UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

Annual Report pursuant to Section 13 of the

Securities Exchange Act of 1934

For the fiscal year ended December 31, 2008

Commission file number 1-11011

THE FINOVA GROUP INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

86-0695381

(State or other jurisdiction

of incorporation)

(I.R.S. employer

identification no.)

8320 North Hayden Road, Suite C112

Scottsdale, AZ

85258

(Address of principal executive offices)

(Zip code)

Registrant’s Telephone Number, Including Area Code: 480-624-4988

Securities registered pursuant to Section 12(b) of the Act: None

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

Title of Class:

Common Stock, $0.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

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 Registration 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 of this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Aggregate market value of Common Stock, held by nonaffiliates of the registrant as of June 30, 2008 (based on its closing price per share on that date of $0.025) was approximately $1.5 million. On March 24, 2009, the registrant had approximately 122,041,000 shares of Common Stock ($0.01 par value) outstanding.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨

DOCUMENTS INCORPORATED BY REFERENCE:

None.

TABLE OF CONTENTS

NAME OF ITEM


	PART I

Item 1.	Business.	1
Item 1A.	Risk Factors.	3
Item 2.	Properties.	5
Item 3.	Legal Proceedings.	5
Item 4.	Submission of Matters to a Vote of Security Holders.	7

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	7
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	8
Item 8.	Financial Statements and Supplemental Data.	8
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	8
Item 9A.	Controls and Procedures.	8
Item 9B.	Other Information.	9

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance.	9
Item 11.	Executive Compensation.	11
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	14
Item 13.	Certain Relationships and Related Transactions and Director Independence.	15
Item 14.	Principal Accountant Fees and Services.	16

	PART IV

Item 15.	Exhibits and Financial Statement Schedules.	17
Signatures		20

PART I

Item 1.

Business.

General

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 was a financial services holding company. Through its principal operating subsidiary, FINOVA Capital, the Company provided a broad range of financing and capital markets products, primarily to mid-size businesses. Throughout this document, “we,” “us” and “our” also refer to The FINOVA Group Inc. and its subsidiaries. FINOVA is a Delaware corporation incorporated in 1991. Our principal executive office is located at 8320 North Hayden Road, Suite C112, Scottsdale, Arizona 85258, telephone (480) 624-4988.

Since emergence from chapter 11 bankruptcy proceedings in August 2001, our business activities have been limited to maximizing the value of our portfolio through the orderly collection of assets. These activities included collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral. We have substantially completed the liquidation of our portfolio and our focus has shifted to the continued wind down of our operations and future dissolution of our entities. We are prohibited by the Indenture (the “Indenture”) governing our 7.5% Senior Secured Notes (the “Senior Notes”) from engaging in any new lending activities or other business. Any funds generated in excess of cash reserves permitted by our debt agreements have been used to reduce obligations to our creditors.

As of December 31, 2008, we remain obligated to repay $1.4 billion of principal on the Senior Notes. Although we have repaid a total of $1.54 billion or approximately 52% of the principal as of the date of this report, we do not have sufficient assets to fully repay the Senior Notes at maturity in November 2009.

In accordance with the terms of the Indenture, we are required to use any excess cash, as defined in the Indenture, to make semi-annual interest and principal payments on the Senior Notes. Additionally, the Indenture permits voluntary prepayments at our option, which we have previously elected to make from time to time; however, due to the uncertainty of cash requirements associated with the wind-up of our affairs and matters related to the TLP Action, discussed in Item 3. “Legal Proceedings,” we anticipate maintaining cash reserves to cover these potential and uncertain expenditures, which is likely to limit our ability to make future voluntary prepayments and our next interest payment, which is scheduled for May 15, 2009. Failure to make the May 15, 2009 interest payment would not be an event of default under the Indenture, which requires the Company to fail to pay two consecutive interest payments before an event of default would occur.

On November 1, 2006, our Board of Directors (the “Board”) approved the Plan of Complete Liquidation and Dissolution (the “Plan of Liquidation”) and the filing of a motion (the “Motion”) with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On December 4, 2006, the Bankruptcy Court granted our Motion and approved (i) the previously announced settlement of various litigations associated with The Thaxton Group, Inc. (the “Thaxton Settlement”), (ii) the ongoing sale of our remaining assets, the orderly windup of our operations and our future dissolution, (iii) our sale of all or substantially all of our assets without stockholder approval and our future dissolution without stockholder approval at such time as our Board deems to be appropriate and (iv) channeling to the Bankruptcy Court any claims against us that the holders of our Senior Notes or the indenture trustee for the Senior Notes may have arising from or in any way related to our joint chapter 11 plan, the ongoing liquidation of FINOVA, the senior secured notes, or the windup of our operations.

As a result of the aforementioned approvals, we took steps to initiate our complete liquidation and as such, the information provided in this Annual Report on Form 10-K reflects our adoption of the liquidation basis of accounting effective the close of business on December 4, 2006 in accordance with accounting principles generally accepted in the United States. Under the liquidation basis of accounting, we are required to value all assets at their estimated net realizable value, which is the non-discounted amount of cash, or its equivalent, into which an asset is expected to be converted in the due course of business less direct costs, while liabilities are reported at their estimated settlement amount, which is the non-discounted amounts of cash, or its equivalent, expected to be paid to liquidate an obligation in the due course of business, including direct costs. Additionally, under the liquidation basis of accounting, we are required to establish a reserve for all future estimated general and administrative expenses and other costs expected to be incurred during the liquidation (exclusive of interest expense). These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the timing or amount of future distributions or our actual dissolution.

We have continued with efforts to wind-up our affairs; however, as previously noted we cannot control the timing of resolving legal matters. Certain legal matters continue to take longer than anticipated to resolve, including the Thaxton Life Partners arbitration hearing, which has been postponed until the second quarter of 2009, and the motion regarding distributions to stockholders described below. Once the legal matters have been resolved, FINOVA believes it will still need a short period of time to complete the final wind-up of our affairs. As a result, the reserve for estimated costs reflected in our Statement of Net Assets in Liquidation currently assumes a liquidation period through August of 2009. There can be no assurance we will complete our liquidation in this time period, and the resolution of the various legal matters may extend for a longer period of time. We are concerned about the continued delays in the legal process, particularly in regards to the motion regarding distributions to stockholders and how such delays continue to deplete assets available to settle our liabilities. We have evaluated and continue to consider alternatives to complete the wind-up process, including transferring to a liquidating trust any assets not sold or distributed (subject to outstanding liabilities), depending on the progress of the outstanding legal matters. We will continue to evaluate our progress in resolving the outstanding legal matters on at least a quarterly basis and re-evaluate our reserve for estimated costs. Refer below to Item 3. “Legal Proceedings” for the status of our outstanding legal matters.

We continue to operate as a public company during the liquidation under a Management Services Agreement with Leucadia National Corporation (“Leucadia”) 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).

High Investment Risk

As previously stated, we will not be able to fully repay the Senior Notes or to make any distributions to our stockholders absent a court order in connection with the litigation disclosed in Item 3. “Legal Proceedings – Motion Regarding Distribution to Stockholders.” Consequently, investing in the Senior Notes and common stock involves a high level of risk. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation for a further discussion of the Senior Notes and restrictions on distributions to stockholders.

Because substantially all of our assets (including cash reserves) are pledged to secure obligations under the Intercompany Notes (as defined in Management’s Discussion and Analysis of Financial Condition and Results of Operations) securing the Senior Notes, our ability to obtain additional or alternate financing is severely restricted. As a result of this and the substantial liquidation of our portfolio, our only meaningful source of liquidity is cash reserves held by the Company.

Employees

At December 31, 2008 and 2007, we had four employees. These four remaining employees are scheduled to remain through the completion of the liquidation process. The Company believes that our staffing levels are adequate to provide us with appropriate oversight of the smaller operation, while maintaining adequate resources to deal with outstanding legal matters and the future dissolution of our entities.

Employees were previously covered by a severance program, which was approved by our Board of Directors. We have also developed an annual performance-based incentive program for employees. To maintain the stability of our workforce throughout the liquidation, our Board of Directors previously approved the establishment of two grantor trusts to secure obligations under the severance and bonus programs. The severance plan and trust agreements were terminated effective December 31, 2007 and the remaining eligible employees were paid their scheduled severance benefits in early 2008, while they remained actively employed. Upon discharge of the remaining severance obligations to employees in 2008, the remaining assets in the trusts of $2.8 million were distributed to the Company. Employees remain eligible to receive future performance bonuses, which will be paid from the Company’s cash reserves.

Investor Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, we file periodic reports and other information with the Securities and Exchange Commission (the “SEC”). Those reports and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, information statements and other information regarding issuers that file electronically.

You can access financial and other information on our website. The address is www.finova.com. We also make available on our website, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act within two business days after filing that material with the SEC.

We have a Code of Conduct applicable to all of our employees, including our Chairman, President, Chief Executive Officer and Chief Financial Officer. A copy of the Code of Conduct is available on our website. We intend to post any amendments to, or waivers from, the Code of Conduct applicable to the senior officers listed above.

Item 1A.

Risk Factors

An investment in our Senior Notes and common stock involves a high degree of risk. The risks can generally be divided into three categories: risks relating to our Plan of Liquidation; risks relating to our assets and liabilities; and risks relating to our organization and structure. The risks, uncertainties and other factors that could cause our net assets in liquidation and cash flows to differ materially from those suggested by this filing or which may materially and adversely affect our performance and the timing and amount repaid to the Senior Note holders include, but are not limited to, those discussed below or identified elsewhere in this Report or from time to time in our public filings.

Risks related to our Plan of Liquidation

We cannot assure the Senior Note holders of the timing or amount of their liquidating distributions. If note holders believe that we will be unable to complete our Plan of Liquidation in a timely manner or if liquidating distributions do not meet current estimates, the market price of our notes may decline.

As a result of the adoption of the Plan of Liquidation, our basis of accounting has changed from the going-concern basis to that of the liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable value and liabilities are stated at their estimated settlement amount. These estimates will be periodically reviewed and adjusted as appropriate. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances of the net realizable value of our assets and the costs associated with carrying out the Plan of Liquidation based on certain assumptions. The actual values and costs associated with carrying out the Plan of Liquidation are expected to differ from the amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the Plan of Liquidation. Accordingly, it is not possible to predict with certainty the aggregate amount which will ultimately be distributed to note holders and no assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying Statement of Net Assets in Liquidation or the price at which the Senior Notes have traded or are expected to trade in the future.

A number of other factors including (i) unknown liabilities or claims, (ii) greater or less than expected expenses, and (iii) greater or less than anticipated net proceeds from asset sales could result in the distributions to the Senior Note holders being more or less than anticipated or delayed.

As a result of the adoption of a Plan of Liquidation, potential purchasers of our assets may try to take advantage of our liquidation process and offer less-than-optimal prices for our assets. We cannot predict how these factors and changes in the national economy or other factors may affect the prices that we can obtain from sales of our remaining assets or the timing of such sales.

It has become more difficult to offset the costs of collecting the remaining assets. Since we have substantially liquidated our portfolio, it has become more difficult to offset the costs associated with collecting the remaining assets and being a public company. Additionally, we incur the risks of potential liabilities that are associated with dispositions of assets, in the form of indemnifications, representations and warranties.

Our Board may abandon the Plan of Liquidation without further action by our stockholders or the Bankruptcy Court. Furthermore, our Board may modify the Plan of Liquidation as necessary, but any material amendment may require further approval of the Bankruptcy Court or stockholders. Thus, we may decide to conduct the liquidation differently than as described, to the extent we are permitted to do so by Delaware law.

At any time, we may transfer to a liquidating trust any assets not sold or distributed, subject to outstanding liabilities. If a liquidating trust is established, we would distribute interests in the liquidating trust to the then holders of Senior Notes pro rata to their interests in the Senior Notes. If the litigation concerning the right of equity holders to receive distributions is still pending or if it has been resolved in favor of a distribution to equity holders, the equity holders would also receive interests in the liquidating trust. However, any interest in the liquidating trust held by equity holders would be limited to the amount of the litigation claims. Such distributions could have tax ramifications to security holders and could affect the ultimate recovery received by the Company’s security holders.

Historically, extraordinary corporate actions, such as a plan of liquidation, often lead to securities lawsuits being filed against a company. We are currently not aware of any pending securities lawsuits relating to our Plan of Liquidation; however, in the event such litigation should occur, it is likely to be expensive and, even if we ultimately prevail, the process will be time consuming and will divert management’s attention from implementing the Plan of Liquidation and otherwise operating our business. If we do not prevail in any such lawsuit, we may be liable for damages, the validity of our approval of the Plan of Liquidation may be challenged, or we may be unable to complete some transactions that we contemplated as part of the Plan of Liquidation. We cannot predict the outcome or the amount of expenses and damages, but the amounts could have a material adverse effect on our business, net assets in liquidation, cash flows and the timing and amount of liquidating distributions to Senior Note holders.

Risks related to our Assets and Liabilities

Our ability to sell the remaining assets is impacted by limitations of buyers. Risks associated with the sale of our assets, which if they materialize, could have a material adverse effect on our business, net assets in liquidation and cash flows include:

•

Lack of demand by prospective buyers;

•

Inability to find qualified buyers;

•

Inability of buyers to obtain satisfactory financing; and

•

Lower than anticipated sale prices;

We rely on information from third parties, which may not be accurate. Third party information is supplied by our borrowers, trustees or prepared by appraisers. Inaccuracies in that information could lead to inaccuracies in our estimates, including asset valuations and cash flow projections.

Current and future legal and administrative claims and proceedings against us may result in increased costs and diversion of management’s attention. We are party either as plaintiff or defendant to various actions, proceedings and pending claims, including legal actions, some of which involve claims for compensatory, punitive or other damages in significant amounts. Litigation often results from our attempts to enforce our lending agreements against borrowers and other parties to those transactions. Litigation is subject to many uncertainties. It is possible that some of the legal actions, proceedings or claims could be decided against us. Legal matters decided against us could have a material adverse impact on our net assets in liquidation or cash flows. Additionally, we cannot control the timing of resolving legal matters. An increase in the anticipated time to resolve certain of the legal matters could adversely affect our estimated costs of completing the liquidation. See Item 3. “Legal Proceedings,” for a discussion of specific claims outstanding against us.

We have current and future obligations to creditors. Claims, liabilities and expenses from operations (such as operating costs, salaries, bonuses, management fees, directors’ and officers’ insurance, payroll and local taxes, legal professional services, accounting and consulting fees and miscellaneous office expenses) will continue to be incurred through the liquidation process. As part of this process, we will attempt to satisfy any obligations with creditors. These expenses will reduce the amount of assets available for ultimate distribution to Senior Note holders. To the extent our liabilities exceed the estimates that we have made, the amount of liquidating distributions to Senior Note holders will be reduced.

Cash reserve estimations are subject to known and unknown risks, uncertainties, and other factors that could materially impact our ability to meet obligations as they come due. The terms of the Indenture governing the Senior Notes prohibit us from using available funds (after certain permitted uses) for any purpose other than to satisfy our obligations to creditors and to make limited payments to stockholders in certain circumstances. Under the terms of the Indenture, we are permitted to establish a cash reserve in an amount not to exceed certain defined criteria. Due to our limited sources of liquidity, the estimation of cash reserves is critical to our overall liquidity. Failure to adequately estimate a cash reserve in one period could result in insufficient liquidity to meet obligations in that period, or in a subsequent period, if actual cash requirements exceed the cash reserve estimates. Due to the substantial liquidation of our portfolio, our incoming cash flows have significantly diminished and the estimation of cash reserves has become increasingly more critical to ensure we retain funds to meet obligations as they become due during the liquidation process.

