USL CAPITAL CORP/, 10-K, 1995-03-24

USL CAPITAL CORP/
10-K, 1995-03-24
FINANCE LESSORS

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004

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

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994.

COMMISSION FILE NUMBER 1-4976

[LOGO]

USL CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware

(STATE OF INCORPORATION)

733 Front Street
San Francisco, California

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
94-1360891

(I.R.S. EMPLOYER IDENTIFICATION NO.)

94111
(ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 627-9000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS
8 3/4% Senior Notes due 2001
NAME OF EACH EXCHANGE ON WHICH REGISTERED
American Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

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

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

As of March 1, 1995, the Registrant had outstanding 10 shares of Common
Stock, all of which were owned by Ford Holdings, Inc.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
J(1)(a) AND (b), AND IS THEREFORE FILING THIS FORM 10-K WITH REDUCED DISCLOSURE
FORMAT.

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<PAGE> 2

TABLE OF CONTENTS

PART I

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Item 1. Business.................................................................... 3
Item 2. Properties.................................................................. 13
Item 3. Legal Proceedings........................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders*

PART II
Item 5. Market for the Company's Common Stock and Related Stockholder Matters....... 13
Item 6. Selected Financial Data*
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 13
Item 8. Financial Statements and Supplementary Data................................. 15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.......................................................................... 15

PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons of the Company*
Item 11. Executive Compensation*
Item 12. Security Ownership of Certain Beneficial Owners and Management*
Item 13. Certain Relationships and Related Transactions*

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............ 15
Signatures............................................................................ 18
Exhibits Index........................................................................ 38
</TABLE>

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

* Not required under General Instruction J to Form 10-K.

2
<PAGE> 3

USL CAPITAL CORPORATION

FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994

PART I

ITEM 1. BUSINESS

USL Capital Corporation ("Company") is a diversified commercial financing
company. The Registrant provides a wide range of financing services, primarily
in the United States, through six core business units, including:

- Business Equipment Financing--leasing and financing of office and
other business and commercial equipment directly with customers and
through vendor programs;

- Transportation and Industrial Financing--leasing and financing of
large-balance transportation equipment (principally commercial
aircraft) and industrial and energy facilities;

- Fleet Services--leasing and managing of commercial automobile, van,
and light-truck fleets;

- Municipal and Corporate Financing--financing of essential-use
equipment for state and local governments and housing bonds, and
investing in publicly-traded and privately-placed preferred stocks and
senior and subordinated debt of public and private companies;

- Real Estate Financing--mortgage financing of income-producing real
estate, including apartments, office buildings, shopping centers, and
warehouses; and

- Rail Services--full-service leasing of railroad equipment to
industrial shippers and railroads.

The Company, a Delaware corporation, has been a wholly-owned subsidiary of
Ford Holdings, Inc. ("Ford Holdings") since October 1, 1989, on which date all
of the Company's capital stock was transferred by Ford Motor Company ("Ford") to
Ford Holdings, a then newly formed Delaware corporation. All of the outstanding
common stock of Ford Holdings is owned directly or indirectly by Ford. The
Company was originally organized as a California corporation in October 1956,
and was purchased by Ford in November 1987. The Company changed its name to USL
Capital Corporation (from United States Leasing International, Inc.) on November
12, 1993.

The Company's principal executive offices are located at 733 Front Street,
San Francisco, California 94111. The telephone number of such offices is (415)
627-9000.

3
<PAGE> 4

KEY DATA

The following table sets forth certain data with respect to the Company's
business for the years ended on, and as of, the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Summary financial data (millions)
Revenue........................................................ $ 598 $ 564 $ 501
Income before taxes............................................ 160 122 89
Net income..................................................... 109 77 57
Additions to earning assets.................................... 1,543 2,045 1,831
Total earning assets........................................... 5,043 4,607 3,585
Business unit earning assets (% of total)
Business Equipment Financing................................... 27% 32% 39%
Transportation and Industrial Financing........................ 25 24 21
Fleet Services................................................. 11 10 12
Municipal and Corporate Financing.............................. 18 16 10
Real Estate Financing.......................................... 9 9 9
Rail Services.................................................. 10 9 9
------ ------ ------
Total.................................................. 100% 100% 100%
====== ====== ======
</TABLE>

BUSINESS UNITS

The Company operates exclusively in the commercial finance segment of the
financial services industry. The Company serves its commercial customers though
six business units, each of which is described in detail below.

Business Equipment Financing

Through its Business Equipment Financing unit, the Company finances, under
finance leases, conditional sale agreements, operating leases, and
collateralized loans, the acquisition and use of equipment for business,
professional, industrial, and governmental users throughout the United States.
The types of equipment financed include computers and computer peripherals,
office equipment, office furnishings, telecommunications, medical,
transportation, manufacturing, and other kinds of equipment. This financing is
sometimes offered in conjunction with the manufacturer of the equipment, but in
other cases is provided directly to the end user of the equipment. Financing
transactions generally cover equipment having an aggregate cost between $50,000
and $5 million, with an average transaction size of approximately $600,000.
These financing services are marketed through 25 offices located throughout the
United States.

The Business Equipment Financing unit does not manufacture or sell under
its own label any of the equipment which it leases. It only purchases equipment
which a particular lessee has committed to lease, and does not take order
positions or make purchases in advance of such a binding agreement by a lessee
to lease the equipment. All lessees are obligated to maintain the equipment and
reimburse the Company for any taxes paid thereon. Any casualty losses of
equipment are covered either by insurance carried by the lessee as required
under the lease or by lessee self-insurance when the Company deems the lessee's
credit to be satisfactory. Upon the expiration of leases, the Company either
renews the leases with the lessees, sells the leased equipment to the lessees,
or remarkets the equipment.

The Company also acquires from manufacturers pools of leases and their
underlying equipment. The manufacturers may retain an economic interest in the
successful operation of each pool and, in exchange, the manufacturers maintain
the equipment, remarket it after the expiration of the initial term of the
leases, and manage the relationship with the lessees. In other transactions, the
lessee is obligated to maintain the equipment and the Company manages the
relationship with the lessees, bills and collects, and remarkets the equipment.

The Company also acquires equipment and related leases originated by other
lessors and, to a lesser extent, by brokers, although the purchase of
broker-originated business has declined significantly over the past

4
<PAGE> 5

few years. On the majority of such acquired transactions, the Company bills and
collects, manages the relationships with the lessees, and remarkets the
equipment.

The following table sets forth certain data with respect to the Business
Equipment Financing unit for the years ended on, and as of, the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets.................................... $ 422 $ 622 $ 560
Total earning assets........................................... 1,376 1,466 1,395
Type of earning assets (% of total)
Finance leases................................................. 81% 83% 85%
Operating leases............................................... 15 13 11
Other.......................................................... 4 4 4
------ ------ ------
Total.................................................. 100% 100% 100%
====== ====== ======
</TABLE>

Transportation and Industrial Financing

Through its Transportation and Industrial Financing unit, the Company
principally owns, leases, finances, and remarkets commercial aircraft, and
leases and finances transportation, energy, and industrial equipment and
facilities. Aircraft, other equipment, and facilities are leased and financed
under single-investor finance leases, leveraged leases, operating leases, and
collateralized loans. Under all leases the lessee is responsible for all taxes,
maintenance, and insurance. The majority of the assets of this business is
acquired through investment bankers and lessee advisors and the balance through
direct lessee contact.

The Company owns a 23% interest in, and through a wholly-owned subsidiary
is the general partner of, Airlease Ltd., a California limited partnership
("Airlease Ltd."). Airlease Ltd. assets were $108 million at December 31, 1994,
compared with $114 million at December 31, 1993. The master limited partnership
units are listed on the New York Stock Exchange. Airlease Ltd. engages in the
ownership and leasing of commercial aircraft to airlines, a freight carrier, and
a charter carrier.

At December 31, 1994, the Company's aggregate commercial aircraft earning
assets in this unit (including its interest in those aircraft owned by Airlease
Ltd.) were $1,003 million. Of this amount, 60% were leased to or financed for
commercial airlines, with the remainder leased primarily to a freight carrier
and aircraft manufacturers. The Company finances four aircraft (two of which are
subject to senior loans) for a foreign airline which is now in financial
difficulties and is restructuring its operations; the airline is expected to
make a proposal to the Company for the continued use of the aircraft. One
aircraft is on lease to an airline which emerged from bankruptcy in late 1993,
and is delinquent on lease payments due in late 1994. Approximately 99% of the
aggregate commercial aircraft owned or financed by the Company (measured by
their book value) were in compliance with Stage III noise regulations (the most
stringent level) of the Aviation Safety and Capacity Act of 1990.

This business unit also manages a portfolio of leveraged leases,
single-investor leases, and loans in which Ford Credit holds a beneficial
interest. These managed leases cover railcars and locomotives, electric power
generation and other facilities, marine vessels, and other types of business
assets. The business unit also acts as agent for Trust Company for USL, Inc., a
wholly-owned subsidiary, which is owner trustee for a portfolio of leveraged
leases the Company arranged for outside institutional investors prior to 1985.
As the remarketing agent for these institutional investors and Ford Credit, the
Company participates in the residual proceeds from the disposition of the
equipment at the termination of some of these leases.

5
<PAGE> 6

The following table sets forth certain data with respect to the
Transportation and Industrial Financing unit for the years ended on, and as of,
the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1994 1993 1992
------ ------ ----
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets...................................... $ 176 $ 321 $346
Total earning assets............................................. 1,243 1,097 767
Type of Equipment (% of earning assets)
Stage III aircraft............................................... 79% 81% 88%
Stage II aircraft................................................ 1 1 3
Non-aircraft equipment........................................... 20 18 9
------ ------ ----
Total.................................................... 100% 100% 100%
====== ====== ====
</TABLE>

Fleet Services

Through its Fleet Services unit, the Company is engaged in the leasing of
automotive, van, and light and heavy-duty truck fleets for commercial purposes.
Fleet Services also provides management services for a substantial portion of
its leased vehicles and for certain of the vehicles owned by its customers.
These leasing and management services are marketed to commercial customers
through 21 offices located throughout the United States. Fleet Services also
provides fleet management services for subsidiaries and affiliates of American
Telephone and Telegraph Company under a long-term agreement.

At December 31, 1994, Fleet Services had an aggregate of approximately
76,100 vehicles in fleets which it leased and managed or managed only, as
compared with approximately 71,600 vehicles at December 31, 1993. At December
31, 1994, Fleet Services also provided services for approximately 14,800
additional vehicles under the long-term agreement with American Telephone and
Telegraph Company, as compared with approximately 14,000 additional vehicles at
December 31, 1993.

