc. Missouri United States
AFSC Agency, Inc. Montana United States
AFSC Agency, Inc. Nevada United States
Associates Financial Life Insurance Company of Nevada Nevada United States
Associates Financial Services Company of Nevada, Inc. Nevada United States
Associates Insurance Agency, Inc. Nevada United States
Associates Mortgage Corporation Nevada United States
Associates Financial Services Company of New Jersey, Inc. New Jersey United States
Associates Financial Services Corporation New Jersey United States
AFSC Agency, Inc. New Mexico United States
Associates Financial Services Company of New York, Inc. New York United States
Associates Home Equity Services, Inc. New York United States
AHES REIT Corporation Delaware United States
Associates Home Equity Receivables Corp. Delaware United States
Associates Home Equity Loan Corporation Florida United States
Associates Home Equity Industrial Loan Company Minnesota United States
Associates Home Equity Consumer Discount Company, Inc. Pennsylvania United States
AFSC Agency, Inc. North Carolina United States
Associates Financial Services Company of North Carolina, Inc. North Carolina United States
Associates Financial Services of America, Inc. North Carolina United States
Morco General Agency, Inc. Ohio United States
Associates Financial Services Company of Oregon, Inc. Oregon United States
Associates Consumer Discount Company Pennsylvania United States
Signal Finance Consumer Discount Company Pennsylvania United States
Associates Financial Services Company of Rhode Island, Inc. Rhode Island United States
Avco Financial Services of Rhode Island, Inc. Rhode Island United States
Associates Financial Services Corporation Rhode Island United States
TranSouth Financial Corporation South Carolina United States
TranSouth Leasing Corporation Delaware United States
TranSouth Financial Corporation of Iowa Iowa United States
TranSouth Mortgage Corporation South Carolina United States
AFSC Agency, Inc. South Dakota United States
Associates REO Realty, Inc. Texas United States
Liquidation Collections, Inc. Texas United States
Shoppers Mart, Inc. Texas United States
</TABLE>

Page 7
<PAGE> 7

<TABLE>
<CAPTION>
Incorporation
Name ----------------------------------------------
Jurisdiction Country
---------------------- -----------------------
<S> <C> <C>
AFSC Agency, Inc. Virginia United States
Associates Financial Services Company of Virginia, Inc. Virginia United States
Associates Financial Services of America, Inc. Virginia United States
AFSC Agency, Inc. Washington United States
Associates Financial Services Company of Washington, Inc. Washington United States
Associates Financial Services of America, Inc. Washington United States
Associates Financial Services Company of West Virginia, Inc. West Virginia United States
Associates Financial Services of America, Inc. West Virginia United States
AFSC Agency, Inc. Wyoming United States
Associates Commercial Corporation Delaware United States
Associates Commercial Corporation Alabama United States
Associates Commercial Leasing Company, Inc. Delaware United States
Great Dane Finance Company Delaware United States
Premium Lease & Finance, LLC Delaware United States
VT Finance, Inc. Delaware United States
Associates Capital Services Corporation Indiana United States
Associates Leasing, Inc. Indiana United States
United States Fleet Leasing, Inc. California United States
Associates Rental Systems, Inc. Delaware United States
Associates/Trans-National Leasing, Inc. Delaware United States
Fleetmark, Inc. Tennessee United States
Capco General Agency, Inc. Indiana United States
Associates Commercial Corporation of Louisiana Louisiana United States
Fruehauf Finance Company Michigan United States
Associates Credit Card Services, Inc. Delaware United States
Associates Credit Card Receivables Corp. Delaware United States
Associates Private Label Receivables Corp. Delaware United States
Associates First Capital Trust I Delaware United States
Associates First Capital Trust II Delaware United States
Associates First Capital Trust III Delaware United States
Associates Housing Finance, LLC Delaware United States
Associates Information Services, Inc. Delaware United States
Associates National Bank (Delaware) (a national banking association) Delaware United States
Atlantic General Insurance Limited Bermuda Bermuda
Atlantic Reinsurance Limited Bermuda Bermuda
Avco Financial Services Ltd. Bermuda Bermuda
Associates International Holdings Corporation New York United States
Servicio de Credito Asociados de Costa Rica, S.A. Costa Rica Costa Rica
DIC Finance Co., Ltd. Japan Japan
DIC Agency Co. Ltd. Japan Japan
JACOF Co. Ltd. Japan Japan
Grupo Financiero Associates, S.A. de C.V. Mexico Mexico
</TABLE>