Cash investments are subject to credit exposure and interest rate fluctuations, which could result in the increase or decrease in the value of the investments. Our cash reserves are invested in short-term instruments, including money markets, U.S. Treasuries and certificates of deposit. Although our investment policy is designed to provide for short-term liquidity and low levels of risk, such investments are subject to credit exposure and interest rate fluctuations. Consequently, the value of investments could increase or decrease accordingly. Any decrease would reduce the amount available for distribution to Senior Note holders.

Risks related to our Organization and Structure

We may not be able to retain our employees. We now employ only four employees, each of whom is important to the continued liquidation of our remaining assets, settlement of liabilities and claims and the future dissolution of our entities. Our failure to retain these employees could result in a less efficient and more expensive liquidation process. Retention incentives intended to retain those employees may not be successful in the future. In addition, as staff is reduced, internal controls and procedures must be readjusted to help assure proper handling and reporting of financial and other matters. Doing so becomes more difficult as our staff is reduced, and the loss of personnel could have a significant impact on our ability to maximize value from our remaining assets and minimize the settlement of claims.

It is unlikely we will be able to utilize our tax attributes. We have not recorded a benefit in our financial statements for existing tax attributes and estimated future tax deductions since we do not expect to generate the future taxable income needed to use those tax benefits. We do not anticipate being able to use those tax attributes, including most of our net operating loss carryforwards. Upon final dissolution of our entities, existing tax attributes and future tax deductions will be extinguished.

We intend to continue to conduct our operations in a manner that will exempt us from the registration requirements of the Investment Company Act of 1940 (the “1940 Act”). We believe that we are not within or will not be within the definition of “investment company” as that term is defined under the 1940 Act, or alternatively, we may rely on one or more of the 1940 Act’s exemptions. If we were deemed to be an investment company because of our investment securities holdings, we must register as an investment company under the 1940 Act. The 1940 Act places significant restrictions on the capital structure and corporate governance of a registered investment company. Compliance with the 1940 Act could also increase our operating costs. Such changes could have a material adverse effect on our business and the timing and amount of liquidating distributions to Senior Note holders.

Item 2.

Properties.

Our principal executive office is located at 8320 North Hayden Road, Suite C112, Scottsdale, Arizona 85258, telephone (480) 624-4988.

As a result of the continued liquidation and sale of assets, we consolidated operations and reduced staff, resulting in the need for less office space. In early 2007, we closed all corporate offices and moved the remaining residual staff to our current location, noted above. This executive office is on a short-term lease and has no termination costs associated with our ultimate departure. The office closures were completed in conjunction with the expiration of their lease terms and as a result, we incurred no termination costs.

Item 3.

Legal Proceedings.

We are party either as plaintiff or defendant to various actions, proceedings and pending claims, including legal actions, some of which involve claims for compensatory, punitive or other damages in significant amounts. Litigation often results from our attempts to enforce our lending agreements against borrowers and other parties to those transactions. Litigation is subject to many uncertainties. It is possible that some of the legal actions, proceedings or claims could be decided against us. Other than the matters described below, we believe that any resulting liability from our legal proceedings should not materially affect our net assets in liquidation or cash flows. The following matters could have a material adverse impact on our net assets in liquidation or cash flows.

Historically, it was our policy to accrue for loss contingencies, including litigation, only when the losses were probable and estimable. The determination of when losses became probable and estimable was inherently subjective and required significant judgment. Under the liquidation basis of accounting, liabilities for loss contingencies and claims are reported at their estimated settlement amount, which is the non-discounted amount of cash expected to be paid to liquidate or settle an obligation in the due course of business.

If any legal proceedings were to result in a significant adverse judgment against us, it is possible that we would not be able to satisfy that liability due to our financial condition. As previously noted, due to our financial condition, we do not expect that we can satisfy all of our secured debt obligations at maturity.

Thaxton Life Partners Litigation

As previously disclosed, on September 29, 2006, a group of noteholders of Thaxton Life Partners, Inc. (“TLP”) filed suit against the Company and FINOVA Capital (the “TLP Action”). The TLP Action is unrelated to the previously disclosed Thaxton Group Inc. litigation that was settled in 2007. The TLP Action purports to be a class action filed on behalf of approximately 150 TLP note holders with claims related to approximately $20 million in TLP notes. The TLP Action alleges that, in connection with TLP’s sale of its notes, the Company, FINOVA Capital, and several other defendants participated in a civil conspiracy, violated the South Carolina Unfair Trade Practices Act, violated the civil RICO statute, and were unjustly enriched. In its various counts, the TLP Action seeks actual, treble, and/or punitive damages.

The TLP Action was filed in the South Carolina Court of Common Pleas of Lancaster County, Sixth Judicial Circuit, and was removed on February 6, 2007 to the United States District Court for the District of South Carolina (the “South Carolina District Court”). We believe that all claims against both us and FINOVA Capital are without merit, and that, under the terms of the TLP notes, the TLP Action must move forward in arbitration. Upon motion by the Company and FINOVA Capital to the South Carolina District Court seeking an order compelling such arbitration, the South Carolina District Court granted the relief sought and entered an order dismissing the action on May 30, 2007. On June 19, 2007, the TLP plaintiffs appealed such order to the United States Court of Appeals for the Fourth Circuit (the “Fourth Circuit”). Further, on June 29, 2007, the TLP plaintiffs filed an arbitration demand with the American Arbitration Association. On August 16, 2007, the Company and FINOVA Capital filed a response to the arbitration demand denying any liability. On December 20, 2007, the TLP plaintiffs’ appeal was denied by the Fourth Circuit. On January 23, 2008, a petition for rehearing by the TLP plaintiffs was denied by the Fourth Circuit. The Company and FINOVA Capital intend to vigorously defend against the TLP note holders’ claims asserted against the Company and FINOVA Capital in the pending arbitration.

A hearing on the merits of the TLP Action was originally scheduled to be heard in September 2008, but was rescheduled for mid-January 2009 due to one of the members of the arbitration panel having a scheduling conflict. The mid-January 2009 hearing was postponed due to the death of one of the three arbitrators scheduled to hear the matter. The parties have agreed upon a new third arbitrator and a hearing on the merits of the TLP Action is expected to be heard in the second quarter of 2009.

Motion Regarding Distributions to Stockholders

As discussed more fully in the Notes to Consolidated Financial Statements, Note E. “Debt”, the Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders may receive a distribution equal to 5.263% of each principal prepayment. However, the Indenture prohibits distribution of those amounts due to our financial condition. Those amounts have been held in a restricted account, and totaled $81.2 million as of December 31, 2008. Because we will not be able to repay the Senior Notes in full, on April 1, 2005, we filed a motion in the Bankruptcy Court seeking an order (1) to cease directing funds into the restricted account and (2) to allow us to use those funds for general corporate purposes.

On June 26, 2007, the Bankruptcy Court issued a final order (the “Final Clarification Order”) finding, among other things, that FINOVA is presently and will be forever insolvent, and lifted the requirement that FINOVA segregate the funds into a restricted account enabling FINOVA to use these funds for general corporate purposes. The equity committee subsequently filed an appeal (on July 6, 2007) of the Final Clarification Order to the United States District Court for the District of Delaware (the “Delaware District Court”) and a motion with the Delaware District Court requesting a stay (on August 31, 2007) pending final resolution of any appeal, which was granted by the Delaware District Court.

Through December 31, 2007, we had been required to pay fees and expenses incurred by the equity committee’s professionals up to an aggregate limit of $388,000. In early 2008, the equity committee sought a further increase in the aggregate limit placed on the amount of fees and expenses. A hearing was held on this matter on January 10, 2008 and the Bankruptcy Court ordered that the aggregate limit placed on the amount of fees and expenses that the equity committee and its professionals were authorized to incur in objecting to, and addressing the issues raised in connection with, the clarification motion be increased to $473,751. The increase granted by the Bankruptcy Court represented one-half of the equity committee’s requested amount. The Bankruptcy Court also ordered that the equity committee shall not submit any further motions or requests for fees and expenses unless they prevailed in the pending appeal of the Final Clarification Order.

On August 26, 2008, the Delaware District Court issued a memorandum opinion and order (the “August Order”) affirming all six of the Bankruptcy Court’s orders and denied the equity committee’s motion to strike the Company’s cross-appeal. The ruling by the Delaware District Court upheld the Bankruptcy Court’s Final Clarification Order and lifted the requirement that FINOVA segregate funds into a restricted account, thereby enabling FINOVA to use those funds for general corporate purposes. The ruling by the Delaware District Court also upheld the Bankruptcy Court’s orders regarding the formation of the equity committee and the multiple fee cap orders, which, as previously disclosed, were being contested by FINOVA.

The equity committee subsequently filed a motion requesting a stay of the distribution of funds held in the restricted account pending appeal of the Delaware District Court’s August Order. On September 22, 2008, the Delaware District Court denied the equity committee’s motion to stay the Delaware District Court’s August Order.

On September 23, 2008, the equity committee filed a notice of appeal to the United States Court of Appeals for the Third Circuit (the “Third Circuit”) with respect to those portions of the August Order that upheld the lifting of the requirement that FINOVA segregate funds into a restricted account. On October 10, 2008, the equity committee filed a motion with the Third Circuit requesting a stay in the distribution of funds held in the restricted account pending the equity committee’s appeal to the Third Circuit. On November 4, 2008, the Third Circuit granted the equity committee’s motion for a stay pending appeal.

Item 4.

Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth quarter of 2008.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock trades over-the-counter (“OTC”) under the symbol “FNVG.” At December 31, 2008 and 2007, we had approximately 122,041,000 shares of common stock outstanding, 50% of which are held by an affiliate of Berkadia LLC (“Berkadia”), an entity jointly owned by Berkshire Hathaway Inc. and Leucadia. The following table summarizes the high and low bid prices as reported on the OTC by Commodity Systems Inc. The OTC market quotations reflect inter-dealer prices, without retail markup, markdown or commission, and may not represent actual transactions.


	Sales Price Range of Common Stock
	2008				2007
	High		Low		High		Low
Quarters:
First	$	0.050	$	0.011	$	0.115	$	0.060
Second		0.050		0.015		0.080		0.040
Third		0.030		0.005		0.085		0.033
Fourth		0.028		0.001		0.050		0.011

We did not pay or declare any dividends during 2008 and 2007. Stockholders should not expect any payments or distributions. Refer to Item 3. “Legal Proceedings” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of stockholder payments and our motion regarding distributions to stockholders.

Our Certificate of Incorporation prohibits persons (except Berkadia and its affiliates) from acquiring 5% or more of Corporation Securities (as defined in the Certificate of Incorporation) unless the purchase is approved by our Board of Directors. Those restrictions did not apply to the acquisition of shares in connection with the reorganization proceedings. The restrictions will remain in effect until the earlier of (a) the repeal of Section 382 of the Internal Revenue Code (or any comparable successor provision) or (b) the beginning of the taxable year to which certain tax benefits may no longer be carried forward.

As of March 24, 2009, there were approximately 13,213 holders of record of The FINOVA Group Inc.’s common stock. The closing price of the common stock on that date was $0.005.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

See pages 1–9 of Annex A.

Item 8.

Financial Statements and Supplemental Data.

Financial Statements – See Item 15 hereof and Annex A.

Item 9.

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

Not applicable.

Item 9A.

Controls and Procedures.

(a)

Our management evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of December 31, 2008. Based on their evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective as of December 31, 2008.

(b)

There has been no change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended December 31, 2008, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;

•

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

•

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

We believe that any system of internal controls, no matter how well designed and operated, can provide only reasonable (and not absolute) assurance that all of our objectives will be met, including the detection of fraud. Furthermore, no evaluation of internal accounting controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, the Company used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework.” These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. The Company’s assessment included extensive documenting, evaluating and testing the design and operating effectiveness of its internal controls over financial reporting.

Based on the Company’s processes and assessment, management has concluded that, as of December 31, 2008, the Company’s internal control over financial reporting was effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Item 9B.

Other Information.

Not applicable.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

Set forth below is information with respect to those individuals who serve as directors or executive officers of FINOVA. Messrs. Cumming, Steinberg and Mara serve pursuant to the Management Services Agreement with Leucadia that expires in 2011. Mr. Ross is an “at will” employee and may be terminated at any time.


Name	Age	Position and Background
Thomas F. Boland	65	Director of FINOVA since 2001.

Ian M. Cumming	68	Chairman of the Board of FINOVA since 2001. Director and Chairman of the Board of Leucadia since 1978.

G. Robert Durham	80	Director of FINOVA since 1992.

Thomas E. Mara	63	Director and Chief Executive Officer of FINOVA since 2002. Executive Vice President of Leucadia since 1980 and Treasurer of Leucadia from 1993 to 2007.

R. Gregory Morgan	55	Director of FINOVA since 2001.

Kenneth R. Smith	66	Director of FINOVA since 1992.

Joseph S. Steinberg	65	Director and President of FINOVA since 2001. Director of Leucadia since 1978 and President of Leucadia since 1979.

Richard A. Ross	41	Senior Vice President, Chief Financial Officer and Treasurer of FINOVA since 2004. Previously, Vice President – Chief Accounting Officer or similar positions of FINOVA and FINOVA Capital for more than five years.

The recent business experience of our directors is summarized as follows:

THOMAS F. BOLAND. Since 2005, Mr. Boland has been an independent consultant. From 2001 until 2005, Mr. Boland was a Managing Director of Seneca Financial Group, Inc. (an investment bank specializing in financial restructuring advisory services). Prior to that, Mr. Boland served as a Managing Director for Citigroup Corporate and Investment Bank, Inc. in charge of Japan, Europe and North America Credit and Operating Risk Management from 1999 to 2001. He served as a Senior Risk Manager for Citibank’s Global Relationship Bank and he was Chairman of the Board of Shuttle, Inc. from 1992 to 1997. Mr. Boland has been designated to serve on the Board by the creditors’ committee in our reorganization proceedings. Mr. Boland was appointed to our Board of Directors as the designee of the creditors’ committee in those proceedings, which was given the right under the plan of reorganization to appoint one director. Our Bylaws provide that our Board will renominate him each year as a director so long as at least $500 million of our 7.5% senior secured notes remain outstanding, unless a majority of the note holders request nomination of a different director, pursuant to procedures set forth in the Bylaws.

IAN M. CUMMING. Mr. Cumming has served as Chairman of the Board of FINOVA since August 2001. Since 1978, Mr. Cumming has also served as a director and Chairman of the Board of Leucadia National Corporation, a diversified company engaged in a variety of businesses (“Leucadia”), which has an indirect 25% interest in FINOVA. Mr. Cumming has served as a director of Skywest, Inc. (a Utah-based regional air carrier) since June 1986, HomeFed Corporation (“HomeFed”) (a publicly held real estate development Company) since May 1999, Jefferies Group Inc. (a publicly held full service global investment bank and institutional securities firm serving companies and other investors) since April 2008 and Americredit Corporation (an automobile finance company) since March 2008. He also has served as an alternate director of Fortescue Metals Group Ltd. (an Australian iron ore mining company) since January 2007.

