[Notes to Financial Statements]

4 MARKETABLE SECURITIES

The fair value of marketable securities is estimated based on quoted market prices, when available. If a quoted price is not available, fair value is estimated using quoted market prices for similar financial instruments.

Information related to the company's marketable securities at October 31 is as follows:

Contractual maturities of marketable debt securities at October 31 are as follows:

Gross gains and losses realized on sales or maturities of marketable securities were not material for each of the two years. At October 31, 1999 and 1998, a domestic insurance subsidiary had $11 million and $13 million, respectively, of marketable securities which were on deposit with various state departments of insurance or otherwise not available. These securities are included in total marketable securities balances at October 31, 1999 and 1998.

5 RECEIVABLES

Receivables at October 31 are summarized by major classification as follows:

The financial services segment purchases the majority of the wholesale notes receivable and some retail notes and accounts receivable arising from the company's operations.

A portion of NFC's funding for retail and wholesale notes comes from sales of receivables by NFC to third parties with limited recourse. NFC's maximum contractual exposure under all receivable sale recourse provisions at October 31, 1999 was $257 million; however, management believes that the allowance for credit losses on sold receivables is adequate. Proceeds from sales of retail notes receivable, net of underwriting costs, were $1,192 million in 1999, $953 million in 1998 and $958 million in 1997. Uncollected sold retail and wholesale receivable balances totaled $2,296 million and $2,145 million as of October 31, 1999 and 1998, respectively.

In November 1999, NFC sold $533 million of retail notes, net of unearned finance income, through Navistar Financial Retail Receivables Corporation (NFRRC) to two multi-seller asset-backed commercial paper conduits sponsored by a major financial institution. The gain on sales, which was not material, was recognized in November 1999. Contractual maturities of accounts receivable, retail notes and lease financing and wholesale notes, including unearned finance income, at October 31, 1999 were: 2000Ð$1,550 million, 2001Ð$443 million, 2002Ð$245 million, 2003Ð $188 million, 2004Ð$148 million and thereafterÐ$49 million. Unearned finance income totaled $154 million at October 31, 1999. Notes receivable are due upon demand from a limited partnership that invests in S&P 500 stock index arbitrage.

6 INVENTORIES

Inventories at October 31 are as follows:

7 PROPERTY AND EQUIPMENT

At October 31, property and equipment includes the following:

Total property includes property under capitalized lease obligations of $24 million and $25 million at October 31, 1999 and 1998, respectively. Future minimum rentals on net investments in operating leases are: 2000Ð$68 million, 2001Ð$58 million, 2002Ð$44 million, 2003Ð$27 million and thereafterÐ$13 million. Each of these assets is depreciated on a straight-line basis over the term of the lease in an amount necessary to reduce the leased vehicle to its estimated residual value at the end of the lease term. Capitalized interest for 1999, 1998 and 1997 was $15 million, $12 million and $2 million, respectively.

  Annual Report 1999