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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K/A
                                 Amendment No. 2

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

 [x]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003

                                       or

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

                         Commission file number: 1-5721

                          LEUCADIA NATIONAL CORPORATION
             (Exact Name of Registrant as Specified in its Charter)


            NEW YORK                                     13-2615557
  (State or Other Jurisdiction              (I.R.S. Employer Identification No.)
of Incorporation or Organization)


                              315 PARK AVENUE SOUTH
                            NEW YORK, NEW YORK 10010
                                 (212) 460-1900
    (Address, Including Zip Code, and Telephone Number, Including Area Code,
                  of Registrant's Principal Executive Offices)

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

                                                         Name of Each Exchange
          Title of Each Class                             on Which Registered

 COMMON SHARES, PAR VALUE $1 PER SHARE                  NEW YORK STOCK EXCHANGE
                                                        PACIFIC EXCHANGE, INC.

7-3/4% SENIOR NOTES DUE AUGUST 15, 2013                 NEW YORK STOCK EXCHANGE

  8-1/4% SENIOR SUBORDINATED NOTES DUE                  NEW YORK STOCK EXCHANGE
              JUNE 15, 2005

  7-7/8% SENIOR SUBORDINATED NOTES DUE                  NEW YORK STOCK EXCHANGE
            OCTOBER 15, 2006


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

                                      NONE.
                                (Title of Class)

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [x] No [_]

Aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant at June 30, 2003 (computed by reference to the
last reported closing sale price of the Common Shares on the New York Stock
Exchange on such date): $1,496,104,000.

On March 5, 2004, the registrant had outstanding 70,867,502 Common Shares.


                      DOCUMENTS INCORPORATED BY REFERENCE:

 Certain portions of the registrant's definitive proxy statement pursuant to
 Regulation 14A of the Securities Exchange Act of 1934 in connection with the
 2003 annual meeting of shareholders of the registrant are incorporated by
 reference into Part III of this Report.

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                                EXPLANATORY NOTE

This Report on Form 10-K/A amends and restates in its entirety Item 15 of the
Annual Report on Form 10-K of Leucadia National Corporation (the "Company") for
the fiscal year ended December 31, 2003 (the "Form 10-K") to reflect that the
financial statements referred to in Item 15(d)(3) have been filed herewith. Such
financials had been previously incorporated by reference into the Form 10-K:

Item 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)(1)(2) Financial Statements and Schedules.

            Report of Independent Accountants....................................................    F-1
            Financial Statements:
               Consolidated Balance Sheets at December 31, 2003 and 2002.........................    F-2
               Consolidated Statements of Operations for the years ended December 31,  2003,
                   2002 and 2001.................................................................    F-3
               Consolidated Statements of Cash Flows for the years ended December 31, 2003,
                   2002 and 2001.................................................................    F-4
               Consolidated Statements of Changes in Shareholders' Equity for the years ended
                  December 31, 2003, 2002 and 2001...............................................    F-6
               Notes to Consolidated Financial Statements........................................    F-7

            Financial Statement Schedule:

               Schedule I - Condensed Financial Information of Registrant........................    F-51

               Schedule II - Valuation and Qualifying Accounts...................................    F-56

       (3) Executive Compensation Plans and Arrangements.

           1999 Stock Option Plan (filed as Annex A to the Company's Proxy
           Statement dated April 9, 1999 (the "1999 Proxy Statement")).

           Amended and Restated Shareholders Agreement dated as of June 30, 2003
           among the Company, Ian M. Cumming and Joseph S. Steinberg.

           Leucadia National Corporation 2003 Senior Executive Annual Incentive
           Bonus Plan (filed as Annex A to the Company's Proxy Statement dated
           April 17, 2003 (the "2003 Proxy Statement")).

           Employment Agreement made as of December 28, 1993 by and between the
           Company and Ian M. Cumming (filed as Exhibit 10.17 to the Company's
           Annual Report on Form 10-K for the fiscal year ended December 31,
           1993 (the "1993 10-K")).

           Amendment, dated as of May 5, 1999, to the Employment Agreement made
           as of December 28, 1993 by and between the Company and Ian M. Cumming
           (filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K
           for the fiscal year ended December 31, 2001 (the "2001 10-K")).

           Employment Agreement made as of December 28, 1993 by and between the
           Company and Joseph S. Steinberg (filed as Exhibit 10.18 to the 1993
           10-K).

           Amendment, dated as of May 5, 1999, to the Employment Agreement made
           as of December 28, 1993 by and between the Company and Joseph S.
           Steinberg (filed as Exhibit 10.21 to the 2001 10-K).


                                       2

           Leucadia National Corporation Senior Executive Warrant Plan (filed as
           Annex B to the 1999 Proxy Statement).

           Deferred Compensation Agreement between the Company and Thomas E.
           Mara dated as of December 20, 2001 (filed as Exhibit 10.28 to the
           2001 10-K).

(b)   Reports on Form 8-K.

      The Company filed current reports on Form 8-K dated October 2, 2003,
      October 16, 2003, October 30, 2003, November 5, 2003, November 6, 2003,
      November 14, 2003 and December 4, 2003, which set forth information under
      Item 5. Other Events and Item 7. Financial Statements and Exhibits.

      The Company filed a current report on Form 8-K dated November 6, 2003
      which set forth information under Item 2. Acquisition or Disposition of
      Assets and Item 7. Financial Statements and Exhibits.

(c)   Exhibits.

           3.1        Restated Certificate of Incorporation (filed as Exhibit
                      5.1 to the Company's Current Report on Form 8-K dated July
                      14, 1993). *

           3.2        Certificate of Amendment of the Certificate of
                      Incorporation dated as of May 14, 2002 (previously filed).

           3.3        Certificate of Amendment of the Certificate of
                      Incorporation dated as of December 23, 2002 (filed as
                      Exhibit 3.2 to the Company's Annual Report on Form 10-K
                      for the fiscal year ended December 31, 2002 (the "2002
                      10-K")).*

           3.4        Amended and Restated By-laws as amended through March 9,
                      2004 (previously filed).

           4.1        The Company undertakes to furnish the Securities and
                      Exchange Commission, upon request, a copy of all
                      instruments with respect to long-term debt not filed
                      herewith.

           10.1       1999 Stock Option Plan (filed as Annex A to the 1999 Proxy
                      Statement).*

           10.2       Articles and Agreement of General Partnership, effective
                      as of April 15, 1985, of Jordan/Zalaznick Capital Company
                      (filed as Exhibit 10.20 to the Company's Registration
                      Statement No. 33-00606).*

           10.3       Fiber Lease Agreement together with Colocation and
                      Maintenance Agreement, each dated April 26, 2002, and each
                      amended October 10, 2002, and February 14, 2003, between
                      WCL and Metromedia Fiber National Network, Inc. (filed as
                      Exhibit 10.48 to WilTel's Annual Report on Form 10-K for
                      the fiscal year ended December 31, 2002 (the "WilTel
                      10-K")). *

           10.4       Leucadia National Corporation Senior Executive Warrant
                      Plan (filed as Annex B to the 1999 Proxy Statement).*

           10.5       Amended and Restated Shareholders Agreement dated as of
                      June 30, 2003 among the Company, Ian M. Cumming and Joseph
                      S. Steinberg (previously filed).