Certain of Fleet Services' vehicles are leased under "open-end finance"
leases in which the Company bears no risk (other than the lessee's credit) on
the resale price of the vehicles at the expiration of the lease. The majority of
the vehicles are leased under "modified open-end" leases in which the resale
price of the leased vehicle at lease expiration is partially guaranteed by the
lessee. The Company's full recovery of the vehicle's cost under a "modified
open-end" lease thus partially depends on the resale proceeds which, however,
are expected to substantially exceed the portion of the cost not guaranteed by
the lessee for which the Company is at risk. Other vehicles are leased under
"closed-end" leases, in which the Company's full recovery of the vehicle's cost
from rental and resale proceeds is dependent upon the Company's realization of
anticipated residual value. Additionally, certain of the closed-end leases
(covering approximately 6% of all leased vehicles at December 31, 1994) contain
maintenance provisions which require that the Company bear the maintenance
expense for the leased vehicle in consideration of a higher lease rate.

6
<PAGE> 7

The following table sets forth certain data with respect to the Fleet
Services unit for the years ended on, and as of, the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets......................................... $408 $386 $389
Total earning assets*............................................... 550 444 426
Type of earning assets (% of total)
Modified open-end leases............................................ 66% 60% 48%
Open-end finance leases............................................. 15 17 22
Closed-end leases................................................... 9 7 11
Other............................................................... 10 16 19
---- ---- ----
Total....................................................... 100% 100% 100%
==== ==== ====
</TABLE>

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

* During 1994, approximately $66 million in earning assets were securitized and
sold; together with earning assets securitized and sold in 1991, 1992, and
1993, the balance of such securitized assets at December 31, 1994, was
approximately $124 million, which amount is not included in total earning
assets. See Borrowing and Other Sources of Funds on page 12.

The increase in modified open-end leases reflects the shift to a lease
structure that is more attractive to the customer. This modified structure
permits, for two-year contracts, operating lease treatment for the customers and
finance lease treatment for the Company.

Under substantially all leases, the lessee is obligated to provide
insurance against public liability and property damage, to reimburse the Company
for all taxes relating to the vehicles or the lease and, except in leases with a
maintenance provision, to maintain, at the lessee's expense, the vehicles in
good operating condition.

Management services are mechanized and provide monthly analyses of each
vehicle in service, allowing customers' fleet operating costs to be closely
controlled. Programs are tailored to meet special customer needs, and many
options are offered including, for example, guaranteed maintenance programs,
assistance in selection of vehicles, and analysis of insurance coverage.

Municipal and Corporate Financing

Through its Municipal and Corporate Financing unit, the Company arranges
and carries on its books municipal financings for state and local governments of
essential-use equipment. This unit also invests in publicly-traded and
privately-placed preferred stocks and senior and subordinated debt of public and
private companies, principally utilities and manufacturing companies. After
extensive due diligence by the Company, these securities are purchased through
investment banking and other intermediaries, either at the initial offering or
on the open market. Approximately 69% of these corporate securities are
currently rated at investment grade.

7
<PAGE> 8

The following table sets forth certain data with respect to the Municipal
and Corporate Financing unit for the years ended on, and as of, the dates
indicated.

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets......................................... $255 $429 $291
Total earning assets................................................ 893 743 363
Type of earning assets (% of total)
Municipal
Finance leases................................................... 8% 9% 10%
Corporate
Preferred stock.................................................. 65 65 69
Debt............................................................. 27 26 21
---- ---- ----
Total....................................................... 100% 100% 100%
==== ==== ====
</TABLE>

Real Estate Financing

Through four loan origination offices in its Real Estate Financing unit,
the Company provides first mortgage financing of income-producing real estate
including apartments, office buildings, shopping centers, and warehouses. This
real estate is geographically diversified throughout the United States. No
financing is provided for motels, hotels, raw land, or specialty properties.
Substantially all transactions are financings of three to five years, and none
is a construction loan. The loans provide funds for acquisitions or
refinancings, or are "bridge" financings between construction and permanent
loans. This unit also manages transactions funded by and carried on the books of
Ford Credit. At December 31, 1994, the Company had commitments to fund
additional first mortgage loans of approximately $4 million. At such date, it
also held title to four foreclosed properties with an aggregate book value of
$27 million.

The following table sets forth certain data with respect to the Real Estate
Financing unit for the years ended on, and as of, the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets......................................... $135 $144 $ 90
Total earning assets................................................ 472 437 326
Type of Property (% of earning assets)
Apartments.......................................................... 46% 53% 50%
Offices............................................................. 39 29 30
Shopping centers.................................................... 13 16 17
Industrial.......................................................... 2 2 3
---- ---- ----
Total....................................................... 100% 100% 100%
==== ==== ====
Location of property (% of earning assets)
Southwest........................................................... 23% 37% 39%
East................................................................ 21 26 20
West................................................................ 40 28 30
Midwest............................................................. 16 9 11
---- ---- ----
Total....................................................... 100% 100% 100%
==== ==== ====
</TABLE>

8
<PAGE> 9

Rail Services

Through its Rail Services unit, the Company leases to industrial shippers
and railroads approximately 21,100 railcars. Approximately 94% of all of these
cars are owned by the Company or leased to it under long-term leases. Of the
cars in the Company's fleet at December 31, 1994, 29% were leased out to the
Company's customers for remaining terms of less than one year, 46% for remaining
terms of between one and five years, and 25% for remaining terms of over five
years. The Company maintains and repairs approximately 73% of its owned and
leased fleet at its expense. As provided in the rules of the American
Association of Railroads, if a car is damaged or destroyed on the line of any
particular railroad, that railroad is obligated either to repair the car or, if
the car is destroyed, pay the car owner an amount which reflects the car's type
and age. Rail Services also manages approximately 1,300 cars for others,
principally for Ford affiliates. The Rail Services unit also orders new
equipment for future delivery, in advance of leasing such equipment to
customers. On December 29, 1994, the Company sold its entire fleet of 1,474
pressurized tank railcars.

The following table sets forth certain data with respect to the Rail
Services unit for the years ended on, and as of, the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets......................................... $147 $143 $155
Total earning assets................................................ 507 422 302
Type of earning assets (% of total)
Hopper cars......................................................... 54% 41% 46%
Tank cars........................................................... 6 17 24
Flat cars........................................................... 11 14 1
Intermodal cars..................................................... 11 9 14
Gondolas cars....................................................... 8 8 9
Box cars............................................................ 6 6 0
Other............................................................... 4 5 6
---- ---- ----
Total....................................................... 100% 100% 100%
==== ==== ====
</TABLE>

FINANCING ARRANGED AND MANAGED FOR FORD MOTOR CREDIT COMPANY

The Company manages certain commercial leasing and financing transactions
carried on the books of Ford Credit. In addition, the Municipal and Corporate
Financing and Transportation and Industrial Financing units arrange a variety of
transactions which are funded by and carried on the books of Ford Credit. Ford
Credit reimburses the Company for the Company's operating costs related to
arranging and managing all transactions funded by Ford Credit.

MANAGEMENT OF FOREIGN AFFILIATES

The Company manages two affiliated corporations in the United Kingdom and
Australia that are owned by Ford. These corporations were wholly owned
subsidiaries of the Company prior to October 1, 1989, on which date they were
dividended to Ford. These two corporations engage in the equipment financing
business, conducted substantially in the same manner as the Company's businesses
in the United States. These affiliates fund their equipment acquisitions, and
pay their own operating expenses. However, the Company guarantees the
indebtedness of the Australian affiliate, which, at December 31, 1994, was $26
million. The company located in the United Kingdom has originated no new
equipment leasing transactions since mid-1992 and is being liquidated; virtually
all of its remaining assets were sold during 1994. The company located in
Australia has originated no new equipment leasing transactions since mid-1994
and is also being liquidated.

9
<PAGE> 10

GENERAL

Credit Loss Experience

The management of credit exposure is an important element of the Company's
business. The Company reviews the credit of all prospective customers, and
manages concentration exposures by customer, collateral type, and geographic
distribution. It establishes appropriate loss allowances based on the credit
characteristics and the loss experience for each type of business, and also
establishes additional reserves for specific transactions if it believes this
action is warranted. Delinquent receivables are reviewed by management monthly
and are generally written down to expected realizable value when, in the opinion
of management, they become uncollectible or when they become more than 180 days
past due. Collection activities continue on accounts written off when management
believes such action is warranted.

The table below shows certain information on the Company's allowance for
doubtful accounts for the years indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Allowance for doubtful accounts (millions)
Beginning balance.............................................. $ 55 $ 40 $ 30
Additions...................................................... 8 25 20
Deductions..................................................... (5) (10) (10)
------ ------ ------
Ending balance................................................. $ 58 $ 55 $ 40
====== ====== ======
Percent of earning assets........................................ 1.2% 1.2% 1.1%
Total balances of accounts receivable over 90 days past due at
year end (millions)............................................ $ 37 $ 44 $ 49
Percent of earning assets........................................ 0.7% 1.0% 1.4%
Total earning assets (millions)
Investment in finance leases--net.............................. $2,435 $2,364 $2,075
Investment in operating leases--net............................ 712 695 558
Investment in leveraged leases--net............................ 266 191 4
Notes receivable............................................... 825 721 502
Investment in securities....................................... 700 563 329
Inventory held for sale or lease............................... 87 55 97
Investments in associated companies............................ 18 18 20
------ ------ ------
Total.................................................. $5,043 $4,607 $3,585
====== ====== ======
</TABLE>

Additions to the allowance for doubtful accounts for 1994 decreased by $17
million from 1993, primarily as a result of decreased write-offs as well as
management's evaluation of the adequacy of the loss reserve. The decline of
write-offs (deductions) in 1994 of $5 million from 1993, resulted primarily from
improved collection activities in the Business Equipment Financing unit.

Additions to the allowance for doubtful accounts for 1993 increased by $5
million from 1992, primarily as a result of the increase in earning assets as
well as management's evaluation of the adequacy of the loss reserve.

Total balances of accounts receivable over 90 days past due at year-end
1994 decreased $7 million over 1993 year end, primarily because of the improved
collections on aged accounts and the completion of foreclosure on an apartment
complex, which was collateral for a $11 million note which was delinquent at
December 31, 1993. These changes were offset in part by a $16 million note,
collateralized by an aircraft, which became delinquent at the end of 1994.
Substantial payment of this delinquent amount was received in January 1995. In
addition to this $16 million note, accounts receivable over 90 days past due at
December 31, 1994, consisted primarily of a delinquent note in the amount of $9
million, collateralized by an office complex.

10
<PAGE> 11

Residual Policy

The establishment and realization of residual values on finance and
leveraged leases, and of salvage values on operating leases are important
elements of the Company's business. In general, finance and leveraged leases are
non-cancelable leases in which the net lease payments over the term amortize the
investment in the leased equipment down to the estimated value of equipment at
lease expiration. Operating leases are usually of a shorter term and the lease
payments by themselves are not sufficient to cover all costs and expenses. Full
recovery of equipment cost is dependent upon selling or re-leasing the
equipment.

Residual values are established upon acquisition of the equipment based
upon the estimated value of the equipment at the time the Company expects to
dispose of the equipment under finance and leveraged leases, and at the end of
the equipment's expected useful life under operating leases. Periodically, the
Company reviews its residual values, and if it determines there has been an
other than temporary impairment in value, adjustments are made which result in
an immediate charge to earnings and/or a reduction in earnings over the
remaining term of the lease.

