SEARS DC CORP
10-K405, 2000-03-28
SHORT-TERM BUSINESS CREDIT INSTITUTIONS
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<center><font face="Arial"><font size=+2>UNITED STATES</font></font>
<p><font face="Arial"><font size=+2>SECURITIES AND EXCHANGE COMMISSION</font></font>
<p><b><font face="Arial"><font size=-2>Washington, D.C. 20549</font></font></b>
<p><b>_______________</b>
<p><font face="Arial"><font size=+2>FORM 10-K</font></font>
<p><b><font face="Arial">FOR ANNUAL AND TRANSITION REPORTS</font></b>
<p><b><font face="Arial">PURSUANT TO SECTIONS 13 OR 15 (d) OF THE</font></b>
<p><b><font face="Arial">SECURITIES EXCHANGE ACT OF 1934</font></b>
<p><b>X        ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934</b>
<p><font face="Arial">For the fiscal year ended January 1, 2000</font>
<p><font face="Arial">OR</font></center>

<p><b>        TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE</b>
<br><b>        ACT OF 1934</b>
<center>
<p><font face="Arial">For the transition period from __________ to __________</font>
<p><font face="Arial"><font size=-2>Commission file number 0-17955</font></font>
<p><font face="Arial"><font size=+3>SEARS DC CORP.</font></font>
<p><font face="Arial"><font size=-2>(Exact Name of Registrant as Specified
in Its Charter)</font></font></center>

<p><font face="Arial"><font size=-1>                                    
Delaware                                         
                           
36-3533346</font></font>
<p><font face="Arial"><font size=-1>                              
(State of Incorporation)                                     
( I.R.S. Employer Identification No.)</font></font>
<p><font face="Arial"><font size=-1>                
3711 Kennett Pike, Greenville, Delaware                                    
               
19807</font></font>
<p><font face="Arial"><font size=-1>                 
(Address of Principal Executive Offices)                                    
                   
(Zip Code)</font></font>
<p><font face="Arial">Registrant's telephone number, including area code:       
302/434-3100</font>
<p><font face="Arial">Securities registered pursuant to Section 12(b) of
the Act:        None</font>
<p><font face="Arial">Securities registered pursuant to Section 12(g) of
the Act: Common Stock par value $1.00 per share</font>
<p><font face="Arial">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, and (2) has been subject to such filing
requirements for the past 90 days.</font>
<p><font face="Arial">Yes <u>X </u>. No .</font>
<p><font face="Arial">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. </font><font face="Wingdings">x</font>
<p><font face="Arial">As of February 29, 2000, the Registrant had 1,000
shares of common stock outstanding, all of which were held by Sears, Roebuck
and Co.</font>
<p><font face="Arial">Registrant meets the conditions set forth in General
Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this
report with a reduced disclosure format.</font>
<center>
<p><font face="Arial">DOCUMENTS INCORPORATED BY REFERENCE</font></center>

<p><font face="Arial">Part II of this Form 10-K incorporates by reference
certain information from the Sears, Roebuck and Co. 1999 Annual Report
to Shareholders.</font>
<br> 
<br> 
<br>
<br>
<br>
<br>
<center>
<p><u><font face="Arial"><font size=-1>SEARS DC CORP.</font></font></u>
<p><u><font face="Arial"><font size=-1>PART I</font></font></u></center>

<p><u>Item 1. Business</u>
<dir>
<dir>
<dir>
<dir>Sears DC Corp. ("SDC"), a wholly-owned subsidiary of Sears, Roebuck
and Co. ("Sears") organized under the laws of Delaware in January 1987,
was formed to borrow in domestic and foreign debt markets and lend the
proceeds of such borrowings to Sears and certain direct and indirect subsidiaries
of Sears in exchange for their unsecured notes. SDC raised funds through
the sale of its medium-term notes and direct placement of commercial paper
with corporate and institutional investors. The only outstanding debt of
SDC is two series of medium-term notes. SDC does not plan to issue additional
debt.
<p>Under an agreement between SDC and Sears, the interest rate paid by
Sears on its unsecured notes is designed to produce earnings sufficient
to cover SDC's fixed charges at least 1.005 times. Required payments of
principal and interest to SDC under the Sears borrowing agreement are intended
to be sufficient to allow SDC to make timely payments of principal and
interest to the holders of its securities.</dir>
</dir>
</dir>
</dir>
                                       
Net Worth Maintenance Agreement exists between Sears and SDC which requires
Sears
<br>                                       
to maintain ownership of and positive stockholder's equity in SDC.
<p>                                       
At February 29, 2000, SDC had no employees on its payroll and its officers
and
<br>                                       
directors consisted of employees of affiliated companies. Its offices are
located at 3711 Kennett
<br>                                       
Pike, Greenville, Delaware 19807.
<p><u>Item 2. </u>Properties.
<p>None.
<p><u>Item 3. </u>Legal Proceedings.
<p>None.
<p><u>Item 4. </u>Submission of Matters to a Vote of Security Holders.
<p>Not applicable.
<br> 
<br> 
<br>
<br>
<center>
<p><u>SEARS DC CORP.</u>
<p><u>PART II</u></center>