           10.6       Form of Amended and Restated Revolving Credit Agreement
                      dated as of March 11, 2003 between the Company, Fleet
                      National Bank as Administrative Agent, The Chase Manhattan
                      Bank, as Syndication Agent, and the Banks signatory
                      thereto, with Fleet Boston Robertson Stephens, Inc., as


                                       3

                      Arranger (filed as Exhibit 10.1 to the Company's Quarterly
                      Report on Form 10-Q for the quarterly period ended March
                      31, 2003).*

           10.7       Purchase Agreement among Conseco, Inc., the Company,
                      Charter National Life Insurance Company, Colonial Penn
                      Group, Inc., Colonial Penn Holdings, Inc., Leucadia
                      Financial Corporation, Intramerica Life Insurance Company,
                      Colonial Penn Franklin Insurance Company and Colonial Penn
                      Insurance Company dated as of April 30, 1997 (filed as
                      Exhibit 10.1 to the Company's Quarterly Report on Form
                      10-Q for the quarterly period ended June 30, 1997). *

           10.8       Purchase Agreement among General Electric Capital
                      Corporation, the Company, Charter National Life Insurance
                      Company, Colonial Penn Group Inc. and Colonial Penn
                      Holdings, Inc. dated as of June 30, 1997 (filed as Annex A
                      to the Company's Proxy Statement dated October 3, 1997
                      (the "1997 Proxy Statement")).*

           10.9       Purchase Agreement by and among Allstate Life Insurance
                      Company, Allstate Life Insurance Company of New York,
                      Charter National Life Insurance Company, Intramerica Life
                      Insurance Company and the Company, dated February 11, 1998
                      (filed as Exhibit 10.16 to the Company's Annual Report on
                      Form 10-K for the fiscal year ended December 31, 1997 (the
                      "1997 10-K")).*

           10.10      Leucadia National Corporation 2003 Senior Executive Annual
                      Incentive Bonus Plan (filed as Annex A to the 2003 Proxy
                      Statement).*

           10.11      Stock Purchase Agreement by and between the Company and
                      Allstate Life Insurance Company dated as of December 18,
                      1998 (filed as Exhibit 10.14 to the Company's Annual
                      Report on Form 10-K for the fiscal year ended December 31,
                      1998 ( the "1998 10-K)).*

           10.12      Employment Agreement made as of December 28, 1993 by and
                      between the Company and Ian M. Cumming (filed as Exhibit
                      10.17 to the Company's 1993 10-K).*

           10.13      Amendment, dated as of May 5, 1999, to the Employment
                      Agreement made as of December 28, 1993 by and between the
                      Company and Ian M. Cumming (filed as Exhibit 10.19 to the
                      2001 10-K).*

           10.14      Employment Agreement made as of December 28, 1993 by and
                      between the Company and Joseph S. Steinberg (filed as
                      Exhibit 10.18 to the 1993 10-K).*

           10.15      Amendment, dated as of May 5, 1999, to the Employment
                      Agreement made as of December 28, 1993 by and between the
                      Company and Joseph S. Steinberg (filed as Exhibit 10.21 to
                      the 2001 10-K).*

           10.16      Management Services Agreement dated as of February 26,
                      2001 among The FINOVA Group Inc., the Company and Leucadia
                      International Corporation (filed as Exhibit 10.20 to the
                      2000 10-K).*

           10.17      Voting Agreement, dated August 21, 2001, by and among
                      Berkadia LLC, Berkshire Hathaway Inc., the Company and The
                      FINOVA Group Inc. (filed as Exhibit 10.J to the Company's
                      Current Report on Form 8-K dated August 27, 2001).*

           10.18      Deferred Compensation Agreement between the Company and
                      Thomas E. Mara dated as of December 20, 2001 (filed as
                      Exhibit 10.28 to the 2001 10-K).*


                                       4

           10.19      Settlement Agreement dated as of July 26, 2002, by and
                      among The Williams Companies Inc. ("TWC"), Williams
                      Communications Group, Inc. ("WCG"), CG Austria, Inc., the
                      official committee of unsecured creditors and the Company
                      (filed as Exhibit 99.2 to the Current Report on Form 8-K
                      of WCG dated July 31, 2002 (the "WCG July 31, 2002
                      8-K")).*

           10.20      Investment Agreement, dated as of July 26, 2002, by and
                      among the Company, WCG and, for purposes of Section 7.4
                      only, Williams Communications, LLC ("WCL") (filed as
                      Exhibit 99.4 to the WCG July 31, 2002 8-K). *

           10.21      First Amendment, made as of September 30, 2002, to the
                      Investment Agreement, dated as of July 26, 2002, by and
                      among the Company, WCG and WCL (filed as Exhibit 99.4 to
                      the Current Report on Form 8-K of WCG dated October 24,
                      2002 (the "WilTel October 24, 2002 8-K")). *

           10.22      Second Amendment, made as of October 15, 2002, to the
                      Investment Agreement, dated as of July 26, 2002, as
                      amended on September 30, 2002, by and among the Company,
                      WCG and WCL (filed as Exhibit 99.5 to the WilTel October
                      24, 2002 8-K). *

           10.23      Purchase and Sale Agreement, dated as of July 26, 2002, by
                      and between TWC and the Company (filed as Exhibit 99.5 to
                      the Company's Current Report on Form 8-K dated July 31,
                      2002).*

           10.24      Amendment, made as of October 15, 2002, to the Purchase
                      and Sale Agreement, dated as of July 26, 2002, by and
                      among the Company and TWC (filed as Exhibit 99.2 to the
                      WilTel October 24, 2002 8-K). *

           10.25      Escrow Agreement, dated as of October 15, 2002, among the
                      Company, TWC, WilTel and The Bank of New York, as Escrow
                      Agent (filed as Exhibit 99.3 to the WilTel October 24,
                      2002 8-K). *

           10.26      Share Purchase Agreement, dated April 17, 2002 between LUK
                      Fidei L.L.C. and Hampton Trust PLC (filed as Exhibit 10.37
                      to the 2002 10-K).*

           10.27      Reiterative Share Purchase Agreement, dated June 4, 2002,
                      among Savits AB Private, Hampton Trust Holding (Europe)
                      SA, John C. Jones and Herald Century Consolidated SA
                      (filed as Exhibit 10.38 to the 2002 10-K).*

           10.28      Agreement and Plan of Merger, dated August 21, 2003, among
                      the Company, Wrangler Acquisition Corp. and WilTel (filed
                      as Exhibit 2.1 to the Company's Current Report on Form 8-K
                      dated August 22, 2003). *

           10.29      Stock Purchase Agreement, dated as of October 21, 2002,
                      between HomeFed Corporation ("HomeFed") and the Company
                      (filed as Exhibit 10.1 to the Current Report on Form 8-K
                      of HomeFed dated October 22, 2002). *

           10.30      Second Amended and Restated Berkadia LLC Operating
                      Agreement, dated December 2, 2002, by and among BH Finance
                      LLC and WMAC Investment Corporation (filed as Exhibit
                      10.40 to the 2002 10-K).*

           10.31      Subscription Agreement made and entered into as of
                      December 23, 2002 by and among the Company and each of the
                      entities named in Schedule I thereto (filed as Exhibit
                      10.41 to the 2002 10-K).*


                                       5

           10.32      Amended and Restated Alliance Agreement between Telefonos
                      de Mexico, S.A. de C.V. and Williams Communications, Inc.,
                      dated May 25, 1999 (filed as Exhibit 10.2 to WCG's Equity
                      Registration Statement, Amendment No. 8, dated September
                      29, 1999). *

           10.33      Master Alliance Agreement between SBC Communications Inc.
                      and Williams Communications, Inc. dated February 8, 1999
                      (filed as Exhibit 10.10 WCG's Equity Registration
                      Statement, Amendment No. 1, dated May 27, 1999). *

           10.34      Transport Services Agreement dated February 8, 1999,
                      between Southwestern Bell Communication Services, Inc. and
                      Williams Communications, Inc. (filed as Exhibit 10.11 to
                      WCG's Equity Registration Statement, Amendment No. 1,
                      dated May 27, 1999). *

           10.35      Copy of WCG's April 22, 2002, agreement with principal
                      creditor group (filed as Exhibit 10.1 to WCG's Current
                      Report on Form 8-K dated April 22, 2002 (the "WCG April
                      22, 2002 8-K")). *

           10.36      Copy of WCG's agreement with TWC (filed as Exhibit 10.2 to
                      the WCG April 22, 2002 8-K). *

           10.37      First Amended Joint Chapter 11 Plan of Reorganization of
                      WCG and CG Austria, filed with the Bankruptcy Court as
                      Exhibit 1 to the Settlement Agreement (filed as Exhibit
                      99.3 to the WCG July 31, 2002 8-K). *

           10.38      Real Property Purchase and Sale Agreement among WilTel,
                      Williams Headquarters Building Company, Williams
                      Technology Center, LLC, WCL, and Williams Aircraft
                      Leasing, LLC, dated July 26, 2002, filed with the
                      Bankruptcy Court as Exhibit 4 to the Settlement Agreement
                      (filed as Exhibit 99.6 to the WCG July 31, 2002 8-K). *