Page 6
<PAGE> 8

<TABLE>
<CAPTION>
Incorporation
Name ----------------------------------------------
Jurisdiction Country
---------------------- -----------------------
<S> <C> <C>
Arrendadora Financiera Associates, S.A. de C.V. Mexico Mexico
Associates Servicios de Mexico, S.A. de C.V. Mexico Mexico
Hipotecaria Associates, S.A. de C.V. Mexico Mexico
Servicios de Credito Associates, S.A. de C.V. Mexico Mexico
Servicios de Factoraje Associates, S.A. de C.V. Mexico Mexico
Sociedad Financiera Associates, S.A. de C.V. Mexico Mexico
Associates Finance Taiwan, Inc. Taiwan Rep. of China
Associates Credit Card Taiwan Inc. Taiwan Rep. of China
Avco Sociedade Gestora de Participacoes Sociais, S.A. Madeira Portugal
Avco Financial Services (Mauritius) LLC Mauritius Mauritius
Associates India Financial Services Private Limited India India
Associates Finance of Virgin Islands, L.L.C. Delaware United States
Avco Financial Services Limited Northern Ireland United Kingdom
Avco Foundation California United States
Family Insurance Corporation Wisconsin United States
The Northland Company Minnesota United States
Jupiter Holdings, Inc. Minnesota United States
Alternative Market Specialists, LLP Minnesota United States
American Equity Insurance Company Arizona United States
American Equity Specialty Insurance Company California United States
Mendota Insurance Company Minnesota United States
Mendakota Insurance Company Minnesota United States
Northland Insurance Company Minnesota United States
Northland Casualty Company Minnesota United States
Northfield Insurance Company Missouri United States
Northland Risk Management Services, Inc. Minnesota United States
Hurley State Bank South Dakota United States
Associates Commerce Solutions, Inc. Delaware United States
ACS Teleservices, Inc. Delaware United States
MedCash, Inc. Delaware United States
MedCash Health Systems, L.P. Delaware United States
Quality Asset Management, Inc. Delaware United States
AFCC Newco, Inc. Minnesota United States
Associates Asset Backed Securities Corp. Delaware United States
</TABLE>

Page 8

<PAGE> 1
EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 333-86745, Form S-8 No. 333-86497, Form S-8 No.
333-09215, Form S-8 No. 333-12145, Form S-8 No. 333-19417, Form S-8 No.
333-24727, Form S-8 No. 333-49049, Form S-8 No. 333-68245, Form S-3 No.
333-62875, Form S-3 No. 333-62875-01, Form S-3 No. 333-62875-02 and Form S-3
No. 333-92875-03) of our report dated January 27, 2000, with respect to the
consolidated financial statements of Associates First Capital Corporation
included in the Annual Report (Form 10-K) for the year ended December 31, 1999.

/s/ ERNST & YOUNG LLP

Dallas, Texas
March 28, 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 FIRST CAPITAL CORPORATION (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.

<TABLE>
<S> <C>
Signature: /s/ KEITH W. HUGHES Signature: /s/ JUDY JOLLEY MOHRAZ
--------------------------- --------------------------
Name: Keith W. Hughes Name: Judy Jolley Mohraz
Title: Chairman of the Board, Principal Title: Director
Executive Officer and Director

Signature: /s/ J. CARTER BACOT Signature: /s/ JOHN F. STILLO
--------------------------- --------------------------
Name: J. Carter Bacot Name: John F. Stillo
Title: Director Title: Executive Vice President, Comptroller
and Principal Accounting Officer

Signature: /s/ ERIC S. DOBKIN Signature: /s/ H. JAMES TOFFEY, JR.
--------------------------- --------------------------
Name: Eric S. Dobkin Name: H. James Toffey, Jr.
Title: Director Title: Director

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

Signature: /s/ WILLIAM M. ISAAC
---------------------------
Name: William M. Isaac
Title: Director
</TABLE>

<ARTICLE> 5
<LEGEND>
O 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> 1,026
<SECURITIES> 7,177
<RECEIVABLES> 68,817
<ALLOWANCES> 2,174
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 662
<DEPRECIATION> 0
<TOTAL-ASSETS> 82,957
<CURRENT-LIABILITIES> 0
<BONDS> 68,657
0
0
<COMMON> 7
<OTHER-SE> 9,793
<TOTAL-LIABILITY-AND-EQUITY> 82,957
<SALES> 12,131
<TOTAL-REVENUES> 12,131
<CGS> 0
<TOTAL-COSTS> 9,754
<OTHER-EXPENSES> 4,341
<LOSS-PROVISION> 1,506
<INTEREST-EXPENSE> 3,907
<INCOME-PRETAX> 2,377
<INCOME-TAX> 887
<INCOME-CONTINUING> 1,490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,490
<EPS-BASIC> 2.05
<EPS-DILUTED> 2.04

</TABLE>