<p><u>Item 5. </u>Market for Registrant's Common Equity and Related Stockholder
Matters.
<dir>
<dir>
<dir>
<dir>There is no established public trading market for SDC's common stock.
As of February 29, 2000, Sears owned all outstanding shares of SDC's common
stock. During 1999 and 1998 there were no dividends declared or paid to
Sears by SDC.</dir>
</dir>
</dir>
</dir>
<u>Item 6. </u>Selected Financial Data.
<p>Not applicable.
<p><u>Item 7. </u>Management's Discussion and Analysis of Financial Condition
and
<p>Results of Operations.
<p><u>Financial Condition</u>
<dir>
<dir>                   
SDC has invested funds in the unsecured notes of Sears, which pay interest
sufficient to cover
<br>                   
SDC's fixed charges at least 1.005 times, and in highly liquid short-term
investments.
<dir>
<dir>The $213.0 million in outstanding medium-term notes as of January
1, 2000 are not redeemable by SDC prior to their stated maturity except
for notes having a stated maturity at the time of issue of more than seven
years which may be redeemed under certain circumstances in the event of
declining Discover Card receivables of Sears former subsidiary, Dean Witter,
which is now a part of Morgan Stanley Dean Witter & Co.
<p>The financial information appearing in this Annual Report on Form 10-K
is presented in historical dollars which do not reflect the decline in
purchasing power that results from inflation. As is the case for most financial
companies, substantially all of SDC's assets and liabilities are monetary
in nature. Interest rates on SDC's investment in Sears notes are set to
provide for a ratio of earnings to fixed charges of at least 1.005 times.
This maintenance mechanism insulates SDC from bearing the effects of inflation-based
interest rate increases.
<p>In addition to the change in the rating of Sears debt by Moody's Investor
Service, as identified in Item 14, on February 24, 2000, the Duff &
Phelps Credit Rating Co. changed its ratings on the Company's debt securities
from A, to A-.</dir>
</dir>
</dir>
</dir>
<u>Results of Operations</u>
<dir>
<dir>
<dir>
<dir>Medium-term notes outstanding decreased 35.9% to $213.0 million as
of January 1, 2000 from $332.5 million as of January 2, 1999. The decrease
in the notes was a result of payment on certain notes that reached their
maturity dates. Revenues decreased 31.6% to $22.1 million in 1999 from
$32.3 million in 1998, primarily as a result of the decrease in the average
amount of Sears notes outstanding during 1999 compared to 1998. Revenues
decreased 32.7% to $32.3 million in 1998 from $48.0 million in 1997, primarily
as a result of the decrease in the average amount of Sears notes outstanding
during 1998 compared to 1997. The decrease in the average amount of medium-term
notes outstanding led to interest and related expenses decreasing 31.6%
to $21.9 million in 1999 from $32.0 million in 1998. In 1998 interest and
related expenses decreased 32.9% to $32.0 million from $47.7 million in
1997 due to a decrease in the average amount of medium-term notes outstanding.
Earnings covered fixed charges 1.005 times in 1999, 1998, and 1997.</dir>
</dir>
<u>Year 2000</u>
<dir>
<dir>Year 2000 compliance is the ability of information systems to properly
recognize and process dates and date-sensitive information, including dates
in the year 2000 and beyond. As a wholly owned subsidiary of Sears, SDC
uses Sears systems and has relied on Sears year 2000 compliance efforts.
Sears has not experienced significant year 2000 problems.
<p>A complete description of the Sears year 2000 initiative can be found
on page 29 of the Sears, Roebuck and Co. 1999 Annual Report under the heading
"Year 2000", which is incorporated by reference in, and filed as Exhibit
99 to, this report.
<p><u>Cautionary Statement Regarding Forward Looking Information:</u>
<p>Certain statements made in this Annual Report on Form 10-K are forward-looking
and are made in reliance on the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. As such they involve risks and uncertainties
that could cause actual results to differ materially. These statements
are based on a number of assumptions about a variety of factors, including
the ability of Sears to perform under the agreements described herein and
general economic conditions (such as interest rates) and, with respect
to the discussion of Year 2000 matters, the technical skills of Sears employees
and independent contractors, the representations and preparedness of third
parties, vendors' delivery of merchandise and performance of services required
by Sears and the collateral effects of Year 2000 compliance issues on Sears
business partners and customers. While SDC believes that these assumptions
are reasonable, SDC cautions that it is impossible to predict the impact
of certain facts that could cause actual results to differ from expected
results.
<br> </dir>
</dir>
</dir>
</dir>
<u>Item 7(a). </u>Quantitative and Qualitative Disclosures about Market
Risk
<dir>
<dir>
<dir>
<dir>The following tables provide information about SDC's financial instruments
that are sensitive to changes in interest rates. The fair value of SDC's
long-term, fixed-rate debt was estimated by discounting estimated cash
flows based on Sears current borrowing rates for debt with similar maturities.
All items described in the tables below are non-trading.</dir>
</dir>
</dir>
</dir>

<table BORDER CELLPADDING=7 WIDTH="720" >
<tr>
<td VALIGN=TOP COLSPAN="12"><font face="Arial"><font size=-1>1999</font></font></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="25%"><font face="Arial"><font size=-1>(millions,
except percent)</font></font></td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>2000</font></font></td>

<td VALIGN=TOP WIDTH="10%"><font face="Arial"><font size=-1>2001</font></font></td>