           10.39      List of TWC Continuing Contracts, filed with the
                      Bankruptcy Court as Exhibit 5 to the Settlement Agreement
                      (filed as Exhibit 99.7 to the WCG July 31, 2002 8-K). *

           10.40      Agreement for the Resolution of Continuing Contract
                      Disputes among WCG, WCL and TWC, dated July 26, 2002,
                      filed with the Bankruptcy Court as Exhibit 6 to the
                      Settlement Agreement (filed as Exhibit 99.8 to the WCG
                      July 31, 2002 8-K). *

           10.41      Tax Cooperation Agreement between WCG and TWC, dated July
                      26, 2002, filed with the Bankruptcy Court as Exhibit 7 to
                      the Settlement Agreement (filed as Exhibit 99.9 to the WCG
                      July 31, 2002 8-K). *

           10.42      Amendment to Trademark License Agreement between WCG and
                      TWC, dated July 26, 2002, filed with the Bankruptcy Court
                      as Exhibit to the Settlement Agreement (filed as Exhibit
                      99.10 to the WCG July 31, 2002 8-K). *

           10.43      Assignment of Rights between Williams Information Services
                      Corporation and WCL, dated July 26, 2002, filed with the
                      Bankruptcy Court as Exhibit 9 to the Settlement Agreement
                      (filed as Exhibit 99.11 to the WCG July 31, 2002 8-K). *

           10.44      Guaranty Indemnification Agreement between WCG and TWC,
                      dated July 26, 2002, filed with the Bankruptcy Court as
                      Exhibit 10 to the Settlement Agreement (filed as Exhibit
                      99.12 to the WCG July 31, 2002 8-K). *

           10.45      Declaration of Trust, dated as of October 15, 2002, by and
                      among WCG, WilTel and the Residual Trustee (filed as
                      Exhibit 99.1 to WilTel's Current Report on Form 8-K dated
                      October 24, 2002 (the "WilTel October 24, 2002 8-K")). *


                                       6

           10.46      Second Amended and Restated Credit and Guaranty Agreement
                      of WilTel, dated as of September 8, 1999, as amended and
                      restated as of April 25, 2001 and as further amended and
                      restated as of October 15, 2002 (filed as Exhibit 99.12 to
                      the WilTel October 24, 2002 8-K). *

           10.47      Amendment No. 9, dated as of October 15, 2002, to Amended
                      and Restated Credit Agreement of WilTel, dated as of
                      September 8, 1999, and Amendment No. 1, dated as of
                      October 15, 2002, to the Subsidiary Guarantee, dated as of
                      September 8, 1999 (filed as Exhibit 99.13 to the WilTel
                      October 24, 2002 8-K).*

           10.48      Amended and Restated Security Agreement, dated as of April
                      23, 2001, as amended and restated as of October 15, 2002
                      (filed as Exhibit 99.14 to the WilTel October 24, 2002
                      8-K). *

           10.49      Amendment No. 1, dated as of October 15, 2002, to the Real
                      Property Purchase and Sale Agreement, dated as of July 26,
                      2002, among Williams Headquarters Building Company, WTC,
                      WCL, WCG and Williams Communications Aircraft, LLC (filed
                      as Exhibit 99.15 to the WilTel October 24, 2002 8-K). *

           10.50      Pledge Agreement dated as of October 15, 2002, by CG
                      Austria, Inc., as pledgor, to Williams Headquarters
                      Building Company, as pledgee (filed as Exhibit 10.42 to
                      the WilTel 10-K). *

           10.51      First Amendment to Master Alliance Agreement between SBC
                      Communications Inc. and Williams Communications, Inc., by
                      and between SBC Communications Inc. and WCL, effective as
                      of September 23, 2002 (filed as Exhibit 10.43 to the
                      WilTel 10-K). *

           10.52      First Amendment to Transport Services Agreement among
                      Southwestern Bell Communications Services Inc., SBC
                      Operations, Inc. and Williams Communications, Inc., by and
                      among Southwestern Bell Communications Services Inc., SBC
                      Operations, Inc. and Williams Communications, Inc., dated
                      September 29, 2000 (filed as Exhibit 10.44 to the WilTel
                      10-K). *

           10.53      Second Amendment to Transport Services Agreement, as
                      amended by Amendment No. 1 dated September 29, 2000, by
                      and among Southwestern Bell Communications Services Inc.,
                      SBC Operations, Inc. and WCL, effective as of June 25,
                      2001 (filed as Exhibit 10.45 to the WilTel 10-K). *

           10.54      Third Amendment to Transport Services Agreement, as
                      amended by Amendment No. 1 dated September 20, 2000, and
                      Amendment No. 2 dated June 25, 2001, by and among
                      Southwestern Bell Communications Services Inc., SBC
                      Operations, Inc. and WCL, effective as of September 23,
                      2002 (filed as Exhibit 10.46 to the WilTel 10-K). *

           10.55      Fiber Lease Agreement, together with Colocation and
                      Maintenance Agreement and Lease Agreement #2, each dated
                      April 26, 2002, and each amended October 10, 2002, between
                      Metromedia Fiber Network Services, Inc. and WCL (filed as
                      Exhibit 10.47 to the WilTel 10-K). *

           10.56      Amendment No. 2 to Master Alliance Agreement and Amendment
                      No. 4 to Transport Services Agreement, dated December 31,
                      2003, amending the (a) Master Alliance Agreement,
                      effective as of February 8, 1999, as amended by Amendment
                      No. 1 effective September 23, 2002, by and between WCL,
                      and SBC Communications Inc. and (b) Transport Services
                      Agreement, effective as of February 8, 1999, as amended by
                      Amendment No. 1 dated as of September 29, 2000, Amendment
                      No. 2 and Amendment No. 3 dated as of September 23, 2002
                      by and among WCL, SBC Operations, Inc., and Southwestern
                      Bell Communications Services Inc. (previously filed).


                                       7

           21         Subsidiaries of the registrant (previously filed).

           23.1       Consent of PricewaterhouseCoopers LLP with respect to the
                      incorporation by reference into the Company's Registration
                      Statement on Form S-8 (File No. 2-84303), Form S-8 and S-3
                      (File No. 33-6054), Form S-8 and S-3 (File No. 33-26434),
                      Form S-8 and S-3 (File No. 33-30277), Form S-8 (File No.
                      33-61682), Form S-8 (File No. 33-61718), Form S-8 (File
                      No. 333-51494) and Form S-4 (File No. 333-86018)
                      (previously filed).

           23.2       Consent of PricewaterhouseCoopers, with respect to the
                      inclusion in this Annual Report on Form 10-K the financial
                      statements of Olympus Re Holdings, Ltd. and with respect
                      to the incorporation by reference in the Company's
                      Registration Statements on Form S-8 (No. 2-84303), Form
                      S-8 and S-3 (No. 33-6054), Form S-8 and S-3 (No.
                      33-26434), Form S-8 and S-3 (No. 33-30277), Form S-8 (No.
                      33-61682), Form S-8 (No. 33-61718), Form S-8 (No.
                      333-51494) and Form S-4 (No. 333-86018) (previously
                      filed).

           23.3       Consent of independent auditors from Ernst & Young LLP
                      with respect to the inclusion in this Annual Report on
                      Form 10-K of the financial statements of Berkadia LLC and
                      with respect to the incorporation by reference in the
                      Company's Registration Statements on Form S-8 (No.
                      2-84303), Form S-8 and S-3 (No. 33-6054), Form S-8 and S-3
                      (No. 33-26434), Form S-8 and S-3 (No. 33-30277), Form S-8
                      (No. 33-61682), Form S-8 (No. 33-61718), Form S-8 (No.
                      333-51494) and Form S-4 (No. 333-86018) (previously
                      filed).

           23.4       Consent of independent auditors from Ernst & Young LLP
                      with respect to the inclusion in this Annual Report on
                      Form 10-K of the financial statements of The FINOVA Group
                      Inc. and with respect to the incorporation by reference in
                      the Company's Registration Statements on Form S-8 (No.
                      2-84303), Form S-8 and S-3 (No. 33-6054), Form S-8 and S-3
                      (No. 33-26434), Form S-8 and S-3 (No. 33-30277), Form S-8
                      (No. 33-61682), Form S-8 (No. 33-61718), Form S-8 (No.
                      333-51494) and Form S-4 (No. 333-86018) (filed herewith).