G. ROBERT DURHAM. Mr. Durham was the Chairman of FINOVA from February to August 2001 and has served as a director of FINOVA since March 1992. He is the retired Chairman and Chief Executive Officer of Walters Industries, Inc. (a homebuilding and financing, building materials, natural resources and industrial manufacturing company), where he served as Chairman and Chief Executive Officer from 1991 to 1996. Mr. Durham was also the former Chairman, President and Chief Executive Officer of Phelps Dodge Corporation (a mining company).

THOMAS E. MARA. Mr. Mara has served as Chief Executive Officer of FINOVA since September 2002. Previously, he served as Executive Vice President of FINOVA from 2001 to September 2002. Mr. Mara also serves as Executive Vice President of Leucadia since 1980 and served as Treasurer of Leucadia from 1993 to 2007. He has served as a director of Inmet Mining Corporation (a Toronto stock exchange listed Canadian mining company) from August 2005 to present.

R. GREGORY MORGAN. Mr. Morgan is Vice President and General Counsel of Massachusetts Institute of Technology. Previously he was a partner in the law firm of Munger, Tolles & Olson LLP, where he practiced law from 1981 through 2004. In 2005 and 2006, he was a member of The Price Group LLC, a private investment partnership.

KENNETH R. SMITH. Mr. Smith has been an Eller Distinguished Service Professor of Economics since 1980, Dean of the Eller College of Management from 1980 to 1995, and Vice Provost from 1992 to 1995 of The University of Arizona. He has served as Chairman since 1996 and director since 1990 of Apache Nitrogen Products, Inc.

JOSEPH S. STEINBERG. Mr. Steinberg has served as President of FINOVA since August 2001. He has served as director of Leucadia since 1978 and President of Leucadia since 1979. Mr. Steinberg also has served as a director of HomeFed since August 1998 (Chairman of the Board since December 1999), Jefferies Group Inc (a publicly held full service global investment bank and institutional securities firm serving companies and other investors) since April 2008 and of Fortescue Metals Group Ltd. (an Australian iron ore mining company) since August 2006.

AUDIT COMMITTEE FINANCIAL EXPERT

The Audit Committee consists of Messrs. Morgan (Chairman), Boland and Smith. The Board of Directors has adopted a written charter for the Audit Committee, which is available on our website, www.finova.com. The Board of Directors has determined that each of Messrs. Boland and Smith qualified as an audit committee financial expert within the meaning of the regulations of the Securities and Exchange Commission (the “SEC”). Applying applicable listing standards of the New York Stock Exchange and the rules and regulations of the SEC, the Board of Directors has determined that Messrs. Morgan, Smith and Boland are independent for purposes of the Audit Committee.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Based solely upon a review of the copies of the forms furnished to us and written representations from our executive officers, directors and greater than 10% beneficial shareholders, we believe that during the year ended December 31, 2008, all persons subject to the reporting requirements of Sections 16(a) filed the required reports on a timely basis.

CODE OF CONDUCT

We have a Code of Conduct, which is applicable to all directors, officers and employees of the Company. The Code of Conduct is available on our website, www.finova.com. We intend to post amendments to or waivers from our Code of Conduct on our website.

Item 11.

Executive Compensation.

COMPENSATION DISCUSSION AND ANALYSIS

We have continued with efforts to wind-up our affairs. At December 31, 2008 and 2007, we had four employees. The four remaining employees are scheduled to remain through the completion of the liquidation period. The Company believes that our staffing levels are adequate to provide us appropriate oversight of the smaller operation, while maintaining adequate resources to deal with outstanding legal matters and the future dissolution of our entities. These facts and circumstances were taken into consideration during the development of our compensation philosophy and programs.

Overview of Compensation Program

Historically, when there was a large population of employees working in various business units, our Board of Directors (the “Board”) actively participated in determining compensation for employees. The Company has downsized dramatically in the past several years. There are only a handful of employees left to wrap up our affairs and as a result, the Board has delegated to the Chief Executive Officer (the “CEO”), the authority to set compensation for the remaining executive and non-executive officers of the Company, while retaining the authority for approval of compensation programs offered to employees through the Human Resources Committee of our Board, consisting of Messrs. Steinberg, Mara and Smith (Chair).

Compensation Philosophy and Objectives

Our Executive Compensation Program is designed to retain our one remaining paid executive officer as well as motivate him to remain focused on maximizing the value of the remaining assets, while containing expenses for the benefit of our creditors and shareholders. After careful consideration of our circumstances, as described above, and voluntary turnover levels in prior years, retention of employees has become critical to the liquidation of our remaining portfolio. Our remaining employees are highly mobile and could obtain employment at other companies with long-term prospects. Our ability to continue to maximize value from our portfolio liquidation and distributions to our creditors would be negatively impacted should we lose personnel that have specific knowledge of our assets, litigation matters and claims and knowledge of historical company information.

2008 Executive Compensation Components

The CEO has been given the discretion to modify or adjust awards for all executives for the fiscal year ending December 31, 2008. The principal components of compensation for the named executive officer listed in the summary compensation table below were:

Base salary

Discretionary incentive awards

Retirement; and

Other personal benefits

Base Salary

We provide our executive officer and other employees with base salary to compensate them for services rendered during the fiscal year. Base salary for the named executive officer was determined based on his position and responsibilities, as well as our desire to retain him in light of the Company’s circumstances and the ability of this employee to obtain competitive salaries at alternate employers.

In determining base salary, in the past we have used outside market data of companies within similar industries (primarily finance) as a benchmark. The outside market data utilized did not reflect the liquidating nature of the Company, but was used as a reference point only of similar businesses within the industry. Market data for other liquidating entities was not available. We have ceased to purchase outside salary data due to cost constraints. The data taken into consideration when assessing base salaries included industry classification, geographic area and size of organization. Within these parameters, trends on compensation as well as the position and function of individuals were taken into consideration. Historically, base salaries were designed so that salary opportunities for a given position were between 75% and 125% of the midpoint of the base salary range for comparable companies.

Discretionary Incentive Awards

As part of our compensation program, employees participate in a bonus program in which they are eligible for a year-end discretionary performance bonus that ranges from 0% to 200% of the employee’s base salary. The bonus ranges are set as a percentage of the person’s annual salary and bonus percentage ranges will generally increase with the employee’s pay grade and level of responsibility and criticality. Bonuses for 2008 were paid based on our subjective determination of the participant’s contribution to the continued wind-down of FINOVA and the employee’s personal performance, in the complete discretion of the Company. Historically, a participant’s performance was measured against objectives established for that participant at the beginning of the year. However, individual objectives are no longer considered to be relevant, as all employees are working towards our overall objective of maximizing value from our liquidation.

Retirement

All compensated employees, including the named executive officer below, were eligible to participate in The FINOVA Group Inc. Savings Plan (the “Savings Plan”), which was a tax qualified 401(k) program. This program was terminated as of March 31, 2007. Up to this date, employees could elect voluntary wage deductions ranging from 0% to 30% of taxable compensation as prescribed by the Internal Revenue Service to the savings plan on a before tax basis. Our matching contributions were based on employee pre-tax salary deductions, up to a maximum of 100% of the first 6% of salary contributions. All contributions to the Savings Plan as well as any matching contributions were fully vested upon contribution.

The Savings Plan was amended as of January 1, 2005 to include an Age and Service contribution to the Savings Plan. Beginning January 1, 2005, substantially all employees received an Age and Service contribution to the Savings Plan based on each employee’s eligible earnings, age, and years of service. Like other contributions to the Savings Plan, the Age and Service contributions were limited to prescribed limits set forth by the Internal Revenue Service.

Perquisites and Other Personal Benefits

We provide our executive officer with certain financial benefits that we believe are reasonable and consistent with our overall compensation program to enable us to retain superior employees for key positions.

The named executive officer is provided with financial and tax counseling, tax gross ups on the financial counseling, medical expense reimbursements and executive physicals. The costs of the financial benefits described above for the named executive officer for the fiscal year ended December 31, 2008 and 2007 are included in the column labeled “All Other Compensation” of the “Summary Compensation Table” shown below. The amounts attributable to each such perquisite or benefit does not exceed the greater of $25,000 or 10% of the total amount of perquisites or benefits received by such named executive officer.

The following table summarizes the compensation we paid during 2008 and 2007 to our only remaining executive officer based on salary and annual bonus. Bonus totals also include amounts paid in 2009, which related to 2008 performance.

SUMMARY COMPENSATION TABLE


Name and Principal Position (1)	Year	Salary		Bonus (2)		All Other Compensation (3)		Total

Richard A. Ross SVP-Chief Financial Officer & Treasurer	2008	$	239,000	$	175,000	$	813,659	$	1,227,659
Richard A. Ross SVP-Chief Financial Officer & Treasurer	2007		227,500		350,000		56,153		633,653

(1)

Ian M. Cumming, our Chairman, Joseph S. Steinberg, our President and Thomas E. Mara, our Chief Executive Officer are not included in this table. Their services are provided to FINOVA under a Management Services Agreement with Leucadia and they receive no compensation as employees. The Management Services Agreement is discussed in more detail in “Certain Relationships and Related Transactions and Director Independence” below.

(2)	Bonuses are discretionary payments based on performance of the recipient in relation to our overall objective of maximizing value from the orderly collection of our portfolio. The 2008 amount for Mr. Ross includes a payment made in January 2009 relating to 2008 performance.

(3)

Amounts for the named executive officer include matching payments and other company contributions under the Savings Plan, financial consulting services, executive healthcare, the payout of unused vacation and certain tax gross-ups. Additionally, Mr. Ross received severance compensation of $772,235 in 2008 (as described under “Arrangements With Respect To Severance Compensation”.)

Cash Compensation Paid To Board Members

Directors receive a $30,000 annual retainer. Directors also receive $1,500 for each Board, committee or other meeting attended. In connection with his duties as a member of the Special Committee, Mr. Boland is authorized to receive a stipend at a rate of $2,500 per day for Special Committee business, other than Special Committee meetings. We reimburse directors for any expenses related to their Board service.

The services of Messrs. Cumming, Mara and Steinberg are provided to FINOVA under a Management Services Agreement with Leucadia. They receive compensation as directors, including the retainer and meeting fees noted above. The Management Services Agreement is discussed in more detail in “Certain Relationships and Related Transactions and Director Independence” below.

The table below summarizes the compensation earned by or paid to our Directors for the fiscal year ended December 31, 2008.

DIRECTOR SUMMARY COMPENSATION TABLE


Name	Fees Earned or Paid in Cash		Total

Thomas F. Boland	$	37,500	$	37,500

Ian M. Cumming	$	30,000	$	30,000

G. Robert Durham	$	31,500	$	31,500

Thomas E. Mara	$	39,000	$	39,000

R. Gregory Morgan	$	37,500	$	37,500

Kenneth R. Smith	$	39,000	$	39,000

Joseph S. Steinberg	$	30,000	$	30,000

Arrangements With Respect To Severance Compensation

The Board previously established and funded two trusts to secure obligations to all of our employees for severance and bonuses. The Trustee of both trusts was Atlantic Trust Company. One trust (the “US Severance Trust”) secured the severance and related medical insurance and outplacement obligations for the US employees. The US Severance Trust paid terminated employees their severance benefits if they were otherwise eligible to receive severance and entered into a release of liability, as was required by our policy.

The other trust (the “Bonus Trust”) secured the bonus obligations for all employees and the severance obligations for the employees that were based in the United Kingdom. The trust provided that if the Company did not pay the bonus or UK severance payments, the employees could request that the Trustee pay those amounts from the trust, pursuant to procedures established in the Trust Agreement.

We funded these trusts in 2003 with a total of approximately $24 million, which approximated the estimated liability due under those programs at that time, and was not in addition to amounts that would otherwise have been due. The severance plan and trust agreements were terminated effective December 31, 2007 and the remaining eligible employees were paid their scheduled severance benefits in early 2008, while they remain actively employed. Upon discharge of the remaining severance obligations to employees in 2008, the remaining assets in the trusts of $2.8 million were distributed to the Company. Employees remain eligible to receive future performance bonuses, which will be paid from the Company’s cash reserves.

Mr. Ross received severance compensation of $772,235 in early 2008 following the termination of the severance plan effective December 31, 2007. This amount represented 2.7 years of base salary and included $135,000 for the cash equivalent of 13 months of health insurance, outplacement assistance and executive benefits, including financial counseling.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Set forth below is certain information as of February 9, 2009 with respect to the beneficial ownership of common shares by the beneficial owners of at least 5% of our outstanding common shares. Ownership includes direct and indirect (beneficial) ownership, as defined by the SEC rules. To our knowledge, each person, along with his or her spouse, has sole voting and investment power over the shares unless otherwise noted. Information in the first table is as of the latest reports by those entities received by us.

CERTAIN BENEFICIAL OWNERS


Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)	Percentage of Shares
Berkshire Hathaway Inc. 1440 Kiewit Plaza Omaha, Nebraska 68131	30,510,290.5	25	%

Leucadia National Corporation 315 Park Avenue South New York, NY 10010-3679	30,510,290.5	25	%

(1)

These shares are owned by an affiliate of Berkadia LLC, a joint venture beneficially owned, through subsidiaries, by Berkshire Hathaway Inc. and Leucadia. Pursuant to the terms of the operating agreements governing Berkadia and its direct members, these shares are to be voted in a manner as determined unanimously by Berkshire Hathaway Inc. and Leucadia. If unanimity cannot be achieved, the shares owned by Berkadia are to be voted 50% as directed by Berkshire Hathaway Inc. and 50% as directed by Leucadia.

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information as of February 9, 2009 with respect to the beneficial ownership of common shares by (1) each director and (2) the executive officer named in the Summary Compensation Table under Item 11. “Executive Compensation.”


Name	Position (s)	Amount and Nature of Beneficial Ownership		Percentage of Outstanding Shares
Thomas F. Boland	Director	0
Ian M. Cumming	Director and Chairman	(1	)
G. Robert Durham	Director	0
Thomas E. Mara	Director and Chief Executive Officer	0
R. Gregory Morgan	Director	0
Kenneth R. Smith	Director	0
Joseph S. Steinberg	Director and President	(1	)
Richard A. Ross	SVP - Chief Financial Officer & Treasurer	0

Directors and Executives, as a group (11 persons)		(1	)	^*

^*	Less than one percent.

(1)

Does not include any interest in 30,510,290.5 shares (25%) of FINOVA’ s common stock that Leucadia may be deemed to beneficially own under SEC Rule 13d-3 by virtue of its indirect membership interests in an affiliate of Berkadia LLC. Together with certain family members, Mr. Cumming and Mr. Steinberg beneficially own significant amounts of Leucadia stock. By virtue of their beneficial ownership of Leucadia, they may be deemed to be the indirect beneficial owners of their pro rata share of our common stock beneficially owned by Leucadia.

EQUITY COMPENSATION PLAN INFORMATION

None.

Item 13.

Certain Relationships and Related Transactions and Director Independence.