<td VALIGN=TOP WIDTH="10%"><font face="Arial"><font size=-1>2002</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>2003</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>2004</font></font></td>

<td VALIGN=TOP WIDTH="11%"><font face="Arial"><font size=-1>Thereafter</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>Total</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>Fair</font></font>
<p><font face="Arial"><font size=-1>Value</font></font></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="25%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="25%"><font face="Arial"><font size=-1>Long-term
debt including</font></font>
<p><font face="Arial"><font size=-1>Current portion</font></font></td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="13%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP COLSPAN="2" WIDTH="21%"><font face="Arial"><font size=-1>Fixed
rate amount</font></font></td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>-</font></font></td>

<td VALIGN=TOP WIDTH="10%"><font face="Arial"><font size=-1>$135.5 </font></font></td>

<td VALIGN=TOP WIDTH="10%"><font face="Arial"><font size=-1>$24.7</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>$9.0</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>-</font></font></td>

<td VALIGN=TOP WIDTH="11%"><font face="Arial"><font size=-1>$43.8</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>$213.0</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>$220.5</font></font></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="13%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP COLSPAN="2" ROWSPAN="2" WIDTH="21%"><font face="Arial"><font size=-1>Average
interest rate</font></font></td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>-</font></font></td>

<td VALIGN=TOP WIDTH="10%"><font face="Arial"><font size=-1>8.97% </font></font></td>

<td VALIGN=TOP WIDTH="10%"><font face="Arial"><font size=-1>8.69%</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>8.58%</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>-</font></font></td>

<td VALIGN=TOP WIDTH="11%"><font face="Arial"><font size=-1>9.15%</font></font></td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="13%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="13%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>
</tr>
</TABLE>

<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<table BORDER CELLPADDING=7 WIDTH="720" >
<tr>
<td VALIGN=TOP COLSPAN="12"><font face="Arial"><font size=-1>1998</font></font></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="25%"><font face="Arial"><font size=-1>(millions,
except percent)</font></font></td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"><font face="Arial"><font size=-1>1999</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>2000</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>2001</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>2002</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>2003</font></font></td>

<td VALIGN=TOP WIDTH="11%"><font face="Arial"><font size=-1>Thereafter</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>Total</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>Fair</font></font>
<p><font face="Arial"><font size=-1>Value</font></font></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="25%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="25%"><font face="Arial"><font size=-1>Long-term
debt including</font></font>
<p><font face="Arial"><font size=-1>Current portion</font></font></td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="13%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP COLSPAN="2" WIDTH="21%"><font face="Arial"><font size=-1>Fixed
rate amount</font></font></td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"><font face="Arial"><font size=-1>$119.5</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>-</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>$135.5</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>$24.7</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>$9.0</font></font></td>

<td VALIGN=TOP WIDTH="11%"><font face="Arial"><font size=-1>$43.8</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>$332.5</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>$360.7</font></font></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="13%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP COLSPAN="2" ROWSPAN="2" WIDTH="21%"><font face="Arial"><font size=-1>Average
interest rate</font></font></td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"><font face="Arial"><font size=-1>8.34%</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>-</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>8.97%</font></font></td>

<td VALIGN=TOP WIDTH="9%"><font face="Arial"><font size=-1>8.69%</font></font></td>

<td VALIGN=TOP WIDTH="8%"><font face="Arial"><font size=-1>8.58%</font></font></td>

<td VALIGN=TOP WIDTH="11%"><font face="Arial"><font size=-1>9.15%</font></font></td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="13%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="4%"> </td>

<td VALIGN=TOP WIDTH="13%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="3%"> </td>

<td VALIGN=TOP WIDTH="10%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="11%"> </td>

<td VALIGN=TOP WIDTH="8%"> </td>

<td VALIGN=TOP WIDTH="9%"> </td>
</tr>
</TABLE>

<p><u><font face="Arial"><font size=-1>Item 8. Financial Statement and
Supplementary Data</font></font></u>
<br> 
<table BORDER CELLPADDING=2 WIDTH="612" >
<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"> </td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="12" HEIGHT="17">
<center><u><font face="Arial"><font size=-1>SEARS DC CORP.</font></font></u></center>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="12" HEIGHT="17">
<center><u><font face="Arial"><font size=-1>STATEMENTS OF INCOME</font></font></u></center>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="5"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="6" WIDTH="60%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="5"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="36%" HEIGHT="17"><i><font face="Arial"><font size=-1>(thousands,
except ratios)</font></font></i></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1999</font></font></center>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1998</font></font></center>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1997</font></font></center>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"><font face="Arial"><font size=-1>Revenues</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="36%" HEIGHT="17"><font face="Arial"><font size=-1>Earnings
on notes of Sears</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>22,076 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>32,290 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>48,043 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"><font face="Arial"><font size=-1>Expenses</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="36%" HEIGHT="17"><font face="Arial"><font size=-1>Interest
and related expenses</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>21,916 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>32,035 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>47,721 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="25%" HEIGHT="17"><font face="Arial"><font size=-1>Operating
expenses</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>51 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>95 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>84 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="25%" HEIGHT="17"><font face="Arial"><font size=-1>Total
expenses</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>21,967 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>32,130 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>47,805 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="36%" HEIGHT="17"><font face="Arial"><font size=-1>Income
before income taxes</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>109 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>160 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>238 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="11"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="25%" HEIGHT="17"><font face="Arial"><font size=-1>Income
taxes</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>38 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>56 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>83 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="25%" HEIGHT="18"><font face="Arial"><font size=-1>Net
income</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>71 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>104 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>155 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="46%" HEIGHT="17"><font face="Arial"><font size=-1>Ratio
of earnings to fixed charges</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>1.005</font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>1.005</font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>1.005</font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="36%" HEIGHT="17"><font face="Arial"><font size=-1>See
notes to financial statements</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="14%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>
</TABLE>