           23.5       Independent Auditors' Consent from KPMG LLP, with respect
                      to the inclusion in this Annual Report on Form 10-K of the
                      financial statements of Jefferies Partners Opportunity
                      Fund II, LLC for the three years ended December 31, 2003
                      and with respect to the incorporation by reference in the
                      Company's Registration Statements on Form S-8 (No.
                      2-84303), Form S-8 and S-3 (No. 33-6054), Form S-8 and S-3
                      (No. 33-26434), Form S-8 and S-3 (No. 33-30277), Form S-8
                      (No. 33-61682), Form S-8 (No. 33-61718), Form S-8 (No.
                      333-51494) and Form S-4 (No. 333-86018) (previously
                      filed).

           23.6       Consent of independent auditors from BDO Seidman, LLP with
                      respect to the inclusion in this Annual Report on Form
                      10-K of the financial statements of EagleRock Capital
                      Partners (QP), LP and EagleRock Master Fund and with
                      respect to the incorporation by reference in the Company's
                      Registration Statements on Form S-8 (No. 2-84303), Form
                      S-8 and S-3 (No. 33-6054), Form S-8 and S-3 (No.
                      33-26434), Form S-8 and S-3 (No. 33-30277), Form S-8 (No.
                      33-61682), Form S-8 (No. 33-61718), Form S-8 (No.
                      333-51494) and Form S-4 (No. 333-86018) (previously
                      filed).

           23.7       Consent of independent auditors from Ernst & Young LLP
                      with respect to the inclusion in this Annual Report on
                      Form 10-K of the financial statements of WilTel
                      Communications Group, Inc. and with respect to the
                      incorporation by reference in the Company's Registration
                      Statements on Form S-8 (No. 2-84303), Form S-8 and S-3
                      (No. 33-6054), Form S-8 and S-3 (No. 33-26434), Form S-8
                      and S-3 (No. 33-30277), Form S-8 (No. 33-61682), Form S-8
                      (No. 33-61718), Form S-8 (No. 333-51494) and Form S-4 (No.
                      333-86018) (previously filed).


                                       8

           31.1       Certification of Chairman of the Board and Chief Executive
                      Officer pursuant to Section 302 of the Sarbanes-Oxley Act
                      of 2002.

           31.2       Certification of President pursuant to Section 302 of the
                      Sarbanes-Oxley Act of 2002.

           31.3       Certification of Chief Financial Officer pursuant to
                      Section 302 of the Sarbanes-Oxley Act of 2002.

           32.1       Certification of Chairman of the Board and Chief Executive
                      Officer pursuant to Section 906 of the Sarbanes-Oxley Act
                      of 2002. **

           32.2       Certification of President pursuant to Section 906 of the
                      Sarbanes-Oxley Act of 2002.**

           32.3       Certification of Principal Financial Officer pursuant to
                      Section 906 of the Sarbanes-Oxley Act of 2002.**


           (d)   Financial statement schedules.

                     (1)  Berkadia LLC financial statements as of December 31,
                          2003 and 2002 and for the years ended December 31,
                          2003 and 2002 and for the period from inception,
                          February 26, 2001, to December 31, 2001 (previously
                          filed).

                     (2)  Olympus Re Holdings, Ltd. combined financial
                          statements as of December 31, 2003 and 2002 for the
                          years ended December 31, 2003 and 2002 and for the
                          period from December 3, 2001 (date of incorporation)
                          to December 31, 2001 (previously filed).

                     (3)  The FINOVA Group Inc. and subsidiaries consolidated
                          financial statements as of December 31, 2003 and 2002
                          and for the years ended December 31, 2003, 2002 and
                          2001.

                     (4)  Jefferies Partners Opportunity Fund II, LLC financial
                          statements as of December 31, 2003 and 2002 and for
                          the years ended December 31, 2003, 2002 and 2001
                          (previously filed).

                     (5)  EagleRock Capital Partners (QP), LP financial
                          statements as of December 31, 2003 and 2002 and for
                          the year ended December 31, 2003 and for the period
                          from January 1, 2002 (commencement of operations) to
                          December 31, 2002 and EagleRock Master Fund financial
                          statements as of December 31, 2003 and 2002 and for
                          the year ended December 31, 2003 and for the period
                          from May 1, 2002 (commencement of operations) to
                          December 31, 2002 (previously filed).

                     (6)  WilTel Communications Group, Inc. consolidated
                          financial statements as of November 5, 2003 and
                          December 31, 2002 (Successor Company), and for the
                          periods from January 1, 2003 through November 5, 2003,
                          and November 1, 2002 through December 31, 2002
                          (Successor Company) and the periods January 1, 2002
                          through October 31, 2002, and for the year ended
                          December 31, 2001 (Predecessor Company) (previously
                          filed).

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

*   Incorporated by reference.

**  Furnished pursuant to item 601(b) (32) of Regulation S-K.



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Report of Independent Auditors

The Board of Directors and Stockholders of The FINOVA Group Inc.

We have audited the accompanying consolidated balance sheets of The FINOVA Group Inc. and subsidiaries (the “Company”) as of December 31, 2003 and 2002, and the related statements of consolidated operations, stockholders’ equity and cash flows for the years ended December 31, 2003 and 2002, the four month period ended December 31, 2001 and the eight month period ended August 31, 2001. These financial statements are the responsibility of The FINOVA Group Inc.’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The FINOVA Group Inc. and subsidiaries at December 31, 2003 and 2002, and the results of their consolidated operations and their cash flows for the years ended December 31, 2003 and 2002, the four month period ended December 31, 2001 and the eight month period ended August 31, 2001, in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming that The FINOVA Group Inc. will continue as a going concern. As more fully described in Notes to the Consolidated Financial Statements, Note A “Nature of Operations,” the Company has a negative net worth as of December 31, 2003 and has limited sources of liquidity to satisfy its obligations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustment to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

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CONSOLIDATED BALANCE SHEETS

DECEMBER 31,

(Dollars in thousands)

See notes to consolidated financial statements.

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STATEMENTS OF CONSOLIDATED OPERATIONS

(Dollars in thousands, except per share data)

See notes to consolidated financial statements.

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STATEMENTS OF CONSOLIDATED CASH FLOWS

(Dollars in thousands)

See notes to consolidated financial statements.

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STATEMENTS OF CONSOLIDATED CASH FLOWS - continued

(Dollars in thousands)

Supplemental Disclosure

In 2003, the Company repurchased $100.0 million (face amount) of Senior Notes at a price of 49.875% or $49.9 million, plus accrued interest. The repurchases generated a net gain of $28.5 million ($50.1 million repurchase discount, partially offset by $21.6 million of unamortized fresh-start discount). In 2002, the Company repurchased $185.0 million (face amount) of Senior Notes at an average price of 29.93% or $55.4 million, plus accrued interest. The repurchases generated net gains of $88.2 million ($129.6 million repurchase discounts, partially offset by $41.4 million of unamortized fresh-start discounts).

During 2003, FINOVA received net income tax refunds of $41.7 million, including $32.5 million from the carryback of certain tax net operating losses. During 2002, FINOVA received net income tax refunds of $39.5 million, including $36.0 million from the carryback of certain tax net operating losses. For the four months ended December 31, 2001, the Company received income tax refunds of approximately $1.6 million and for the eight months ended August 31, 2001, the Company paid approximately $5.7 million.

FINOVA paid interest of $275.2 million, $376.9 million, $138.0 million and $535.4 million for the years ended December 31, 2003 and 2002, the four months ended December 31, 2001 and the eight months ended August 31, 2001, respectively.

As part of the consideration for the $5.6 billion senior secured loan received from Berkadia in 2001, FINOVA issued Berkadia 61,020,581 shares of common stock, representing 50% of FINOVA’s shares outstanding after giving effect to the implementation of the Plan.