Related Transactions

The Company’s Audit Committee Charter addresses the reporting, review and approval or ratification of transactions with related persons. The Audit Committee is authorized to review all related person transactions and approve such transactions in advance of such transactions being given effect. In determining whether to approve or ratify a related person transaction, the Audit Committee will consider the relevant facts and circumstances of the related person transaction, which may include factors such as the relationship of the related person with the Company, the materiality or significance of the transaction to the Company and the related person, the business purpose and reasonableness of the transaction, whether the transaction is comparable to a transaction that could be available to the Company on an arms-length basis, and the impact of the transaction on the Company’s business and operation.

The Charter authorizes the Audit Committee to recommend to the Board or to the stockholders any matters for which the approval of the Board or stockholders is required under applicable law.

During 2004, R. Gregory Morgan retired as a partner of the law firm of Munger, Tolles & Olson LLP. That firm serves as counsel to Berkshire Hathaway Inc. and Berkadia LLC.

Set forth below is information concerning agreements or relationships between FINOVA and Leucadia.

Ian M. Cumming is the Chairman of the Board of Leucadia and Joseph S. Steinberg is a director and President of Leucadia. Each beneficially owns in excess of 10% of the outstanding common shares of that company. Thomas E. Mara is Executive Vice President of Leucadia.

Leucadia manages FINOVA pursuant to the Management Services Agreement, which was originally entered into in February 2001, before we commenced the reorganization proceedings. The management agreement expires in 2011 and provides that Leucadia will appoint the Chairman, President and other officers, as it deems necessary to fulfill its duties. Leucadia generally manages our affairs, subject to direction by the Board of Directors.

The management agreement was entered into in 2001 simultaneously with the execution of a $6 billion loan commitment from Berkadia LLC, a joint venture between Berkshire Hathaway Inc. and Leucadia (the “Berkadia Loan”). As part of the transaction, we paid Berkadia $120 million in commitment and funding fees. Berkadia loaned us $5.6 billion in August 2001 to finance our plan of reorganization. The Berkadia Loan bore annual interest at the London Interbank Offered Rate plus 2.25%, with interest payable monthly. The loan was scheduled to mature in 2006, but principal was to be repaid earlier if excess cash was available, as set forth in our credit agreements. The Berkadia Loan was repaid in full in February 2004.

When the Berkadia Loan was made, we issued Berkadia sufficient common stock in FINOVA to result in Berkadia holding 50% of the total number of outstanding shares of common stock upon emergence from the reorganization proceedings, as required by the plan of reorganization. The bankruptcy court overseeing our reorganization approved the management fee to Leucadia, the fees paid to Berkadia, the issuance of the stock and the terms of the Berkadia Loan.

We pay Leucadia $8 million each year for management fees under the Management Services Agreement. Fees are paid quarterly in advance. As of February 28, 2009, we have paid Leucadia $2 million of management fees during the fiscal year 2009. Leucadia has advised us that the $8 million annual management fee is shared equally with Berkshire Hathaway under the terms of the Berkadia operating agreement.

We do not pay compensation for the services of Messrs. Cumming, Steinberg and Mara or any of Leucadia’s other personnel, except for the management fees noted above. Under the management agreement, we pay reasonable out-of-pocket expenses incurred by those individuals. We also pay directors’ fees to those who serve on the Board as noted above.

Each of the management agreement, the Berkadia Loan, and the issuance of common stock to Berkadia was approved by the Bankruptcy Court overseeing the Company’s reorganization.

Director Independence

The Board has determined that Messrs. Boland, Durham, Morgan and Smith are independent under applicable listing standards of the New York Stock Exchange. In determining Mr. Durham’s independence, the Board noted that during 2008 Mr. Durham had a one-year consulting agreement with Leucadia pursuant to which he provided consulting services with respect to Leucadia’s mining operations and investments and for which Mr. Durham was paid $150,000 by Leucadia. The Board has determined that this consulting arrangement was not a material relationship and does not affect Mr. Durham’s status as an independent director. The Leucadia affiliated directors, Messrs. Cumming, Steinberg and Mara are not independent under applicable listing standards of the New York Stock Exchange. The Board does not have, and historically has never had, a nominating committee.

As discussed above, Thomas F. Boland was appointed to our Board of Directors as the designee of the creditors’ committee in those proceedings, which was given the right under the plan of reorganization to appoint one director. Our Bylaws provide that our Board will renominate him each year as director so long as at least $500 million of our 7.5% senior secured notes remain outstanding, unless a majority of the note holders request nomination of a different director, pursuant to procedures set forth in the Bylaws.

Item 14.

Principal Accountant Fees and Services.

The following table sets forth the total fees billed or expected to be billed by Ernst & Young LLP for audit services rendered in connection with the audit of our financial statements for 2008 and 2007, and fees billed for other services rendered by that firm for those years:


	2008		2007
Audit Fees	$	267,000	$	312,000
Audit Related Services (1)				44,000
All Other Fees (2)				1,500

Total Fees	$	267,000	$	357,500

(1)	Audit Related Services included audits of our benefit plans.

(2)	All Other Fees included fees billed for access to on-line accounting research tools and publications.

The Audit Committee has considered whether the provision of the non-audit services is compatible with the maintenance of the auditors’ independence. The Audit Committee approved all of those services and fees. The Audit Committee has adopted policies and procedures for pre-approving all audit and non-audit work performed by our independent auditor, Ernst & Young LLP. Specifically, the committee has pre-approved certain specific categories of work and an initially authorized annual amount for each category. For additional services or services in an amount above the initially authorized annual amount, additional authorization from the Audit Committee is required. All requests for services to be provided by Ernst & Young LLP that do not require specific approval by the Audit Committee must be submitted to the Chief Financial Officer of the Company, who determines that such services are in fact within the scope of those services that have been pre-approved by the Audit Committee. The Chief Financial Officer reports to the Audit Committee periodically.

PART IV

Item 15.

Exhibits and Financial Statement Schedules.

Documents filed.


		Page
1)	Financial Statements.

	The following financial information is included in Annex A:

	Management’s Discussion and Analysis of Financial Condition and Results of Operations	A-1
	Report of Independent Registered Public Accounting Firm	A-10
	Consolidated Statements of Net Assets in Liquidation (liquidation basis) at December 31, 2008 and 2007	A-11
	Consolidated Statements of Changes in Net Assets in Liquidation (liquidation basis) for the Years Ended December 31, 2008 and 2007	A-12
	Notes to Consolidated Financial Statements	A-13

2)	Financial Statement Schedules.

	All schedules have been omitted because they are not applicable or the required information is shown in the financial statements or related notes.

3)	Exhibits.

All documents referenced below were filed pursuant to the Securities and Exchange Act of 1934 by the Company, file number 1-11011, unless otherwise indicated.


		Incorporated by Reference From:
Exhibit		Report on Form	Date Filed	Exhibit
(2.A)	Third Amended and Restated Joint Plan of Reorganization of Debtors Under Chapter 11 of the Bankruptcy Code.	8-K	6/22/01	10.A

(2.B)	Revised Technical Amendments to Third Amended and Restated Joint Plan of Reorganization.	8-K	8/27/01	2.B

(2.C)	Form of Plan of Liquidation and Dissolution.	10-K	3/22/07	2.C

(3.A)	Amended and Restated Certificate of Incorporation of FINOVA.	8-K	8/27/01	3.A

(3.B)	Amended and Restated Bylaws of FINOVA.	8-K	8/27/01	3.B

(4.A)	Form of Common Stock Certificate.	10-K	3/15/02	4.A

(4.B)	Relevant provisions of FINOVA’s Certificate of Incorporation and Bylaws included in Exhibits 3.A and 3.B above are incorporated by reference.			3.A and 3.B

(10.A)	Credit Agreement, dated as of August 21, 2001, by and between FINOVA Capital and Berkadia.	8-K	8/27/01	10.A

(10.B)	Indenture, dated as of August 22, 2001, between FINOVA and The Bank of New York, as trustee (the “Indenture Trustee”), with respect to FINOVA’s 7.5% Senior Secured Notes Maturing 2009 with Contingent Interest Due 2016, including the form of Senior Secured Note.	8-K	8/27/01	10.B

(10.C)	Form of Intercompany Notes by FINOVA Capital payable to FINOVA.	8-K	8/27/01	10.C

(10.D)	Collateral Trust Agreement, dated as of August 21, 2001, among FINOVA, FINOVA Capital, Berkadia, Wilmington Trust Company, as collateral trustee (the “Collateral Trustee”), the Indenture Trustee and each grantor from time to time party thereto.	8-K	8/27/01	10.D


		Incorporated by Reference From:
Exhibit		Report on Form	Date Filed	Exhibit
(10.E)	Guaranty, dated as of August 21, 2001, by FINOVA in favor of Berkadia.	8-K	8/27/01	10.E

(10.F)	Guaranty, dated as of August 21, 2001, by FINOVA Capital and certain subsidiaries of FINOVA Capital (the “Subsidiary Guarantors”), in favor of Berkadia.	8-K	8/27/01	10.F

(10.G)	Pledge Agreement, dated as of August 21, 2001, by FINOVA, in favor of the Collateral Trustee.	8-K	8/27/01	10.G

(10.H)	Pledge and Security Agreement, dated as of August 21, 2001, by FINOVA Capital and the Subsidiary Guarantors, in favor of the Collateral Trustee.	8-K	8/27/01	10.H

(10.I.1)	Novation Agreement and Amendment to Registration Rights Agreement, dated as of August 23, 2002, among FINOVA, Berkadia and Berkadia Equity Holdings LLC.	10-K	3/21/03	10.I.1

(10.J)	Voting Agreement, dated as of August 21, 2001, among FINOVA, Berkadia, Berkshire and Leucadia.	8-K	8/27/01	10.J

(10.K)	Amended and Restated Management Agreement among FINOVA, FINOVA Capital and Leucadia, dated April 3, 2001.+	10-K	4/26/01	10.T.1

(10.L.1)	Form of Letter for the Bonus Program.+	10-K	3/15/02	10.L

(10.L.2)	2008 Annual Incentive Plan Rules.+	10-K	3/17/08	10.L.3

(10.L.3)	2009 Annual Incentive Plan Rules.+	^*

(10.M.1)	Severance Plan.+	10-K	3/15/02	10.M.1

(10.M.2)	Enhanced Severance Plan.+	10-K	3/15/02	10.M.2

(10.M.3)	Amended and Restated Severance Pay Plan and Summary Plan Description.+	10-Q	8/11/05	10.B

(10.M.4)	Amendment of The FINOVA Group Severance Plan and Summary Plan Description dated November 12, 2007+	10-Q	11/13/07	10.1

(10.N.1)	Severance Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003.+	10-K	3/30/04	10.R

(10.N.2)	Termination of The FINOVA Group Severance Trust Agreement dated November 12, 2007.+	10-Q	11/13/07	10.2

(10.O.1)	Bonus and United Kingdom Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003.+	10-K	3/30/04	10.S

(10.O.2)	Termination of The FINOVA Group Bonus and United Kingdom Severance Trust Agreement dated November 12, 2007.+	10-Q	11/13/07	10.3


		Incorporated by Reference From:
Exhibit		Report on Form	Date Filed	Exhibit
(10.P)	Purchase and Sale Agreement by and among FINOVA Capital Corporation and AIRCRAFT 48008/48009, LLC as Sellers and FAP, LLC as buyer, dated January 17, 2007.	8-K	1/18/07	10.A

(14)	Code of Conduct (Code of Ethics).	10-K	3/17/08	14

(21)	Subsidiaries.	^*

(23)	Consent of Independent Registered Public Accounting Firm.	^*

(31.1)	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.	^*

(31.2)	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.	^*

(32.1)	Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	^**

(32.2)	Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	^**

(99.A)	Order entered August 10, 2001 confirming the Third Amended and Restated Joint Plan of Reorganization, as amended and supplemented.	8-K	8/27/01	99.B

^*	Filed with this report

^**	Furnished with this report pursuant to Item 601 (b) (32) of Regulation S-K

+	Relating to management compensation

Signatures

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

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 dates indicated.


Name and Title	Date	Signature
Principal Executive Officer:

Thomas E. Mara Chief Executive Officer and a Director	March 30, 2009	/s/ Thomas E. Mara

Principal Financial and Accounting Officer:

Richard A. Ross Senior Vice President – Chief Financial Officer and Treasurer	March 30, 2009	/s/ Richard A. Ross

Directors:

Thomas F. Boland	March 30, 2009	/s/ Thomas F. Boland

Ian M. Cumming	March 30, 2009	/s/ Ian M. Cumming

G. Robert Durham	March 30, 2009	/s/ G. Robert Durham

R. Gregory Morgan	March 30, 2009	/s/ R. Gregory Morgan

Kenneth R. Smith	March 30, 2009	/s/ Kenneth R. Smith

Joseph S. Steinberg	March 30, 2009	/s/ Joseph S. Steinberg

EXHIBIT INDEX


Exhibit Number		Description
(2.A)		Third Amended and Restated Joint Plan of Reorganization of Debtors Under Chapter 11 of the Bankruptcy Code (filed as Exhibit 10.A to the Current Report on Form 8-K dated June 22, 2001 (the “June 22, 2001 8-K”)).

(2.B)		Revised Technical Amendments to Third Amended and Restated Joint Plan of Reorganization (filed as Exhibit 2.B to the Current Report on Form 8-K dated August 27, 2001 (the “August 27, 2001 8-K”)).

(2.C)		Form of Plan of Liquidation and Dissolution (filed as Exhibit 2.C to the Annual Report on Form 10-K for the fiscal year ended December 31, 2006).

(3.A)		Amended and Restated Certificate of Incorporation of FINOVA (filed as Exhibit 3.A to the August 27, 2001 8-K).

(3.B)		Amended and Restated Bylaws of FINOVA (filed as Exhibit 3.B to the August 27, 2001 8-K).

(4.A)		Form of Common Stock Certificate (filed as Exhibit 4.A to the Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the “2001 10-K”)).

(4.B)		Relevant provisions of FINOVA’s Certificate of Incorporation and Bylaws included in Exhibits 3.A and 3.B above are incorporated by reference.

(10.A)		Credit Agreement, dated as of August 21, 2001, by and between FINOVA Capital and Berkadia (filed as Exhibit 10.A to the August 27, 2001 8-K).

(10.B)		Indenture, dated as of August 22, 2001, between FINOVA and The Bank of New York, as trustee (the “Indenture Trustee”), with respect to FINOVA’s 7.5% Senior Secured Notes Maturing 2009 with Contingent Interest Due 2016, including the form of Senior Secured Note (filed as Exhibit 10.B to the August 27, 2001 8-K).

(10.C)		Form of Intercompany Notes by FINOVA Capital payable to FINOVA (filed as Exhibit 10.C to the August 27, 2001 8-K).

(10.D)		Collateral Trust Agreement, dated as of August 21, 2001, among FINOVA, FINOVA Capital, Berkadia, Wilmington Trust Company, as collateral trustee (the “Collateral Trustee”), the Indenture Trustee and each grantor from time to time party thereto (filed as Exhibit 10.D to the August 27, 2001 8-K).

(10.E)		Guaranty, dated as of August 21, 2001, by FINOVA in favor of Berkadia (filed as Exhibit 10.E to the August 27, 2001 8-K).