<br> 
<br> 
<table BORDER CELLPADDING=2 WIDTH="552" >
<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="10" HEIGHT="17">
<center><u><font face="Arial"><font size=-1>SEARS DC CORP.</font></font></u></center>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="10" HEIGHT="17">
<center><u><font face="Arial"><font size=-1>STATEMENTS OF FINANCIAL POSITION</font></font></u></center>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="27%" HEIGHT="17"><i><font face="Arial"><font size=-1>(thousands)</font></font></i></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1999</font></font></center>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1998</font></font></center>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"><font face="Arial"><font size=-1>Assets</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="11"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="38%" HEIGHT="17"><font face="Arial"><font size=-1>Cash
and cash equivalents</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>- </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>58 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="27%" HEIGHT="17"><font face="Arial"><font size=-1>Notes
of Sears</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>223,993 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>345,958 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="50%" HEIGHT="17"><font face="Arial"><font size=-1>Interest
receivable and other assets</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>420 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>586 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="27%" HEIGHT="18"><font face="Arial"><font size=-1>Total
assets</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>224,413 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>346,602 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="18"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"><font face="Arial"><font size=-1>Liabilities</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="11"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="11"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="27%" HEIGHT="17"><font face="Arial"><font size=-1>Medium-term
notes</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>213,025 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>332,505 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="9"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="9"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="9"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="9"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="9"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="9"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="9"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="9"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="9"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="9"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="50%" HEIGHT="17"><font face="Arial"><font size=-1>Interest
payable and other liabilities</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>6,062 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>8,842 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="27%" HEIGHT="17"><font face="Arial"><font size=-1>Total
liabilities</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>219,087 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>341,347 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="27%" HEIGHT="17"><font face="Arial"><font size=-1>Stockholder's
Equity</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="50%" HEIGHT="17"><font face="Arial"><font size=-1>Common
stock, par value $1.00 per share,</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="5" WIDTH="62%" HEIGHT="30"><font face="Arial"><font size=-1>1,000
shares authorized and outstanding</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="30"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="30">
<div align=right><font face="Arial"><font size=-1>1 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="30"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="30"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="30">
<div align=right><font face="Arial"><font size=-1>1 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="38%" HEIGHT="17"><font face="Arial"><font size=-1>Capital
in excess of par value</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>7 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>7 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="27%" HEIGHT="17"><font face="Arial"><font size=-1>Retained
income</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>5,318 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>5,247 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="38%" HEIGHT="17"><font face="Arial"><font size=-1>Total
stockholder's equity</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>5,326 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>5,255 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="50%" HEIGHT="18"><font face="Arial"><font size=-1>Total
liabilities and stockholder's equity</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>224,413 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>346,602 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="18"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="38%" HEIGHT="17"><font face="Arial"><font size=-1>See
notes to financial statements</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="15%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="8%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>
</tr>
</TABLE>

<br> 
<br> 
<br> 
<br> 
<table BORDER CELLPADDING=2 WIDTH="671" >
<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="12" WIDTH="90%" HEIGHT="17">
<center><u><font face="Arial"><font size=-1>SEARS DC CORP.</font></font></u></center>
</td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="12" WIDTH="90%" HEIGHT="17">
<center><u><font face="Arial"><font size=-1>STATEMENTS OF STOCKHOLDER'S
EQUITY</font></font></u></center>
</td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><i><font face="Arial"><font size=-1>(thousands)</font></font></i></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1999</font></font></center>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1998</font></font></center>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1997</font></font></center>
</td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"><font face="Arial"><font size=-1>Capital
stock</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>1 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>1 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>1 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="32%" HEIGHT="17"><font face="Arial"><font size=-1>Capital
in excess of par value</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>7 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>7 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>7 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>Retained
income</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>Beginning
of year</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>5,247 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>5,143 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>4,988 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>Net
income</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>71 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>104 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>155 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>End
of year</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>5,318 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>5,247 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>5,143 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="32%" HEIGHT="18"><font face="Arial"><font size=-1>Total
stockholder's equity</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>5,326 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>5,255 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>5,151 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="18"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="18"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="32%" HEIGHT="17"><font face="Arial"><font size=-1>See
notes to financial statements</font></font></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="6%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="10%" HEIGHT="17"></td>
</tr>
</TABLE>