Upon emergence from bankruptcy in 2001 and in accordance with the Plan, holders of FINOVA’s unsecured indebtedness received a cash payment equal to 70% of their unsecured claim and Senior Notes having an aggregate principal amount equal to the remaining 30% of the unsecured claim. This resulted in a non-cash exchange of $3.22 billion of Predecessor Company debt for $3.22 billion in Senior Notes. Holders of FINOVA Finance Trust’s 5½% Convertible Trust Originated Preferred Securities (the “TOPrS”) received a cash payment equal to 52.5% of the liquidation preference attributable to the TOPrS and Senior Notes having an aggregate principal amount equal to 22.5% of the liquidation preference attributable to the TOPrS. This resulted in a non-cash exchange of the TOPrS for Senior Notes in the amount of $25.9 million and a non-cash extraordinary gain on debt discharge in the amount of $28.8 million.

See notes to consolidated financial statements.

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STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY

(Dollars in thousands)

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

(Dollars in thousands in tables)

The following discussion relates to The FINOVA Group Inc. and its subsidiaries (collectively “FINOVA” or the “Company”), including FINOVA Capital Corporation and its subsidiaries (“FINOVA Capital”). FINOVA, a Delaware corporation incorporated in 1991, is a financial services holding company. Through its principal operating subsidiary, FINOVA Capital, the Company has provided a broad range of financing and capital markets products, primarily to mid-size businesses. FINOVA Capital has been in operation since 1954.

On March 7, 2001, FINOVA, FINOVA Capital and seven of their subsidiaries (the “Debtors”) filed for protection pursuant to chapter 11, title 11, of the United States Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to enable them to restructure their debt. On August 10, 2001, the Bankruptcy Court entered an order confirming FINOVA’s Third Amended and Restated Joint Plan of Reorganization (the “Plan”), pursuant to which the Debtors restructured their debt, effective August 21, 2001, when the Company emerged from bankruptcy.

The Company’s business activities are limited to maximizing the value of its portfolio through the orderly collection of its assets. These activities include collection efforts pursuant to underlying contractual terms, negotiation of prepayments, sales of assets or collateral and may include efforts to retain certain customer relationships and restructure or terminate other relationships. The Company has sold portions of asset portfolios and will consider future sales of any asset if buyers can be found at acceptable prices; however, there can be no assurance that the Company will be successful in efforts to sell additional assets. Any funds generated in excess of cash reserves permitted by the Company’s debt agreements are used to reduce FINOVA’s obligations to its creditors. The Company is prohibited by the Indenture governing its Senior Notes (the “Indenture”) from engaging in any new lending activities, except to honor existing customer commitments and in certain instances, to restructure financing relationships with existing customers to maximize value.

Because virtually all of the Company’s assets are pledged to secure the Company’s debt obligations, FINOVA’s ability to obtain additional or alternate financing is severely restricted. Accordingly, FINOVA intends to rely on internally generated cash flows from the liquidation of its assets to meet its liquidity needs.

FINOVA’s business continues to be operated under a Management Services Agreement with Leucadia National Corporation that expires in 2011. Pursuant to that agreement, Leucadia has designated its employees to act as Chairman of the Board (Ian M. Cumming), President (Joseph S. Steinberg) and Chief Executive Officer (Thomas E. Mara).

Going Concern

As of December 31, 2003, the Company has a substantial negative net worth. While FINOVA continues to pay its obligations as they become due, the ability of the Company to continue as a going concern is dependent upon many factors, particularly the ability of its borrowers to repay their obligations to FINOVA and the Company’s ability to realize the value of its portfolio. Even if the Company is able to recover the book value of its assets, and there can be no assurance of the Company’s ability to do so, the Company would not be able to repay the Senior Notes in their entirety at maturity in November 2009. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s independent public accountants qualified their report on the Company’s 2003, 2002 and 2001 financial statements due to concerns regarding the Company’s ability to continue as a going concern.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires FINOVA to use estimates and assumptions that affect reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Those estimates are subject to known and unknown risks, uncertainties and other factors that could materially impact the amounts reported and disclosed in the financial statements. Significant estimates include anticipated amounts and timing of future cash flows used in the calculation of the reserve for credit losses and measurement of impairment. Other estimates

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include selection of appropriate risk adjusted discount rates used in net present value calculations, determination of fair values of certain financial assets for which there is not an active market, residual assumptions for leasing transactions and the determination of appropriate valuation allowances against deferred tax assets. Actual results could differ from those estimated.

Consolidation Policy

The consolidated financial statements present the financial position, results of operations and cash flows of FINOVA and its subsidiaries, including FINOVA Capital. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. All intercompany balances have been eliminated in consolidation. Certain amounts for prior periods have been reclassified to be consistent with the 2003 presentation.

Portfolio Policies

The following policies include the most critical accounting policies and those that could most significantly impact the consolidated financial statements. The application of these policies rely upon management discretion and the use of estimates.

Carrying Amounts, Impairment and Use of Estimates

Several of the Company’s accounting policies pertain to the ongoing determination of impairment reserves on financing assets and the carrying amount valuation of other financial assets. Determination of impairment reserves and carrying amounts rely, to a great extent, on the estimation and timing of future cash flows. FINOVA’s cash flow estimates assume that its asset portfolios are collected in an orderly fashion over time. These cash flows do not represent estimated recoverable amounts if FINOVA were to liquidate its asset portfolios over a short period of time. Management believes that a short-term asset liquidation would have a material negative impact on the Company’s ability to recover recorded amounts.

FINOVA’s process of determining impairment reserves and carrying amounts includes a periodic assessment of its portfolios on a transaction by transaction basis. Cash flow estimates are based on current information and numerous assumptions concerning future general economic conditions, specific market segments, the financial condition of the Company’s customers and FINOVA’s collateral. In addition, assumptions are sometimes necessary concerning the customer’s ability to obtain full refinancing of balloon obligations or residuals at maturity. As a result, the Company’s cash flow estimates assume FINOVA incurs refinancing discounts for certain transactions.

Changes in facts and assumptions have resulted in, and may in the future result in, significant positive or negative changes to estimated cash flows and therefore, impairment reserves and carrying amounts.

Impairment of financing assets (subsequent to implementation of fresh-start reporting) is recorded through the Company’s reserve for credit losses, and accounting rules permit the reserve for credit losses to be increased or decreased as facts and assumptions change. However, certain financing assets were previously marked down for impairments that existed at the time fresh-start reporting was implemented. These marked down values became the Company’s new cost basis in those assets, and accounting rules do not permit the carrying value of these assets to be increased above that fresh-start cost basis if subsequent facts and assumptions result in a projected increase in value. Recoveries of amounts in excess of the fresh-start cost basis are recorded through operations when collected.

Impairment of other financial assets is marked down directly against the asset’s carrying amount. Accounting rules permit further markdown if changes in facts and assumptions result in additional impairment; however, most of these assets (except certain investments and assets held for sale, which may be marked up for subsequent events) may not be marked up if subsequent facts and assumptions result in a projected increase in value. Recoveries of previous markdowns are recorded through operations when collected.

Because of these accounting restrictions, FINOVA is not permitted to fully reflect some anticipated improvements in the portfolio until they are actually realized.

The carrying amounts and reserve for credit losses recorded on FINOVA’s financial statements reflect the Company’s expectation of collecting less than the full contractual amounts owed by some of its customers and recovering less than its original investment in certain owned assets. The Company continues to pursue collection of full contractual amounts and original investments, where appropriate, in an effort to maximize the value of its asset portfolios.

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FINOVA has a significant number of aircraft that are off-lease and anticipates that additional aircraft will be returned to the Company as leases expire or operators are unable or unwilling to continue making payments. In accordance with the provisions of SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” FINOVA has recorded impairment losses on owned aircraft by calculating the present value of estimated cash flows. For many of these aircraft, scrap value was assumed, but for certain aircraft, the Company elected (or anticipates electing upon return of the aircraft) to park and maintain the aircraft under the assumption that they will be re-leased or sold in the future despite the lack of demand for those aircraft today. While the current inactive market makes it difficult to quantify, the Company believes that the recorded values determined under this methodology significantly exceed the values that the Company would realize if it were to liquidate those aircraft today; however, actual amounts recovered from these aircraft may differ from recorded amounts and will be significantly impacted by the used aircraft market in the future, which is difficult to predict with any certainty.

The process of determining appropriate carrying amounts for these aircraft is particularly difficult and subjective, as it requires the Company to estimate future demand, lease rates and scrap values for assets for which there is currently little or no demand. The Company re-assesses its estimates and assumptions each quarter. In particular, the Company assesses market activity and the likelihood that certain aircraft types, which are forecast to go back on lease in the future, will in fact be re-leased.