FINANCE AND LEVERAGED LEASES. The following table shows, for each
respective year, for the Company's continuing businesses: (a) the aggregate
sales proceeds and renewal proceeds from sales of equipment subject to finance
and leveraged leases, and (b) these proceeds as a percentage of the adjusted
residual value of the equipment.

<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1994 1993 1992
----- ------ -----
<S> <C> <C> <C>
Business Equipment Financing
Amount (millions)................................................ $ 24 $ 19 $ 49
Percent.......................................................... 154% 161% 126%
Transportation and Industrial Financing
Amount (millions)................................................ $ 4 $ 11* $ 2
Percent.......................................................... 260% 7,073%* 526%
Rail Services
Amount (millions)................................................ $ 5 -- --
Percent.......................................................... 109% -- --
Total
Amount (millions)................................................ $ 33 $ 30 $ 51
Percent.......................................................... 152% 252% 129%
</TABLE>

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

* These amounts reflect proceeds received under a residual sharing agreement
arranged in 1972. The residual was carried on the Company's books at a nominal
amount.

OPERATING LEASES. The following table shows, for each respective year, for
the Company's continuing businesses: (a) the aggregate proceeds (including
renewal proceeds beyond the original expected useful life period) from sales of
equipment subject to operating leases, and (b) these proceeds as a percentage of
the net book value of the equipment sold.

11
<PAGE> 12

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Business Equipment Financing
Amount (millions)................................................... $ 5 $ 6 $ 21
Percent............................................................. 128% 116% 111%
Fleet Services
Amount (millions)................................................... $ 16 $ 13 $ 16
Percent............................................................. 121% 116% 115%
Rail Services
Amount (millions)................................................... $ 41 $ 3 $ --
Percent............................................................. 111% 137% 95%
Other
Amount (millions)................................................... $ 1 $ 1 $ 1
Percent............................................................. 261% 990% 203%
Total
Amount (millions)................................................... $ 63 $ 23 $ 38
Percent............................................................. 115% 125% 115%
</TABLE>

Employees

The Company had 637 full time employees at December 31, 1994.

Competition

In all of its financing programs, the Company competes with other leasing
and finance companies, banks, lease brokers, and investment banking firms who
arrange for the financing and leasing of equipment, and manufacturers and
vendors who sell, finance and, lease their own products to customers.

Borrowing and Other Sources of Funds

The funds required to operate the Company's business are generated
internally from loan and lease payments and equipment sales, and externally from
medium-term debt, commercial paper, securitized financings, and bank borrowings.

The Company raises short-term debt financing through its established
commercial paper programs and raises long-term debt in the public market through
periodic offerings of medium-term notes and underwritten debt offerings. The
Company has committed bank lines of $1.4 billion with 23 banks, consisting of
$1.0 billion under five-year credit agreements expiring in 1999 and $335 million
under one-year agreements. Neither Ford nor Ford Holdings guarantees the debt of
the Company, although the Company's existing credit lines require that Ford
maintain at least a 75% direct or indirect ownership interest in the Company. At
present, the Company's profitability is not significantly related to the
business outlook for Ford, and this situation is not expected to change in the
future.

In 1991 the Company securitized and sold approximately $212 million of its
vehicle leases by transferring such leases, without recourse to the Company, to
a wholly-owned subsidiary, which, in turn, sold the leases to an unrelated
cooperative corporation. Such wholly-owned subsidiary is a separate entity from
its parent company, USL Capital Corporation, whose assets are available first
and foremost to satisfy the claims of its creditors. Beginning in June 1994, the
Company discontinued securitizing additional leases under this arrange-ment to
replace the run-off of principal of the leases initially securitized. See Note 2
of Notes to Consolidated Financial Statements on page 26.

On April 30, 1992, the Company securitized and sold approximately $94
million in principal amount of receivables under lease-purchase agreements with
various state and local governments. These lease-purchase agreements were
purchased by the Company from Ford Credit, for whom they had been managed by the

12
<PAGE> 13

Company. The Company then immediately transferred them to tax-exempt grantor
trusts, which issued tax-exempt, asset-backed certificates to investors in a
public offering. See Note 2 of Notes to Consolidated Financial Statements on
page 26.

ITEM 2. PROPERTIES

The Company owns no significant real property and leases all of its
offices. See Note 10 of Notes to Consolidated Financial Statements on page 32
for information as to rental obligations.

ITEM 3. LEGAL PROCEEDINGS

There are no pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Company is a party or to
which its property is subject, nor are any such proceedings known to be
contemplated by governmental authorities or others.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The information called for by this item has been omitted pursuant to
General Instruction J(2)(c).

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

All outstanding shares of the Company's Common Stock are owned by Ford
Holdings, and therefore there is no market for such shares. The Company declared
a $100 million dividend, effective December 31, 1994, which was distributed to
Ford Holdings in January 1995. Ford Holdings made a $5 million and a $40 million
capital contribution to the Company in 1992 and 1993, respectively. The Company
and Ford Holdings will, from time to time, determine the appropriate
capitalization for the Company, which will, in part, affect any future payment
of dividends to Ford Holdings or capital contributions to the Company.

ITEM 6. SELECTED FINANCIAL DATA

The information called for by this item has been omitted pursuant to
General Instruction J(2)(a).

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

Pursuant to General Instruction J(2)(a), the following narrative analysis
of the results of operations is presented in lieu of Management's Discussion and
Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS

REVENUES, EXPENSES, AND OPERATING PROFIT

<TABLE>
<CAPTION>
YEARS ENDED 1994 VS. 1993
DECEMBER 31 INCREASE/(DECREASE)
--------------------- ------------------
(IN THOUSANDS) 1994 1993 AMOUNT PERCENT
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Revenues........................................... $597,865 $564,472 $ 33,393 6%
-------- -------- --------
Expenses
Sales, administrative and general................ 62,275 70,352 (8,077) (11)
Interest......................................... 220,759 189,942 30,817 16
Depreciation--operating leases................... 121,555 131,100 (9,545) (7)
Other............................................ 33,490 50,907 (17,417) (34)
-------- -------- --------
Total expenses........................... 438,079 442,301 (4,222) (1)
-------- -------- --------
Operating Profit................................... $159,786 $122,171 $ 37,615 31%
======== ======== ======== =======
</TABLE>

13
<PAGE> 14

Revenues

Revenues increased $33 million, or 6% in 1994 compared with 1993, primarily
as a result of an 15% increase in average earning assets. This increase was
partially offset by a decrease of $10 million in the gain on sale of residuals
and equipment in the Transportation and Industrial Financing unit.

Expenses

Sales, administrative, and general expenses decreased $8 million, or 11% in
1994, primarily as a result of cost reduction actions.

Interest expense increased $31 million, or 16% in 1994, reflecting an
increase in average borrowings from $3.15 billion in 1993 to $3.57 billion in
1994 to finance earning assets. In addition, there was a slight increase in
borrowing rates, which averaged 6.1% in 1994 compared with 6.0% in 1993.

Depreciation expense on operating lease equipment decreased $10 million, or
7% in 1994, although the average investment in the cost of operating lease
equipment increased 7% or $73 million. The reduction in depreciation expense is
the result of the run-off of the high depreciation rate Fleet Services assets
and the expected declining usage of equipment contained in a copier portfolio in
which depreciation is based upon the physical use of the assets, offset in part
by an increase in longer-lived Rail Services assets.

Other expenses decreased $18 million, or 34% in 1994, due primarily to a
decrease in the provision for losses (see page 10 for discussion of credit loss
experience).

Operating Profit

Operating profit improved $38 million, or 31% compared with 1993. The
improvement in operating results reflects the impact of higher earning assets
and lower operating costs.

Taxes on Income

Income taxes were 31.8% on income before taxes in 1994 compared with 36.9%
in 1993. See Note 9 of Notes to Consolidated Financial Statements on page 30 for
the principal reasons for differences from the normal statutory rates.

New Accounting Standards

In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan." This standard was partially amended by the
issuance, in October 1994, of SFAS 118, "Accounting by Creditors for Impairment
of a Loan -- Income Recognition and Disclosures." These standards require that
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. The Company has adopted
these standards effective January 1, 1995, and the effect is not expected to be
material.

In May 1993, the FASB issued SFAS 115, "Accounting for Certain Investments
in Debt and Equity Securities." This standard establishes standards of financial
accounting and reporting for investments in equity securities (excluding those
accounted for under the equity method and investments in consolidated
subsidiaries) that have readily determinable fair values and for all investments
in debt securities. The Company adopted this standard effective January 1, 1994,
and the effect was not material.

In October 1994, the FASB issued SFAS 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments," which the
Company adopted effective December 31, 1994. See Note 13 of Notes to
Consolidated Financial Statements on page 33 for the required disclosures.

14
<PAGE> 15

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by this Item are
listed in Item 14 of Part IV on page 15, are set forth in detail at the end of
this report, and are filed as part hereof.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

The information called for by Items 10, 11, 12 and 13 has been omitted
pursuant to General Instruction J(2)(c).

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The consolidated financial statements of the Company are included in
this report at the pages indicated.

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Management's Responsibility for Financial Statements...................... 19
Report of Independent Accountants......................................... 20
Consolidated Statements of Income for the years ended December 31, 1994,
1993, and 1992.......................................................... 21
Consolidated Balance Sheets at December 31, 1994 and 1993................. 22
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1993, and 1992.................................................... 23
Consolidated Statements of Changes in Shareholder's Equity for the years
ended December 31, 1994, 1993, and 1992................................. 24
Notes to Consolidated Financial Statements................................ 25
</TABLE>

(a) 2. Financial Statement Schedules

<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
Schedule II -- Valuation and Qualifying Accounts....................... 37
</TABLE>

Financial statements and schedules other than those listed above are
omitted because the required information is included in the financial
statements or the notes thereto or because of the absence of
conditions under which they are required.

(a) 3. Exhibits required by Item 601 of Regulation S-K:

<TABLE>
<C> <S>
(3)A. Copy of the Certificate of Incorporation of United States Leasing
International, Inc., a Delaware Corporation filed with the Secretary of
State of the State of Delaware on August 15, 1986 and filed as Exhibit
3(A). to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 is incorporated herein by this reference.
</TABLE>

15
<PAGE> 16

<TABLE>
<C> <S>
B. Copy of the Agreement of Merger pursuant to which United States Leasing
International, Inc., a California corporation, merged into United States
Leasing International, Inc., a Delaware corporation filed with the
Secretary of State of the State of Delaware on October 27, 1986 and filed
as Exhibit 3(B). to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 is incorporated hereby by this reference.
C. Copy of the Certificate of Amendment of Certificate of Incorporation of
United States Leasing International, Inc., pursuant to which United States
Leasing International, Inc. changed its name to USL Capital Corporation
filed with the Secretary of State of the State of Delaware on November 12,
1993 and filed as Exhibit 3(C). to the Company's Annual Report on Form
10-K for the year ended December 31, 1993 is incorporated herein by this
reference.
D. Copy of Bylaws, as amended, through January 13, 1992, filed as Exhibit
(3)D. to the Company's Annual Report on Form 10-K for the year ended
December 31, 1991 is incorporate herein by this reference.
(4)A. Copy of Indenture dated as of January 15, 1986, between the Company and
The Chase Manhattan Bank (National Association), Trustee, including forms
of Debt Security and Medium Term Note, filed as Exhibit (4)A. to the
Company's Annual Report on Form 10-K for the year ended December 31, 1991
is incorporated herein by this reference.
B. Copy of Supplemental Indenture dated as of October 27, 1986, between the
Company and The Chase Manhattan Bank (National Association), Trustee,
filed as Exhibit (4)B. to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, is incorporated herein by this reference.
C. Copy of Second Supplemental Indenture dated as of December 1, 1988 to
Indenture dated as of January 15, 1986, between the Company and The Chase
Manhattan Bank (National Association), Trustee, filed as Exhibit (4)C. to
the Company's Annual Report on Form 10-K for the year ended December 31,
1993, is incorporated herein by this reference.
D. Copy of Indenture dated as of July 1, 1991, between the Company and The
First National Bank of Chicago, Trustee, including forms of Debt Security
and Medium Term Note, filed on July 15, 1991 as Exhibits 4.1, 4.2, 4.3
respectively, to the Company's Registration Statement on Form S-3 (File
No. 33-4165) is incorporated herein by this reference.
E. Copy of the Indenture dated as of November 15, 1994, between the Company
and The Chase Manhattan Bank (National Association), Trustee, including
forms of Debt Security and Medium Term Note, filed on December 13, 1994 as
Exhibits 4.1, 4.2 and 4.3 respectively, to the Company's Registration
Statement on Form S-3 (File No. 33-56839) is incorporated herein by this
reference.
(10)A. Copy of Asset Purchase Agreement among USLI Fleet Financing, Inc., Asset
Securitization Cooperative Corporation, Canadian Imperial Bank of Commerce
and United States Leasing International, Inc., dated as of December 23,
1991, filed as Exhibit 10(A). to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991 is incorporated herein by this
reference.
B. Copy of Purchase Agreement between United States Leasing International,
Inc. and USLI Fleet Financing, Inc., dated as of December 23, 1991, filed
as Exhibit 10(B). to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991 is incorporated herein by this reference.
</TABLE>

16
<PAGE> 17

<TABLE>
<C> <S>
C. Copies of the First and Second Amendments to Asset Purchase Agreement
among USLI Fleet Financing, Inc., Asset Securitization Cooperative
Corporation, Canadian Imperial Bank of Commerce and United States Leasing
International, Inc., dated as of December 23, 1991, filed as Exhibit
(10)C. to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 is incorporated herein by this reference.
D. First Amendment to Purchase Agreement between United States Leasing
International, Inc. and USLI Fleet Financing, Inc., dated as of December
23, 1991, filed as Exhibit (10)D. to the Company's Annual Report on Form
10-K for the year ended December 31, 1993, is incorporated herein by this
reference.
E. Copy of Lease Purchase Agreement dated as of April 1, 1992, between the
Company and Ford Motor Credit Company, filed as Exhibit 10(C) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1992,
is incorporated herein by this reference.
(12) Computation of Ratio of Earnings to Fixed Charges.
(23) Consent of Independent Public Accountants (with respect to the Company's
current Registration Statement on Form S-3).
</TABLE>

The Company agrees to furnish to the Commission upon request a copy of
each instrument with respect to issues of long-term debt of the Company,
the authorized principal amount of which does not exceed 10% of the
total assets of the Company.

(b) Report on Form 8-K.

None.

17
<PAGE> 18

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON MARCH 24, 1995.

USL CAPITAL CORPORATION
(Registrant)

By: /s/ JAMES G. DUFF
-----------------------------
James G. Duff,
Chairman and Chief Executive
Officer

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 COMPANY
AND IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------------------------- ---------------------------- ---------------
<C> <S> <C>
(a) Principal Executive Officer

/s/ JAMES G. DUFF Chairman and Chief Executive March 24, 1995
--------------------------------------------- Officer
James G. Duff

(b) Principal Financial Officer:

/s/ GEORGE F. STALLOS Senior Vice President and March 24, 1995
--------------------------------------------- Chief Financial Officer
George F. Stallos

/s/ ROBERT A. KEYES, JR. Vice President, Corporate March 24, 1995
--------------------------------------------- Controller
Robert A. Keyes, Jr.

(d) Directors:

/s/ JAMES G. DUFF March 24, 1995
---------------------------------------------
James G. Duff

/s/ GEORGE F. STALLOS March 24, 1995
---------------------------------------------
George F. Stallos

/s/ S.I. GILMAN March 24, 1995
---------------------------------------------
S.I. Gilman

/s/ KENNETH WHIPPLE March 24, 1995
---------------------------------------------
Kenneth Whipple
</TABLE>

18
<PAGE> 19

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

Management is responsible for the preparation of the Company's financial
statements and the other financial information in this report. This
responsibility includes maintaining the integrity and objectivity of the
financial records and the presentation of the Company's financial statements in
accordance with generally accepted accounting principles.

The Company maintains an internal control structure designed to provide,
among other things, reasonable assurance that its records include the
transactions of its operations in all material respects and to provide
protection against significant misuse or loss of Company assets. The internal
control structure is supported by careful selection and training of financial
management personnel, by written procedures that communicate the details of the
control structure to the Company's activities, by a staff of internal auditors
of Ford Motor Company who employ thorough auditing programs, and by the
Company's staff of operating control specialists who conduct reviews of
adherence to the Company's procedures and policies.

The Company's financial statements have been audited by Coopers & Lybrand
L.L.P., independent certified public accountants. Their audit was conducted in
accordance with generally accepted auditing standards which include a review of
the Company's internal control structure to the extent deemed necessary for the
purposes of their audit. The Report of Independent Accountants appears on the
following page.

The Board of Directors is responsible for overseeing management's
fulfillment of its responsibilities in the preparation of financial statements
and the financial control of operations. The Company's independent accountants
have full and free access to the Board to discuss their audit work, the
Company's internal controls, and financial reporting matters.

/s/ James G. Duff
------------------------------------
James G. Duff
Chairman and Chief Executive Officer

/s/ George F. Stallos
------------------------------------
George F. Stallos
Senior Vice President
and Chief Financial Officer

19
<PAGE> 20

[LETTERHEAD OF COOPERS & LYBRAND L.L.P.]

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors,
USL Capital Corporation:

We have audited the consolidated financial statements and the financial
statement schedules of USL Capital Corporation and subsidiaries listed in Part
IV Item 14(a)1. and 2. of this Form 10-K. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of USL Capital
Corporation and subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.

As discussed in Note 1 to the financial statements, USL Capital Corporation
changed its method of accounting for investment in securities in 1994.

/s/ Coopers & Lybrand L.L.P.

San Francisco, California
January 26, 1995

20
<PAGE> 21

USL CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
REVENUES................................................... $597,865 $564,472 $501,420
-------- -------- --------
EXPENSES
Sales, administrative and general........................ 62,275 70,352 63,250
Interest................................................. 220,759 189,942 154,157
Depreciation -- operating leases......................... 121,555 131,100 159,324
Other.................................................... 33,490 50,907 35,638
-------- -------- --------
Total expenses................................... 438,079 442,301 412,369
-------- -------- --------
Income before taxes on income and cumulative effect of
accounting change..................................... 159,786 122,171 89,051
Taxes on income.......................................... 50,773 45,119 29,228
-------- -------- --------
Income before cumulative effect of accounting change..... 109,013 77,052 59,823
Cumulative effect of accounting change................... -- -- (3,097)
-------- -------- --------
NET INCOME............................................... $109,013 $ 77,052 $ 56,726
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

21
<PAGE> 22

USL CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and cash equivalents.......................................... $ 16,226 $ 6,708
Investment in finance leases -- net................................ 2,435,429 2,364,062
Notes receivable................................................... 824,619 721,257
Investment in operating leases -- net.............................. 711,602 694,737
Investment in leveraged leases..................................... 266,392 190,502
Investment in securities........................................... 700,355 562,873
Inventory held for sale or lease................................... 86,816 54,811
Other receivables.................................................. 18,335 18,296
Investment in associated companies................................. 17,838 18,357
Office equipment at cost less accumulated depreciation:
$13,519 and $17,125 at December 31, 1994 and 1993,
respectively ................................................. 8,772 8,386
Other assets....................................................... 20,439 21,981
Goodwill less accumulated amortization:
$42,020 and $36,176 at December 31, 1994 and 1993,
respectively ................................................. 183,395 189,239
------------ ------------
Total assets............................................. $5,290,218 $4,851,209
========== ==========
LIABILITIES
Short-term notes payable........................................... $1,337,601 $ 985,277
Accounts payable................................................... 58,078 65,643
Payable to Ford and affiliates..................................... 134,763 79,490
Accrued liabilities and lease deposits............................. 113,847 120,416
Deferred taxes on income........................................... 424,301 314,505
Long-term debt..................................................... 2,478,547 2,548,250
------------ ------------
Total liabilities........................................ 4,547,137 4,113,581
------------ ------------
Commitments (Note 10).............................................. -- --
SHAREHOLDER'S EQUITY
Common stock, $1 par value, authorized: 10,000 shares;
outstanding: 10 shares........................................... * *
Additional capital................................................. 521,425 521,425
Net unrealized (loss) on available-for-sale securities............. (3,560) --
Retained earnings.................................................. 225,216 216,203
------------ ------------
Total shareholder's equity............................... 743,081 737,628
------------ ------------
Total liabilities and shareholder's equity............... $5,290,218 $4,851,209
========== ==========
</TABLE>

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

* Less than $1,000

See notes to consolidated financial statements.

22
<PAGE> 23

USL CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash flow from operating activities:
Income from operations............................ $ 109,013 $ 77,052 $ 56,726
Noncash expenses, revenues, losses, and gains
included in income:
Cumulative effect of accounting change......... -- -- 5,002
Depreciation and amortization.................. 150,562 154,322 180,745
Deferred taxes on income....................... 112,781 112,719 57,273
Provision for losses........................... 8,296 24,752 19,439
Accrued interest income on notes receivable
added to the principal balance............... (1,601) -- (565)
Net increase/(decrease) in advances from Ford
and affiliates............................... (44,727) 4,462 58,035
(Decrease) in accounts payable................. (7,565) (17,082) (6,182)
Increase/(decrease) in accrued liabilities and
lease deposits............................... (6,567) 8,773 18,541
(Increase)/decrease in other receivables....... (39) (14,691) 741
Other.......................................... (187) 1,357 1,776
----------- ----------- -----------
Net cash flow from operating activities... 319,966 351,664 391,531
----------- ----------- -----------
Cash flows from investing activities:
Recovery of equipment costs and residual
interests...................................... 675,645 622,364 488,165
Proceeds from sale of finance receivables......... 67,581 103,006 175,779
Cost of equipment acquired for lease.............. (1,045,007) (1,446,217) (1,453,248)
Notes receivable investments...................... (329,394) (317,969) (212,678)
Collections on notes receivable investments....... 190,731 121,238 63,045
Purchase of held-to-maturity securities........... (108,302) -- --
Maturity of held-to-maturity securities........... 29,986 -- --
Purchase of available-for-sale securities......... (58,210) -- --
Sale and maturity of available-for-sale
securities..................................... 7,181 -- --
Purchase of investment securities................. -- (280,812) (164,510)
Sale of investment securities..................... -- 40,123 69,526
Increase in deferred initial direct costs......... (11,114) (10,867) (17,418)
Office equipment purchased........................ (4,150) (5,118) (1,359)
Investment in associated companies................ -- (73) (41)
Other............................................. (8,015) (1,896) (9,561)
----------- ----------- -----------
Net cash used by investing activities..... (593,068) (1,176,221) (1,062,300)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from long-term borrowings................ 290,932 1,125,145 646,625
Long-term debt repaid............................. (360,636) (260,778) (268,204)
Net increase/(decrease) in short-term
borrowings..................................... 352,324 (78,103) 273,096
Capital contribution from Ford Holdings........... -- 40,000 5,000
----------- ----------- -----------
Net cash provided by financing
activities.............................. 282,620 826,264 656,517
----------- ----------- -----------
Increase/(decrease) in cash and cash equivalents.... 9,518 1,707 (14,252)
Cash and cash equivalents at beginning of period.... 6,708 5,001 19,253
----------- ----------- -----------
Cash and cash equivalents at end of period.......... $ 16,226 $ 6,708 $ 5,001
========== ========== ==========
Supplemental schedule of cash flow information:
lnterest paid..................................... $ 227,572 $ 356,829 $ 153,691
Income taxes paid................................. 50 250 604
Supplemental schedule of noncash investing and financing activities:
Accrued interest on notes receivable added to
principal...................................... $ 1,601 $ -- $ 565
Notes receivable transferred to inventory held for
sale or lease.................................. 23,163 -- --
Fair market value adjustment on available-for-sale
securities..................................... 5,839 -- --
</TABLE>

See notes to consolidated financial statements.

23
<PAGE> 24

USL CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
NET UNREALIZED
GAIN/(LOSS) ON TOTAL
COMMON ADDITIONAL AVAILABLE-FOR-SALE RETAINED SHAREHOLDER'S
STOCK CAPITAL SECURITIES EARNINGS EQUITY
-------- ---------- ------------------ --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992.......... $ * $ 476,425 $ 82,425 $ 558,850
Capital contributions............. 5,000 5,000
Net income........................ 56,726 56,726
-------- ---------- --------- ------------
Balance at December 31, 1992........ * 481,425 139,151 620,576
Capital contributions............. 40,000 40,000
Net income........................ 77,052 77,052
-------- ---------- --------- ------------
Balance at December 31, 1993........ * 521,425 216,203 737,628
Dividend.......................... (100,000) (100,000)
Unrealized gain/(loss)
At January 1, 1994............. $ (979) (979)
Net Change..................... (2,581) (2,581)
Net income........................ 109,013 109,013
-------- ---------- ---------- --------- ------------
Balance at December 31, 1994........ $ * $ 521,425 $ (3,560) $ 225,216 $ 743,081
======== ======== ============= ========= =========
</TABLE>

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

* Less than $1,000

See notes to consolidated financial statements.

24
<PAGE> 25

USL CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES

Consolidation -- The consolidated financial statements include USL Capital
Corporation ("Company") and all of its majority-owned subsidiaries. Investments
in partnerships and 50%-or-less owned associated companies are accounted for on
the equity method. All material intercompany balances and transactions are
eliminated. Certain amounts have been reclassified to conform to the 1994
presentation.

Cash and Cash Equivalents -- Cash and cash equivalents consist of highly
liquid investments with a maturity of three months or less at the time of
purchase. Outstanding checks ($25,859,000 at December 31, 1994 and $21,582,000
at December 31, 1993) are reclassified to Accounts Payable. For Cash and Cash
Equivalents, the carrying amount is stated at fair value.

Finance Leases -- At lease commencement, the Company records the lease
receivable, estimated residual value of the leased equipment, and unearned lease
income. Initial direct costs are deferred as part of the investment and
amortized over the lease term. Unearned lease income is recognized as revenue
over the lease term so as to approximate a level rate of return on the net
investment. Residual values, which are reviewed periodically, represent the
estimated amount to be received at lease termination from the disposition of
leased equipment.

Operating Leases -- Lease contracts that do not meet the criteria of
finance leases are accounted for as operating leases. Rental equipment is
recorded at cost and depreciated over its useful life or lease term to an
estimated salvage or residual value (10 to 30 years for railroad cars and 3 to 7
years for other equipment), primarily on a straight-line basis.

Leveraged Leases -- Leveraged lease assets acquired by the Company are
financed primarily through nonrecourse loans from third-party debt participants.
These loans are collateralized by the lessee's rental obligations and the leased
property. Unearned income is recognized over the lease term at a constant
after-tax rate of return on the net investment in the lease in those periods in
which the net investment is positive. Unguaranteed estimated residual values are
principally based on independent appraisals of the estimated values of the
assets remaining at the expiration of the lease.

Investment in Securities -- The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" effective January 1, 1994. The cumulative effect of
this change in accounting principle was not material. Investments in securities
consist principally of debt securities (preferred stock, corporate and Municipal
bonds) which are reported as held-to-maturity and recorded at amortized cost,
net of a provision for losses that is sufficient to cover estimated
uncollectibles, because the Company has the ability and intent to hold such
securities until maturity. Securities classified as available-for-sale are
recorded net of the unrealized holding gain/loss which is excluded from earnings
and reported as a separate component of Shareholder's Equity, net of related
deferred taxes. Equity securities which do not have readily determinable fair
values are recorded at cost. Prior to the adoption of SFAS 115, investments in
securities were recorded at amortized cost because the Company had the ability
to hold such securities until maturity and had this intention. See Notes 6 and
15 for additional information on the fair value of securities.

Goodwill -- Goodwill, arising principally from the acquisition by Ford, is
being amortized on the straight-line method over 40 years (1994, $5,643,000;
1993, $5,643,000; 1992, $5,643,000).

Taxes on Income and Tax Credits -- Since the transfer of ownership of the
Company by Ford to Ford Holdings in 1989, the Company has been included in the
consolidated federal income tax return of Ford Holdings and continues to be
included in the combined state income tax returns of Ford, except in those
states where the Company is required to file separate returns. Income taxes,
including the federal alternative minimum tax, if any, are allocated by Ford
Holdings based on the Company's effect on taxes paid by the

25
<PAGE> 26

NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
group. Deferred income tax liabilities give effect to temporary differences
between financial statement and tax return amounts based upon enacted tax rates
in effect for the future periods when such differences are expected to reverse.

Derivatives -- Derivatives consist principally of interest rate swap and
interest rate cap agreements used to manage the Company's interest rate risk.
Interest differentials paid or received under interest rate swap agreements are
recognized as an adjustment to interest expense over the life of the agreements.
Premiums paid for interest rate caps are included with long-term debt and are
amortized to interest expense on a straight-line basis over the terms of the
related agreements.

NOTE 2 -- INVESTMENT IN FINANCE LEASES

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Receivable in installments........................ $3,276,655 $ 3,264,170
Residual value.................................... 303,416 297,139
Allowance for doubtful accounts................... (27,805) (28,768)
Unearned lease income............................. (1,137,730) (1,191,499)
Deferred initial direct costs..................... 20,893 23,020
------------ ------------
Net investment.................................... $2,435,429 $ 2,364,062
========== ==========
</TABLE>

Finance lease receivables at December 31, 1994 are due in installments as
follows (in thousands): 1995, $794,667; 1996, $603,716; 1997, $316,244; 1998,
$219,866; 1999, $160,754 and thereafter, $1,181,408. Receivables of $9.7 million
serve as collateral to long-term debt.

In December 1991, U.S. Fleet Financing, Inc. ("USFF"), a wholly owned
subsidiary of the Company, sold a portfolio of finance leases for proceeds of
$211.5 million. During 1992, 1993 and 1994, additional leases were sold for
proceeds of $79.9 million, $103.0 million and $67.6 million, respectively, to
replace the run-off of principal in the leases initially securitized. The sale
agreement provides recourse to the assets of USFF, $24.8 million at December 31,
1994, for any uncollectible receivables in the portfolio. USFF is a separate
entity from its parent company, USL Capital Corporation, and its assets will be
available first and foremost to satisfy the claims of its creditors. An
allowance of $559,000 has been provided on the books of USFF for estimated
losses on the sold receivables. The agreement provides that the Company will
service the lease receivables for the purchaser. At December 31, 1994, $124.3
million of net investment in the leases serviced by the Company was outstanding.

In April 1992, the Company sold a portfolio of municipal finance leases for
proceeds of $95.1 million. The sale agreement provides the buyers with limited
recourse against the Company, $2.0 million at December 31, 1994, for any
uncollectible receivables in the portfolio. The agreement provides that the
Company will service the lease receivables for the purchaser. At December 31,
1994, $7.8 million of net investment in the leases serviced by the Company was
outstanding.

26
<PAGE> 27

NOTE 3 -- INVESTMENT IN OPERATING LEASES

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Equipment cost:
Automotive....................................... $ 131,363 $ 155,600
EDP, peripheral and word processing.............. 105,310 139,972
Copiers.......................................... 187,120 151,886
Rail............................................. 476,255 463,395
Aircraft......................................... 51,668 46,420
Office furniture................................. 23,006 24,440
Manufacturing and industrial equipment........... 55,229 24,423
Other............................................ 46,997 34,644
---------- ----------
Total equipment cost............................. 1,076,948 1,040,780
Accumulated depreciation........................... (369,760) (352,516)
Rentals receivable................................. 8,839 9,757
Allowance for doubtful accounts.................... (4,425) (3,284)
---------- ----------
Net investment..................................... $ 711,602 $ 694,737
========== ==========
</TABLE>

Initial lease terms of rental equipment range from one month to 9.3 years.
Future minimum rentals on operating leases at December 31, 1994 are due in
installments as follows (in thousands): 1995, $153,544; 1996, $97,757; 1997,
$54,352; 1998, $25,664; 1999, $23,266, and thereafter, $4,506.

Minimum future rentals do not include contingent rentals that may be
received under certain railcar leases, because of use in excess of specified
amounts. Contingent rentals (in thousands) received were $9,697 in 1994, $8,170
in 1993, and $2,454 in 1992. The increase in 1994 and 1993 is the result of the
large expansion of the Rail Services fleet (see Item 1. Business "Business
Units").

NOTE 4 -- INVESTMENT IN LEVERAGED LEASES

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Rentals receivable (net of principal and interest
on nonrecourse debt)............................ $ 276,921 $ 259,243
Estimated residual values......................... 197,149 69,837
Allowance for doubtful accounts................... (2,354) (1,661)
Unearned income................................... (205,773) (137,331)
Deferred initial direct costs..................... 449 414
--------- ---------
Investment in leveraged leases.................... 266,392 190,502
Less deferred income taxes arising from leveraged
leases.......................................... (69,677) (23,571)
--------- ---------
Net investment.................................... $ 196,715 $ 166,931
========= =========
</TABLE>

A summary of the components of income from leveraged leases was as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Income before taxes on income..................... $18,800 $ 6,898
Taxes on income................................... 7,338 2,692
------- -------
Income from leveraged leases...................... $11,462 $ 4,206
======= =======
</TABLE>

27
<PAGE> 28

NOTE 5 -- NOTES RECEIVABLE

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Principal......................................... $ 828,111 $ 731,641
Interest receivable............................... 9,841 1,898
Deferred loan origination costs................... 1,255 906
Allowance for doubtful accounts................... (14,588) (13,188)
------------- -------------
Net............................................... $ 824,619 $ 721,257
========== ==========
</TABLE>

At December 31, 1994, $663.5 million of principal was collateralized by
equipment, real estate, and other assets. Included in notes receivable (in
thousands) at December 31, 1994 was principal of $205,322 with fixed interest
rates and $622,789 with variable interest rates. The weighted average interest
rate at December 31, 1994 was 10.1%. Notes receivable are due in subsequent
years as follows (in thousands): 1995, $121,088; 1996, $82,434; 1997, $89,144;
1998, $151,147; 1999, $175,921; and thereafter, $208,377.

NOTE 6 -- INVESTMENT IN SECURITIES

Investments in securities at December 31, 1994 were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR BOOK
COST GAINS LOSSES VALUE VALUE
--------- ---------- ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Available-for-Sale Securities
Preferred Stock................... $ 69,636 $ 770 $ 6,609 $ 63,797 $ 63,797
Common Stock...................... 755 0 0 755 755
Debt Securities................... 5,270 0 0 5,270 5,270
--------- ---------- ---------- --------- ---------
Total available-for-sale
securities..................... 75,661 770 6,609 69,822 69,822
--------- ---------- ---------- --------- ---------
Held-to-Maturity Securities
Preferred Stock................... 536,180 3,922 31,123 508,979 536,180
Corporate Bonds................... 31,215 0 0 31,215 31,215
Debt Securities................... 54,958 1,073 2,676 53,355 54,958
--------- ---------- ---------- --------- ---------
Total held-to-maturity
securities..................... 622,353 4,995 33,799 593,549 622,353
--------- ---------- ---------- ---------
Allowance for doubtful accounts... (9,013)
---------
Total held-to-maturity securities
(net).......................... 613,340
---------
Equity securities not practicable to
fair value........................ 17,193 0 0 17,193 17,193
--------- ---------- ---------- --------- ---------
Total Investments in Securities..... $ 715,207 $ 5,765 $ 40,408 $ 680,564 $ 700,355
======== ======== ======== ======== ========
</TABLE>

The amortized cost and fair value of investments in available-for-sale
securities and held-to-maturity securities at December 31, 1994, by contractual
maturity, were as follows:

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------ -----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less......................... $ 755 $ 755 $ 26,786 $ 25,789
Due after one year through five years........... 8,509 6,704 34,935 34,811
Due after five years through ten years.......... 3,098 2,593 220,512 212,625
Due after ten years............................. 63,299 59,770 340,120 320,324
--------- ---------- --------- ---------
Total...................................... $75,661 $ 69,822 $ 622,353 $ 593,549
======= ======== ======== ========
</TABLE>

28
<PAGE> 29

NOTE 6 -- INVESTMENT IN SECURITIES (CONTINUED)
Expected maturities of debt securities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without penalty.

Proceeds from the sale of available-for-sale securities were $5.1 million
in 1994, with a realized gain of $0.1 million. The net unrealized gain/(loss)
net of tax included in shareholder's equity was $(3.6) million at December 31,
1994.

Investments in securities at December 31, 1993 were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Preferred Stock......................... $ 476,235 $ 12,881 $6,582 $482,534
Common Stock............................ 1,122 2,645 220 3,547
Debt Securities......................... 82,408 2,962 1,522 83,848
Other Equity Securities................. 10,736 0 0 10,736
--------- ---------- ---------- --------
Total Securities........................ 570,501 $ 18,488 $8,324 $580,665
======== ======== ========
Allowance for doubtful accounts......... (7,628)
---------
Net Investment.......................... $ 562,873
========
</TABLE>

Proceeds from the sale of investments in debt securities (in thousands)
were $58,251 in 1993, and $44,253 in 1992. The resulting gains (in thousands)
were $4,888 and $2,195, respectively.

NOTE 7 -- SHORT-TERM NOTES PAYABLE

Short-term notes payable consist entirely of commercial paper. Average
interest rates, after giving effect to interest rate exchange agreements, on
commercial paper outstanding at December 31, 1994 and 1993 were 6.2% and 4.6%
respectively. The interest rate exchange agreements, which expire through 2005,
had the effect of fixing interest rates on $364.2 million of debt at December
31, 1994 and $292.1 million of debt at December 31, 1993. The balance
outstanding at December 31, 1994 had an average maturity of 17 days. The Company
has committed credit lines, wherein it may borrow up to $1.4 billion at floating
rates which approximate prime. A commitment fee of .08% to .1875% is paid on the
unused portion of these credit lines. These lines contain certain provisions
related to (a) continuing Ford ownership; (b) limitations on liens; and (c)
limitations on activities and indebtedness of subsidiaries. There were no
borrowings outstanding on these lines at December 31, 1994.

NOTE 8 -- LONG-TERM DEBT

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
<S> <C> <C>
(IN THOUSANDS)
Collateralized:
6.3% due through 1995............................ $ 9,719
6.3% to 8.3% due through 1994.................... $ 6,957
Senior:
0.0% to 9.9% due through 2011.................... 2,468,828
3.3% to 9.9% due through 2011.................... 2,541,293
------------ ------------
Total.................................... $2,478,547 $2,548,250
========== ==========
</TABLE>

Payments required on long-term debt are (in thousands): 1995, $357,884;
1996, $564,310; 1997, $222,351; 1998, $192,393; 1999, $165,668; and thereafter,
$975,941. Average interest rates on collateralized and senior debt outstanding
at December 31, 1994 were 6.3% and 7.0%, respectively.

29
<PAGE> 30

NOTE 8 -- LONG-TERM DEBT (CONTINUED)
Included in long-term debt (in thousands) at December 31, 1994 were
obligations of $1,776,828 with fixed interest rates and $701,719 with variable
interest rates. The Company has entered into agreements to manage exposures to
fluctuations in interest rates, primarily interest rate swap agreements. These
agreements decreased the overall weighted average interest rate to 6.9%,
compared with 7.0% excluding these agreements, and effectively decreased the
obligations subject to variable interest rates (in thousands) to $419,719.

NOTE 9 -- TAXES ON INCOME

The Company uses the liability method of accounting for income taxes
pursuant to SFAS No. 109. The adoption of SFAS No. 109 at the beginning of 1992
had no effect on net income in that year.

The provision for taxes on income includes:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred:
United States............................ $ 94,674 $ 95,891 $ 60,484
State.................................... 18,107 16,828 (3,211)
Foreign.................................. -- -- --
-------- -------- --------
Total deferred........................ 112,781 112,719 57,273
-------- -------- --------
Current:
United States............................ (54,178) (58,858) (37,682)
State.................................... (8,018) (8,927) 7,216
Foreign.................................. 188 185 516
-------- -------- --------
Total current.................... (62,008) (67,600) (29,950)
-------- -------- --------
Total............................ $ 50,773 $ 45,119 $ 27,323
======== ======== ========
Shown as:
Taxes on income.......................... $ 50,773 $ 45,119 $ 29,228
Cumulative effect of accounting change... -- -- (1,905)
-------- -------- --------
$ 50,773 $ 45,119 $ 27,323
======== ======== ========
</TABLE>

30
<PAGE> 31

NOTE 9 -- TAXES ON INCOME (CONTINUED)
Deferred income taxes reflect the estimated future tax effect of temporary
differences between the amount of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws and regulations. The
components of deferred income tax assets and liabilities were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax liability
Leasing transactions..................... $450,327 $293,501 $175,655
Notes payable............................ 45,137 62,316 67,925
Other.................................... 6,933 5,436 1,974
-------- -------- --------
502,397 361,253 245,554
-------- -------- --------
Deferred tax asset
Allowance for credit losses.............. 37,011 17,290 15,316
Employee benefit plans................... 8,861 6,802 7,798
State net operating loss carry
forwards.............................. 29,944 21,773 12,887
Other.................................... 2,280 883 378
-------- -------- --------
78,096 46,748 36,379
-------- -------- --------
Net deferred taxes......................... $424,301 $314,505 $209,175
======== ======== ========
</TABLE>

State net operating loss carry forwards will be recovered in future periods
as an offset to future state tax liabilities in accordance with the Company's
tax sharing agreement with Ford Holdings.

The provision for taxes on income differs from the normal statutory rate
for the following reasons:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Normal U.S. tax rate....................................... 35.0% 35.0% 34.0%
State taxes, less U.S. tax benefit......................... 4.1 4.4 3.9
Goodwill................................................... 1.2 1.6 2.2
Rate adjustment on U.S. deferred taxes..................... -- 4.6 --
Income taxed at reduced rates:
Foreign sales corporations............................... (1.9) (2.2) (2.2)
Dividends received deduction............................. (5.8) (5.6) (4.7)
Government obligations................................... (0.9) (0.9) (0.6)
Other -- net............................................... 0.1 -- 0.2
---- ---- ----
Provision for taxes........................................ 31.8% 36.9% 32.8%
==== ==== ====
</TABLE>

The deferred tax assets and liabilities were restated effective January 1,
1993 to reflect the increase of the U.S. corporate tax rate to 35% from 34%,
resulting in additional tax provision in 1993 of $5.6 million.

At December 31, 1994, investment tax credit carry forwards of approximately
$600,000 are available to reduce future federal income tax liabilities and
expire between 1997 and 1999 if not utilized.

Federal income taxes receivable from/(payable to) Ford Holdings (in
thousands) were: $5,573 at December 31, 1994 and $(15,466) at December 31, 1993.

31
<PAGE> 32

NOTE 10 -- COMMITMENTS

The Company leases office facilities and equipment under operating leases.
The equipment leased by the Company is for sublease to end-user lessees under
operating leases of various terms. New leases are arranged when the equipment is
returned to the Company. Rental expense (in thousands) for all operating leases
was $9,423 in 1994, $11,574 in 1993, and $12,626 in 1992; and sublease income
was $5,403, $6,129, and $6,169, respectively. Future minimum rentals (excluding
executory costs) and related sublease income under operating leases that have
non-cancelable lease terms in excess of one year as of December 31, 1994 are:

<TABLE>
<CAPTION>
OFFICE RENTAL SUBLEASE NET
FACILITIES EQUIPMENT INCOME RENTALS
---------- --------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1995............................................... $ 2,921 $ 4,383 $ 4,514 $ 2,790
1996............................................... 2,672 4,388 2,965 4,095
1997............................................... 2,602 3,955 1,994 4,563
1998............................................... 2,508 3,955 1,470 4,993
1999............................................... 1,853 2,418 612 3,659
Thereafter......................................... 5,252 -- -- 5,252
---------- --------- -------- -------
Total.................................... $ 17,808 $19,099 $ 11,555 $25,352
======= ======== ======= =======
</TABLE>

NOTE 11 -- PENSIONS

The Company sponsors a defined contribution retirement plan comprising a
profit sharing part and a deferred compensation matching contribution part which
covers substantially all of its employees. The combined contribution for profit
sharing and deferred compensation match is limited to 10 percent of a
participant's qualified earnings. Under the profit sharing part, contributions
are determined as 6.9 percent of each covered participant's qualified earnings,
plus an additional 5.7 percent of earnings above the Social Security maximum
taxable amount. Profit sharing cost represents contributions minus forfeited
amounts of terminated participants. Under the deferred compensation part,
contributions (cost) are determined for eligible participants as 75 cents per
dollar of deferred compensation for the first 3 percent of compensation plus 25
cents per dollar for the next 3 percent, up to 6 percent of compensation. The
total cost of the retirement plan (in thousands) amounted to $2,750 in 1994,
$3,500 in 1993, and $3,700 in 1992.

NOTE 12 -- TRANSACTIONS WITH AFFILIATED COMPANIES

The Company provides administrative services for Ford Credit and other Ford
affiliates, for which the Company is reimbursed. Ford also provides
administrative services to the Company, for which Ford is reimbursed. The
Company believes that these arrangements, which are not covered by any formal
agreement between the Company, Ford Credit and Ford or its affiliates, are
mutually beneficial. Assessments for services by the Company to Ford Credit and
other affiliates were (in thousands): 1994, $8,766; 1993, $12,423; 1992,
$11,781; and assessments by Ford to the Company were $1,900, $2,280, and $2,776,
respectively.

In 1989, the Company leased office space from Ford Motor Land Development
Corporation, a subsidiary of Ford. The lease, with a term of five years which
expired in July 1994, was classified as an operating lease. Rent expense (in
thousands) amounted to $471 in 1994, $701 in 1993, and $731 in 1992. Beginning
in 1991, a portion of the leased office space was subleased to several divisions
of Ford Motor Company. Sublease income, which included amounts for leasehold
improvements and furniture and fixtures, (in thousands) amounted to $529 in
1994, $1,013 in 1993, and $716 in 1992.

In 1992, the Company purchased equipment and the remaining payments under
an existing operating lease agreement due from Ford. The revenue earned during
the remaining operating lease term in 1992 amounted to $8.1 million. The
corresponding depreciation of the asset during the period was $7.5 million. In
December 1992, the lease with Ford was renewed with upgraded equipment,
purchased for $28.2 million, and classified as a finance lease with an initial
lease term of 42 months. The revenue earned under the finance lease was $1.6
million in 1994, $2.2 million in 1993 and $198,000 in 1992.

32
<PAGE> 33

NOTE 12 -- TRANSACTIONS WITH AFFILIATED COMPANIES (CONTINUED)
A 1991 agreement with Ford provides for payments by Ford to the Company of
broker fees for the negotiation and arrangement of leases for Ford. Such fees
(in thousands) were $1,325 in 1994, $2,546 in 1993, and $1,514 in 1992.

The Company receives fees for the management of railcars for Ford Credit.
Such fees (in thousands) were $515 in 1994, $294 in 1993, and $145 in 1992.

In 1994, the Company declared a dividend, effective December 31, 1994, in
the amount of $100 million, which was paid to Ford Holdings in January 1995. The
accrued dividend is included in the Payable to Ford and Affiliates caption on
the December 31, 1994 Consolidated Balance Sheet. In 1993 and 1992, Ford
Holdings made capital contributions to the Company of $40 million and $5
million, respectively.

The Company acts as general partner to a limited partnership, in which it
has a 23% equity interest. In accordance with the limited partnership
agreements, the Company receives fees and other compensation for services
provided. Such amounts earned were as follows (in thousands): 1994, $800; 1993,
$774; and 1992, $770. Equity income from the partnership, included in
consolidated revenues, was as follows (in thousands): 1994, $1,452; 1993,
$1,396; and 1992, $1,297.

NOTE 13 -- DERIVATIVE FINANCIAL INSTRUMENTS

The Company has entered into arrangements to manage exposure to
fluctuations in interest rates. It is the objective of the Company to optimize
its borrowing costs while maintaining stable interest rate margins through term
matching assets with debt of similar maturities. These arrangements primarily
include interest rate swap and interest rate cap agreements. Under interest rate
cap agreements, the Company pays a premium for the right to receive interest in
excess of the capped rates. Interest rate swap agreements involve the exchange
of interest obligations on fixed and floating interest rate debt without the
exchange of the underlying principal amounts. The agreements generally mature at
the time the related debt matures. The differential paid or received on interest
rate swap agreements is recognized as an adjustment to interest expense over the
life of the agreements. Notional amounts are used to express the volume of
interest rate swap agreements. The notional amounts do not represent cash flows
and are not subject to risk of loss. In the unlikely event that a counterparty
fails to meet the terms of an interest rate swap agreement, the Company's
exposure is the termination value of the contracts.

The following table summarizes the interest rate contracts that the Company
uses to manage its interest rate risk:

<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------------- -------------------------
NOTIONAL TERMINATION NOTIONAL TERMINATION
PRINCIPAL VALUE PRINCIPAL VALUE
--------- ----------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Interest Rate Swaps -- Net Receivable
Position..................................... $ 890.4 $ 20.7 $ 629.9 $ 45.3
Interest Rate Swaps -- Net Payable Position.... 1,058.0 (20.1) 1,313.0 (43.6)
Interest Rate Caps............................. 34.8 0.9 59.4 0.0
</TABLE>

NOTE 14 -- OTHER FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company has issued financial guarantees in support of lines of credit
and lease/sublease transactions entered into by an affiliate of Ford. This
affiliate, located in Australia, was previously a subsidiary of the Company,
which retains management responsibility for its operations. The lines of credit
have various expiration dates through 1995, and the sublease transactions extend
through 1995. At December 31, 1994, the financial guarantees issued totaled $31
million, and the outstanding balance subject to such guarantees was $26 million.
(See Item 1. Business "Management of Foreign Affiliates".)

Additionally, under several of the Company's domestic lease transactions,
it guaranteed under certain conditions that the lessor or lender will receive
additional rents of specified amounts after the original lease terms expire. The
expiration dates are between 1996 and 2001. At December 31, 1994, such
guarantees

33
<PAGE> 34

NOTE 14 -- OTHER FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED)
totaled $17 million. The Company has not provided collateral or other security
to support financial instruments with credit risk.

At December 31, 1994, the Company had committed to purchase railcars in the
amount of $88 million, to be included in its operating lease inventory in 1995.

The Company has also entered into several commitment agreements with third
parties contemplating possible first mortgage loans and equipment leases. The
interest rates on the first mortgage loan commitments represent a spread over
average prime or Libor and they have various expiration dates through 1999. At
December 31, 1994, such commitments totaled approximately $121 million.

The Company has entered into other revolving loan commitments which contain
potential risk of loss. Neither the face amounts of these commitments, their
fair value, nor the potential risk of loss was considered to be significant at
December 31, 1994.

NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 1994 and December 31, 1993. The
fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale.

<TABLE>
<CAPTION>
1994 1993
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Notes receivable (Note 5)................... $ 824,619 $ 837,824 $ 721,257 $ 727,400
Investment securities (Note 6).............. 700,355 680,564 562,873 580,665
Short-term notes payable (Note 7)........... (1,337,601) (1,337,601) (985,277) (985,277)
Long-term debt (Note 8)..................... (2,478,547) (2,383,014) (2,548,250) (2,451,000)
Derivatives relating to debt (Note 13)
Interest rate swaps -- net rec.
position............................... N/A 20,700 N/A 45,300
Interest rate swaps -- net pay position... N/A (20,100) N/A (43,600)
Interest rate caps........................ N/A 900 N/A 0
Guarantees and commitments (Note 14)........ N/A 209 N/A 95
</TABLE>

The carrying amounts presented in the table are included in the
consolidated balance sheets under the indicated captions, and are net of any
applicable allowance for doubtful accounts.

The following notes summarize the major methods and assumption used in
estimating the fair values of financial instruments:

NOTES RECEIVABLE are estimated by either discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities, or dealer quotes.

INVESTMENT SECURITIES are estimated primarily by market and dealer
quotes. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities. Debt securities are also
valued using the discounted future cash flows based upon current rates of
similar debt instruments traded, when a market quote of a similar
investment is not available.

SHORT-TERM NOTES PAYABLE are estimated at their carrying amount
because of the short maturity of these instruments.

LONG-TERM DEBT is estimated by discounting the future cash flows using
rates currently available to the Company for debt with similar terms and
remaining maturities. It is the Company's policy to follow a strategy of
match funding all financing, and as such, the Company believes that the
change in the fair

34
<PAGE> 35

NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
market value of its debt would be offset by a corresponding increase in the
estimated fair value of its investment in leases.

DERIVATIVES are estimated as the amount that the Company would receive
or pay to terminate the agreements at the reporting date, taking into
account current market interest rates and corresponding borrowing spreads.

FINANCIAL GUARANTEES are estimated as the amount that the Company
would need to pay an independent third party to assume responsibility for
the guarantees. Based upon an assessment that the probability of
performance under each guarantee is remote, the Company believes that such
amounts are insignificant.

LOAN COMMITMENTS are estimated at the amount of the commitment, in
that the financing rates associated with the various commitments float
until funding.

NOTE 16 -- CONCENTRATIONS OF CREDIT RISK

The Company controls its credit risk through credit standards, limits on
exposure, and monitoring the financial condition of other parties. The lease,
note and investment portfolios are well diversified, consisting of more than 35
industries.

A significant portion of the Company's business activity is with customers
and businesses located in California. As of December 31, 1994, the Company's net
finance and operating leases, notes receivable and investments in California
totaled approximately $627 million. There were no other significant regional,
industrial or group concentrations at December 31, 1994.

The Company generally requires the leased asset to serve as collateral for
the lease. The collateral consists principally of autos, computers and
peripherals, office furnishings, copiers, railcars and aircraft. Notes
receivable are collateralized by first mortgages on real estate or equipment.
Investments are not collateralized.

NOTE 17 -- POSTRETIREMENT BENEFITS

The Company sponsors defined benefit postretirement health care plans that
provide medical and life insurance coverage to retirees and their dependents.
The cost of retiree and dependent medical coverage is shared between the Company
and the retiree. The life insurance plan is noncontributory. The accounting for
the health care plan anticipates future cost-sharing changes to the written plan
that are consistent with the Company's past practice. The Company defines a
maximum amount (or "cap") that it will contribute toward the health benefits of
each retiree. This cap is re-determined annually, and is based on the individual
retiree's number of dependents. The Company has a history of increasing this
cap. Over the last seven years the aggregate increase in the cap approximates
the average increase in the underlying premium costs of the program. This
valuation assumed that in future years the Company will continue to increase the
cap at the average rate of increase of the underlying cost of the retiree
benefit program. However, benefits and eligibility rules may be modified by the
Company from time to time.

35
<PAGE> 36

NOTE 17 -- POSTRETIREMENT BENEFITS (CONTINUED)
The following table sets forth the plans' combined funded status reconciled
with the amount shown in the Company's statement of financial position at
December 31:

ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:

<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Retirees................................................. $(2,425) $(2,167)
Fully eligible plan participants......................... (462) (572)
Other active plan participants........................... (2,677) (3,119)
------- -------
(5,564) (5,858)
Plan assets at fair value................................ 0 0
------- -------
Accumulated postretirement benefit obligation in excess
of plan assets......................................... (5,564) (5,858)
Unrecognized net (gain)/loss from past experience
different from that assumed and from changes in
assumptions............................................ (1,688) (694)
------- -------
(Accrued)/prepaid postretirement benefit cost............ $(7,252) $(6,552)
======= =======
</TABLE>

The Company's postretirement plans are underfunded; the accumulated
postretirement benefit obligation and plan assets for the plan at December 31,
1994 (in thousands) are $5,564 and $0, respectively.

NET PERIODIC POSTRETIREMENT BENEFIT COST INCLUDED THE FOLLOWING COMPONENTS:

<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Service cost -- benefits attributed to service during the
period................................................. $ 460 $ 429
Interest cost on accumulated postretirement benefit
obligation............................................. 426 484
Net amortization and deferral............................ (6) 0
------- -------
Net periodic postretirement benefit cost................. $ 880 $ 913
======= =======
Assumption: Discount rate at year-end.................... 8.75% 7.50%
</TABLE>

For measurement purposes, 9 percent and 7.5 percent annual rates of
increase in the per capita cost of postretirement medical benefits were assumed
for 1994 for the under age 65 indemnity and HMO and over age 65 indemnity plans,
respectively; the rates were assumed to decrease gradually to 5.5 percent for
2006 and remain at that level thereafter. The comparable rates assumed for 1993
were 12 percent and 8 percent for the under age 65 indemnity and HMO and over
age 65 indemnity plans, respectively. The health care cost trend rate assumption
has a significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation as of December 31,
1994 by $865,000 and the aggregate of the service and interest cost components
of net periodic postretirement benefit cost for the year then ended by $166,000.

36
<PAGE> 37

SCHEDULE II

USL CAPITAL CORPORATION AND SUBSIDIARY COMPANIES

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
------------------------------------ ------------ --------------------- ------------ --------
ADDITIONS
CHARGED TO BALANCE
BALANCE --------------------- AT END
AT BEGINNING COST AND OTHER OF
CLASSIFICATION OF PERIOD EXPENSE ACCOUNTS (DEDUCTIONS) PERIOD
------------------------------------ ------------ -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful Accounts..... $ 54,529 $ 8,296 $4,635(1) $58,190
Allowance for Losses(3)............. 990 85(1) 905
Allowance for Residual
Valuation(4)...................... 0 2,680 2,680

YEAR ENDED DECEMBER 31, 1993
Allowance for Doubtful Accounts..... $ 39,888 $ 24,454 $9,813(1) $54,529
Allowance for Losses(3)............. 359 298 $384(2) 51(1) 990

YEAR ENDED DECEMBER 31, 1992
Allowance for Doubtful Accounts..... $ 29,799 $ 19,375 $163(5) $9,449(1) $39,888
Allowance for Losses(3)............. 1,182 64 887(1) 359
Allowance for Residual
Valuation(4)...................... 210 210(1) 0
</TABLE>

---------------
(1) Write-offs, net of recoveries.

(2) Reclassification

(3) Principally included in "Other receivables" caption on the balance sheet.

(4) Included in "Residual value" caption on the balance sheet, the purpose for
which relates to equipment casualties and lessee defaults.

(5) Represents balance of purchased portfolio.

37
<PAGE> 38

EXHIBITS INDEX

<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
(3)A. Copy of the Certificate of Incorporation of United States Leasing
International, Inc., a Delaware Corporation filed with the Secretary of
State of the State of Delaware on August 15, 1986 and filed as Exhibit
3(A), to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 is incorporated herein by this reference................. *
B. Copy of the Agreement of Merger pursuant to which United States Leasing
International, Inc., a California corporation, merged into United States
Leasing International, Inc., a Delaware corporation filed with the
Secretary of State of the State of Delaware on October 27, 1986 and filed
as Exhibit 3(B), to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 is incorporated hereby by this reference........... *
C. Copy of the Certificate of Amendment of Certificate of Incorporation of
United States Leasing International, Inc., pursuant to which United States
Leasing International, Inc. changed its name to USL Capital Corporation
filed with the Secretary of State of the State of Delaware on November 12,
1993 and filed as Exhibit 3(C), to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993 is incorporated herein by this
reference.................................................................. *
D. Copy of Bylaws, as amended, through January 13, 1992, filed as Exhibit
(3)D, to the Company's Annual Report on Form 10-K for the year ended
December 31, 1991 is incorporate herein by this reference.................. *
(4)A. Copy of Indenture dated as of January 15, 1986, between the Company and The
Chase Manhattan Bank (National Association), Trustee, including forms of
Debt Security and Medium Term Note, filed as Exhibit (4)A, to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991 is
incorporated herein by this reference...................................... *
B. Copy of Supplemental Indenture dated as of October 27, 1986, between the
Company and The Chase Manhattan Bank (National Association), Trustee, filed
as Exhibit (4)B, to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, is incorporated herein by this reference.......... *
C. Copy of Second Supplemental Indenture dated as of December 1, 1988 to
Indenture dated as of January 15, 1986, between the Company and The Chase
Manhattan Bank (National Association), Trustee, filed as Exhibit (4)C, to
the Company's Annual Report on Form 10-K for the year ended December 31,
1993, is incorporated herein by this reference............................. *
D. Copy of Indenture dated as of July 1, 1991, between the Company and The
First National Bank of Chicago, Trustee, including forms of Debt Security
and Medium Term Note, filed on July 15, 1991 as Exhibits 4.1, 4.2, 4.3
respectively, to the Company's Registration Statement on Form S-3 (File No.
33-4165) is incorporated herein by this reference.......................... *
E. Copy of the Indenture dated as of November 15, 1994, between the Company
and The Chase Manhattan Bank (National Association), Trustee, including
forms of Debt Security and Medium Term Note, filed on December 13, 1994 as
Exhibits 4.1, 4.2 and 4.3 respectively, to the Company's Registration
Statement on Form S-3 (File No. 33-56839) is incorporated herein by this
reference.................................................................. *
</TABLE>

38
<PAGE> 39

<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
(10)A. Copy of Asset Purchase Agreement among USLI Fleet Financing, Inc., Asset
Securitization Cooperative Corporation, Canadian Imperial Bank of Commerce
and United States Leasing International, Inc., dated as of December 23,
1991, filed as Exhibit 10(A), to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991 is incorporated herein by this
reference.................................................................. *
B. Copy of Purchase Agreement between United States Leasing International,
Inc. and USLI Fleet Financing, Inc., dated as of December 23, 1991, filed
as Exhibit 10(B), to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991 is incorporated herein by this reference........... *
C. Copies of the First and Second Amendments to Asset Purchase Agreement among
USLI Fleet Financing, Inc., Asset Securitization Cooperative Corporation,
Canadian Imperial Bank of Commerce and United States Leasing International,
Inc., dated as of December 23, 1991, filed as Exhibit (10)C, to the
Company's Annual Report on Form 10-K for the year ended December 31, 1993
is incorporated herein by this reference................................... *
D. First Amendment to Purchase Agreement between United States Leasing
International, Inc. and USLI Fleet Financing, Inc., dated as of December
23, 1991, filed as Exhibit (10)D, to the Company's Annual Report on Form
10-K for the year ended December 31, 1993, is incorporated herein by this
reference.................................................................. *
E. Copy of Lease Purchase Agreement dated as of April 1, 1992, between the
Company and Ford Motor Credit Company, filed as Exhibit 10(C), to the
Company's Annual Report on Form 10-K for the year ended December 31, 1992,
is incorporated herein by this reference................................... *
(12) Computation of Ratio of Earnings to Fixed Charges.......................... 40
(23) Consent of Independent Public Accountants (with respect to the Company's
current Registration Statement on Form S-3)................................ 41
</TABLE>

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

* Incorporated by Reference.

<PAGE> 1

EXHIBIT 12

USL CAPITAL CORPORATION
AND SUBSIDIARY COMPANIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED; DOLLARS IN THOUSANDS)
Earnings:
Income before taxes on income per
statement of income................... $159,786 $122,171 $ 89,051 $ 86,059 $ 51,114
Add (deduct)
Fixed charges......................... 223,900 193,806 158,444 151,811 124,289
Distribution and proceeds in excess of
net income and foreign exchange
gains or losses of associated
companies.......................... 520 272 601 292 519
-------- -------- -------- -------- --------
Income as adjusted...................... $384,206 $316,249 $248,096 $238,162 $175,922
======== ======== ======== ======== ========
Fixed charges:
Interest on indebtedness including
amortization of debt issue costs and
discount or premium thereon........... $220,759 $189,942 $154,157 $147,027 $117,237
Interest factor of annual rentals(1).... 3,141 3,864 4,287 4,784 7,052
-------- -------- --------- -------- --------
Fixed charges........................... $223,900 $193,806 $158,444 $151,811 $124,289
======== ======== ======== ======== ========
Ratio of earnings to fixed charges...... 1.72 1.63 1.57 1.57 1.42
======== ======== ======== ======== ========
</TABLE>

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

(1) The interest portion of annual rentals is estimated to be one-third of such
rentals.

<PAGE> 1

EXHIBIT (23)

[LETTERHEAD OF COOPERS & LYBRAND L.L.P.]

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the reference in the
registration statement of USL Capital Corporation on Form S-3 (File No.
33-56196) of our report dated January 26, 1995, on our audits of the
consolidated financial statements and financial statement schedules of USL
Capital Corporation as of December 31, 1994 and 1993 and for the years ended
December 31, 1994, 1993, and 1992, which report is included in this Annual
Report on Form 10-K.

/s/ Coopers & Lybrand L.L.P.

San Francisco, California
March 24, 1995

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 16,226
<SECURITIES> 700,355
<RECEIVABLES> 4,256,377
<ALLOWANCES> 58,190
<INVENTORY> 86,816
<CURRENT-ASSETS> 0
<PP&E> 8,772
<DEPRECIATION> 383,279
<TOTAL-ASSETS> 5,290,218
<CURRENT-LIABILITIES> 0
<BONDS> 3,816,148
<COMMON> 0
0
0
<OTHER-SE> 743,081
<TOTAL-LIABILITY-AND-EQUITY> 5,290,218
<SALES> 597,865
<TOTAL-REVENUES> 597,865
<CGS> 0
<TOTAL-COSTS> 146,749
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,296
<INTEREST-EXPENSE> 220,759
<INCOME-PRETAX> 159,786
<INCOME-TAX> 50,773
<INCOME-CONTINUING> 109,013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,013
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>