(10.F)		Guaranty, dated as of August 21, 2001, by FINOVA Capital and certain subsidiaries of FINOVA Capital (the “Subsidiary Guarantors”), in favor of Berkadia (filed as Exhibit 10.F to the August 27, 2001 8-K).

(10.G)		Pledge Agreement, dated as of August 21, 2001, by FINOVA, in favor of the Collateral Trustee (filed as Exhibit 10.G to the August 27, 2001 8-K).

(10.H)		Pledge and Security Agreement, dated as of August 21, 2001, by FINOVA Capital and the Subsidiary Guarantors, in favor of the Collateral Trustee (filed as Exhibit 10.H to the August 27, 2001 8-K).


(10.I.1)		Novation Agreement and Amendment to Registration Rights Agreement, dated as of August 23, 2002, among FINOVA, Berkadia and Berkadia Equity Holdings LLC (filed as Exhibit 10.1.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the “2002 10-K”)).

(10.J)		Voting Agreement, dated as of August 21, 2001, among FINOVA, Berkadia, Berkshire and Leucadia (filed as Exhibit 10.J to the August 27, 2001 8-K).

(10.K)		Amended and Restated Management Agreement among FINOVA, FINOVA Capital and Leucadia, dated April 3, 2001 (filed as Exhibit 10.T.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the “2000 10-K”)).

(10.L.1)		Form of Letter for the Bonus Program (filed as Exhibit 10.L to the 2001 10-K).

(10.L.2)		2008 Annual Incentive Plan Rules (filed as Exhibit 10.L.3 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (the “2007 10-K”)).

(10.L.3)		2009 Annual Incentive Plan Rules.

(10.M.1)		Severance Plan (filed as Exhibit 10.M.1 to the 2001 10-K).

(10.M.2)		Enhanced Severance Plan (filed as Exhibit 10.M.2 to the 2001 10-K).

(10.M.3)		Amended and Restated Severance Pay Plan and Summary Plan Description (filed as Exhibit 10.B to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2005 (the “2nd Quarter 2005 10-Q”)).

(10.M.4)		Amendment of The FINOVA Group Severance Plan and Summary Plan Description dated November 12, 2007 (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007 (the “3rd Quarter 2007 10-Q”)).

(10.N.1)		Severance Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003 (filed as Exhibit 10.R to the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the “2003 10-K”)).

(10.N.2)		Termination of The FINOVA Group Severance Trust Agreement dated November 12, 2007 (filed as Exhibit 10.2 to the 3rd Quarter 2007 10-Q).

(10.O.1)		Bonus and United Kingdom Trust Agreement between FINOVA and Atlantic Trust Company, dated as of November 1, 2003 (filed as Exhibit 10.S to the 2003 10-K).

(10.O.2)		Termination of The FINOVA Group Bonus and United Kingdom Severance Trust Agreement dated as of November 12, 2007 (filed as Exhibit 10.3 to the 3rd Quarter 2007 10-Q).

(10.P)		Purchase and Sale Agreement by and among FINOVA Capital Corporation and AIRCRAFT 48008/48009, LLC as Sellers and FAP, LLC as buyer, dated January 17, 2007 (filed as Exhibit 10.A to the Current Report on Form 8-K dated January 18, 2007 (the “January 18, 2007 8-K”)).

(14)		Code of Conduct (Code of Ethics) (filed as Exhibit 14 to the 2007 10-K).

(21)		Subsidiaries.


(23)		Consent of Independent Registered Public Accounting Firm.

(31.1)		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

(31.2)		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

(32.1)		Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(32.2)		Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(99.A)		Order entered August 10, 2001 confirming the Third Amended and Restated Joint Plan of Reorganization, as amended and supplemented.

ANNEX A

THE FINOVA GROUP INC.

INDEX TO CONSOLIDATED FINANCIAL INFORMATION


		Page
Management’s Discussion and Analysis of Financial Condition and Results of Operations		A-1

Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm		A-10

Consolidated Statements of Net Assets in Liquidation (liquidation basis) at December 31, 2008 and 2007		A-11

Consolidated Statements of Changes in Net Assets in Liquidation (liquidation basis) for the Years Ended December 31, 2008 and 2007		A-12

Notes to Consolidated Financial Statements		A-13

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with Item 1. “Business,” Item 8. “Financial Statements and Supplemental Data” and the Special Note Regarding Forward-Looking Statements included herein. The discussion relates to The FINOVA Group Inc. and its subsidiaries (collectively “FINOVA” or the “Company”), including FINOVA Capital Corporation and its subsidiaries (“FINOVA Capital”).

OVERVIEW

Plan of Liquidation. On November 1, 2006, our Board of Directors (the “Board”) approved the Plan of Complete Liquidation and Dissolution (the “Plan of Liquidation”) and the filing of a motion (the “Motion”) with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), which was approved by the Bankruptcy Court on December 4, 2006. As a result of these approvals, we took steps to initiate our complete liquidation and as such, the information provided in this Annual Report on Form 10-K reflects our adoption of the liquidation basis of accounting effective the close of business on December 4, 2006 in accordance with accounting principles generally accepted in the United States.

As of December 31, 2008, we had substantially completed the liquidation of our asset portfolio. Our attention is now focused on the wind down of our operations, resolution of legal matters and the future dissolution of our entities. We are in the process of withdrawing our authority to conduct business in the states that we no longer have active assets or legal requirements that necessitate our continued authorization to conduct business. As of December 31, 2008, we have completed the withdrawal process for 44 states, while others are pending. The timing and amount of distributions to Senior Note holders will primarily depend on the resolution of legal matters, the extent to which reserves for current or future liabilities are required, the length of time required to settle all our matters and, to a lesser extent, the timing and amounts we receive for our remaining assets.

We have continued with efforts to wind-up our affairs; however, as previously noted we cannot control the timing of resolving legal matters. Certain legal matters continue to take longer than anticipated to resolve, including the Thaxton Life Partners arbitration hearing, which has been postponed until the second quarter of 2009, and the motion regarding distributions to stockholders described below. Once the legal matters have been resolved, FINOVA believes it will still need a short period of time to complete the final wind-up of our affairs. As a result, the reserve for estimated costs reflected in our Statement of Net Assets in Liquidation currently assumes a liquidation period through August of 2009. There can be no assurance we will complete our liquidation in this time period, and the resolution of the various legal matters may extend for a longer period of time. We are concerned about the continued delays in the legal process, particularly in regards to the motion regarding distributions to stockholders and how such delays continue to deplete assets available to settle our liabilities. We have evaluated and continue to consider alternatives to complete the wind-up process, including transferring to a liquidating trust any assets not sold or distributed (subject to outstanding liabilities), depending on the progress of the outstanding legal matters. We will continue to evaluate our progress in resolving the outstanding legal matters on at least a quarterly basis and re-evaluate our reserve for estimated costs. Refer to Item 3. “Legal Proceedings” for the status of our outstanding legal matters.

We continue to retain cash reserves to fund our expenses, including the costs associated with the wind-up of our affairs and matters related to the TLP Action, which is likely to limit our ability to make and the timing of future voluntary principal prepayments and interest payments.

Forever Insolvent. As of December 31, 2008, we have repaid $1.54 billion or approximately 52% of the principal on the Senior Notes. Based on the valuation of our assets at their estimated net realizable value and liabilities at estimated settlement amount, we currently estimate the Senior Note holders will receive additional liquidation distributions (principal and interest) of approximately $139.5 million, which is considerably less than the total principal and interest due of approximately $1.4 billion. We clearly do not have sufficient assets to fully repay the Senior Note obligation. On June 26, 2007, the Bankruptcy Court issued a final order finding, among other things, that FINOVA is presently and will be forever insolvent.

No Stockholder Payments Anticipated. While the Indenture contemplated we would make payments to our stockholders as the Senior Notes were repaid, we have not made those payments. Distributions to stockholders are prohibited due to our financial condition. Based on our liquidation basis financial statements, we will not be able to repay approximately $1.3 billion of the Senior Notes. As a result, stockholders should not expect any payments or return on their common stock. Funds related to the restricted distributions have been held in a segregated account, pending their final disposition. We anticipate that those funds will eventually be paid to our creditors, not to our stockholders. If the funds were to be paid to our stockholders, affiliates of Berkadia (which are owned by Berkshire Hathaway and Leucadia), as owner of 50% of our stock, would receive half of those payments.

A-1

As discussed in Item 3. “Legal Proceedings,” in June 2007, the Bankruptcy Court determined that (1) we no longer need to direct funds into a restricted account, and (2) we may use those funds for general corporate purposes. On August 26, 2008, the Delaware District Court upheld the Bankruptcy Court ruling, but on September 23, 2008, the equity committee appealed the District Court’s ruling to the United States Court of Appeals for the Third Circuit.

No Restructuring Plan Contemplated. On numerous occasions, we have been asked whether there is some plan to restructure the Company so as to be able to realize value on our net operating loss carryforwards (“NOL”). We are not formulating a restructuring plan. However, as we have noted for some time, the Board remains willing to consider legitimate proposals presented by note holders or others. Multiple groups have made proposals or presented us with concepts designed to save the NOLs. In each and every instance to date, the proposals and concepts were determined to not be viable under the applicable tax regulations and/or did not make economic sense.

Many obstacles exist to creation of a viable restructuring plan. A restructuring presumes a sensible business plan emerging from that process. In light of our dwindling asset base, lack of retained business knowledge and the competitive environment, we believe it would be difficult, if not futile, in these circumstances to develop a business model that can produce returns to the creditors and/or new investors greater than that expected from the present course. Absent that, or a substantial new investment in FINOVA, we believe it would be difficult to obtain the requisite approval to restructure the present debt obligations. The task has become more difficult due to the substantial liquidation of our portfolio, continuation of the wind-up process and current general economic conditions. We caution investors to carefully evaluate applicable tax regulations, which restrict the ability to transfer or use NOLs in a variety of circumstances. Our financial statements do not anticipate using the NOLs. Upon final dissolution of our entities, the NOLs will be extinguished. For a further discussion of NOLs and deferred taxes, see the Notes to Consolidated Financial Statements, Note F. “Income Taxes.”

HIGH INVESTMENT RISK OF SECURITIES. As previously stated, we will not be able to fully repay the Senior Notes or to make any distributions to our stockholders, absent a court order in connection with the appeal referred to above. Consequently, investing in our Senior Notes and common stock involves a high level of risk.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements continue to be prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to use estimates and assumptions that affect reported amounts of assets and liabilities. These 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. See Item 1A. “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for more information on these risks and uncertainties. We believe the following to be among the most critical judgment areas in the application of our accounting policies.

Liquidation Basis of Accounting

As a result of the approval of our Plan of Liquidation by the Bankruptcy Court, we took steps to initiate our complete liquidation and as such, the information provided in this Report on Form 10-K reflects our adoption of the liquidation basis of accounting effective the close of business on December 4, 2006 in accordance with accounting principles generally accepted in the United States. A Statement of Net Assets in Liquidation and a Statement of Changes in Net Assets in Liquidation are the principal financial statements presented under the liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable value, which is the non-discounted amount of cash, or its equivalent, into which an asset is expected to be converted in the due course of business less direct costs, while liabilities are reported at their estimated settlement amount, which is the non-discounted amounts of cash, or its equivalent, expected to be paid to liquidate an obligation in the due course of business, including direct costs. Additionally, under the liquidation basis of accounting, we are required to establish a reserve for all future estimated general and administrative expenses and other costs expected to be incurred during the liquidation (exclusive of interest expense). These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the timing or amount of future distributions or our actual dissolution. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the Plan of Liquidation based on the assumptions set forth below. The actual values and costs associated with carrying out the Plan of Liquidation are expected to differ from amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the Plan of Liquidation. Accordingly, it is not possible to predict with certainty the timing or

A-2

aggregate amount which will ultimately be distributed to note holders and no assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying Statement of Net Assets in Liquidation or the price at which our Senior Notes have traded or are expected to trade in the future.

The following are the significant assumptions utilized by management in assessing the value of our liquidating portfolio and the expected settlement amount of liabilities included in the Statement of Net Assets in Liquidation at December 31, 2008 and 2007.

Liquidating Portfolio. The remaining liquidating portfolio is primarily comprised of judgments and claims against former customers and non-marketable private equity and other securities. All assets were adjusted to their estimated net realizable values, which represented all future undiscounted cash flows expected to be collected from each of these transactions, including sales and settlement proceeds, principal collections, scheduled rental payments and interest. Cash flow estimates for these assets are based on current information obtained from trustees and others, collection efforts, customer collateral and the financial condition of these former customers. Certain investments are reported at their fair value, based on published information or quotes by registered securities brokers. 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, net realizable values.

Reserve for Estimated Costs During the Liquidation Period. Under the liquidation basis of accounting, we are required to estimate and accrue for costs associated with implementing and completing the Plan of Liquidation. The reserve for estimated costs includes four primary areas of accruals including people costs (payroll and benefits), Leucadia management fees, professional services and litigation costs, and corporate expenses (insurance, directors’ fees and entity related expenses). These amounts can vary significantly due to, among other things, the timing of asset sales, the timing and amounts associated with discharging known and contingent liabilities and claims, the costs associated with cessation of our operations including an estimate of costs subsequent to that date (which would include reserve contingencies for the appropriate statutory periods) and the costs of retaining knowledgeable personnel and others to oversee the liquidation. As a result, we have accrued the projected costs including corporate overhead and specific liquidation costs of performance bonuses, professional fees and various other wind-up costs expected to be incurred during the projected period to complete the liquidation and dissolution. These expense accruals will be periodically reviewed for adequacy and adjusted from time to time as projections and assumptions change. Changes to the accruals will be recorded as adjustments to net assets in liquidation in future periods.

With the adoption of the liquidation basis of accounting, all anticipated improvements or deterioration in the portfolio are fully reflected in our financial statements as facts and assumptions change.

New Accounting Standards. There were no new accounting standards issued during 2008 that impacted FINOVA.

CHANGES IN NET ASSETS IN LIQUIDATION

The following table summarizes the changes in net assets in liquidation for the years ended December 31, 2008 and 2007 (dollars in thousands):


	2008			2007
Net Assets in Liquidation, beginning of year	$	—		$	—

Changes in net assets in liquidation:
Change in estimated net realizable value of assets and other liabilities		913			5,923
Interest earned on investment of cash reserves and other operating activity		6,121			15,181
Increase in estimated costs during the liquidation period		(8,365	)		(9,913	)
Interest accruing on the Senior Notes		(106,812	)		(108,465	)
Reduction in the estimated settlement of the Senior Notes		108,143			97,274

Net Change in Net Assets in Liquidation		—			—


Net Assets in Liquidation, end of year	$	—		$	—

A-3

Changes in Net Assets in Liquidation for the Years Ended December 31, 2008 and 2007

During the years ended December 31, 2008 and 2007, the estimated net realizable value of our assets and liabilities increased a net $0.9 million and $5.9 million, respectively. The increase during 2008 was primarily attributed to the realization of certain customer claims for amounts in excess of previous estimates, partially offset by a decline in the value of certain cash investments; while the increase in 2007 was due to the settlement of certain bankruptcy claims for lower than previously anticipated amounts, an increase in interest accrued on sales transactions due to delays in the final closure of the transactions, a slight increase in the purchase price of certain aviation assets and the actual and projected realization of certain customer claims for amounts in excess of previous estimates, partially offset by revised purchase prices on certain aircraft following their revaluation based upon updated aircraft specifications and usage reports and a slight decline in the net realizable value of an engine based upon bids obtained through an auction process to liquidate the asset.

Additionally, during 2008 and 2007, we accrued $106.8 million and $108.5 million of additional interest on the Senior Notes and earned interest income on cash investments and other operating activity of $6.1 million and $15.2 million, respectively. All cash received on the portfolio is applied against its estimated net realizable value, which takes into consideration all expected interest and rental payments. Any cash received in excess of an individual asset’s estimated net realizable value is shown as a change in net assets in the period of collection.

The net realizable value of our assets does not take into consideration all future interest to be earned on cash and cash equivalents. Interest earned on the investment of cash reserves is shown separately as a change in net assets. During 2008, our short-term investments were primarily comprised of lower risk money markets, U.S. Treasuries and certificates of deposit. In late 2007, we decided that we would forego some yield to ensure maximum principal preservation. The aggregate yield we are currently receiving on our cash investments is not sufficient to fully offset the costs of the liquidation process.

As previously discussed, we established a reserve for estimated costs during the liquidation period and all future expenditures for operating expenses are charged directly against the reserve. During the year ended December 31, 2008, the reserve declined to $8.9 million due to the payment of expenses ($15.3 million) and a reduction in our estimate as a result of certain actual expenses being lower than previously anticipated, partially offset by an $8.4 million net increase caused by the extension of the estimated liquidation period through August of 2009. During the year ended December 31, 2007, the reserve declined due to the payment of expenses ($18.4 million) and a reduction in our estimate as a result of certain actual expenses being lower than previously anticipated, partially offset by a $9.9 million net increase caused by the extension of the estimated liquidation period and an increase in certain costs associated with our wind-up.

We have continued with efforts to wind-up our affairs; however, as previously noted we cannot control the timing of resolving legal matters. Certain legal matters continue to take longer than anticipated to resolve, including the Thaxton Life Partners arbitration hearing, which has been postponed until the second quarter of 2009, and the motion regarding distributions to stockholders described below. Once the legal matters have been resolved, FINOVA believes it will still need a short period of time to complete the final wind-up of our affairs. As a result, the reserve for estimated costs reflected in our Statement of Net Assets in Liquidation currently assumes a liquidation period through August 2009. There can be no assurance we will complete our liquidation in this time period, and the resolution of the various legal matters may extend for a longer period of time. We are concerned about the continued delays in the legal process, particularly in regards to the motion regarding distributions to stockholders and how such delays continue to deplete assets available to settle our liabilities. We have evaluated and continue to consider alternatives to complete the wind-up process, including transferring to a liquidating trust any assets not sold or distributed (subject to outstanding liabilities), depending on the progress of the outstanding legal matters. We will continue to evaluate our progress in resolving the outstanding legal matters on at least a quarterly basis and re-evaluate our reserve for estimated costs. Refer to Item 3. “Legal Proceedings” for the status of our outstanding legal matters.

Due to the fact that we do not have sufficient assets to fully satisfy all obligations to our creditors, any change to the estimated net realizable value of our assets and liabilities results in a corresponding adjustment to the estimated settlement amount of the Senior Notes. During the year ended December 31, 2008, the estimated settlement amount of the Senior Notes (principal only) was reduced by $108.1 million to a balance of $125.9 million; however, we currently estimate the Senior Note holders will receive total liquidation distributions (principal and interest) of approximately $139.5 million, which when combined with $106.8 of interest distributed during 2008, is a $1.3 million decrease over our 2007 year-end estimate. This decrease is the direct result of the $8.4 million increase in the estimated costs during the liquidation period exceeding the $6.1 million of interest earned on the investment of cash reserves and other operating activity and the $0.9 million change in the estimated net realizable value of assets and other liabilities.

A-4

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Since emergence from chapter 11 bankruptcy proceedings in August 2001, our business activities have been limited to maximizing the value of our portfolio through the orderly collection of our assets. These activities included collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral. We have substantially completed the liquidation of our portfolio and our focus has shifted to the continued wind down of our operations and future dissolution of our entities. We are prohibited by the Indenture governing our 7.5% Senior Secured Notes from engaging in any new lending activities or other business. Any funds generated in excess of cash reserves permitted by our debt agreements have been used to reduce obligations to our creditors.

Because substantially all of our assets (including cash reserves) are pledged to secure obligations under the Intercompany Notes securing the Senior Notes, our ability to obtain additional or alternate financing is severely restricted. Berkadia has no obligation to lend additional sums to or to further invest in FINOVA. As a result of these factors and the substantial liquidation of our portfolio, our only meaningful source of liquidity is cash reserves held by the Company.

The terms of the Indenture prohibit us from using available funds (after certain permitted uses) for any purpose other than to satisfy our obligations to creditors and to make limited payments to stockholders in certain circumstances. Under the terms of the Indenture, we are permitted to establish a cash reserve in an amount not to exceed certain defined criteria. Due to our limited sources of liquidity, the estimation of cash reserves is critical to our overall liquidity. Cash reserve estimations are subject to known and unknown risks, uncertainties, and other factors that could materially impact the amounts determined. Failure to adequately estimate a cash reserve in one period could result in insufficient liquidity to meet obligations in that period, or in a subsequent period, if actual cash requirements exceed the cash reserve estimates. Due to the substantial liquidation of our portfolio, our incoming cash flows have significantly diminished and the estimation of cash reserves has become increasingly more critical to ensure we retain sufficient funds to meet obligations as they become due during the liquidation process. Our cash reserve methodology has been altered to retain our maximum potential cash requirements. As a result, we are reserving cash for the full amount of legal claims even though we anticipate settling or resolving the matters for considerably less.

The timing and amount of distributions to Senior Note holders will primarily depend on the resolution of legal matters, the extent to which reserves for current or future liabilities are required, the length of time required to settle all of our matters and, to a lesser extent, the timing and amounts we receive for our remaining assets. Refer above to Item 3. “Legal Proceedings” for the status of our outstanding legal matters.

During the year ended December 31, 2008, we made two interest payments of $53.4 million ($106.8 million in total) and no principal prepayments on the Senior Notes, while during 2007; we made interest payments totaling $109.0 million and $59.4 million of partial principal prepayments. Cumulative principal prepayments through December 31, 2008 totaled $1.54 billion, which reduced the outstanding principal to $1.4 billion and represented approximately 52% of the principal being repaid. Based on the valuation of our assets at their estimated net realizable value and liabilities at estimated settlement amount, we currently estimate the Senior Note holders will receive additional liquidation distributions (principal and interest) of approximately $139.5 million, which is considerably less than the total principal and interest due of approximately $1.4 billion. The estimated settlement amount was determined solely based on the net assets available for settlement of the Senior Notes and is subject to change due to changes in the estimated net realizable value of our net assets. We clearly do not have sufficient assets to fully repay the Senior Note obligation at maturity in November 2009.

A-5

The Senior Notes have a first priority security interest in substantially all of our remaining assets; however, as noted above, the Indenture requires us to first use any cash and cash equivalents to pay or to fund operating expenses, taxes and reasonable reserves for commitments and general corporate purposes.

Stockholders should not expect any payments or distributions. The Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders may receive a distribution equal to 5.263% of each principal prepayment. However, the Indenture prohibits us from making distributions to and/or repurchases from stockholders if the payments would render the Company insolvent, would be a fraudulent conveyance or would not be permitted to be made under applicable law. Any such distribution and/or repurchase would be considered an impermissible restricted payment under the Indenture.

In conjunction with the prepayments of Senior Notes noted above, we retained a total of $81.2 million as of December 31, 2008. Retained amounts have been segregated and reflected as restricted cash in our financial statements, pending their final disposition. We anticipate that the retained amounts will eventually be paid to our creditors, not our stockholders. If the funds were to be paid to our stockholders, affiliates of Berkadia (jointly owned by Leucadia and Berkshire Hathaway), which owns 50% of our common stock, would receive half of the retained amounts. Berkadia has advised us that it does not believe that stockholders are entitled to the retained amounts since we cannot fully satisfy our creditor obligations.

As previously reported, in June 2007, the Bankruptcy Court determined that (1) we no longer need to direct funds into a restricted account, and (2) we may use those funds for general corporate purposes. On August 26, 2008, the Delaware District Court upheld the Bankruptcy Court ruling, but on September 23, 2008, the equity committee appealed the District Court’s ruling to the United States Court of Appeals for the Third Circuit. For a further discussion of the appeal and its status, see Item 3. “Legal Proceedings.”

Based on our financial condition, there will not be sufficient funds available to fully repay the outstanding principal on the Senior Notes or to make any 5% distribution to common stockholders, absent a court order in connection with the appeal referred to above. As a result, there will not be a return to our stockholders. Consequently, investing in the Senior Notes and common stock involves a high level of risk.

Obligations and Commitments

The following is a listing of our significant contractual obligations and contingent commitments at December 31, 2008 and 2007. A detailed repayment schedule has not been provided because our most significant obligations are contractual as to amount, but contingent regarding the timing of repayment. The listing is not intended to be all encompassing and excludes normal recurring trade and other accounts payable obligations.


	December 31, 2008				December 31, 2007
Obligations and Commitments	Contractual		Contingent		Contractual		Contingent
	(Dollars in thousands)
Senior Notes	$	1,424,166	$		$	1,424,166	$
Management Services Agreement		16,000				24,000
Impermissible Restricted Payments				81,228				81,228
Contingent interest on Senior Notes				91,232				91,232
Lease obligations		22				22

	$	1,440,188	$	172,460	$	1,448,188	$	172,460

The Senior Notes mature in November 2009 and bear interest, payable semi-annually, to the extent that cash is available, at a fixed interest rate of 7.5% per annum. Principal prepayments of the Senior Notes are contingent on the availability of excess cash. Our obligations with respect to the payment of interest and principal under the Senior Notes are secured by a first priority security interest in (a) all capital stock of FINOVA Capital, (b) secured promissory notes of FINOVA Capital issued to FINOVA in the aggregate principal amount of the Senior Notes (the “Intercompany Notes”) and (c) certain other property of FINOVA that may be acquired from its subsidiaries in the future. The Intercompany Notes are secured by substantially all of the assets of FINOVA Capital. As noted above, we made $59.4 million of partial principal prepayments on the Senior Notes in 2007, while no principal was repaid during 2008. Based on the valuation of our assets at their estimated net realizable value and liabilities at estimated settlement amount, we currently estimate the Senior Note holders will receive additional liquidation distributions (principal and interest) of approximately $139.5 million, which when combined with $106.8 million of interest already distributed during 2008, is a $1.3 million decrease over our 2007 year-end estimate and is considerably less than the total principal and interest due of approximately $1.4 billion.

A-6

Our business continues to be operated under a Management Services Agreement with Leucadia that expires in 2011. We pay Leucadia an annual management fee of $8.0 million and reimburse it for expenses incurred.

Permitted uses of cash are specified in the Indenture. Generally, we are permitted to use cash in the following order: first to fund operating expenses, including payment of taxes and funding customer commitments; then to pay interest on the Senior Notes; then to make optional purchases of the Senior Notes in accordance with the terms of the Indenture in an amount not to exceed $150 million per year. Ninety-five percent (95%) of the remaining available cash after establishment of cash reserves as defined in the Indenture will be used to make prepayments of principal on the Senior Notes and five percent (5%) is identified for distributions to and/or repurchases of stock from common stockholders. However, the Indenture prohibits us from making distributions to and/or repurchases from stockholders if the payments would render us insolvent, would be a fraudulent conveyance or would not be permitted under applicable law. Any such distribution and/or repurchase would be considered an impermissible restricted payment under the Indenture. Since the Senior Notes will not be fully repaid (current shortfall estimated to be approximately $1.3 billion), we are required to retain impermissible restricted payments. As of December 31, 2008, we had retained a total of $81.2 million. Refer to Item 3. “Legal Proceedings” for a further discussion of the restricted payments.

The Indenture provides that if payment in full is made of the outstanding principal of the Senior Notes and payments are made to our common stockholders in an aggregate amount equal to 5.263% (i.e., 5%/95% as noted above) of the aggregate principal amount of the Senior Notes, ninety-five percent (95%) of any available cash will be used to pay contingent interest to holders of Senior Notes in an aggregate amount of up to $91.2 million (reflecting Senior Notes that have been repurchased by us) and five percent (5%) of remaining available cash will be used for distributions to and/or repurchases of stock from common stockholders, if those distributions can be made to stockholders, as noted above. Our obligation for the contingent interest payments is not secured. Based on our current financial condition, there will not be funds available to fully repay the outstanding principal on the Senior Notes, to make any distributions to common stockholders or to pay any contingent interest.

Lease obligations represent total contractual obligations (rent and operating costs) due under an operating lease. Lease obligations totaled $22 thousand at December 31, 2008 and 2007 and are comprised entirely of a renewable short-term lease on our executive office space.

Collection of the Portfolio

As noted previously, our business activities have been limited to maximizing the value of our portfolio through the orderly collection of assets. These activities included collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral.

The following table presents the activity in our liquidating portfolio for the years ended December 31:


	2008			2007
	(Dollars in thousands)
Liquidating Portfolio, beginning of year	$	6,271		$	185,544

Cash activity		(7,289	)		(179,903	)

Non-cash activity		1,523			630


Liquidating Portfolio, end of year	$	505		$	6,271

Our liquidating portfolio declined to $0.5 million at December 31, 2008, down from $6.3 million at December 31, 2007. Cash activity for 2008 primarily represented collections and proceeds from the liquidation of our investments in the severance and bonus trusts ($2.8 million) and recoveries on accounts and claims in excess of our previous estimates, while non-cash activity primarily represented an increase in the estimated net realizable value of certain assets due to higher than previously anticipated recovery of claims against former customers, partially offset by a decline in the value and reclassification of certain maturing investments to cash equivalents.

A-7

During 2007, our cash activity was comprised of customer collections (including recoveries) and proceeds received from the sale of assets, while non-cash activity resulted in a net increase to the estimated net realizable value of our assets. Cash activity for 2007 included the collection of $83.7 million in full and final settlement of the Thaxton loan and the sale of the remainder of our aviation assets for amounts on an aggregate basis that approximated their previously reported estimated net realizable values; while the non-cash increase in the value of assets was primarily due to an increase in interest accrued on sales transactions due to delays in the final closure of the transactions, a slight increase in the purchase price of certain aviation assets and the actual and projected realization of certain customer claims for amounts in excess of previous estimates, partially offset by revised purchase prices on certain aircraft following their revaluation based upon updated aircraft specifications and usage reports and a slight decline in the net realizable value of an engine based upon bids obtained through an auction process to liquidate the asset.

As of December 31, 2008, the remaining portfolio value is primarily comprised of a number of judgments and claims against former customers (estimated net realizable value of $0.5 million) and a few non-marketable private equity and other securities. In the majority of these instances, we did not attribute any net realizable value to these assets due to our inability to predict the collection of any cash flows from the transactions with even a remote level of confidence. Most of these transactions were previously included in due diligence materials in an attempt to sell the assets, but were excluded on multiple occasions by prospective buyers because of costs of collection and potential liability concerns of the buyers. Prospective buyers that specialize in these types of residual assets and claims performed due diligence, but were not interested in making an offer. We continue to monitor these accounts for changes in facts and circumstances that would allow us to attribute value to these assets or events that would resolve their ultimate disposition. As a result, there is the possibility that some net realizable value will be attributed to these assets in the future. An increase in the estimated net realizable value of these assets, if any, will be reflected as a change in net assets in liquidation in future filings. Additionally, we continue to occasionally receive proceeds from trustees and liquidators for assets that in certain cases were written off years ago. These cash flows are typically immaterial and are reflected as a change in net assets in liquidation as they are received. We expect certain of these assets will outlast the Company. In connection with or prior to the final dissolution of our entities, we anticipate assigning or transferring the rights to collection of these assets to a trustee or receiver for the benefit of the Senior Note holders.

Liquidation Process

Due to the substantial liquidation of our portfolio, our incoming cash flows have significantly diminished and the estimation of cash reserves has become increasingly more critical to ensure we retain funds to meet obligations as they become due during the liquidation process. Our cash reserve methodology has been altered to retain our maximum potential cash requirements. Due to the uncertainty of cash requirements associated with the wind-up of our affairs and resolution of matters related to the TLP Action, discussed in Item 3. “Legal Proceedings,” we anticipate maintaining cash reserves to cover these potential and uncertain expenditures, which is likely to limit our ability to make future voluntary prepayments and interest payments.

Our liquidation process is now focused on the wind down of our operations, resolution of legal matters and the future dissolution of our entities. We are in the process of withdrawing our authority to conduct business in the states that we no longer have active assets or legal requirements that necessitate our continued authorization to conduct business. The estimated time required to withdraw our licenses will vary by state. Many states have only take a month or two to complete, while certain states have a more prolonged process that may take a number of months. Additionally, there are a handful of states such as Arizona and Delaware, among others, where we do not anticipate commencing the withdraw process until all outstanding claims and litigation have been resolved or active assets liquidated. As of December 31, 2008, we have completed the withdrawal process for 44 states, while others are pending.

On October 3, 2007, we filed a clean-up objection to outstanding disputed proofs of claims (the “Clean-up Motion”) with the Bankruptcy Court. The Clean-up Motion requested, among other things, to have the outstanding bankruptcy claims, which aggregated $26.1 million, disallowed and expunged in their entirety. The Bankruptcy Court ordered that $21.1 million of claims that did not file an objection to the Clean-up Motion were disallowed and expunged in their entirety, while we agreed to settle $5.0 million of the outstanding claims for $0.8 million. As a result of certain claims being disallowed and other claims being settled for lower than previously anticipated amounts, we reversed an excess accrual of $4.8 million during the fourth quarter of 2007. Prior to the fourth quarter of 2007, we had settled all active bankruptcy claims for amounts that were less than previously estimated, resulting in an additional $0.7 million reduction in our claims accrual.

A-8

hearing, which has been postponed until the second quarter of 2009, and the motion regarding distributions to stockholders. Once the legal matters have been resolved, FINOVA believes it will still need a short period of time to complete the final wind-up of our affairs. As a result, the reserve for estimated costs reflected in our Statement of Net Assets in Liquidation currently assumes a liquidation period through August of 2009. There can be no assurance we will complete our liquidation in this time period, and the resolution of the various legal matters may extend for a longer period of time. We are concerned about the continued delays in the legal process, particularly in regards to the motion regarding distributions to stockholders and how such delays continue to deplete assets available to settle our liabilities. We have evaluated and continue to consider alternatives to complete the wind-up process, including transferring to a liquidating trust any assets not sold or distributed (subject to outstanding liabilities), depending on the progress of the outstanding legal matters. We will continue to evaluate our progress in resolving the outstanding legal matters on at least a quarterly basis and re-evaluate our reserve for estimated costs. Refer to Item 3. “Legal Proceedings” for the status of our outstanding legal matters.

At December 31, 2008 and 2007, we had four employees. The four remaining employees are scheduled to remain through the completion of the liquidation process. The Company believes that our staffing levels are adequate to provide us with appropriate oversight of the smaller operation, while maintaining adequate resources to deal with outstanding legal matters and the future dissolution of our entities. We continue to operate as a public company during the liquidation under a Management Services Agreement with Leucadia that expires in 2011.

Special Note Regarding Forward-Looking Statements

Certain statements in this report are “forward-looking,” in that they do not discuss historical fact, but instead reflect future expectations, projections, intentions, or other items. Forward-looking statements are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include assumptions, estimates and valuations implicit in the financial statements and related notes as well as matters discussed throughout this report including, but not limited to projections, our Plan of Liquidation, sections captioned Item 1. “Business” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” They are also made in documents incorporated in this report by reference, or in which this report may be incorporated.

Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. When used in this report, the words “estimate,” “expects,” “anticipates,” “believes,” “plans,” “intends” and similar expressions are intended to identify forward-looking statements that involve known and unknown risks and uncertainties. The risks, uncertainties and other factors that could cause our actual results or performance to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those set forth in Item 1A. “Risk Factors” and elsewhere in this Report and in our public filings.

Undue reliance should not be placed on these forward-looking statements, which are applicable only as of the date of this Report. We do not intend to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. We cannot predict the risk from reliance on forward-looking statements in light of the many factors that could affect their accuracy.

Off-Balance Sheet Arrangements and Derivative Financial Instruments

At December 31, 2008 and 2007, we did not have any significant transactions, agreements or other contractual arrangements with unconsolidated entities, nor did we have any significant derivative financial instruments.

A-9

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

The FINOVA Group Inc.

We have audited the accompanying consolidated statement of net assets in liquidation (liquidation basis) of The FINOVA Group Inc. (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statement of changes in net assets in liquidation (liquidation basis) for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note A to the consolidated financial statements, the Company’s Board of Directors approved a plan of liquidation (the “Plan”) on November 1, 2006. The Plan was approved by the bankruptcy court on December 4, 2006. The court authorized the Company to sell all or substantially all of the Company’s assets. The court also authorized the Company’s future dissolution without stockholders’ approval. As a result, the Company has changed its basis of accounting for periods subsequent to December 4, 2006 from the going-concern basis to a liquidation basis.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated net assets in liquidation (liquidation basis) of the Company at December 31, 2008 and 2007 and the related changes in consolidated net assets in liquidation (liquidation basis) for the years then ended, in conformity with U.S. generally accepted accounting principles applied on the basis described in the preceding paragraph.

/s/ Ernst & Young LLP

Phoenix, Arizona

March 30, 2009

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THE FINOVA GROUP INC.

CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS)

DECEMBER 31,

(Dollars in thousands)


	2008		2007
ASSETS
Cash and cash equivalents	$	65,914	$	175,140
Restricted cash—impermissible restricted payments		81,228		81,228
Liquidating portfolio		505		6,271
Other assets and deposits		759		1,369

Total Assets	$	148,406	$	264,008


LIABILITIES (excluding Senior Notes)
Interest payable on the Senior Notes	$	13,648	$	13,648
Accounts payable and other liabilities				574
Reserve for estimated costs during the liquidation period		8,906		15,791

Total Liabilities (excluding Senior Notes)		22,554		30,013


Net Assets Available for Settlement of Senior Notes		125,852		233,995

Senior Notes with outstanding principal of $1.4 billion at estimated settlement amount		125,852		233,995


Net Assets in Liquidation	$	—	$	—

See notes to consolidated financial statements.

A-11

THE FINOVA GROUP INC.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS)

(Dollars in thousands)


	Years Ended December 31,
	2008			2007
Net Assets in Liquidation, beginning of year	$	—		$	—

Changes in net assets in liquidation:
Change in estimated net realizable value of assets and other liabilities		913			5,923
Interest earned on investment of cash reserves & other operating activity		6,121			15,181
Increase in estimated costs during the liquidation period		(8,365	)		(9,913	)
Interest accruing on the Senior Notes		(106,812	)		(108,465	)
Reduction in the estimated settlement of the Senior Notes		108,143			97,274

Net Change in Net Assets in Liquidation		—			—


Net Assets in Liquidation, end of year	$	—		$	—

See notes to consolidated financial statements.

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THE FINOVA GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands in tables)

A.	Nature of Operations and Plan of Liquidation

Nature of Operations

The notes to the financial statements relate to The FINOVA Group Inc. and its subsidiaries (collectively “FINOVA” or the “Company”), including FINOVA Capital Corporation and its subsidiaries (“FINOVA Capital”). FINOVA was a financial services holding company. Through its principal operating subsidiary, FINOVA Capital, we provided a broad range of financing and capital markets products, primarily to mid-size businesses. Throughout this document, “we,” “us” and “our” also refer to The FINOVA Group Inc. and its subsidiaries.

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 our Third Amended and Restated Joint Plan of Reorganization (the “Plan”), pursuant to which the Debtors restructured their debt, effective August 21, 2001, when we emerged from bankruptcy.

Since emergence from chapter 11 bankruptcy proceedings in August 2001, our business activities have been limited to maximizing the value of our portfolio through the orderly collection of our assets. These activities included collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral. We have substantially completed the liquidation of our portfolio and our focus has shifted to the continued wind down of our operations and future dissolution of our entities. We are prohibited by the Indenture (the “Indenture”) governing our 7.5% Senior Secured Notes (the “Senior Notes”) from engaging in any new lending activities or other business. Any funds generated in excess of cash reserves permitted by our debt agreements have been used to reduce obligations to our creditors.

Because substantially all of our assets (including cash reserves) are pledged to secure obligations under the promissory notes of FINOVA Capital issued to us in the aggregate principal amount of the Senior Notes (the “Intercompany Notes”), our ability to obtain additional or alternate financing is severely restricted. As a result of this and the substantial liquidation of our portfolio, our only meaningful source of liquidity is cash reserves held by the Company.

Plan of Liquidation

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THE FINOVA GROUP INC.

liabilities), depending on the progress of the outstanding legal matters. We will continue to evaluate our progress in resolving the outstanding legal matters on at least a quarterly basis and re-evaluate our reserve for estimated costs. Refer below to Note H. “Litigation and Claims” for the status of our outstanding legal matters.

We will continue to operate as a public company during the liquidation under a Management Services Agreement with Leucadia National Corporation (“Leucadia”) 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).

B.	Significant Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to use estimates and assumptions that affect reported amounts of assets and liabilities. These 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 net realizable values, reserve for future costs and settlement amounts. Actual results could differ from those estimated.

Consolidation Policy

The consolidated financial statements present the assets and liabilities and changes to the net assets of FINOVA and its subsidiaries, including FINOVA Capital. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. All intercompany balances have been eliminated in consolidation.

Liquidation Basis of Accounting

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THE FINOVA GROUP INC.

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 $62.0 million and $172.0 million at December 31, 2008 and 2007, respectively. During 2008, our short-term investments were primarily comprised of lower risk money markets, U.S. Treasuries and certificates of deposit.

Deferred Income Taxes. Deferred tax assets and liabilities were 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 liabilities were measured using enacted tax law. A valuation allowance was recorded since it was more likely than not that a deferred tax asset would not be realized.

Impermissible Restricted Payments. The Indenture defines impermissible restricted payments as dividends or distributions to and/or repurchases of stock from common stockholders that, if made, would render the Company insolvent, would be a fraudulent conveyance or would not be permitted to be made under applicable law. Impermissible restricted payments are required to be retained until such time, if ever, that we are no longer restricted from making a distribution to our stockholders or until it is necessary to use the cash to satisfy general corporate purposes.

Segment Reporting. In connection with our reorganization and emergence from bankruptcy in 2001, formerly reported operating segments were combined into one operating unit. We are no longer soliciting new business and our 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.

Savings Plan. We previously maintained The FINOVA Group Inc. Savings Plan (the “Savings Plan”), a qualified 401(k) program. The Savings Plan had been available to substantially all employees. The employee was able to elect voluntary wage deductions ranging from 0% to 30% of taxable compensation. Our matching contributions were based on employee pre-tax salary deductions, up to a maximum of 100% of the first 6% of salary contributions. Additionally, beginning January 1, 2005, substantially all employees received an Age & Service contribution to the Savings Plan based on each employee’s eligible earnings, age and years of service. The Savings Plan was terminated effective March 31, 2007.

New Accounting Standards. There were no new accounting standards issued during 2008 that impacted us.

C.	Changes in Net Assets in Liquidation

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THE FINOVA GROUP INC.

increase in 2007 was due to the settlement of certain bankruptcy claims for lower than previously anticipated amounts, an increase in interest accrued on sales transactions due to delays in the final closure of the transactions, a slight increase in the purchase price of certain aviation assets and the actual and projected realization of certain customer claims for amounts in excess of previous estimates, partially offset by revised purchase prices on certain aircraft following their revaluation based upon updated aircraft specifications and usage reports and a slight decline in the net realizable value of an engine based upon bids obtained through an auction process to liquidate the asset.

Under the liquidation basis of accounting, we were also required to establish a reserve for all future general and administrative expenses and other costs expected to be incurred during the liquidation (exclusive of interest expense). The following is a summary of and changes to the reserve for estimated costs during the liquidation period:


	December 31, 2007		Net Adjustments and Payments			December 31, 2008
People costs (payroll and benefits)	$	3,319	$	(1,981	)	$	1,338
Leucadia management fees		6,000		(2,000	)		4,000
Professional services and litigation costs		4,955		(2,496	)		2,459
General corporate expenses		1,517		(408	)		1,109

Total reserve for estimated costs during the liquidation period	$	15,791	$	(6,885	)	$	8,906


	December 31, 2006		Net Adjustments and Payments			December 31, 2007
People costs (payroll and benefits)	$	4,144	$	(825	)	$	3,319
Leucadia management fees		8,000		(2,000	)		6,000
Professional services and litigation costs		10,431		(5,476	)		4,955
General corporate expenses		1,684		(167	)		1,517

Total reserve for estimated costs during the liquidation period	$	24,259	$	(8,468	)	$	15,791

During the year ended December 31, 2008, the reserve declined to $8.9 million due to the payment of expenses ($15.3 million) and a reduction in our estimate as a result of certain actual expenses being lower than previously anticipated, partially offset by a $8.4 million net increase caused by the extension of the estimated liquidation period through August of 2009. During the year ended December 31, 2007, the reserve declined due to the payment of expenses ($18.4 million) and a reduction in our estimate as a result of certain actual expenses being lower than previously anticipated, partially offset by a $9.9 million net increase caused by the extension of the estimated liquidation period and an increase in certain costs associated with our wind-up.

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THE FINOVA GROUP INC.

liquidation period through August of 2009. There can be no assurance we will complete our liquidation in this time period, and the resolution of the various legal matters may extend for a longer period of time. We are concerned about the continued delays in the legal process, particularly in regards to the motion regarding distributions to stockholders and how such delays continue to deplete assets available to settle our liabilities. We have evaluated and continue to consider alternatives to complete the wind-up process, including transferring to a liquidating trust any assets not sold or distributed (subject to outstanding liabilities), depending on the progress of the outstanding legal matters. We will continue to evaluate our progress in resolving the outstanding legal matters on at least a quarterly basis and re-evaluate our reserve for estimated costs. Refer below to Note H. “Litigation and Claims” for the status of our outstanding legal matters.

Due to the fact that we do not have sufficient assets to fully satisfy all obligations to our creditors, any change to the estimated net realizable value of our assets and liabilities results in a corresponding adjustment to the estimated settlement amount of the Senior Notes. During the year ended December 31, 2008, the estimated settlement amount of the Senior Notes (principal only) was reduced by $108.1 million to a balance of $125.9 million; however, we currently estimate the Senior Note holders will receive total liquidation distributions (principal and interest) of approximately $139.5 million, which when combined with $106.8 million of interest distributed during 2008, is a $1.3 million decrease over our 2007 year-end estimate. This decrease is the direct result of the $8.4 million increase in the estimated costs during the liquidation period exceeding the $6.1 million of interest earned on the investment of cash reserves and other operating activity and the $0.9 million change in the estimated net realizable value of assets and other liabilities.

D.	Liquidating Portfolio

Our liquidating portfolio is recorded at its estimated net realizable value, which incorporates all future cash flows, including earnings expected to be collected.

The following table presents the activity in our liquidating portfolio for the years ended December 31:


	2008			2007
	(Dollars in thousands)
Liquidating Portfolio, beginning of year	$	6,271		$	185,544

Cash activity		(7,289	)		(179,903	)

Non-cash activity		1,523			630


Liquidating Portfolio, end of year	$	505		$	6,271

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THE FINOVA GROUP INC.

of any cash flows from the transactions with even a remote level of confidence. Most of these transactions were previously included in due diligence materials in an attempt to sell the assets, but were excluded on multiple occasions by prospective buyers because of costs of collection and potential liability concerns of the buyers. Prospective buyers that specialize in these types of residual assets and claims performed due diligence, but were not interested in making an offer. We continue to monitor these accounts for changes in facts and circumstances that would allow us to attribute value to these assets or events that would resolve their ultimate disposition. As a result, there is the possibility that some net realizable value will be attributed to these assets in the future. An increase in the estimated net realizable value of these assets, if any, will be reflected as a change in net assets in liquidation in future filings. Additionally, we continue to occasionally receive proceeds from trustees and liquidators for assets that in certain cases were written off years ago. These cash flows are typically immaterial and are reflected as a change in net assets in liquidation as they are received. We expect certain of these assets will outlast the Company. In connection with or prior to the final dissolution of our entities, we anticipate assigning or transferring the rights to collection of these assets to a trustee or receiver for the benefit of the Senior Note holders.

Debt

As of December 31, total debt outstanding on a liquidation basis, was as follows:


	2008			2007
Senior Notes:
Principal	$	1,424,166		$	1,424,166
Principal of Senior Notes estimated to not be settled or repaid		(1,298,314	)		(1,190,171	)

Senior Notes	$	125,852		$	233,995

During the year ended December 31, 2008, we made two interest payments of $53.4 million ($106.8 million in total) and no principal prepayments on the Senior Notes, while during 2007, we made interest payments totaling $109.0 million and $59.4 million of partial principal prepayments. Cumulative principal prepayments through December 31, 2008 totaled $1.54 billion, which reduced the outstanding principal to $1.4 billion and represented approximately 52% of the principal being repaid. Based on the valuation of our assets at their estimated net realizable value and liabilities at estimated settlement amount, we currently estimate the Senior Note holders will receive additional liquidation distributions (principal and interest) of approximately $139.5 million, which when combined with $106.8 million of interest already distributed during 2008, is a $1.3 million decrease over our 2007 year-end estimate and is considerably less than the total principal and interest due of approximately $1.4 billion. The estimated settlement amount was determined solely based on the net assets available for settlement of the Senior Notes and is subject to change due to changes in the estimated net realizable value of our net assets. We clearly do not have sufficient assets to fully repay the Senior Note obligation at maturity.

The Senior Notes mature in November 2009 and bear interest, payable semi-annually to the extent that cash is available for that purpose in accordance with the Indenture, at a fixed interest rate of 7.5% per annum. The Indenture has no financial covenants, except for the requirement to use available cash as discussed below.

FINOVA’s obligations with respect to the payment of interest and principal under the Senior Notes are secured by a first priority security interest in (a) all capital stock of FINOVA Capital, (b) secured promissory notes of FINOVA Capital issued to FINOVA in the aggregate principal amount of the Senior Notes (the “Intercompany Notes”) and (c) certain other property of FINOVA that may be acquired from its subsidiaries in the future. The Intercompany Notes are secured by a first priority lien on the assets of FINOVA Capital. Substantially all of FINOVA Capital’s subsidiaries have guaranteed FINOVA Capital’s repayment of the Intercompany Notes.

While, the Senior Notes have a first priority security interest in substantially all of our remaining assets, the Indenture requires us to first use any cash and cash equivalents to pay or to fund operating expenses, taxes and reasonable reserves for commitments and general corporate purposes.

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THE FINOVA GROUP INC.

In accordance with the terms of the Indenture, we are required to use any excess cash, as defined in the Indenture, to make semi-annual interest and principal payments on the Senior Notes. Additionally, the Indenture permits voluntary prepayments at our option, which we have previously elected to make from time to time; however, due to the uncertainty of cash requirements associated with the wind-up of our affairs and matters related to the TLP Action, discussed in Note H. “Litigation and Claims,” we anticipate maintaining cash reserves to cover these potential and uncertain expenditures, which is likely to limit our ability to make future voluntary prepayments and our next interest payment, which is scheduled for May 15, 2009. Failure to make the May 15, 2009 interest payment would not be an event of default under the Indenture, which requires the Company to fail to pay two consecutive interest payments before an event of default would occur.

The timing and amount of distributions to Senior Note holders will primarily depend on the resolution of legal matters, the extent to which reserves for current or future liabilities are required, the length of time required to settle all of our matters and, to a lesser extent, the timing and amounts we receive for our remaining assets. Refer to Note H. “Litigation and Claims” for the status of our outstanding legal matters and a discussion of the equity committee’s appeals of the Bankruptcy Court’s and Delaware District Court’s orders.

Stockholders should not expect any payments or distributions. The Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders may receive a distribution equal to 5.263% (i.e., 5%/95%) of each principal prepayment. Ninety-five percent (95%) of the remaining available cash after establishment of cash reserves as defined in the Indenture may be used to make prepayments of principal on the Senior Notes and five percent (5%) is identified for distributions to and/or repurchases of stock from common stockholders. However, the Indenture prohibits us from making distributions to and/or repurchases from stockholders if the payments would render the Company insolvent, would be a fraudulent conveyance or would not be permitted to be made under applicable law. Any such distribution and/or repurchase would be considered an impermissible restricted payment under the Indenture.

In conjunction with the prepayments of Senior Notes noted above, we have retained a total of $81.2 million as of December 31, 2008. Retained amounts have been segregated and reflected as restricted cash in our financial statements, pending their final disposition. We anticipate that the retained amounts will eventually be paid to our creditors, not our stockholders. If the funds were to be paid to our stockholders, affiliates of Berkadia (jointly owned by Leucadia and Berkshire Hathaway), which owns 50% of our common stock, would receive half of the retained amounts. Berkadia has advised us that it does not believe that stockholders are entitled to the retained amounts since we cannot fully satisfy our creditor obligations.

The Indenture provides that if payment in full is made of the outstanding principal of the Senior Notes and payments are made to our common stockholders in an aggregate amount equal to 5.263% of the aggregate principal amount of the Senior Notes, ninety-five percent (95%) of any available cash will then be used to pay contingent interest to holders of Senior Notes in an aggregate amount of up to $91.2 million (reflecting Senior Notes that have been repurchased by us), and five percent (5%) of any remaining available cash will be used for distributions to and/or repurchases of stock from common stockholders, if those distributions can be made to stockholders, as noted above. Contingent interest payments will terminate in 2016. Our obligation to make the contingent interest payments is not secured.

Based on our financial condition, there will not be sufficient funds available to fully repay the outstanding principal on the Senior Notes, to make any 5% distribution to common stockholders, absent a court order in connection with the appeal referred to above, or to make any contingent interest payments. As a result, there will not be a return to our stockholders. Consequently, investing in the Senior Notes and common stock involves a high level of risk.

F.	Income Taxes

As of December 31, 2008 and 2007, we had federal NOL carryfowards of $1.7 billion and $1.6 billion, respectively, which begin to expire in 2009. Our financial statements do not anticipate using the NOLs. Upon final dissolution of our entities, the NOLs will be extinguished.

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THE FINOVA GROUP INC.

No income tax expense or benefit was recorded during the years ended December 31, 2008 and 2007. Any income or loss has been entirely offset by a decrease or increase in valuation allowances against deferred tax assets, which were previously established due to concerns regarding our ability to utilize income tax benefits generated from losses in prior periods. We do not expect to be able to utilize all the deferred tax assets due to uncertainty about the amount of future earnings, a variety of loss or other tax attribute carryover limitations in the various jurisdictions in which we file tax returns and uncertainty regarding the timing of the reversal of deferred tax liabilities.

The significant components of deferred tax liabilities and deferred tax assets, on a liquidation basis at December 31, consisted of the following:


	2008			2007
Deferred tax liabilities:
Basis difference in loans and investments	$	193		$	451
Basis difference in debt		404,158			357,513

Gross deferred tax liability		404,351			357,964

Deferred tax assets:
Alternative minimum tax		5,283			5,283
Net operating loss carryforward		648,892			608,493
Basis difference in owned assets		1,913			1,913
Reserve for estimated costs during the liquidation period		3,406			6,109
Other		324			294

Gross deferred tax asset		659,818			622,092
Valuation allowance		(255,467	)		(264,128	)

Net deferred tax asset		404,351			357,964

Net deferred tax liability	$	—		$	—

The deferred tax assets and liabilities at December 31, 2008 and 2007 take into consideration the effects of recording assets at their estimated net realizable value. In addition, the reserve for estimated liquidation costs can only be utilized for tax purposes in the years when such costs are incurred.

During 2008 and 2007, the valuation allowance decreased $8.7 million and $38.2 million, respectively. The decreased in 2008 was primarily due to book versus tax basis differences in debt, while the decrease in 2007 was primarily due to the loss of foreign tax assets due to the liquidation of foreign subsidiaries.

G.	Stockholders’ Equity

In August 2001, we issued 61,020,581 shares of common stock to Berkadia, representing 50% of our outstanding shares after giving effect to implementation of the Plan. At December 31, 2008 and 2007, we had approximately 125,873,000 shares of common stock issued with approximately 122,041,000 shares of common stock outstanding. We have 400,000,000 shares of common stock authorized.

We have 200,000,000 shares of one cent ($0.01) per share par value preferred stock authorized, none of which was issued at December 31, 2008. The Board of Directors is authorized to provide for the issuance of shares of preferred stock in series, to establish the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series.

H.	Litigation and Claims

Legal Proceedings

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THE FINOVA GROUP INC.

Thaxton Life Partners Litigation

As previously disclosed, on September 29, 2006, a group of noteholders of Thaxton Life Partners, Inc. (“TLP”) filed suit against the Company and FINOVA Capital (the “TLP Action”). The TLP Action is unrelated to the previously disclosed Thaxton Group Inc. litigation that was settled in 2007. The Company and FINOVA Capital were served with the TLP Action in February of 2007. The TLP Action purports to be a class action filed on behalf of approximately 150 TLP note holders with claims related to approximately $20 million in TLP notes. The TLP Action alleges that, in connection with TLP’s sale of its notes, the Company, FINOVA Capital, and several other defendants participated in a civil conspiracy, violated the South Carolina Unfair Trade Practices Act, violated the civil RICO statute, and were unjustly enriched. In its various counts, the TLP Action seeks actual, treble, and/or punitive damages.

Motion Regarding Distributions to Stockholders

As discussed more fully in Note E. “Debt”, the Indenture contemplates that as principal payments are made on the Senior Notes, our stockholders may receive a distribution equal to 5.263% of each principal prepayment. However, the Indenture prohibits distribution of those amounts due to our financial condition. Those amounts have been held in a restricted account, and totaled $81.2 million as of December 31, 2008. Because we will not be able to repay the Senior Notes in full, on April 1, 2005, we filed a motion in the Bankruptcy Court seeking an order (1) to cease directing funds into the restricted account and (2) to allow us to use those funds for general corporate purposes.

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THE FINOVA GROUP INC.

I.	Related Party

In conjunction with our emergence from bankruptcy, Berkadia LLC, an entity jointly owned by Berkshire Hathaway Inc. (“Berkshire”) and Leucadia National Corporation (“Leucadia”), loaned $5.6 billion to FINOVA Capital on a senior secured basis. The proceeds of the Berkadia Loan, together with cash on hand and the issuance by FINOVA of approximately $3.25 billion aggregate principal amount of the Senior Notes were used to restructure our debt. In addition, we issued Berkadia 61,020,581 shares of common stock, representing 50% of our shares outstanding after giving effect to the implementation of the Plan. The Berkadia loan was scheduled to mature in 2006, but was fully repaid earlier than anticipated (first quarter of 2004) due to accelerated runoff and collection of the portfolio.

In connection with our reorganization, our Board of Directors was reconstituted and is currently comprised of four directors designated by Berkadia, two prior directors of FINOVA and one director designated by the creditor’s committee. The Berkadia designated directors are Ian M. Cumming, Joseph S. Steinberg, R. Gregory Morgan and Thomas E. Mara; the continuing FINOVA directors are G. Robert Durham and Kenneth R. Smith; and Thomas F. Boland was designated by the creditor’s committee. All directors are subject to reelection annually by the stockholders, without regard to their original designation, except that the Board of Directors is required to renominate Mr. Boland or another director designated by holders of the Senior Notes as long as the outstanding balance of the Senior Notes is greater than $500 million.

Our business is being operated under a Management Services Agreement with Leucadia 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). In accordance with the agreement, we pay Leucadia an annual management fee of $8 million. Additionally, we reimburse Leucadia personnel for all reasonable out-of-pocket expenses.

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THE FINOVA GROUP INC.

Certain members of our Board of Directors have a relationship with Leucadia, Berkshire or ours creditors. The table below summarizes the background of the directors that have some form of related party relationship:


Name		Position and Background
Ian M. Cumming		Chairman of the Board of FINOVA since 2001. Director and Chairman of the Board of Leucadia since 1978.

Joseph S. Steinberg		Director and President of FINOVA since 2001. Director of Leucadia since 1978 and President of Leucadia since 1979.

Thomas E. Mara		Director and Chief Executive Officer of FINOVA since 2002. Executive Vice President of Leucadia since 1980 and Treasurer of Leucadia from 1993 to 2007.

R. Gregory Morgan		Director of FINOVA since 2001.

G. Robert Durham		Director of FINOVA since 1992.

Thomas F. Boland		Director of FINOVA since 2001.

During 2004, R. Gregory Morgan retired as a partner of the law firm of Munger, Tolles & Olson LLP. That firm serves as counsel to Berkshire Hathaway Inc. and Berkadia LLC.

In determining Mr. Durham’s independence, the Board noted that during 2008 Mr. Durham had a one-year consulting agreement with Leucadia pursuant to which he provided consulting services with respect to Leucadia’s mining operations and investments and for which Mr. Durham was paid $150,000 by Leucadia. The Board has determined that this consulting arrangement was not a material relationship and does not affect Mr. Durham’s status as an independent director.

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Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

FINOVA GROUP INC 10-K