The current state of the aircraft industry continues to include significant excess capacity for both new and used aircraft and lack of demand for certain classes and configurations of aircraft in the portfolio. Accordingly, during the last three years, the Company reduced the useful lives and anticipated scrap values of various aircraft and reduced its estimates regarding its ability to lease or sell certain returned aircraft.

Assets Held for the Production of Income. Assets held for the production of income include off-lease and returned assets previously the subject of financing transactions that are currently being made available for new financing transactions. Assets held for the production of income are carried at amortized cost with adjustment for impairment, if any, recorded in operations. The determination of impairment is often dependent upon the estimation of anticipated future cash flows discounted at appropriate risk adjusted market rates to determine net present value. Depreciation of these assets is charged to operations over their estimated remaining useful lives.

Assets Held for Sale. Assets held for sale are comprised of assets previously classified as financing transactions and other financial assets that management does not have the intent and/or ability to hold to maturity. Assets held for sale are revalued at least quarterly at the lower of cost or market, less anticipated selling expenses, with adjustment, if any, recorded in current operations. The determination of market value is often dependent upon the estimation of anticipated future cash flows discounted at appropriate risk adjusted market rates to determine net present value.

Fresh-Start Reporting. In accordance with the provisions of the American Institute of Certified Public Accountants’ Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”), FINOVA implemented fresh-start reporting upon emergence from chapter 11. This resulted in a material net reduction to the carrying amounts of the Company’s assets and liabilities to record them at their then current fair values. The new carrying amounts were dependent upon the use of estimates and many other factors and valuation methods, including estimating the present value of future cash flows discounted at appropriate risk adjusted market rates, traded market prices and other applicable ratios and valuation techniques believed by the Company to be appropriate.

The fresh-start adjustments to revenue accruing loans and financing leases accrete into interest income utilizing the effective interest method over the life of the transactions. If transactions are classified as nonaccruing, the Company’s policy is to suspend income accretion.

The fresh-start adjustment to the Senior Notes partially amortizes to interest expense over the term of the notes utilizing the effective interest method. The effective rate (10.8%) represents the implicit rate derived from the estimated fair value and the Company’s estimate of anticipated future cash flows to the debt holders at the time of emergence. The amortization at 10.8% will increase the recorded amount of the debt to the principal amount expected to be repaid at the time of emergence (approximately $2.8 billion). In the event that any Senior Notes are repurchased and extinguished, the unamortized fresh-start adjustment related to those notes is written off and reflected as part of the gain or loss recognized from extinguishment of the debt.

Impaired Loans. In accordance with SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” (“SFAS No. 114”), a loan becomes impaired when it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms. Impairment reserves are recorded when the current carrying amount of a loan exceeds the greater of (a) its net present value, determined by discounting expected cash flows from the borrower at the original contractual interest rate of the transaction or (b) net fair value of collateral. The risk adjusted interest rates utilized in fresh-start reporting are now considered to be the contractual rates

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for purposes of calculating net present value of cash flows in the determination of fair values and impairment. Accruing impaired loans are paying in accordance with a current modified loan agreement or are believed to have adequate collateral protection. The process of measuring impairment requires judgment and estimation, and actual outcomes may differ from the estimated amounts.

Impairment of Owned Assets. In accordance with SFAS No. 144, an owned asset is considered impaired if undiscounted future cash flows expected to be generated by the asset are less than the carrying amount of the asset. SFAS No. 144 provides several acceptable methods for measuring the amount of the impairment. FINOVA’s typical practice is to compare the carrying amount of the asset to the present value of the estimated future cash flows, using risk adjusted discount rates determined by the Company to be appropriate. The process of measuring impairment requires judgment and estimation, and actual outcomes may differ from the estimated amounts.

Investments. The Company’s investments include debt and equity securities and partnership interests. At acquisition, marketable debt and equity securities are designated as either (a) held to maturity, which are carried at amortized cost adjusted for other than temporary impairment, if any, (b) trading, which are carried at estimated fair value, with unrealized gains and losses reflected in results of operations or (c) available for sale, which are carried at estimated fair value using the specific identification method, with unrealized gains and losses reflected as a separate component of stockholders’ equity.

Partnerships are accounted for using either the cost or equity method depending on the Company’s level of ownership in the partnership. Under the equity method, the Company recognizes its share of income or loss of the partnership in the period in which it is earned or incurred. Under the cost method, the Company recognizes income based on distributions received.

The carrying values of equity securities and partnership interests are periodically reviewed for impairment, which, if identified, is recorded as a charge to operations. The impairment analysis for investments utilizes various valuation techniques involving the use of estimates and management judgment, and actual outcomes may differ from the estimates.

Net Assets of Discontinued Operations. Upon emergence from chapter 11, the Company reclassified its net assets of discontinued operations to assets held for sale. This decision reflected management’s intention to manage all assets of the Company as one operating unit. These assets were reclassified at their estimated net realizable values. The net assets of discontinued operations represented reasonable estimates of the net realizable values of those businesses. These estimates were based on market conditions, interest rates and other factors that could differ significantly from actual results for the remaining corporate finance assets.

Nonaccruing Assets. Accounts are generally classified as “nonaccruing” when the earlier of the following events occur: (a) the borrower becomes 90 days past due on the payment of principal or interest or (b) when, in the opinion of management, a full recovery of income and principal becomes doubtful. Due to a variety of factors, accounts may be classified as nonaccruing even though the borrower is current on principal and interest payments. In certain instances, accounts may be returned to accruing status if sustained contractual performance is demonstrated. Changes in borrower performance assumptions or estimates could result in a material change in nonaccruing account classification and income recognition.

Receivable Sales. In accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” when the Company sold receivables, it may have retained subordinated interests in the transferred receivables. These receivable transfers were accounted for as sales when legal and effective control of the transferred receivables were surrendered. Carrying amount of the financial assets involved was allocated between the receivables sold and the retained interests based on their relative fair value at the date of transfer and was used to determine gain or loss on sale. Active markets with quoted prices for retained interests generally do not exist, therefore, the Company estimates fair value based on the present value of future estimated cash flows and other key assumptions, such as net credit losses, prepayments and discount rates commensurate with the risks involved. In general, the servicing fees earned are approximately equal to the cost of servicing; therefore, no material servicing assets or liabilities have been recognized in those transactions.

FINOVA’s retained interests in transferred receivables are generally treated as investments available for sale, which are carried at estimated fair value using the specific identification method with unrealized gains and losses being recorded as a component of accumulated other comprehensive income within the equity section of the balance sheet; however, in accordance with the Emerging Issues Task Force (“EITF”) Issues No. 99-20 “Recognition of Interest Income and Impairment on Purchase and Retained Beneficial Interests in Securitized Financial Assets,” if a decline in value is considered other than temporary, the valuation adjustment is recorded through the statement of operations.

Reserve for Credit Losses. The reserve for credit losses is established for estimated credit impairment on individual assets and inherent credit losses in the Company’s loan and financing lease portfolios. This reserve is not established for other financial assets, as those

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asset classes are subject to other accounting rules. The provision for credit losses is the charge or credit to operations resulting from an increase or decrease to the reserve for credit losses to the level that management estimates to be adequate. Impairment reserves are created if the carrying amount of an asset exceeds the present value of its estimated recovery. Impairment reserves are measured by estimating the present value of expected future cash flows (discounted at contractual rates), market value or the fair value of collateral. Reserves on assets that are not impaired are based on assumptions regarding general and industry specific economic conditions, overall portfolio performance including loss experience, delinquencies and other inherent portfolio characteristics. Establishing reserves includes the use of significant estimates and assumptions regarding future customer performance, amount and timing of future cash flows and collateral value. Accounts are either written off or written down and charged to the reserve when the actual loss is determinable, after giving consideration to the customer’s financial condition and the value of the underlying collateral, including any guarantees. Recoveries of amounts previously written off as uncollectable increase the reserve for credit losses.

Residual Values. FINOVA has a significant investment in residual values in its leasing portfolio. These residual values represent estimates of the value of leased assets at the end of contract terms and are initially recorded based upon appraisals or estimates. Residual values are periodically reviewed for other than temporary impairment.