<br> 
<br> 
<table BORDER CELLPADDING=2 WIDTH="590" >
<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="12" HEIGHT="17">
<center><u><font face="Arial"><font size=-1>SEARS DC CORP.</font></font></u></center>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="12" HEIGHT="17">
<center><u><font face="Arial"><font size=-1>STATEMENTS OF CASH FLOWS</font></font></u></center>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><i><font face="Arial"><font size=-1>(thousands)</font></font></i></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1999</font></font></center>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1998</font></font></center>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1997</font></font></center>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>CASH
FLOWS FROM OPERATING</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>ACTIVITIES:</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>Net
income</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>71 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>104 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>155 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>Adjustment
to reconcile net income to</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>net
cash used in operating activities</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="10"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>Net
change in interest receivable and</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>other
assets and interest payable and</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>other
liabilities</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>(2,614)</font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>(2,322)</font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>(4,821)</font></font></u></div>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>Net
cash used in operating activities</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>(2,543)</font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>(2,218)</font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>(4,666)</font></font></u></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="5"><font face="Arial"><font size=-1>CASH
FLOWS FROM INVESTING</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="5"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="10"><font face="Arial"><font size=-1>ACTIVITIES:</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="10"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="10"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="33%" HEIGHT="17"><font face="Arial"><font size=-1>Decrease
in notes of Sears</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>121,965 </font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>113,497 </font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>339,765 </font></font></u></div>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>Net
cash provided by investing activities</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>121,965 </font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>113,497 </font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><u><font face="Arial"><font size=-1>339,765 </font></font></u></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>CASH
FLOWS FROM FINANCING</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>ACTIVITIES:</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="30"><font face="Arial"><font size=-1>Repayments
of medium-term notes</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="30"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="30">
<div align=right><u><font face="Arial"><font size=-1>(119,480)</font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="30"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="30"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="30">
<div align=right><u><font face="Arial"><font size=-1>(111,275)</font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="30"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="30"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="30">
<div align=right><u><font face="Arial"><font size=-1>(335,100)</font></font></u></div>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="5"><font face="Arial"><font size=-1>Net
cash used in financing activities</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="5">
<div align=right><u><font face="Arial"><font size=-1>(119,480)</font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="5">
<div align=right><u><font face="Arial"><font size=-1>(111,275)</font></font></u></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="5"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="5">
<div align=right><u><font face="Arial"><font size=-1>(335,100)</font></font></u></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>Net
increase (decrease) in cash and</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>cash
equivalents</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>(58) </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>4</font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>(1)</font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="6"><font face="Arial"><font size=-1>Balance
at beginning of year</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="6"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="6">
<center><font face="Arial"><font size=-1>58 </font></font></center>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="6"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="6"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="6">
<div align=right><font face="Arial"><font size=-1>54 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="6"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="6"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="6">
<div align=right><font face="Arial"><font size=-1>55 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="33%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>Balance
at end of year</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>$</font></font></div>
</td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<center><font face="Arial"><font size=-1>-</font></font></center>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>$</font></font></div>
</td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>58</font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>$</font></font></div>
</td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>54</font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>Supplemental
Disclosure of Cash Flow</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>Information</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="33%" HEIGHT="17"><font face="Arial"><font size=-1>Cash
paid during the year</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"><font face="Arial"><font size=-1>Interest</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$ </font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>24,561 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>34,512 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>52,708 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="22%" HEIGHT="17"><font face="Arial"><font size=-1>Incomes
taxes</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>56 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>83</font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>148 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="44%" HEIGHT="17"><font face="Arial"><font size=-1>See
notes to financial statements</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="2"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="2"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>
</TABLE>

<br> 
<center>
<p><u><font face="Arial"><font size=-1>SEARS DC CORP.</font></font></u>
<p><u><font face="Arial"><font size=-1>NOTES TO FINANCIAL STATEMENTS</font></font></u></center>

<p><u>1. </u>ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
<p>Sears DC Corp. ("SDC"), a wholly-owned subsidiary of Sears, Roebuck
and Co. ("Sears"), was principally engaged in borrowing in domestic and
foreign debt markets and lending the proceeds of such borrowings to Sears
and certain direct and indirect subsidiaries of Sears in exchange for their
unsecured notes.
<p>Under an agreement between SDC and Sears, the interest rate paid by
Sears is designed to produce earnings sufficient to cover SDC's fixed charges
at least 1.005 times. Required payments of principal and interest to SDC
under the Sears borrowing agreement are intended to be sufficient to allow
SDC to make timely payments of principal and interest to the holders of
its securities.
<p>The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
<p>SDC's fiscal year ends on the Saturday nearest December 31. Unless otherwise
stated, references to years in this report relate to fiscal years rather
than to calendar years.
<p>Fiscal year Ended Weeks
<p>1999 January 1, 2000 52
<p>1998 January 2, 1999 52
<p>1997 January 3, 1998 53
<p>Cash and cash equivalents includes all highly liquid investments with
maturities of three months or less at the date of purchase.
<p>The results of operations of SDC are included in the consolidated federal
income tax return of Sears. Tax liabilities and benefits are allocated
as generated by SDC, whether or not such benefits would be currently available
on a separate return basis. Taxes are provided based on the statutory federal
income tax rate.
<p><u>2. </u>BORROWINGS
<p>The medium-term notes are not redeemable by SDC except for notes having
a stated maturity at the time of issue of more than seven years which may
be redeemed under certain circumstances in the event of declining Discover
Card receivables. The fair market value of medium-term notes approximated
$220.5 million and $360.7 million at January 1, 2000 and January 2, 1999,
respectively, based on discounted cash flows using interest rates currently
available to Sears. Selected details of SDC's borrowings are shown below.
<br> 
<table BORDER CELLPADDING=2 WIDTH="530" >
<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"><i><font face="Arial"><font size=-1>(millions)</font></font></i></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1999</font></font></center>
</td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1998</font></font></center>
</td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="4"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="4"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="5" WIDTH="62%" HEIGHT="18"><font face="Arial"><font size=-1>8.52%
to 9.26% medium-term notes due through 2012</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>$213.0</font></font></div>
</td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>$332.5</font></font></div>
</td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="18"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="18"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="12" HEIGHT="17"><font face="Arial"><font size=-1>At
January 1, 2000 medium-term note maturities for the next five years and
thereafter were as follows:</font></font></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="17"><font face="Arial"><font size=-1>2000</font></font></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>-</font></font></div>
</td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="17"><font face="Arial"><font size=-1>2001</font></font></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>135.5</font></font></div>
</td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="17"><font face="Arial"><font size=-1>2002</font></font></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>24.7</font></font></div>
</td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="17"><font face="Arial"><font size=-1>2003</font></font></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>9.0</font></font></div>
</td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="17"><font face="Arial"><font size=-1>2004</font></font></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>-</font></font></div>
</td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="17"><font face="Arial"><font size=-1>Thereafter</font></font></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>43.8</font></font></div>
</td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="3"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="3"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18">
<div align=right><font face="Arial"><font size=-1>213.0</font></font></div>
</td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="18"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="18"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="18"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="16%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="9%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="4%" HEIGHT="17"></td>
</tr>
</TABLE>

<br> 
<br> 
<br> 
<center>
<p><u><font face="Arial"><font size=-1>SEARS DC CORP.</font></font></u>
<p><u><font face="Arial"><font size=-1>PART III</font></font></u></center>

<p><u>Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.</u>
<p>None.
<br> 
<br> 
<p><u>Item 10. Directors and Executive Officers of the Registrant.</u>
<dir>
<dir>
<dir>
<dir>Not applicable.</dir>
</dir>
</dir>
</dir>
<u>Item 11. Executive Compensation.</u>
<p>Not applicable.
<br> 
<br> 
<p><u>Item 12. Security Ownership of Certain Beneficial Owners and Management.</u>
<p>Not applicable.
<p><u>Item 13. Certain Relationships and Related Transactions.</u>
<p>Not applicable.
<br> 
<br> 
<br>
<br>
<center>
<p><u>PART IV</u></center>

<p><u>Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.</u>
<p>(a) The following documents are filed as a part of this report:
<p>1. An "Index to Financial Statements" has been filed as a part of this
report on page S-1 hereof.
<p>2. No financial statement schedules are included herein because they
are not required or because the information is contained in the financial
statements and notes thereto, as noted in the "Index to Financial Statements"
filed as part of this report.
<p>3. An "Exhibit Index" has been filed as part of this report beginning
on page E-1 hereof.
<ol START=2 TYPE="a">
<dir>
<dir>
<ol TYPE="a">
<li>
Reports on Form 8-K:</li>
</ol>
</dir>
</dir>
</ol>

<dir>
<dir>
<dir>
<dir>
<dir>
<dir>Sears DC filed a Current Report on Form 8-K dated December 15, 1999,
reporting under Item 5 that Moody's Investor Service had announced that
it had lowered the debt ratings of Sears, Roebuck and Co.</dir>
</dir>
</dir>
</dir>
</dir>
</dir>

<br> 
<br> 
<br> 
<br> 
<center>
<p><u>SIGNATURES</u></center>

<p><br>
<br>
<br>
<br>
<br>
<p>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.
<p>SEARS DC CORP.
<p>(Registrant)
<br> 
<br> 
<p><u>By: /s/ ROBERT J. PHELAN</u>
<br>Robert J. Phelan
<p>Vice President and Controller
<br> 
<br> 
<br> 
<br> 
<p>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.
<p><u>Signature</u>                                       
            
<u>Title</u>                                        
   
<u>Date</u>
<br> 
<br> 
<p><u>/s/LARRY R. RAYMOND</u>                        
Director, President and          
)
<p>Larry R. Raymond                                      
Chief Executive Officer        
)
<p>                                          
                        
(Principal Executive Officer)  )
<br> 
<p><u>/s/KEITH E. TROST          </u>                      
Vice President and Treasurer   )       
March 24, 2000
<p>Keith E. Trost                                       
     
(Principal Financial Officer)    )
<p><u>/s/ROBERT J. PHELAN</u>                            
Vice President and Controller )
<p>Robert J. Phelan                                       
 
(Principal Accounting Officer) )
<p><u>/s/Jeffrey N. Boyer</u>                                    
Director                                
)
<p>Jeffrey N. Boyer                                       
                                          
 &
)
<br> 
<br> 
<br>
<br>
<br>
<center>
<p><u>SEARS DC CORP.</u>
<p><u>INDEX TO FINANCIAL STATEMENTS</u>
<p><u>YEARS ENDED JANUARY 1, 2000 AND JANUARY 2, 1999</u></center>

<p><br>
<br>
<br>
<br>
<br>
<p>                                          
                                          
 
<u>PAGE</u>
<p><u>STATEMENTS OF INCOME</u>                                     
                  
<u>6</u>
<p><u>STATEMENTS OF FINANCIAL POSITION</u>                               
<u>7</u>
<p><u>STATEMENTS OF STOCKHOLDER'S EQUITY</u>                        
<u>8</u>
<p><u>STATEMENTS OF CASH FLOWS</u>                                     
          <u>
9</u>
<p><u>NOTES TO FINANCIAL STATEMENTS</u>                                  
<u>10</u>
<p><u>INDEPENDENT AUDITORS' REPORT</u>                                   
<u>S-2</u>
<br> 
<br> 
<br>
<br>
<br>
<br>
<center>
<p>S-1</center>

<p><u>INDEPENDENT AUDITORS' REPORT</u>
<br> 
<br> 
<p>To the Stockholder and Board of Directors
<p>Sears DC Corp.
<p>Greenville, DE
<br> 
<br> 
<p>We have audited the accompanying Statements of Financial Position of
Sears DC Corp. (a wholly-owned subsidiary of Sears, Roebuck and Co.) as
of January 1, 2000 and January 2, 1999, and the related Statements of Income,
Stockholder's Equity and Cash Flows for each of the three years in the
period ended January 1, 2000. 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.
<p>We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
<p>In our opinion, such financial statements present fairly, in all material
respects, the financial position of Sears DC Corp. as of January 1, 2000
and January 2, 1999, and the results of its operations and its cash flows
for each of the three years in the period ended January 1, 2000, in conformity
with generally accepted accounting principles.
<br> 
<p><u>/s/ Deloitte & Touche LLP</u>
<p>Chicago, Illinois
<p>March 16, 2000
<br> 
<br> 
<br>
<br>
<center>
<p><u>S-2</u>
<p><u>EXHIBIT INDEX</u></center>

<p><br>
<dir>
<dir>3(a) Certificate of Incorporation of Discover Credit Corp. dated January
9, 1987 (Incorporated by reference to Exhibit 3(a) to Form 10 of the Registrant
(Form 10)*).
<p>3(b) Amendment to Certificate of Incorporation of Discover Credit Corp.
dated April 9, 1987 (Incorporated by reference to Exhibit 3(b) to Form
10*).
<p>3(c) Certificate of Amendment of Certificate of Incorporation dated
May 21, 1993 to change the name of Discover Credit Corp. to Sears DC Corp.
(Incorporated by reference to exhibit 3(c) on Form 10-K of the Registrant
for the year ended December 30, 1995*).
<p>3(d) By-laws of Sears DC Corp., as amended to February 6, 1996 (Incorporated
by reference to exhibit 3(c) on Form 10-K of the Registrant for the year
ended December 30, 1995*).
<p>4(a) Net Worth Maintenance Agreement between Discover Credit Corp. and
Sears, Roebuck and Co., dated as of November 13, 1987 (Incorporated by
reference to Exhibit 4 to Form 10*).
<p>4(b) Forms of fixed rate Medium-Term Note and floating rate Medium-Term
Note (Incorporated by reference to Exhibits 4.1 and 4.2 to Current Report
on Form 8-K of the Registrant dated February 9, 1990*).
<p>4(c) Indenture, dated as of June 1, 1991 between Discover Credit Corp.
and Bank of Delaware as Trustee (Incorporated by reference to Exhibit 4
to Registration Statement No. 33-40056*).
<p>4(d) Forms of fixed rate Medium-Term Note Series II and floating rate
Medium-Term Note Series II (Incorporated by reference to Exhibits 4.2 and
4.3 to Current Report on Form 8-K of the Registrant dated June 20, 1991*).
<p>4(e) Indenture, dated as of February 15, 1992, between Discover Credit
Corp. and Harris Trust Company of New York (Incorporated by reference to
Exhibit 4.1 to Current Report on Form 8-K of the Registrant dated February
28, 1992*).
<p>4(f) Forms of fixed rate Medium-Term Note Series III and floating rate
Medium-Term Note Series III (Incorporated by reference to Exhibits 4.2
and 4.3 to Current Report on Form 8-K of the Registrant dated February
28, 1992*).
<p>4(g) The Registrant hereby agrees to furnish the Commission, upon request,
with each instrument defining the rights of holders of long-term debt of
the Registrant with respect to which the total amount of securities authorized
does not exceed 10% of the total assets of the Registrant.</dir>
</dir>
<u>_________________________________________</u>
<p>* SEC File No. 0-17955
<p>** Filed herewith
<center>
<p>E-1</center>

<p><br>
<br> 
<br> 
<br> 
<br> 
<br> 
<dir>
<dir>10(a) Letter Agreement dated March 9, 1993 between Sears, Roebuck
and Co. and Discover Credit Corp. (Incorporated by reference to Exhibit
10(g) to Annual Report on Form 10-K of the Registrant for the year ended
December 31, 1992*).
<p>10(b) Amendment dated March 22, 1994 to Letter Agreement dated March
9, 1993 between Sears, Roebuck and Co. and Discover Credit Corp. (Incorporated
by reference to Exhibit 10(b) to Annual Report on Form 10-K of the Registrant
for the year ended December 31, 1994*).
<p>12 Calculation of ratio of earnings to fixed charges**
<p>23 Consent of Deloitte & Touche LLP**</dir>
</dir>

<ol START=27>
<li>
Financial Data Schedule**</li>
</ol>

<dir>
<dir>99 Page 29 of the Sears, Roebuck and Co. Annual Report (Incorporated
by reference to Exhibit 13.(ii) of the Sears, Roebuck and Co. Annual Report
on Form 10-K for the fiscal year ended January 1, 2000).</dir>
</dir>
<u>______________________________</u>
<p>* SEC File No. 0-17955
<p>** Filed herewith
<br> 
<p>E-2
<br> 
<br> 
<br> 
<br> 
<p><u>Exhibit 12</u>
<br> 
<br> 
<br>
<center>
<p><u>SEARS DC CORP.</u>
<p><u>CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES</u></center>

<p><br>
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<br> 
<table BORDER CELLPADDING=2 WIDTH="600" >
<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"><i><font face="Arial"><font size=-1>(thousands)</font></font></i></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1999</font></font></center>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1998</font></font></center>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<center><font face="Arial"><font size=-1>1997</font></font></center>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="3" WIDTH="34%" HEIGHT="17"><font face="Arial"><font size=-1>Income
before income taxes</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>109 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>160 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"><font face="Arial"><font size=-1>$</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>238 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="23%" HEIGHT="17"><font face="Arial"><font size=-1>Fixed
Charges</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>21,916 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>32,035 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>47,721 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="45%" HEIGHT="17"><font face="Arial"><font size=-1>(i)
Earnings available for Fixed Charges</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>22,025 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>32,195 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>47,959 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="2" WIDTH="23%" HEIGHT="17"><font face="Arial"><font size=-1>(ii)
Fixed Charges</font></font></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>21,916 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>32,035 </font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17">
<div align=right><font face="Arial"><font size=-1>47,721 </font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="7"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="7"></td>
</tr>

<tr>
<td VALIGN=TOP COLSPAN="4" WIDTH="45%" HEIGHT="28"><font face="Arial"><font size=-1>Ratio
of Earnings to Fixed Charges (i/ii)</font></font></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="28"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="28">
<div align=right><font face="Arial"><font size=-1>1.005</font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="28"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="28"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="28">
<div align=right><font face="Arial"><font size=-1>1.005</font></font></div>
</td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="28"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="28"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="28">
<div align=right><font face="Arial"><font size=-1>1.005</font></font></div>
</td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>

<tr>
<td VALIGN=TOP WIDTH="13%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="12%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="7%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="2%" HEIGHT="17"></td>

<td VALIGN=TOP WIDTH="11%" HEIGHT="17"></td>
</tr>
</TABLE>

<p><font face="Arial"><font size=-1>Exhibit 23</font></font>
<br> 
<br> 
<p><font face="Arial"><font size=-1>CONSENT OF INDEPENDENT AUDITORS</font></font>
<br> 
<br> 
<p><font face="Arial"><font size=-1>We consent to the incorporation by
reference in Registration Statement No. 33-44671 of Sears DC Corp. of our
report dated March 24, 2000 appearing in this Annual Report on Form 10-K
of Sears DC Corp. for the year ended January 1, 2000.</font></font>
<br> 
<br> 
<br> 
<br> 
<p><u><font face="Arial"><font size=-1>/S/Deloitte & Touche LLP</font></font></u>
<p><font face="Arial"><font size=-1>Deloitte & Touche LLP</font></font>
<p><font face="Arial"><font size=-1>Chicago, Illinois</font></font>
<p><font face="Arial"><font size=-1>March 16, 2000</font></font>
</body>
</HTML>


<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF FINANCIAL POSITION, INCOME AND CASH FLOWS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000

<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          JAN-01-2000
<PERIOD-END>                               JAN-01-2000
<CASH>                                               0
<SECURITIES>                                         0<F1>
<RECEIVABLES>                                  223,993
<ALLOWANCES>                                         0<F1>
<INVENTORY>                                          0<F1>
<CURRENT-ASSETS>                                     0<F1>
<PP&E>                                               0<F1>
<DEPRECIATION>                                       0<F1>
<TOTAL-ASSETS>                                 224,413
<CURRENT-LIABILITIES>                                0<F1>
<BONDS>                                        213,025
                                0<F1>
                                          0<F1>
<COMMON>                                             1
<OTHER-SE>                                       5,325
<TOTAL-LIABILITY-AND-EQUITY>                   224,413
<SALES>                                              0<F1>
<TOTAL-REVENUES>                                22,076
<CGS>                                                0<F1>
<TOTAL-COSTS>                                        0<F1>
<OTHER-EXPENSES>                                    51
<LOSS-PROVISION>                                     0<F1>
<INTEREST-EXPENSE>                              21,916
<INCOME-PRETAX>                                    109
<INCOME-TAX>                                        38
<INCOME-CONTINUING>                                  0<F1>
<DISCONTINUED>                                       0<F1>
<EXTRAORDINARY>                                      0<F1>
<CHANGES>                                            0<F1>
<NET-INCOME>                                        71
<EPS-BASIC>                                        0<F1>
<EPS-DILUTED>                                        0<F1>
<FN>
<F1>Not applicable
</FN>


</TABLE>


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