Revenue Recognition. For loans and other financing contracts, earned income is recognized over the life of the contract, using the effective interest method.

Leases that are financed by nonrecourse borrowings and meet certain other criteria are classified as leveraged leases. For leveraged leases, aggregate rental receivables are reduced by the related nonrecourse debt service obligation including interest (“net rental receivables”). The difference between (a) the net rental receivables and (b) the cost of the asset less estimated residual value at the end of the lease term is recorded as unearned income. Earned income is recognized over the life of the lease at a constant rate of return on the positive net investment, which includes the effects of deferred income taxes.

For operating leases, earned income is recognized on a straight-line basis over the lease term and depreciation is taken on a straight-line basis over the estimated useful lives of the leased assets.

Origination fees, net of direct origination costs, are deferred and amortized over the life of the originated asset as an adjustment to yield. As a result of FINOVA’s elimination of new business activities, no significant new origination fees are anticipated.

Original issue discounts are established when equity interests are received in connection with a funded loan and are based on the fair value of the equity interest. The assigned value is amortized to income over the term of the loan as an adjustment to yield. As a result of FINOVA’s elimination of new business activities, no significant new original issue discounts are anticipated.

Fees received in connection with loan commitments, extensions, waivers and restructurings are recognized as income over the term of the loan as an adjustment to yield. Fees on commitments that expire unused are recognized at expiration.

Income recognition is generally suspended for leases, loans and other financing contracts at the earlier of the date at which payments become 90 days past due, or when, in the opinion of management, a full recovery of income and principal becomes doubtful and the account is determined to be impaired. Income recognition is resumed only when the lease, loan or other financing contract becomes contractually current and performance resumption is demonstrated or when in the opinion of management, recovery of interest and principal becomes probable.

Troubled Debt Restructuring. In accordance with SFAS No. 15, “Accounting by Debtors and Creditors for Troubled Debt Restructurings” (“SFAS No. 15”), a restructuring of a debt constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. Virtually all of the Company’s restructurings of financing arrangements are considered to be troubled debt restructurings in accordance with SFAS No. 15.

General Accounting Policies

Cash Equivalents. FINOVA classifies short-term investments with original maturities of three months or less as cash equivalents. Cash and cash equivalents included short-term investments of $737.7 million and $520.4 million at December 31, 2003 and 2002, respectively.

Deferred Income Taxes. Deferred tax assets and liabilities are recorded for estimated future tax effects attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and

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liabilities are measured using enacted tax law. A valuation allowance is recorded if the Company expects that it is more likely than not that a deferred tax asset will not be realized.

Derivative Financial Instruments. The Company does not currently have material derivative financial instruments. Historically, the Company used derivative financial instruments as part of its interest rate risk management policy of match funding its assets and liabilities.

Earnings (Loss) Per Share. Basic earnings (loss) per share exclude the effects of dilution and are computed by dividing income (loss) available to common stockholders by the weighted average amount of common stock outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if options, convertible preferred securities or other contracts to issue stock were exercised or converted into common stock. Basic and diluted earnings (loss) per share are the same since the Company has no dilutive contracts or agreements outstanding.

Pursuant to the Plan, in August 2001, all rights under existing options, restricted stock, warrants and rights of conversion were deemed cancelled. No additional shares of FINOVA common stock may be issued pursuant to any restricted stock plans, arrangements or awards.

Goodwill. FINOVA does not currently have any goodwill recorded in its financial statements. Historically, FINOVA amortized the excess of cost over the fair value of net assets acquired (“goodwill”) on a straight-line basis primarily over 20 to 25 years. Amortization totaled $1.6 million for the eight months ended August 31, 2001. Upon emergence from chapter 11, the Company implemented fresh-start reporting, which resulted in the charge-off of the remaining goodwill balance of $43.4 million.

Foreign Currency. Foreign currency denominated financial statements are translated into U.S. dollars in accordance with the guidelines established in SFAS No. 52 “Foreign Currency Translation.” The current exchange rate is used to translate the assets and liabilities of the foreign companies. Revenues and expenses are translated at the average exchange rates during each reporting period. Any resulting translation adjustments are reported as a component of stockholders’ equity or through operations, if realized.

Furniture, Equipment and Leasehold Improvements. The Company’s general policy is to report furniture, equipment and office leasehold improvements at cost, less accumulated depreciation and amortization, computed on a straight-line method over the estimated useful lives of the assets. Assets are periodically reviewed for impairment, and adjustments, if any, are charged to current operations.

Segment Reporting. In connection with the Company’s reorganization and emergence from bankruptcy in 2001, formerly reported operating segments were combined into one operating unit. FINOVA is no longer soliciting new business and its assets are not managed by separate strategic business units. Many components of the segments have been sold, dissolved or combined with other business units and as a result, comparisons with prior periods are not meaningful. Management’s plan is to maximize the value of its assets through an orderly administration and collection of the portfolio. Accordingly, the performance of reportable business segments presented in the Predecessor Company’s financial statements is no longer meaningful to the operation of the Reorganized Company.

Compensation and Benefit Policies

Pension and Other Benefits. Trusteed, noncontributory pension plans cover substantially all FINOVA employees. Benefits are based primarily on final average salary and years of service. Funding policies provide that payments to pension trusts shall be at least equal to the minimum funding required by applicable regulations.

Other postretirement benefit costs were recorded during the period the employees provided service to FINOVA. Postretirement obligations were funded as benefits were paid. FINOVA terminated its postretirement benefit plan on December 31, 2003.

Post-employment benefits are any benefits other than retirement benefits. Generally, FINOVA records post-employment benefit costs if payment of the benefits is probable and the amount of the benefits can be reasonably estimated.

All employees are covered by severance arrangements with the Company. Prior to December 31, 2002, severance accruals were recorded when management had approved a formal plan of termination and communicated the plan to its employees. As of December 31, 2002, the Company implemented the provisions of SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”) and now recognizes any severance liability ratably over the employee’s remaining service period.

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Savings Plan. FINOVA maintains The FINOVA Group Inc. Savings Plan (the “Savings Plan”), a qualified 401(k) program. The Savings Plan is available to substantially all employees. The employee may elect voluntary wage deductions ranging from 0% to 30% of taxable compensation. The Company’s matching contributions are based on employee pre-tax salary deductions, up to a maximum of 100% of the first 6% of salary contributions.

Recently Issued Accounting Standards

In December 2003, the Financial Accounting Standards Board (“FASB”) revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” which became effective and was adopted by the Company during the fiscal year ending December 31, 2003. The statement requires the Company to provide additional disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans. The revised statement retains the disclosure requirements in the original Statement No. 132, and contains additional requirements about assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans.

In December 2003, FASB revised Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 addresses consolidation of variable interest entities, which are defined as entities whose equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company adopted the provisions of FIN 46, which had no significant impact to the Company, during the fiscal year ending December 31, 2003.

Virtually all of FINOVA’s impaired loans to entities with marginal or negative equity were the result of operating losses which were not envisioned at the time of the original design and structure of the loans (i.e., actual losses incurred subsequent to the origination of each of the loans have exceeded expected losses at the time of loan origination). FINOVA has restructured debt in accordance with the provisions of SFAS No. 15, which are accounted for in accordance with that statement and are not subject to the provisions of FIN 46.

FINOVA has from time to time for economic or legal reasons related to its borrowers’ financial difficulties granted concessions to borrowers that it would not otherwise consider. Those concessions either stemmed from an agreement between FINOVA and its borrowers or were imposed by law or a court. For example, FINOVA has restructured the terms of debt to alleviate the burden of the borrowers’ near-term cash requirements, and many troubled debt restructurings involved modifying terms to reduce or defer cash payments required of the borrowers in the near future to help the borrowers’ attempts to improve their financial condition and eventually be able to pay FINOVA. In other instances, FINOVA has accepted cash, other assets, or an equity interest in the borrowers in satisfaction of the debt though the value received was less than the amount of the debt because FINOVA concluded that step would maximize recovery of its investment.

Additionally, FINOVA holds variable interests in two qualifying special-purpose entities in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS No. 140”). In accordance with FIN 46, these variable interests are excluded from consolidation as long as the Company continues to meet the qualifying special-purpose entity conditions of SFAS No. 140, which it currently does. See Note E “Receivable Sales” for a further discussion of FINOVA’s retained subordinated interests in transferred receivables including FINOVA’s rights and obligations.

Total financial assets represents the Company’s portfolio of investment activities, primarily consisting of secured financing to commercial and real estate enterprises principally under financing contracts (such as loans and other financing contracts, direct financing leases and leveraged leases). In addition to its financing contracts, the Company has other financial assets including assets held for sale, owned assets (such as operating leases and assets held for the production of income) and investments (debt and equity securities and partnership interests). The following discussion provides a breakdown of the Company’s investment activities. As of December 31, 2003 and 2002, the carrying amount of total financial assets (before reserve for credit losses) was $1.8 billion and $3.7 billion, respectively.

In December 2003, FINOVA received $276 million in final settlement of substantially all amounts owed from the Company’s largest borrower, a timeshare resort company. The cash settlement resulted in a $91.1 million recovery in excess of FINOVA’s carrying amount.

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In March 2003, the Company completed the sale of rediscount assets with a carrying amount of $188.8 million for $175.4 million of net cash proceeds and a $17.8 million participation in a performing loan, resulting in a net gain of $4.4 million.

In April 2002, the Company completed the sale of approximately $485 million of its franchise assets for approximately $490 million. This sale included substantially all of FINOVA’s performing franchise assets. In August 2002, the Company sold an additional $67 million of franchise assets (primarily impaired assets) at their carrying amount (net of reserves).

During 2001, in conjunction with fresh-start reporting, the Company recorded a $709.7 million charge to the carrying amounts of its total financial assets to record them at their reorganization value. Reorganization value was primarily determined based upon the present value of estimated future cash flows, discounted at appropriate risk adjusted market rates for similar loans and leases and other assets. Allocation of the adjustment to individual assets was determined in a manner similar to the accounting provisions applied for business combinations under purchase accounting. The charge was comprised of a $365.4 million adjustment to financing assets that was to accrete into interest income over the life of the transactions, assuming the accrual of income continued, and a $344.3 million permanent write down to other financial assets (such as operating leases, investments and assets held for sale and the production of income). At December 31, 2003 and 2002, the unamortized amount of fresh-start adjustments was $130.6 million and $214.8 million, respectively, of which the Company suspended the accretion of $76.9 million and $139.7 million, respectively, due to the underlying assets being classified as nonaccruing.

Diversification of Credit Risk

The following table presents the composition of FINOVA’s total financial assets (before reserve for credit losses) at December 31:

As indicated in the table above, since FINOVA’s total financial assets are concentrated in several specialized industries, the Company is subject to both general economic risk and the additional risk of economic downturns within individual sectors of the economy. Additionally, the Company has completed multiple financial transactions with individual borrowers and their affiliates, resulting in a greater total exposure to those borrowers beyond the typical transaction size and increased concentration risk to economic events affecting the industries (including resort and transportation) of such borrowers and their affiliates. At December 31, 2003, the carrying value of the Company’s top 10 aggregate exposures to borrowers and their affiliates totaled approximately $510.0 million and represented 28.2% of total financial assets (before reserves), as compared to the top 10 exposures at December 31, 2002 of $911.3 million, which represented 24.7% of total financial assets (before reserves). The top 10 exposures for 2003 and 2002 were primarily related to the resort portfolio.

At December 31, 2003 and 2002, the Company’s transportation portfolio consisted of the following aircraft:

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The aircraft presented in the tables represent owned assets and collateral supporting financing arrangements. The Company continues to monitor all aircraft due to the significant level of defaults and returned aircraft.

At December 31, 2003, 66 aircraft with a carrying value of $240.8 million were operated by U.S. domiciled carriers and 69 aircraft with a carrying value of $167.0 million were operated by foreign carriers. Additionally, 62 aircraft with a carrying value of $25.6 million were off-lease, classified as assets held for the production of income and parked at various storage facilities in the United States and Europe, including 10 aircraft which are currently being dismantled to be sold in the used parts market.

Some of the off-lease aircraft are periodically placed in rental agreements with payments based on aircraft usage, commonly known as power-by-the-hour agreements. Often under these agreements there are no minimum rents due, and future cash flows are difficult to project. During 2003, the Company reassessed the likelihood of off-lease assets being re-leased and began dismantling certain aircraft for sale in the used parts market, rather than continue to incur significant storage, maintenance and costs to potentially return to service. The Company completed the dismantling of five aircraft in addition to the 10 referred to above that are currently in process. The Company anticipates additional aircraft being dismantled as it reassesses its portfolio, relative to demand within the aircraft industry and the used parts market.

At December 31, 2002, 82 aircraft with a carrying value of $409.2 million were operated by U.S. domiciled carriers and 80 aircraft with a carrying value of $233.8 million were operated by foreign carriers. Additionally, 69 aircraft with a carrying value of $48.8 million were off-lease, classified as held for the production of income and were parked at various storage facilities in the United States and Europe.

The Company’s transportation portfolio also includes domestic railroad and other transportation equipment. The carrying value of this equipment was $15.4 million and $24.3 million at December 31, 2003 and 2002, respectively.

In addition to the concentrated exposures within the transportation portfolio, the Company has certain geographic concentrations within its resort portfolio. At December 31, 2003 and 2002, the carrying amount of the resort portfolio by state was as follows:

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Changes in geographic concentrations during 2003 were due to the amount of fundings (under existing customer commitments) and portfolio runoff within individual states as compared to the net runoff for the total portfolio. Runoff included $276 million received in final settlement of substantially all amounts owed to the Company from its largest borrower (carrying amount of $184.9 million), a timeshare resort development company whose developments were highly concentrated within Arizona, Hawaii and California.

Financing Assets

Loans and other financing contracts, excluding certain loans classified as held for sale at December 31, consisted of the following:

FINOVA has a substantial number of loans with payments that fluctuate with changes in interest rates, primarily prime interest rates and the London interbank offer rates (“LIBOR”). The total carrying amount of loans (including loans classified as held for sale) with floating interest rates was $807.4 million and $2.0 billion at December 31, 2003 and 2002, respectively.

Interest earned from financial transactions, excluding the recognition of previously suspended income and fresh-start accretion, with floating interest rates was approximately $64.8 million, $110.9 million, $80.9 million and $293.3 million for the years ended December 31, 2003 and 2002, the four months ended December 31, 2001 and the eight months ended August 31, 2001, respectively. Adjustments resulting from changes in interest rates can have an effect on interest earned from financing assets (including loans classified as held for sale).

Accrued interest increased to $98.9 million at December 31, 2003 from $82.5 million at December 31, 2002, despite a significant decline in receivables. The increase in accrued interest is primarily due to the proportionate level of delinquencies in the portfolio increasing over the prior year as well as a significant increase to the average age of delinquencies, partially offset by payoffs of outstanding interest accruals. As the portfolio shrinks, nonaccruing accounts become a higher percentage of outstanding loans and many of these delinquent accounts have not been paying for some time, resulting in an increasing concentration of accrued interest within these accounts. The accrued interest is offset by a corresponding increase of suspended income, resulting in no net impact to the carrying amount of loans, but an increase in the delinquency aging.

At December 31, 2003, FINOVA had unfunded customer commitments of approximately $73.8 million compared to $568.3 million at December 31, 2002. The decline was primarily due to the elimination of outstanding commitments associated with asset sales during 2003 and the termination and/or expiration of outstanding committed lines of credit. A significant portion of the decline was due to the final settlement of all amounts owed to the Company from its largest borrower, a timeshare resort development company. Because of the primarily revolving nature of its commitments, the Company is unable to estimate with certainty what portion of the commitments will be funded. Historically, in the aggregate, actual fundings have been significantly below commitment amounts. Funding is typically dependent upon certain conditions precedent and the availability of eligible collateral. In the event of a contractual customer default, FINOVA typically has the legal right to cease funding. In these circumstances, decisions to continue or cease funding are made on a case-by-case basis following an evaluation as to what management believes is in the Company’s best interest. Commitments generally have a fixed expiration and at the Company’s discretion, may be extended. The majority of these commitments expire in 2004. The Company may seek appropriate fees, equity and other consideration if circumstances warrant doing so in exchange for extensions, modifications and waivers.

Direct financing leases at December 31, consisted of the following: