PITNEY BOWES CREDIT CORP, 10-K405, 2000-03-30

PITNEY BOWES CREDIT CORP
10-K405, 2000-03-30
FINANCE LESSORS

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004

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FORM 10-K

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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 1999

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

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Commission file number 0-13497

PITNEY BOWES CREDIT CORPORATION
Incorporated pursuant to the Laws of the State of Delaware

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Internal Revenue Service -- Employer Identification No. 06-0946476

27 Waterview Drive, Shelton, CT 06484-4361
(203) 922-4000

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

None None

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

Indicate by check mark if disclosure by delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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. [X]

The aggregate market value of voting stock held by non-affiliates of the
Registrant at March 29, 2000: None

As of March 29, 2000, 460 shares of common stock, no par value, with a stated
value of $100,000 per share, were outstanding, all of which were owned by Pitney
Bowes Inc., the parent of the Registrant.

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b)
OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT
<PAGE>

PITNEY BOWES CREDIT CORPORATION

Part I

Item 1.-- Business................................................... 3
Item 2.-- Properties................................................. 7
Item 3.-- Legal proceedings.......................................... 7
Item 4.-- Submission of matters to a vote of security holders........ 7

Part II

Item 5.-- Market for the registrant's common equity and related
stockholder matters..................................... 7
Item 6.-- Selected financial data.................................... 8
Item 7.-- Management's discussion and analysis of financial
condition and results of operations..................... 9
Item 7A. -- Quantitative and qualitative disclosures about market risk 13
Item 8.-- Financial statements and supplementary data................. 14
Item 9.-- Changes in and disagreements with accountants on
accounting and financial disclosure...................... 37

Part III

Item 10.-- Directors and executive officers of the registrant......... 37
Item 11.-- Executive compensation..................................... 37
Item 12.-- Security ownership of certain beneficial owners and
management............................................... 37
Item 13.-- Certain relationships and related transactions............. 37

Part IV

Item 14.-- Exhibits, financial statement schedules and reports
on Form 8-K.............................................. 38
Index to exhibits..................................................... 38
Signatures............................................................ 41
<PAGE>

PITNEY BOWES CREDIT CORPORATION
PART I
ITEM 1. -- BUSINESS

GENERAL

Pitney Bowes Credit Corporation (the "Company" or "PBCC") operates primarily
in the United States and is a wholly-owned subsidiary of Pitney Bowes Inc.
("PBI" or "Pitney Bowes"). As such, the Company is part of PBI's Mailing and
Integrated Logistics, Office Solutions and Capital Services segments. The
Company is principally engaged in the business of providing lease financing for
PBI products as well as other financial services to the capital services
markets.

The Internal Financing Division ("IFD") of PBCC provides marketing support to
PBI. Equipment financed for the IFD lease financing programs includes mailing,
paper handling and shipping equipment, scales, copiers, and facsimile units.
Transaction sizes generally range from $500 to $500,000, although historically
most transactions have occurred in the $1,000 to $10,000 range, with lease terms
generally from 36 to 60 months. As part of its focus on Small Business
Solutions, the Company offers a co-branded credit card called Pitney Bowes
Business RewardsSM Visa(R) and a postage financing program called Purchase
PowerSM. Customers receive air mileage points based on purchases made under
these programs. In April 1999, the Company began its Reserve AccountSM program.
Under this program, customers can prepay for postage and earn interest on their
deposits in the form of free postage. The products are designed for the small
business owner and allow the customer to facilitate business purchases. PBCC
earns income on membership and transaction fees as well as interest on balances
from customers choosing to use the credit facility.

PBCC's Capital Services Division ("CSD") operates in the commercial and
industrial market by offering financial services to its customers for products
not manufactured or sold by PBI or its subsidiaries. Products financed through
Capital Services Division financing programs include both commercial and
non-commercial aircraft, over-the-road trucks and trailers, railcars and
locomotives, and high-technology equipment such as data processing and
communications equipment. Transaction sizes (other than aircraft leases) range
from $150,000 to several million dollars, with original lease terms generally
from 84 to 252 months. Aircraft transaction sizes range from less than $1
million to $30 million for non-commercial aircraft and up to $54 million for
commercial aircraft. Original lease terms are generally from five to ten years
for non-commercial aircraft and from 20 to 24 years for commercial aircraft. The
Company has also participated in seven commercial aircraft leveraged lease
transactions with a net investment of $299.0 million at December 31, 1999. The
Company's Capital Services Division also participates, on a select basis, in
certain other types of financial transactions including: sales of lease
transactions, senior secured loans in connection with acquisitions, and certain
project financings. Equipment financed by former PBI subsidiaries Dictaphone and
Monarch is also reported as a component of the Capital Services Division.

PBCC's Capital Services Division is also responsible for managing Pitney Bowes
Real Estate Financing Corporation ("PREFCO"), a wholly-owned subsidiary of PBCC
providing lease financing for commercial real estate properties. Both PBCC and
Pitney Bowes have provided capital for PREFCO's investments.

On October 30, 1998, the Company transferred the operations, employees and
substantially all related assets of its wholly-owned subsidiary, Colonial
Pacific Leasing Corporation ("CPLC"), to General Electric Capital Corporation, a
subsidiary of the General Electric Company. The Company received approximately
$790 million at closing, which approximates the book value of the net assets
sold or otherwise disposed of and related transaction costs. The transaction was
subject to post-closing adjustments. In connection with this transaction, the
Company recorded a gain of approximately $3.7 million (net of taxes of $2.0
million) for the year ended December 31, 1999. This gain resulted from the
settlement of post-closing adjustments in 1999 related to the sale, offset by
the cost of settlement with regard to a dispute with GECC over certain assets
that were included in the sale. (See Note 2 to CONSOLIDATED FINANCIAL
STATEMENTS.)

On January 14, 2000, the Company sold its mortgage servicing business,
Atlantic Mortgage & Investment Corporation ("AMIC"), a wholly-owned subsidiary
of the Company to ABN AMRO North America. The Company received approximately
$484 million in cash at closing. Accordingly, operating results of AMIC have
been segregated and reported as discontinued operations in the Consolidated
Statements of Income. Prior year results have been reclassified to conform to
the current year presentation. In connection with the sale, the Company recorded
a loss of approximately $27.6 million (net of taxes of $18.4 million) for the
year ended December 31, 1999. The transaction is subject to post-closing
adjustments. (See Note 2 to CONSOLIDATED FINANCIAL STATEMENTS.)

Substantially all lease financing is done through direct finance leases
whereby PBCC recovers its costs plus a return on investment over the initial,
noncancelable term of the contract. The Company has also entered into leveraged
and operating lease structures.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 3 of 47
<PAGE>

The Company's gross finance assets (see Note 3 to CONSOLIDATED FINANCIAL
STATEMENTS) outstanding for the internal and capital services programs at
December 31, 1995 through 1999 are presented in ITEM 6 -- SELECTED FINANCIAL
DATA. Total Company gross finance assets at December 31, 1999 were $3.7 billion
of which approximately 55 percent were related to mailing, paper handling and
shipping products, 15 percent to Small Business Solution programs receivables, 8
percent to commercial and corporate aircraft, 2 percent to railcars, 9 percent
to copier and office equipment, 1 percent to both data processing equipment and
manufacturing products and 1 percent to over-the-road trucks and trailers. Total
investment in net finance assets amounted to $2.9 billion in 1999 and $1.4
billion in 1998. Capital services programs accounted for 3 percent of gross
finance contracts acquired in 1999 compared to 39 percent in 1998.

At December 31, 1999, PBCC had approximately 728,000 active accounts compared
with 738,000 active accounts at December 31, 1998.

At December 31, 1999, PBCC's largest customer accounted for $71.7 million, or
2.2 percent of gross finance receivables, and the Company's ten largest
customers accounted for $497.3 million in gross finance receivables, or 15.3
percent of the receivable portfolio.

CREDIT EXPERIENCE

The percentage of receivables over 30 days delinquent was 4.4 percent, 4.3
percent and 3.7 percent at December 31, 1999, 1998 and 1997, respectively. Total
Company delinquency at December 31, 1999 and 1998 increased over 1997 mainly due
to a shift in business mix to a higher proportion of Internal Financing Division
business, which exhibits a higher average delinquency rate than the Capital
Services Division.

CREDIT POLICIES

PBCC's management and Board of Directors establish credit approval limits at
regional, divisional, subsidiary and corporate levels based on the credit
quality of the customer and the type of equipment financed. The Company and PBI
have established an Automatic Approval Program ("AAP") for certain products
within the Internal Financing Division. The AAP dictates the criteria under
which PBCC will accept a customer without performing the Company's usual credit
investigation. The AAP considers criteria such as maximum equipment cost, a
customer's time in business and current payment experience with PBCC.

PBCC bases credit decisions primarily on a customer's financial strength.
However, with the Company's Capital Services Division programs, collateral
values may also be considered.

LOSS EXPERIENCE

PBCC has charged against the allowance for credit losses $85.8 million, $66.8
million and $60.5 million in 1999, 1998 and 1997, respectively. The increase in
write-offs in 1999 is attributable to the higher investment in Small Business
Solutions programs, as well as higher delinquencies related to transitional
difficulties encountered in the regional consolidation project. For further
information see Note 6 to CONSOLIDATED FINANCIAL STATEMENTS.

RELATIONSHIP WITH PITNEY BOWES INC.

PBCC is PBI's domestic finance subsidiary and provides the largest financing
support for PBI's Mailing and Integrated Logistics, Office Solutions and Capital
Services segments. Equipment sales to PBCC as a percentage of PBI's consolidated
revenue from continuing operations was 14 percent in 1999, 1998 and 1997.

Business relationships between PBCC and PBI are defined by several agreements
including an Operating Agreement, Finance Agreement and Tax Sharing Agreement.

Operating Agreement An operating agreement with PBI was initiated on March 3,
- -------------------
1977 and was subsequently amended. This agreement was terminated in its entirety
and superseded with a successor agreement on November 6, 1996 as the First
Amended and Restated Operating Agreement ("Operating Agreement"). The Operating
Agreement can be modified or canceled on a prospective basis by either party
upon 90 days prior written notice. PBI and PBCC have entered into detailed
written operating procedures ("Operating Procedures") which govern among other
things: the terms and prices of equipment purchases by PBCC for lease to third
parties; computation and payment of fees for referrals and services provided by
PBI sales personnel; the AAP for PBI equipment; buyback allowances; and the
handling of contract terminations, cancellations, trade-ups and trade-ins.

In connection with sales of finance assets in the IFD lease programs, PBI
agreed not to cancel or modify, in any material respect, its obligations under
the Operating Agreement concerning the sold receivables, without the prior
written consent of PBCC and the transferee.

Pursuant to the Operating Procedures, the purchase of equipment by the Company
is contingent upon a lessee entering into a direct finance lease with the
Company and delivery to and acceptance of the equipment by the lessee. Service
and maintenance of the equipment leased is the responsibility of the lessee and
is generally arranged through a separate equipment maintenance agreement between
the lessee and PBI.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 4 of 47
<PAGE>

In connection with the buyback provision of the Operating Procedures, PBCC has
the option to request a buyback from PBI for non-copier equipment subject to a
lease which is terminated or canceled, provided the equipment is available for
repossession. Following such buyback, PBI is responsible for the repossession
and disposition of equipment. The buyback provision sets forth a stipulated
amount that is payable by PBI to PBCC for certain terminated leases; such amount
is calculated on the basis of a declining percentage, based upon the passage of
time, of the original total invoice value to PBCC. The difference between the
buyback amount received from PBI and the remaining value of the lease usually
results in a loss that is charged against PBCC's allowance for credit losses.

The Pitney Bowes Office Solutions segment does not remanufacture used copier
equipment; therefore copier equipment is excluded from the buyback arrangement
described above. However, under the Returned Copier Equipment Agreement (the
"Agreement"), the Office Solutions segment issues an annual blanket purchase
order for the repurchase of certain copier models. These returns are made under
conditions and at rates specifically set forth in the Agreement. All copier
equipment lease transactions are subject to the Company's standard credit review
procedures.

Finance Agreement Pursuant to the Amended and Restated Finance Agreement (the
- -----------------
"Finance Agreement") dated June 12, 1995, between PBI and PBCC, PBI has agreed
to retain, directly or indirectly, ownership of the majority of the outstanding
shares of capital stock of the Company having voting power in the election of
directors, to make payments, if necessary, to enable the Company to maintain a
ratio of income available for fixed charges as defined to such fixed charges of
1.25 to 1 as of the end of each fiscal quarter, and to provide or cause to be
provided funds sufficient to make timely payment of any principal, interest or
premium in respect of any of the Company's indebtedness for borrowed money that
has the benefit of the Finance Agreement if the Company is unable to make such
payment.

Under the terms of the Finance Agreement and the Indenture dated as of
November 1, 1995, between the Company and Chase Manhattan Bank (successor to
Chemical Bank), as Trustee (the "1995 Indenture"), the Finance Agreement may not
be amended, in any material respect, or terminated while the Company has any
series of debt securities issued under the 1995 Indenture or any series of other
debt outstanding that is, by its express terms, entitled to the provisions of
the Finance Agreement unless at least two nationally recognized statistical
rating agencies that have been rating such series of debt, confirm that their
ratings for such series of debt will not be downgraded as a result or the
holders of at least a majority of the outstanding principal amount of such
series of debt have consented in writing.

Under the Indenture dated as of May 1, 1985 (together with all Supplemental
Indentures as noted in Part IV Item 14(a) 3, the "Indenture"), between PBCC and
the trustee (Sun Trust Bank effective December 16, 1996 replacing Bankers Trust
Company), as Trustee (the "Trustee"), PBCC agreed it would not waive compliance
with, or amend in any material respect, the Finance Agreement without the
consent of the holders of a majority in principal amount of the outstanding
securities of each series of debt securities issued under the Indenture. In
addition, PBI has entered into a Letter Agreement with the Trustee pursuant to
which it agreed, among other things, that it would not default under the Finance
Agreement nor terminate the Finance Agreement without the consent of the holders
of a majority in principal amount of the outstanding securities issued under the
Indenture.

Tax Sharing Agreement The Company's taxable results are included in the
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consolidated Federal and certain state income tax returns of Pitney Bowes. Under
the Tax Sharing Agreement, dated April 1, 1977, between the Company and Pitney
Bowes (the "Tax Sharing Agreement"), the Company makes payment to Pitney Bowes
for its share of consolidated income taxes, or receives cash equal to the
benefit of tax losses utilized in consolidated returns in exchange for which it
issues non-interest bearing subordinated notes with a maturity one day after all
senior debt is repaid. The Tax Sharing Agreement can be canceled by either PBI
or PBCC upon twelve months written notice.

Real Estate Transactions When the Company entered into real estate lease
- ------------------------
financing, PBI agreed to make capital contributions up to a maximum of $15.0
million to provide a portion of the financing for such transactions, of which
$13.8 million has been received to date. There is no formal agreement in place
and PBI is under no obligation to continue to make capital contributions. There
have been no capital contributions received since 1993.

PITNEY BOWES INC.

PBI, a Delaware corporation organized in 1920, is listed on the New York Stock
Exchange. Headquartered in Stamford, Connecticut, PBI employs approximately
30,600 people throughout the United States, Europe, Canada, Australia and other
countries. PBI operates within three industry segments: Mailing and Integrated
Logistics, Office Solutions and Capital Services.

The Mailing and Integrated Logistics segment includes revenues from the sale
and financing of mailing equipment, related supplies and services, and the
rental of postage meters. In accordance with postal regulations, postage meters
may not be sold in the United States; they are rented to users and therefore are
not subject to lease by PBCC.

The Office Solutions segment includes revenues from the sale, financing,
rental and service of reprographic and facsimile equipment including related
supplies, and facilities management services which provides reprographic
business support document resource planning functions.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 5 of 47
<PAGE>

Capital Services provides large-ticket financing and fee-based programs
covering a broad range of products and other financial services to the
commercial and industrial markets in North America.

At December 31, 1999, PBI and its consolidated subsidiaries had total assets
of $8.2 billion and stockholders' equity of $1.6 billion. For the year ended
December 31, 1999, PBI's consolidated revenue and income from continuing
operations were $4.4 billion and $659.2 million, respectively, compared with
$4.1 billion and $542.5 million, respectively, for 1998.

COMPETITION AND REGULATION

The finance business is highly competitive with aggressive rate competition.
Leasing companies, commercial finance companies, commercial banks and other
financial institutions compete in varying degrees in the several markets in
which PBCC does business and range from very large diversified financial
institutions to many small, specialized firms. In view of the market
fragmentation and absence of any dominant competitors which result from such
competition, it is not possible to provide a meaningful description of PBCC's
competitive position in its markets. While financing rates are generally
considered by customers to be the principal factor in choosing a financing
source, the Company believes there are additional important factors related to a
customer's decision, including simplicity of documentation, flexibility and ease
of doing business over the duration of the contract. PBCC seeks to distinguish
itself from its competition by providing excellent service to its customers.
PBCC considers its documentation and systems to be among the best in the
industry. The Company has an established communication network in its regional
offices to eliminate costly delays and to increase the quality of service
offered to customers and vendors.

PBI has historically been a leading supplier of certain products and services
in its business segments, particularly postage meters and mailing machines.
However, all of its segments have strong competition from a number of companies.
In particular, PBI is facing competition in many countries for new placements
from several postage meter and mailing machine suppliers, and its mailing
systems products face competition from products and services offered as
alternative means of message communications. Pitney Bowes believes that its long
experience and reputation for product quality, and its sales and support service
organizations, along with PBCC, are important factors in influencing customer
choices with respect to its products and services.

Several states have ceilings on interest rates which may be charged to
commercial customers on secured lending transactions. PBCC may be required to
charge lower interest rates in certain jurisdictions than it charges elsewhere,
or to cease offering secured lending transactions in such states. PBCC does not
extend consumer credit as defined in the Federal Consumer Credit Protection Act.
Accordingly, PBCC's financing transactions are not subject to that Act.

FUNDING POLICY

PBCC's borrowing strategy is to use a balanced mix of debt maturities,
variable- and fixed-rate debt and interest rate swap agreements ("interest rate
swaps") to control its sensitivity to interest rate volatility. The Company
utilizes interest rate swaps when it considers the economic benefits to be
favorable. Interest rate swaps have been principally utilized to fix interest
rates on commercial paper and/or obtain a lower cost on debt than would
otherwise be available absent the swap. (See ITEM 7A.- QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK for information regarding market
risk.) The Company may borrow through the sale of commercial paper, under its
confirmed bank lines of credit and by private and public offerings of
intermediate- or long-term debt securities. In August 1999, the Company
established a medium-term note program for the issuance from time to time of up
to $500 million aggregate principal amount of Medium-Term Notes, Series D having
maturities of nine months or more, of which $375 million aggregate principal
amount remains available for issuance as of December 31, 1999 after the issuance
of $125 million aggregate principal amount of such notes in September, 1999. See
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources."

While the Company's funding strategy of balancing short-term and longer-term
borrowings and variable- and fixed-rate debt may reduce sensitivity to interest
rate changes over the long-term, effective interest costs have been and will
continue to be impacted by interest rate changes. The Company periodically
adjusts prices on its new leasing and financing transactions to reflect changes
in interest rates; however, the impact of these rate changes on revenue is
usually less immediate than the impact on borrowing costs.

EMPLOYEE RELATIONS

At December 31, 1999, there were 603 individuals employed by the Company and
its subsidiaries. Employee relations are considered to be highly satisfactory.
Management follows the policy of keeping employees informed of its decisions,
and encourages and implements suggestions whenever practicable.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 6 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
ITEM 2. -- PROPERTIES

PBCC's executive and administrative offices are located in Shelton, Connecticut,
which it leases from its parent, PBI. The remaining lease term is for 13 years,
cancelable upon mutual agreement. Except for its executive offices, all of the
Company's remaining office space is occupied under operating leases with
original terms ranging from one to ten years. PBCC has two regional offices
located throughout the United States and seven district sales offices located in
or near major metropolitan areas.

ITEM 3. -- LEGAL PROCEEDINGS

From time to time, the Company is a party to lawsuits that arise in the ordinary
course of its business. These lawsuits may involve litigation by or against the
Company to enforce contractual rights under contracts; lawsuits by or against
the Company relating to equipment, service or payment disputes with customers;
disputes with employees; or other matters. The Company is currently a plaintiff
or defendant in a number of lawsuits, none of which should have, in the opinion
of management and legal counsel, a material adverse effect on the Company's
financial condition or results of operations.

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

Omitted pursuant to General Instruction I.

PART II

Item 5. -- Market for the registrant's common equity and related stockholder
matters

All of the Company's common stock is owned by Pitney Bowes Inc. Accordingly,
there is no public trading market for the Company's common stock. The Board of
Directors declared and the Company paid dividends to PBI in amounts totaling
$85.0 million in 1999, $86.0 million in 1998 and $78.0 million in 1997. The
Company intends to continue to pay dividends to PBI in 2000.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 7 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Item 6. -- Selected financial data

The following tables summarize selected financial data for the Company, and
should be read in conjunction with the more detailed financial statements and
related notes thereto included under Item 8 of this report.

December 31,
(Dollars in thousands) ---------------------------------------------------------------------

For the Years Ended (2) 1999 1998 1997 1996 1995

<S> <C> <C> <C> <C> <C>
Investment in net finance assets....................... $ 2,443,828 $ 1,399,498 $ 1,420,409 $ 1,494,606 $ 1,527,065
========= ========= ========= ========= =========

Finance income......................................... $ 568,689 $ 514,287 $ 524,913 $ 529,987 $ 507,413
Equipment sales........................................ 8,206 - - 26,666 2,687
Selling, general and administrative expenses........... 122,886 99,067 98,542 92,737 83,618
Depreciation and amortization.......................... 32,053 10,040 15,218 19,155 16,897
Cost of equipment sales................................ 8,206 - - 22,821 2,214
Provision for credit losses............................ 41,917 36,080 34,076 35,617 33,661
Interest expense....................................... 121,210 124,411 154,634 163,860 173,745
--------- -------- -------- --------- ---------
Income from continuing operations before income taxes... 250,623 244,689 222,443 222,463 199,965
Provision for income taxes.............................. 60,204 69,946 61,285 70,114 61,648
--------- -------- -------- --------- ---------
Income from continuing operations....................... 190,419 174,743 161,158 152,349 138,317
Discontinued operations, net of tax.................... (22,947) 32,733 33,675 26,885 20,339
--------- -------- -------- --------- ---------
Net income.............................................. $ 167,472 $ 207,476 $ 194,833 $ 179,234 $ 158,656
========= ========= ========= ========= =========
Ratio of earnings from continuing operations
to fixed charges (1) 3.06X 2.96X 2.43X 2.35X 2.14X

At Year End

Gross finance assets
Internal programs....................................... $ 2,964,068 $ 2,560,524 $ 2,222,735 $ 2,039,567 $ 1,872,593
Capital services........................................ 703,868 902,617 2,162,083 3,520,395 3,631,757
--------- --------- -------- --------- ---------
Total gross finance assets.............................. 3,667,936 3,463,141 4,384,818 5,559,962 5,504,350
Unearned income, net of initial direct costs deferred.. (683,690) (741,336) (909,280) (1,285,778) (1,333,280)
--------- --------- -------- --------- ---------
Finance assets.......................................... $ 2,984,246 $ 2,721,805 $ 3,475,538 $ 4,274,184 $ 4,171,070
========= ========= ========= ========= =========

Investment in leveraged leases.......................... $ 850,000 $ 764,145 $ 667,779 $ 617,970 $ 562,500
========= ========= ========= ========= =========

Investment in operating leases, net..................... $ 45,607 $ 33,261 $ 32,112 $ 86,634 $ 114,587
========= ========= ========= ========= =========

Allowance for credit losses............................. $ (80,655) $ (115,233) $ (116,588) $ (98,721) $ (101,355)
========= ========= ========= ========= =========

Total assets............................................ $ 5,382,976 $ 5,293,670 $ 5,328,340 $ 5,347,002 $ 5,057,874
========= ========= ========= ========= =========

Senior notes payable
Within one year......................................... $ 1,044,573 $ 991,853 $ 1,970,110 $ 1,901,581 $ 2,122,880
After one year.......................................... 1,332,000 1,382,000 1,050,000 1,275,000 1,020,500
--------- --------- -------- --------- ---------
Total senior notes payable.............................. $ 2,376,573 $ 2,373,853 $ 3,020,110 $ 3,176,581 $ 3,143,380
========= ========= ========= ========= =========

Short-term notes payable to affiliates.................. $ 37,000 $ 137,000 $ - $ 139,400 $ 149,709
========= ========= ========= ========= =========

Long-term notes payable to affiliates................... $ 333,000 $ 333,000 $ - $ - $ -
========= ========= ========= ========= =========

Subordinated notes payable.............................. $ 299,892 $ 285,886 $ 270,487 $ 229,154 $ 170,857
========= ========= ========= ========= =========

Stockholder's equity.................................... $ 1,298,809 $ 1,216,337 $ 1,094,861 $ 978,028 $ 869,994
========= ========= ========= ========= =========

Debt to equity.......................................... 2.35:1 2.57:1 3.01:1 3.62:1 3.98:1
</TABLE>

(1) The computation of the ratio of earnings to fixed charges has been computed
by dividing income from continuing operations before income taxes as
adjusted by fixed charges. Included in fixed charges is one-third of rental
expense as the representative portion of interest. (See Item 14 - Exhibit
12 for calculation).

(2) AMIC and CPLC have been accounted for as discontinued operations on the
Consolidated Statement of Income for the years ended December 31, 1999 and
1998. Consequently, prior years' consolidated statements of income have
been reclassified to conform to current year presentation.

(3) In 1997, the Company entered into a transaction which reduced Capital
Services Division finance assets by $958.8 million. (See Note 3 to
CONSOLIDATED FINANCIAL STATEMENTS).

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 8 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION

Item 7. -- Management's discussion and analysis of financial condition and
results of operations

DISCONTINUED OPERATIONS

On January 14, 2000, the Company sold its mortgage servicing business,
Atlantic Mortgage & Investment Corporation ("AMIC"), a wholly-owned subsidiary
of the company to ABN AMRO North America. The Company received approximately
$484 million in cash at closing. Accordingly, operating results of AMIC have
been segregated and reported as discontinued operations in the Consolidated
Statement of Income. Prior year results have been reclassified to conform to the
current year presentation. In connection with the sale, the Company recorded a
loss of approximately $27.6 million (net of taxes of $18.4 million) for the year
ended December 31, 1999. The transaction is subject to post-closing adjustments.
(See Note 2 to CONSOLIDATED FINANCIAL STATEMENTS.)

On October 30, 1998, the Company's wholly-owned subsidiary, Colonial Pacific
Leasing Corporation ("CPLC"), transferred the operations, employees and
substantially all assets related to its broker-oriented capital services
financing business to General Electric Capital Corporation ("GECC"). As part of
the sale, the Company retained certain non-performing accounts of CPLC. (See
Note 6 to CONSOLIDATED FINANCIAL STATEMENTS.) The Company received approximately
$790 million at closing, which approximates the book value of the net assets
sold or otherwise disposed of and related transaction costs. The transaction was
subject to post-closing adjustments. In connection with this transaction, the
Company recorded a gain of approximately $3.7 million (net of taxes of $2.0
million) for the year ended December 31, 1999. This gain resulted from the
settlement of post-closing adjustments in 1999 related to the sale, offset by
the cost of settlement with regard to a dispute with GECC over certain assets
that were included in the sale. (See Note 2 to the CONSOLIDATED FINANCIAL
STATEMENTS.)

RESULTS OF CONTINUING OPERATIONS

The Company's finance income from continuing operations increased 12.2 percent
to $576.9 million in 1999 compared with $514.3 million in 1998, which was down
2.0 percent from 1997. Finance income for Internal Financing programs increased
16.2 percent to $416.2 million in 1999 compared with $358.3 million in 1998,
which was up 8.0 percent from 1997. These increases are primarily due to higher
fee-based income from mail financing and Small Business SolutionsSM programs and
higher investment levels for the mailing and copier programs. Finance income for
Capital Services financing programs increased 3.0 percent to $160.7 million in
1999 compared with $156.0 million in 1998, which decreased 19.2 percent from
1997. The marginal increase is due to higher gains on asset syndications,
including the sale of certain leveraged lease transactions in 1999, offset by
the Company's ongoing strategy of generating lower asset based revenue streams.
In particular, the decrease in 1998 revenue over 1997 is mainly due to the $1
billion reduction of Capital Services finance assets in the third quarter of
1997.

Selling, general and administrative ("SG&A") expenses increased 24.0 percent
to $122.9 million in 1999 compared with $99.1 million in 1998, which was up 0.5
percent from 1997. SG&A expenses for Internal Financing programs increased 22.6
percent to $88.6 million in 1999 compared to $72.3 million in 1998, which was
10.9 percent above 1997. These increases are principally due to higher
professional fees and outsourcing expenses related to Small Business Solutions
programs, higher consulting services in support of strategic initiatives such as
improvements to information technology and customer service and set-up costs
associated with increased investment in the mailing systems portfolio. SG&A
expenses for Capital Services financing programs increased 29.2 percent to $34.1
million in 1999 compared with $26.4 million in 1998, down 19.9 percent from
1997. The current year increase is due to higher legal and other professional
costs associated with the portfolio and business development.. The decrease in
1998 was mainly due to a charge of approximately $5.0 million for costs incurred
in 1997 related to the transfer of certain Capital Services Division finance
assets.

Depreciation on operating leases was $5.2 million in 1999 and $6.0 million in
1998.

The provision for credit losses in 1999 increased 16.2 percent to $41.9
million compared to $36.1 million for 1998, which increased 5.9 percent from
1997. The provision for the Internal Financing programs increased 9.7 percent to
$35.6 million in 1999 compared to $32.5 million in 1998, which had increased 2.5
percent from 1997. The increases are primarily attributable to increased
provisions for the Company's Purchase PowerSM and Business RewardsSM programs,
due to the growth of the respective businesses. The Company has also reserved
for increased delinquencies caused by difficulties encountered in the
consolidation of its regional offices. Operations were temporarily disrupted by
changes in location, training of new personnel and new technology
implementation. Because of these, collection efforts were temporarily effected
causing the delinquencies. However, the Company has established a dedicated task
force of experienced personnel to resolve the collection issue. Accounts deemed
uncollectable have been written off during 1999 and the Company does not foresee
any further difficulties. (See Note 6 to the CONSOLIDATED FINANCIAL STATEMENTS.)
The provision for Capital Services financing programs was $6.3 million in 1999
compared with $3.6 million in 1998 and $2.4 million in 1997.

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Pitney Bowes Credit Corporation Page 9 of 47
<PAGE>

The Company's allowance for credit losses as a percentage of net lease
receivables (net investments before allowance for credit losses plus the
uncollected principal balance of receivables sold, exclusive of assets held for
sale) was 1.83 percent at December 31, 1999, 2.87 percent at December 31, 1998
and 2.55 percent at December 31, 1997. The current year's decrease is mainly due
to an increased investment in finance assets coupled with increased write-offs.
PBCC charged $85.8 million, $66.8 million and $60.5 million against the
allowance for credit losses in 1999, 1998 and 1997, respectively. (See Note 6 to
CONSOLIDATED FINANCIAL STATEMENTS.)

Interest expense was $121.2 million in 1999 compared with $124.4 million in
1998, a decrease of 2.6 percent. The decrease in 1999 reflects lower average
borrowings combined with lower short-term interest rates. The effective interest
rate on short-term average borrowings was 2.74 percent in 1999 compared to 4.00
percent in 1998 and 5.00 percent in 1997. Also included in interest expense is
the offsetting effect of a $3.6 million gain from the termination of an interest
rate swap in September 1999. The swap was for a notional principal amount of
$125 million, at a fixed interest rate of 5.83 percent and a floating rate equal
to the Money Market Yield of Commercial Paper - Nonfinancial. Under the terms of
the swap agreement the Company was the fixed rate payer. The swap would have
been effective through February 2, 2005. The Company does not match fund its
financing investments and does not apply different interest rates to its various
financing programs.

The effective tax rate for 1999 was 24.0 percent compared to 28.6 percent for
1998 and 27.6 percent in 1997. The lower effective tax rate is principally due
to the impact of certain Capital Services Division partnership leasing
transactions.

Income from continuing operations increased 9.0 percent to $190.4 million in
1999 compared with $174.7 million in 1998, which was up 8.4 percent from 1997.
The increase in 1999 is primarily attributable to higher Internal Financing
Division investment levels, additional fee-based income, and lower borrowing
levels partly offset by higher SG&A.

The Company's ratio of earnings from continuing operations to fixed charges
was 3.06 times for 1999 compared with 2.96 times for 1998 and 2.43 times for
1997. The increase reflects the lower interest expense due to the factors
mentioned above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of funds are from operations and borrowings.
It has been PBCC's practice to use a balanced mix of debt maturities, variable-
and fixed-rate debt and interest rate swap agreements to control sensitivity to
interest rate volatility. PBCC's debt mix was 45 percent short-term and 55
percent long-term at both December 31, 1999 and 1998. PBCC's swap-adjusted
variable-rate versus fixed-rate debt mix was 39 percent variable-rate and 61
percent fixed-rate at December 31, 1999 and 24 percent variable-rate and 76
percent fixed-rate at December 31, 1998. The Company may borrow through the sale
of commercial paper, under its confirmed bank lines of credit, and by private
and public offerings of intermediate- or long-term debt securities.

The Company has $625 million of unissued debt securities available at December
31, 1999 from a shelf registration statement filed with the SEC in July 1998. In
August, 1999, the Company established a medium-term note program for the
issuance from time to time of up to $500 million aggregate principal amount of
Medium-Term Notes, Series D. Under this program, in September 1999 the Company
issued $125 million of 5.95% unsecured notes (the "Notes") available under a
shelf registration filed with the Securities and Exchange Commission in July
1998. The proceeds from the Notes were used for general corporate purposes,
including the repayment of short-term debt. The Notes are due September 29,
2000, with interest payable on March 29, 2000 and at maturity.

During August 1999 the Company also entered into three interest rate swaps for
an aggregate notional amount of $350 million.

Notional Effective
Amount Through Fixed Rate Floating Rate
------ ------- ---------- -------------
$100,000,000 February 2008 8.625% See below
$100,000,000 June 2008 9.250% See below
$150,000,000 September 2009 8.550% See below

The floating rates for each swap are based on six month LIBOR plus a spread,
equal to the difference between the fixed rate of the debt and the fixed rate
available at the time the swap was entered into. Under the terms of the swap
agreements the Company is the floating rate payer.

The Company's utilization of derivative instruments is normally limited to
interest rate swap agreements ("interest rate swaps") and foreign currency
exchange forward contracts ("foreign currency contracts"). The Company
periodically enters into interest rate swaps as a means of managing interest
rate exposure. The interest rate differential paid or received is recognized as
an adjustment to interest expense.

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Pitney Bowes Credit Corporation Page 10 of 47
<PAGE>

The Company is exposed to credit loss in the event of non-performance by the
counterparties to the interest rate swaps to the extent of the differential
between fixed- and variable-rates; such exposure is considered minimal. The
Company periodically enters into a foreign currency contract for the purpose of
minimizing its risk of loss from fluctuations in exchange rates in connection
with certain intercompany transactions. When in effect, the Company is exposed
to credit loss in the event of non-performance by the counterparties to the
foreign currency contracts to the extent of the difference between the spot rate
at the date of the contract delivery and the contracted rate; such exposure is
also considered minimal. At December 31, 1999 and 1998 there were no foreign
currency contracts outstanding.

Since the Company normally enters into derivative transactions only with
members of its banking group, the credit risk of these transactions is monitored
as part of the normal credit review of the banking group. The Company monitors
the market risk of derivative instruments through periodic review of fair market
values.

The Company continues to actively pursue a strategy of asset sales, thereby
allowing it to focus on fee and service-based revenue rather than asset-based
income. In keeping with this strategy, during 1997 the Company entered into a
transaction with GATX Capital Corporation which reduced Capital Services
Division finance assets by approximately $1 billion. As part of this
transaction, the Company holds $167.1 million of equity investment in a limited
liability company as of December 31, 1999. Additionally, in 1999, 1998 and 1997,
the Company sold approximately $227 million, $384 million and $264 million,
respectively, of Capital Services Division finance assets. Sales of these asset
portfolios were made with limited recourse in privately-placed transactions with
third-party investors. The proceeds from the sales of these assets were used to
repay a portion of the Company's commercial paper borrowings. The uncollected
principal balance of receivables sold at December 31, 1999 and 1998 was $534.4
million and $501.2 million, respectively.

The Company's liquidity ratio (finance contracts receivable plus residuals
expected to be realized in cash over the next 12 months to current maturities of
debt over the same period) was 1.80 and 1.47 times at December 31, 1999 and
1998, respectively.

Under the Finance Agreement between Pitney Bowes and the Company, Pitney Bowes
is obligated on a quarterly basis to make payments, to the extent necessary, so
that the Company's earnings available for fixed charges for the preceding one
year period shall not be less than 1.25 times its fixed charges. Pitney Bowes
has also agreed to make any past due principal, interest or premium payments on
behalf of PBCC in respect to all approved debt and/or commercial paper, in the
event that PBCC is unable to make such payments. To date, no such payments from
Pitney Bowes have been required.

The Company will continue to use cash to invest in finance assets with
emphasis on internal leasing transactions and select investment in Capital
Services Division financing transactions. The Company believes that cash
generated from operations and collections on existing lease contracts will
provide the majority of cash needed for such investment activities. Borrowing
requirements will be dependent on the level of equipment purchases from PBI, the
level of Capital Services Division financing activity, capital requirements for
new business initiatives, intercompany loans and the refinancing of maturing
debt. Additional cash, to the extent needed, is expected to be provided from
commercial paper, intermediate- or long-term debt securities and intercompany
funds, when available. While the Company expects that market acceptance of its
short- and long-term debt will continue to be strong, additional liquidity is
available, if needed, under revolving credit facilities and credit lines.

YEAR 2000

In 1997, the Company's parent, Pitney Bowes Inc., established a formal
worldwide program to identify and resolve the impact of the Year 2000 date
processing issue on its business systems, products and supporting
infrastructure. PBCC was included as part of this program. This program included
a comprehensive review of information technology ("IT") and non-IT systems,
software, and embedded processors. The program structure had strong executive
sponsorship and consisted of a Year 2000 steering committee comprised of senior
business and technology management, a Year 2000 program office staffed with
full-time project management, and subject matter experts and dedicated business
unit project teams. The Company had also engaged independent consultants to
perform periodic program reviews and assist in systems assessment and test plan
development.

The program encompassed the following phases: an inventory of affected
technology and critical third party suppliers, an assessment of Year 2000
readiness, resolution, unit and integrated testing and contingency planning. PBI
completed its worldwide inventory and assessment of all business systems,
products and supporting infrastructure. Required modifications were
substantially completed by year-end 1998. Tests were performed as software was
remediated, upgraded or replaced.

PBI experienced no significant Year 2000 issues on its business systems,
products and supporting infrastructure. Minor issues noted in the early days of
the year were fully addressed and remedied by the first week of January 2000.
PBI has not noted or been notified of any significant concerns or impacts on its
many business and IT systems, products, services and infrastructure or the
failure of any third party on which PBI relies, to make timely changes to their
own systems and processes.

Although PBI cannot determine with any degree of accuracy the potential
revenue it may have lost in the later months of 1999, PBI believes it is
possible that some of its customers may have deferred certain purchasing on
leasing decisions until the year 2000.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 11 of 47
<PAGE>

While the Company has not been notified of any specific product or system
failure as a result of the year 2000 issue, it will continue its monitoring
activity into the second quarter of 2000 to ensure that any and all problems
that may arise are promptly resolved.

PBCC estimates the total cost of the program from inception in 1997 through
the Year 2000 will be approximately $2.0 million, of which approximately $1.8
million was incurred through December 31, 1999. These costs, which are funded
through the Company's cash flows, include both internal labor costs as well as
consulting and other external costs. These costs are incorporated in the
Company's budgets and current forecasts and are being expensed as incurred

OTHER MATTERS

In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). Under SFAS 131, the Company has two reportable segments: Internal
Financial Division programs and Capital Services Division programs. . (See Note
12 to CONSOLIDATED FINANCIAL STATEMENTS.)

In June 1999, FAS No 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133-an amendment
of FASB Statement No. 133," was issued. This statement defers the effective date
of FAS No. 133 one year (January 1, 2001 for the Company). FAS No. 133 requires
that an entity recognize all derivative instruments as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. Changes in the fair value of those instruments will be reflected
as gains or losses. The accounting for the gains and losses depends on the
intended use of the derivative and the resulting designation. The Company is
currently evaluating the impact of this statement.

In December 1999, the SEC issued SAB No. 101, "Revenue Recognition in
Financial Statements," summarizing certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. This guidance is provided due, in part, to the large number of
revenue recognition issues that SEC registrants encounter. Although the Company
believes it is in compliance with this guidance, in all material respects, the
company is currently evaluating its current revenue recognition policies to
determine the impact of SAB No. 101, if any.

LEGAL, ENVIRONMENTAL AND REGULATORY MATTERS

From time to time, the Company is a party to lawsuits that arise in the
ordinary course of its business. These lawsuits may involve litigation by or
against the Company to enforce contractual rights under contracts; lawsuits by
or against the Company relating to equipment, service or payment disputes with
customers; disputes with employees; or other matters. The Company is currently a
defendant in a number of lawsuits, none of which should have, in the opinion of
management and legal counsel, a material adverse effect on the Company's
financial condition, results of operations or cash flows.

Pitney Bowes is subject to Federal, state and local laws and regulations
related to the environment, and is currently named as a member of various groups
of potentially responsible parties in administrative or court proceedings. Based
on facts presently known, PBI believes that the outcome of any current
proceeding will not have a material adverse effect on its financial condition,
results of operations or cash flows.

In January 2000, the U.S. Postal Services ("USPS") issued a proposed schedule
for the phase out of manually reset electronic meters in the U.S. as follows:

. as of February 1, 2000, new placements of manually reset electronic meters
are no longer permitted. Current users of manually reset electronic meters
can continue to use these meters for the term of their current rental and
lease agreements.

Based on the proposed schedule, PBI believes that the phase out of manually
reset electronic meters will not cause a material adverse financial impact on
it.

As a result of PBI's aggressive efforts to meet the USPS mechanical meter
migration phase out schedule combined with its ongoing and continuing investment
in advanced postage evidencing technologies, mechanical meters represented less
than 1% of PBI's installed U.S. meter base at December 31, 1999, compared with
10% at December 31, 1998. At December 31, 1999, over 99% of PBI's installed U.S.
meter base is electronic or digital, compared with 90% at December 31, 1998. PBI
continues to work in close cooperation with the USPS to convert those mechanical
meter customers who have not migrated to digital or electronic meters.

In May 1995, the USPS publicly announced its concept of its Information Based
Indicia Program ("IBIP") for future postage evidencing devices. As initially
stated by the USPS, the purpose of the program was to develop a new standard for
future digital postage evidencing devices which significantly enhanced postal
revenue security and supported expanded USPS value-added services to mailers.
The program would consist of the development of four separate specifications:

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 12 of 47
<PAGE>

. the Indicium specification - the technical specifications for the indicium to
be printed
. a Postal Security Device specification- the technical specification for the
devise that would contain the accounting and security features of the system
. a Host specification
. a Vendor Infrastructure specification

During the period from May 1995 through December 31, 1999, PBI has submitted
extensive comments to a series of proposed IBIP specifications issued by the
USPS. In July 1999, the USPS issued the latest set of proposed specifications,
entitled "Performance Criteria for Information-Based Indicia and Security
Architecture for Open IBI Postage Evidencing Systems" (the IBI Performance
Criteria). PBI has submitted comments to the IBI Performance Criteria.

As of December 31, 1999, PBI was in the process of finalizing the development
of both PC and Internet versions of a product which satisfy the proposed IBI
Performance Criteria. In March 2000, PBI received approval from the U.S.P.S. for
the commercial launch of the internet version of this product, ClickStampTM
Online. The PC version of this product is currently in the final phase of beta
testing and is expected to be ready for market upon final approval from the
U.S.P.S.

In June 1999, PBI was served with a Civil Investigative Demand (CID) from the
Justice Department's Antitrust Division. A CID is a tool used by the Antitrust
Division for gathering information and documents. PBI believes that the Justice
Department may be reviewing its efforts to protect its intellectual property
rights. PBI believes it has complied fully with the antitrust laws and is
cooperating fully with the department's investigation.

ITEM 7A. -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK

In the normal course of business, PBCC is exposed to the impact of market
risk. Market risk is the sensitivity of income to variations in interest rates,
foreign exchange rates, and other market-driven rates or prices.

Interest-rate risk is the most significant market risk to which the Company is
exposed. Interest-rate risk is the sensitivity of income to variations in
interest rates.

The Company manages its interest-rate risk mainly by using a variety of
off-balance sheet instruments. The most frequently used off-balance sheet
instruments are interest-rate swaps.

At December 31, 1999, interest-rate swaps totaling $550 million (notional
amount) were being used to manage risk due to interest-rate risk.

It is the Company's policy to use financial instruments only to the extent
necessary to meet the above stated objectives, and not for speculative purposes.

PBCC uses a Value-at-Risk ("VaR") model to determine the maximum potential
one-day loss in the fair value of its interest rate and foreign exchange
sensitive financial instruments. The VaR model estimates were made assuming
normal market conditions and a 95 percent confidence level. The Company's
computations are based on the interrelationships between movements in various
currencies and interest rates. The model includes all of the Company's debt as
well as interest rate swaps. Anticipated transactions, firm commitments and
accounts receivable and payable denominated in foreign currencies, which certain
of these instruments are intended to hedge, were excluded from the model.

The VaR model is a risk analysis tool and does not purport to represent actual
losses in fair value that will be incurred by PBCC, nor does it consider the
potential effect of favorable changes in market factors. At December 31, 1999,
the Company's maximum potential one-day loss in fair value on the interest rate
swaps, using a variance/co-variance technique, was not material to the Company's
financial condition, results of operations or cash flows.

- --------------------------------------------------------------------------------
The Company wishes to caution readers that any forward-looking statements (those
which talk about the Company's or management's current expectations as to the
future), in this Form 10-K or made by Company management involve risks and
uncertainties which may change based on various important factors. Some of the
factors which could cause future financial performance to differ materially from
the expectations as expressed in any forward-looking statement made by or on
behalf of the Company include: the level of business and financial performance
of Pitney Bowes, including the impact of changes in postal regulations in the
United States and competition from internet postage provided by other firms; the
impact of governmental financing regulations; the success of the Company in
developing strategies to manage debt levels, including the ability of the
Company to access the capital markets; the strength of worldwide economies; the
effects of and changes in trade, monetary and fiscal policies and laws, and
inflation and monetary fluctuations, including changes in interest rates; the
willingness of customers to substitute financing sources; and the success of the
Company at managing customer credit risk and associated collection and asset
management efforts; and the impact of the Year 2000 issue.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 13 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Item 8. -- Financial statements and supplementary data

REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------

To the Stockholder and Board of Directors of
Pitney Bowes Credit Corporation

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 38 present fairly, in all material
respects, the financial position of Pitney Bowes Credit Corporation and its
subsidiaries (the "Company") at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 14(a)(2) on page 38
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP

Stamford, Connecticut
January 20, 2000

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Pitney Bowes Credit Corporation Page 14 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(in thousands of dollars)

Years Ended December 31 1999 1998 1997
---- ---- ----
Revenue:
Finance income..................... $ 568,689 $ 514,287 $ 524,913
Equipment sales.................... 8,206 - -
------- ------- -------

Total revenue.................... 576,895 514,287 524,913
------- ------- -------

Expenses:
Selling, general and administrative 122,886 99,067 98,542
Interest........................... 121,210 124,411 154,634
Provision for credit losses........ 41,917 36,080 34,076
Depreciation and amortization...... 32,053 10,040 15,218
Cost of equipment sales............ 8,206 - -
------- ------- -------
Total expenses................... 326,272 269,598 302,470
------- ------- -------
Income from continuing operations
before income taxes................ 250,623 244,689 222,443
Provision for income taxes........... 60,204 69,946 61,285
------- ------- -------
Income from continuing operations.... 190,419 174,743 161,158
Discontinued operations:
Income from discontinued operations
(net of taxes of $177 in 1999;
$17,751 in 1998 and $20,998
in 1997............................ 971 32,733 33,675
Loss on disposal of discontinued
operations (net of taxes of
$(16,382) in 1999 (23,918) - -
------- ------- -------

Net income [1]....................... $ 167,472 $ 207,476 $ 194,833
======= ======= =======

Consolidated Statement of Retained Earnings
(in thousands of dollars)

Years Ended December 31 1999 1998 1997
---- ---- ----

Retained earnings at beginning of year $1,128,612 $1,007,136 $ 890,303
Net income for the year.............. 167,472 207,476 194,833
Dividends paid to Pitney Bowes Inc. (85,000) (86,000) (78,000)
-------- ------- -------

Retained earnings at end of year..... $ 1,211,084 $1,128,612 $1,007,136
======== ======== =======

[1] For the years ended December 31, 1999, 1998 and 1997, the Company had
no other comprehensive income items. Consequently, net income represents
the Company's total comprehensive income.

The accompanying notes are an integral part of the financial statements.

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Pitney Bowes Credit Corporation Page 15 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)

December 31,
1999 1998
---- ----

Assets:
Cash and cash equivalents......................... $ 132,914 $ 19,154
--------- ---------
Investments:
Finance assets.................................. 2,984,246 2,721,805
Investment in leveraged leases.................. 850,000 764,145
Investment in operating leases, net of
accumulated depreciation...................... 45,607 33,261
Allowance for credit losses..................... (80,655) (115,233)
--------- ---------
Net investments............................... 3,799,198 3,403,978
--------- ---------

Mortgage servicing rights, net of accumulated
amortization.................................. - 364,071
Assets held for sale............................ 342,934 337,757
Investment in partnership....................... 167,071 165,950
Loans and advances to affiliates................ 362,012 611,625
Net assets of discontinued operations........... 491,763 -
Other assets.................................... 87,084 391,135
--------- ---------
Total assets................................. $5,382,976 $5,293,670
========= =========

Liabilities:
Senior notes payable within one year............ $1,044,573 $ 991,853
Short-term notes payable to affiliates.......... 37,000 137,000
Accounts payable to affiliates.................. 227,503 278,452
Accounts payable and accrued liabilities........ 283,361 182,236
Deferred taxes.................................. 526,838 486,906
Senior notes payable after one year............. 1,332,000 1,382,000
Long-term notes payable to affiliates........... 333,000 333,000
Subordinated notes payable...................... 299,892 285,886
--------- ---------
Total liabilities........................... 4,084,167 4,077,333
--------- ---------
Stockholder's Equity:
Common stock.................................... 46,000 46,000
Capital surplus................................. 41,725 41,725
Retained earnings............................... 1,211,084 1,128,612
--------- ---------
Total stockholder's equity................... 1,298,809 1,216,337
--------- ---------
Total liabilities and stockholder's equity... $5,382,976 $5,293,670
========= =========

The accompanying notes are an integral part of the financial statements.

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Pitney Bowes Credit Corporation Page 16 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)

Years Ended December 31 1999 1998 1997
Operating Activities ---- ---- ----

<S> <C> <C> <C>
Net income....................................................... $ 167,472 $ 207,476 $ 194,833
Loss on disposal of discontinued operations, net of taxes........ 23,918 - -
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses.................................... 41,917 65,404 78,320
Depreciation and amortization.................................. 63,136 75,163 42,648
Cost of equipment sales........................................ 8,206 - -
Increase in deferred taxes...................................... 52,828 22,387 31,436
Decrease (increase) in other receivables........................ 113,102 (28,878) (41,195)
Decrease (increase) in discontinued other assets................ 74,251 (116,698) (56,429)
(Decrease) increase in accounts payable to affiliates........... (50,949) 45,535 64,359
Increase in accounts payable and accrued liabilities............ 67,386 7,518 23,248
Other, net...................................................... (3,051) (10,155) 12,271
--------- --------- --------
Net cash provided by operating activities 558,216 267,752 349,491
--------- --------- --------
Investing Activities
Proceeds from sale of subsidiary............................... 0 789,936 -
Investment in net finance assets............................... (2,443,828) (1,399,498) (1,420,409)
Investment in leveraged leases................................. (70,014) (77,441) (46,390)
Investment in operating leases................................. (552) (6,366) (16,023)
Investment in assets held for sale............................. (306,081) (545,149) (650,951)
Cash receipts collected under lease contracts, net of finance
income recognized........................................... 2,333,300 1,783,235 2,538,321
Investment in mortgage service rights.......................... (28,738) (206,464) (110,014)
Investment in affiliate notes.................................. - (282,000) -
Loans and advances to affiliated companies, net................ 245,696 (26,101) (281,777)
Additions to equipment and leasehold improvements.............. (5,965) (9,012) (14,327)
--------- --------- --------
Net cash provided by (used in) investing activities.............. (276,182) 21,140 (1,570)
--------- --------- --------
Financing Activities
Net change in short-term debt................................. 77,720 (1,012,457) 89,029
Short-term loans from affiliates.............................. (100,000) 137,000 (139,400)
Proceeds from issuance of senior notes payable after one year. 125,000 532,000 -
Proceeds from issuance of subordinated debt................... 14,006 15,399 41,333
Settlement of long-term debt.................................. (200,000) (225,000) (245,500)
Loans from affiliates ........................................ - 333,000 -
Dividends paid to Pitney Bowes, Inc........................... (85,000) (86,000) (78,000)
--------- --------- --------
Net cash (used in) provided by financing activities.............. (168,274) (306,058) (332,538)
--------- --------- --------
(Decrease) increase in cash...................................... 113,760 (17,166) 15,383
Cash at beginning of year........................................ 19,154 36,320 20,937
--------- --------- --------
Cash at end of year.............................................. $ 132,914 $ 19,154 $ 36,320
========= ========= ========
Interest paid.................................................... $ 155,044 $ 162,270 $ 196,968
========= ========= ========
Income taxes refunded, net....................................... $ 25,456 $ (63,420) $ (21,773)
========= ========= ========
</TABLE>

Supplemental noncash activities:

During 1998, the Company acquired a lease portfolio consisting of direct
financing and operating leases. In connection with this acquisition, the Company
assumed certain non-recourse debt in the amount of $59.2 million.

The accompanying notes are an integral part of the financial statements.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 17 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 1. - Summary of Significant Accounting Policies

Consolidation The consolidated financial statements include the accounts of
- -------------
Pitney Bowes Credit Corporation and all of its subsidiaries (the "Company" or
"PBCC"). All significant intercompany transactions and balances have been
eliminated.

Use of estimates The preparation of financial statements in conformity with
- ----------------
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and cash equivalents Cash equivalents include short-term, highly liquid
- -------------------------
investments with a maturity of three months or less from the date of
acquisition.

Basis of accounting for financing transactions At the time a financing
- ----------------------------------------------
transaction is consummated, the Company records on its balance sheet the total
receivable, unearned income and the estimated residual value of leased
equipment. Unearned income represents the excess of the total receivable plus
the estimated residual value over the cost of equipment. Unearned income is
recognized as finance income under the interest method over the term of the
transaction. Initial direct costs incurred in consummating transactions,
including fees paid to Pitney Bowes Inc. ("Pitney Bowes" or "PBI"), are
accounted for as part of the investment in a direct financing lease and
amortized to income using the interest method over the term of the lease.
Fee income is recognized as services are provided.

The Company has, from time-to-time, sold selected finance assets. Beginning
January 1, 1997, the Company adopted Statement of Financial Accounting Standards
No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", to account for the sale of these assets. All
assets obtained or liabilities incurred in consideration are recognized as
proceeds of the sale and any resulting gain or loss is recognized in income
currently.

Allowance for credit losses The Company evaluates the collectibility of its net
- ---------------------------
investment in finance assets based upon its loss experience and assessment of
prospective risk, and does so through ongoing reviews of its exposures to net
asset impairment. The Company adjusts the carrying value of its net investment
in finance assets to the estimated collectible amount through adjustments to the
allowance for credit losses. Finance receivables are charged to the allowance
for credit losses after the account is deemed uncollectible. (See Note 6 to
CONSOLIDATED FINANCIAL STATEMENTS.)

The Company's general policy is to discontinue income recognition for finance
receivables contractually past due for over 90 to 120 days depending on the
nature of the transaction. Resumption of income recognition occurs when payments
reduce the account to 60 days or less past due. Capital services transactions
are reviewed on an individual basis. Income recognition is discontinued when it
is apparent an obligor will not be making payment in accordance with lease terms
and is resumed when the Company has sufficient experience on resumption of
payments to be satisfied that such payments will continue in accordance with
contract terms.

Income taxes The Company's taxable results are included in the consolidated
- ------------
Federal and certain state income tax returns of Pitney Bowes. For tax purposes,
income from leases is recognized under the operating method and represents the
difference between gross rentals billed and operating expenses. Under a tax
sharing agreement between the Company and Pitney Bowes, the Company makes
payments to Pitney Bowes for its share of consolidated income taxes or receives
cash equal to the benefit of tax losses utilized in consolidated returns in
exchange for which it issues non-interest bearing subordinated notes with a
maturity one day after all senior debt is repaid. Deferred taxes reflected in
the Company's balance sheet represent the difference between Federal and state
income taxes reported for financial and tax reporting purposes, less
non-interest bearing subordinated notes issued.

Investment in operating leases Equipment under operating leases is depreciated
- ------------------------------
over the initial term of the lease to its estimated residual value. Rental
revenue is recognized on a straight-line basis over the related lease term.

Mortgage servicing rights ("MSRs") The Company recognizes, as separate assets,
- ----------------------------------
rights to service mortgage loans, whether those servicing rights are originated
or purchased. MSRs originated by others, purchased separately from loans, are
recorded at cost. The Company assesses impairment of MSRs based on the fair
value of those rights. The Company estimates the fair value of MSRs based on
estimated future net servicing income, using a valuation model which considers
such factors as market discount rates, consensus loan prepayment predictions,
servicing costs and other economic factors. For purposes of impairment
valuation, the Company's policy stratifies MSRs based on predominant risk
characteristics of the underlying loans, including loan type, amortization type
(fixed or adjustable) and note rate. To the extent that the carrying value of
MSRs exceeds fair value by individual stratum, a valuation reserve is
established, which is adjusted as the value of MSRs increases or decreases. The
cost of MSRs is amortized in proportion to and over the period of estimated net
servicing income.

Capitalized computer software costs The Company capitalizes certain costs of
- -----------------------------------
internally developed software. Capitalized costs include purchased materials and
services, payroll and payroll related costs and interests costs. The cost of
internally developed software is amortized on a straight-line basis over
approximate periods, principally three to five years.

Reclassifications Certain amounts from prior years have been reclassified in
- -----------------
order to conform to current year presentation.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 18 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 2. - Discontinued Operations

On January 14, 2000, the Company sold its mortgage servicing business, Atlantic
Mortgage & Investment Corporation (AMIC), a wholly-owned subsidiary of the
Company to ABN AMRO North America. The Company received approximately $484
million in cash at closing. Accordingly, operating results of AMIC have been
segregated and reported as discontinued operations in the Consolidated
Statements of Income. Prior year results have been reclassified to conform to
the current year presentation. In connection with the sale, the Company recorded
a loss of approximately $27.6 million (net of taxes of $18.4 million) for the
year ended December 31, 1999. The transaction is subject to post-closing
adjustments.

Operating results of both AMIC and CPLC have been segregated and reported as
discontinued operations in the consolidated statements of income. Prior year
results have been reclassified to conform to the current year presentation. Net
assets of discontinued operations have not been separately classified in the
consolidated balance sheets as of December 31, 1998. Cash flow impacts of
discontinued operations have not been segregated in the accompanying
consolidated statements of cash flows. Details of income from discontinued
operations, net of income taxes, are as follows (in thousands of dollars):

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AMIC (net of taxes of $177; $12,514 and $10,452)... $ 971 $ 24,280 $ 16,650
CPLC (net of taxes of $5,237 and $10,546).......... - 8,453 17,025
-------- -------- --------
Income from discontinued operations, net
of taxes $ 971 $ 32,733 $ 33,675
======== ======== ========
</TABLE>

Mortgage servicing revenue of AMIC was $114.9 million, $132.1 million and $73.2
million for the years ended December 31, 1999, 1998 and 1997, respectively. Net
interest expense allocated to AMIC's discontinued operations was $5.6 million,
$4.9 million and $0.1 million for the years ended December 31, 1999, 1998, and
1997, respectively. Interest has been allocated based on the level of
intercompany borrowings by AMIC, charged at the Company's weighted average
borrowing rate, partially offset by the interest savings the Company realized
due to it's borrowing against AMIC's escrow deposits as opposed to regular
commercial paper borrowings.

Finance income of CPLC was $128.8 million and $180.5 million for the years ended
December 31, 1998 and 1997, respectively. Interest expense of $33.9 million and
$46.2 million for the years ended December 31, 1998 and 1997 respectively.
Income from discontinued operations included allocated interest expense based on
the level of CPLC's intercompany borrowing, charged at the Company's weighted
average borrowing rate.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 19 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 3. - Finance Assets

The composition of the Company's finance assets is as follows:

December 31 1999 1998
(in thousands of dollars) ---- ----

Lease finance receivables............... $ 2,713,358 $2,683,875
Other finance receivables............... 539,499 366,697
--------- ---------
Total gross finance receivables...... 3,252,857 3,050,572
Unguaranteed residual valuation......... 415,079 412,569
--------- ---------
Total gross finance assets........... 3,667,936 3,463,141
Initial direct costs deferred........... 43,916 46,224
Unearned income......................... (727,606) (787,560)
--------- ---------
Total finance assets................. $ 2,984,246 $2,721,805
========= =========

Gross finance receivables represent earning assets held by the Company which are
generally due in monthly, quarterly or semi-annual installments over original
periods ranging from 36 to 180 months. In addition, gross finance receivables
for the Company's capital services programs include commercial jet aircraft
transactions with lease terms of up to 23 years and other non-commercial jet
aircraft transactions with lease terms ranging from two to 12 years.

Other finance receivables represent the Company's investment in its Business
RewardsSM Visa(R) and Purchase PowerSM programs.

The balance due at December 31, 1999, including estimated residual value
realizable at the end of the lease term, is payable as follows:

Gross Finance Assets
----------------------------------------------------

Internal Financing Capital Services Total
------------------ ---------------- -----
2000 $1,477,911 $ 125,091 $1,603,002
2001 720,923 77,678 798,601
2002 478,363 88,317 566,680
2003 230,575 58,732 289,307
2004 50,615 45,865 96,480
Thereafter 5,681 308,185 313,866
--------- -------- ---------
Total $2,964,068 $ 703,868 $3,667,936
========= ======== =========

Equipment financed for Pitney Bowes products were $689.0 million, $672.7 million
and $611.2 million in 1999, 1998, and 1997, respectively.

During 1997, PBCC and GATX Corporation ("GATX") formed PBG Capital Partners LLC
("PBG") for the purpose of financing and managing certain leasing related
assets. PBCC and GATX each contributed assets (primarily direct financing
leases) to PBG. The Company and GATX each maintain a 50 percent ownership
interest and jointly manage PBG. PBCC accounts for its investment in PBG under
the equity method and recorded income of approximately $6.0 million, $8.0
million for the years ended December 31, 1999, 1998 and 1997 respectively.
During 1998, PBCC contributed $65.3 million of assets to PBG and received cash
distributions totaling $3.2 million in 1999 and $89.6 million in 1998.

During 1999, 1998 and 1997, PBCC sold finance assets with limited recourse of
approximately $227 million, $384 million and $264 million, respectively. The
uncollected principal balance of receivables sold at December 31, 1999 and 1998
was $534.4 million and $501.2 million, respectively. The maximum risk of loss in
these transactions arises from the possible non-performance of lessees to meet
the terms of their contracts. The Company believes adequate provisions have been
made for sold receivables which may become uncollectible.

As of December 31, 1999, $289.0 million (9.7 percent) of the Company's finance
assets and $376.7 million (10.3 percent) of the Company's gross finance assets
were related to aircraft leased to commercial airlines. The Company considers
its credit risk for these leases to be minimal due to the credit worthiness of
the underlying lessees and the fact that all payments are being made in
accordance with lease agreements. The Company believes any potential exposure in
commercial aircraft investment is mitigated by the value of the collateral as
the Company retains a security interest in the leased aircraft.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 20 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 4. - Net Investment in Leveraged Leases

The Company's net investment in leveraged leases is composed of the following
elements:

December 31 1999 1998
(in thousands of dollars) ---- ----

Net rents receivable.................... $ 869,788 $ 788,404
Unguaranteed residual valuation......... 613,419 599,741
Unearned income......................... (633,207) (624,000)
--------- ---------
Investment in leveraged leases.......... 850,000 764,145
Deferred taxes arising from
leveraged leases (1) .................. (565,991) (450,900)
--------- ---------
Net investment in leveraged leases...... $ 284,009 $ 313,245
========= =========

(1) Includes amounts reclassified to subordinated debt.

Following is a summary of the components of income from leveraged leases:

Years Ended December 31 1999 1998 1997
(in thousands of dollars) ---- ---- ----

Pretax leveraged lease income. $ 29,782 $ 16,513 $ 4,467
Income tax benefit............ 3,119 11,770 17,110
-------- ------- -------
Net income from leveraged leases $ 32,901 $ 28,283 $ 21,577
======== ======= ========

As of December 31, 1999, leveraged lease assets acquired by the Company are
financed primarily through nonrecourse loans from third-party debt participants.
These loans are secured by the lessee's rental obligations and the leased
property. Net rents receivable represent gross rents less the principal and
interest on the nonrecourse debt obligations. Unguaranteed residual values are
principally based on independent appraisals of the values of leased assets
remaining at the expiration of the lease.

Leveraged lease investments totaling $289.4 million (34.0 percent) are related
to commercial real estate facilities, with original lease terms ranging up to 25
years. Also included are seven aircraft transactions with major commercial
airlines, with a total investment of $299.0 million (35.2 percent) and with
original lease terms ranging from 22 to 25 years; one transaction involving
locomotives with a total investment of $38.5 million (4.5 percent) with an
original lease term of 38 years, six transactions involving rail and bus
facilities with a total investment of $207.3 million (24.4 percent) and original
lease terms of 32 to 44 years and one transaction involving postal equipment
with a total investment of $15.7 million (1.9 percent).

Note 5. - Investment in Operating Leases, Net

The Company is the lessor of various types of equipment under operating leases
including data processing, transportation and production equipment.

Minimum future rental payments to be received in each of the next five years
under non-cancelable operating leases are $3.0 million in 2000, $2.7 million in
2001, $1.0 million in 2002, $0.8 million in 2003, $0.7 million in 2004 and $2.5
million thereafter.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 21 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 6. - Allowance for Credit Losses

The following is a summary of the Company's allowance for credit losses:

<TABLE>
<CAPTION>
December 31 1999 1998 1997
(in thousands of dollars) ---- ---- ----
<S> <C> <C> <C>
Beginning balance............................ $ 115,233 $ 116,588 $ 98,721
Additions charged to
discontinued operations.................... 9,300 29,324 44,244
Additions charged to continuing operations... 41,917 36,080 34,076
Amounts written-off:
Internal programs......................... (43,184) (28,945) (27,182)
Capital services programs................. 86 (490) 40
External small-ticket..................... (42,697) (37,324) (33,311)
------- ------- -------
Total write-offs...................... (85,795) (66,759) (60,453)
------- ------- -------

Ending balance................................ $ 80,655 $ 115,233 $ 116,588
======= ======= =======
</TABLE>

The increase in the amount of additions charged to continuing operations in 1999
and 1998 is the result of higher investment levels. The increase in write-offs
related to internal programs in 1999 is attributable to the higher investment in
Small Business Solutions programs, as well as higher delinquencies related to
transitional difficulties encountered in the regional office consolidation which
occurred in 1999. These difficulties were due solely to the transition and are
not ongoing in nature. The Company has established a special task force to
resolve the delinquencies and does not feel these difficulties will be an issue
in the future.

In establishing the provision for credit losses, the Company utilizes an
asset-based percentage. This percentage varies depending on the nature of the
asset, recent historical experience, vendor recourse, management judgement, and
for capital services financing transactions, the credit ratings assigned by
Moody's and Standard & Poor's. In evaluating the adequacy of reserves, estimates
of expected losses, again by nature of the asset, are utilized. While historical
experience is the principal factor in determining loss percentages, adjustments
are also made for current economic conditions, deviations from historical aging
patterns, seasonal write-off patterns and levels of non-earning assets. If the
resulting evaluation of expected losses differs from the actual aggregate
reserve, adjustments are made to the reserve.

For transactions in the internal financing programs, the Company discontinues
income recognition for finance receivables past due over 120 days. The Company
has utilized this period because historically internal collection efforts have
continued for this time period. In Capital Services Division programs, income
recognition is discontinued as soon as it is apparent that the obligor will not
be making payments in accordance with lease terms, such as in the event of
bankruptcy. Otherwise, income recognition is discontinued when accounts are past
due over 90 days.

Finance receivables are written-off to the allowance for credit losses after
collection efforts are exhausted and the account is deemed uncollectible. For
internal financing transactions, this usually occurs near the point in time when
the transaction is placed in a non-earning status. For Capital Services Division
financing transactions, write-offs are normally made after efforts are made to
repossess the underlying collateral, the repossessed collateral is sold, and
efforts to recover remaining balances are exhausted.

Resumption of income recognition on internal program non-earning accounts occurs
when payments are reduced to 60 days or less past due. On Capital Services
Division financing transactions, resumption of income recognition occurs after
the Company has had sufficient experience on resumption of payments and is
satisfied that such payments will continue in accordance with the original or
restructured contract terms.

The carrying values of non-performing and troubled finance assets are outlined
below. There are no leveraged leases classified under these categories.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 22 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 6. - Allowance for Credit Losses (continued)
December 31 1999 1998 1997
---- ---- ----
(in thousands of dollars)
Non-performing (non-earning) transactions
Internal programs.......... $ 25,316 $ 15,214 $ 11,394
Capital services programs.. 763 2,134 2,543
External small-ticket...... 13,118 42,063 37,184
------- ------- -------
Total.................. $ 39,197 $ 59,411 $ 51,121
======= ======= =======
Troubled (potential problem) transactions
Capital services programs.. $ 11,469 $ 12,906 $ 13,446
======= ======= =======

The increase in non-performing transactions in 1999 in internal small-ticket
programs is mainly due to the transitional difficulties encountered in the
regional consolidation project, discussed above. The decrease in non-performing
transactions in external small-ticket programs is due to final resolution and
write-off of certain accounts retained in the sale of CPLC in October 1998.

As part of this sale, the Company retained certain non-performing accounts.
These accounts were placed with a specialized late stage collection group in an
effort to maximize the potential for recovery. The Company believes it has
sufficient reserves remaining to provide for any losses which may result from
the final resolution of the above transactions.

Historically, the Company has not allocated a specific amount of credit loss
reserve to non-performing and troubled transactions. This is due to the
historically low level of write-offs in the capital services financing programs
and the limited number of transactions with material credit loss exposure in
other areas. As stated previously, the Company adjusts its aggregate reserve
position in comparison to the evaluation of expected losses.

Note 7. - Mortgage Servicing Rights

The cost of rights to service mortgage loans, whether those servicing rights are
originated or purchased, are capitalized and recorded as separate assets by the
Company. These costs are amortized in proportion to and over the period of
estimated net servicing income. The Company assesses impairment of MSRs based on
the fair value of those rights. The Company estimates the fair value of MSRs
based on estimated future net servicing income, using a valuation model which
considers such factors as market discount rates, consensus loan prepayment
predictions, servicing costs and other economic factors. For purposes of
impairment valuation, the Company's policy stratifies MSRs based on predominant
risk characteristics of the underlying loans, including loan type, amortization
type (fixed or adjustable) and note rate. To the extent that the carrying value
of MSRs exceeds fair value by individual stratum, a valuation reserve is
established, which is adjusted as the value of MSRs increases or decreases.

The Company purchased rights to service loans with aggregate unpaid principal
balances of approximately $12.2 million in 1999, $12.4 billion in 1998 and $8.1
billion in 1997. The costs associated with acquiring these rights were
capitalized and recorded as MSRs.

The following summarizes the Company's capitalized MSR activity:

December 31 1999 1998 1997
(in thousands of dollars) ---- ---- ----

Balance at beginning of year.... $ 364,071 $ 220,912 $ 138,146
MSR acquisitions................ 693 206,464 110,014
Deferred hedge loss............. - 1,709 -
MSR amortization................ (42,088) (54,787) (27,248)
Impairment reserve.............. - (10,227) -
Reclass to net assets of
discontinued operations........ (322,676) - -
------- ------- -------
Balance at end of year.......... $ 0 $ 364,071 $ 220,912
======= ======= =======

On January 14, 2000 the Company sold its mortgage servicing business to ABN AMRO
North America. Accordingly, the net assets have been segregated for this
discontinued operation as of December 31, 1999.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 23 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 8. - Assets Held for Sale

The Company funded transactions totaling $306.1 million in 1999, $545.1 million
in 1998, and $650.9 million in 1997, relating to assets held for sale.
Transactions totaling $302.7 million in 1999 and $380.3 million in 1998, were
sold for a net gain before taxes of $1.9 million in 1999 and $7.4 million in
1998, which is recorded as part of finance income. Twenty-one transactions
relating to assets held for sale remain in inventory with a net carrying value
of $342.9 million at December 31, 1999 compared with thirty-eight transactions
with a net carrying value of $337.8 million at December 31, 1998.

Note 9. - Other Assets

December 31 1999 1998
(in thousands of dollars) ---- ----

Billed meter rental receivables ........... $ 38,916 $ 33,514
Equipment and leasehold improvements,
net of accumulated depreciation and
amortization: 1999-$23,734; 1998-$22,259. 22,562 15,393
Other receivables.......................... 17,275 74,834
Deferred debt placement fees............... 2,653 3,594
Prepaid expenses and other assets.......... 5,678 2,646
Loans held for sale........................ - 131,504
Foreclosure claims receivable, net......... - 57,471
Mortgage escrow advances................... - 33,019
Other advances and deposits................ - 29,698
Other...................................... - 9,462
-------- --------
Total other assets......................... $ 87,084 $391,135
======== ========

Loans held for sale principally consist of purchased and originated mortgage
loans secured by first real estate mortgages and are stated at the lower of
aggregated cost or market. Market value is determined by outstanding commitments
from investors or by current investor yield requirements. In general, the
Company enters into forward delivery contracts for the sale of loans.
Write-downs of loans to the lower of cost or market are included in net income
of the period in which the adjustment occurs. Any discount resulting from the
purchase of mortgage loans is not included in net income until the loans are
sold. Write-downs of loans held for sale were $0.9 million for the year ended
December 31, 1999 and none in 1998.

Other receivables decreased in 1999 over the prior year due to the liquidation
of certain assets retained in the CPLC sale in October 1998 and the collections
of lease insurance receivables.

Foreclosure claims receivable include loans and related advances in the process
of foreclosure. Such loans are insured or guaranteed by either the Federal
Housing Administration, the Veterans Administration or private mortgage
insurance and will be repaid when the foreclosure process is completed. The
Company had established reserves for possible losses in excess of insured or
guaranteed amounts of approximately $8.4 million at December 31, 1998.

Equipment and leasehold improvements are stated at cost. Equipment is
depreciated on a straight-line basis over the expected useful life generally
ranging from five to ten years. Leasehold improvements are amortized on a
straight-line basis over the remaining lease terms.

Billed meter rental receivables represent uncollected meter rental receivables
billed to customers who have opted to have their meter rental charged on their
lease invoice. PBCC remits these charges to PBI based on billings. There is no
reserve established at PBCC, since any unpaid meter rentals are netted against
future payments due PBI. The increase in billed meter rental receivables in 1999
from 1998 resulted from a larger customer base and higher meter rates.

Mortgage escrow advances include advances made in connection with loan servicing
activities. These advances consist primarily of property taxes and insurance
premiums made before they are collected from mortgagors.

Other advances and deposits include advances made in connection with the
acquisition of new mortgage servicing portfolios.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 24 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 10. - Accounts Payable and Accrued Liabilities

December 31 1999 1998
(in thousands of dollars) ---- ----

Advances and deposits from customers.... $ 85,997 $ 48,503
Reserve for loss on discontinued operations 45,120 -
Accounts payable........................ 41,547 44,761
Due to noteholders...................... 2,635 2,193
Accrued interest payable................ 30,665 27,393
Sales and use, property and sundry taxes 23,762 18,004
Portfolio purchase price payable........ - 4,448
Accrued salary and benefits payable..... 8,180 7,139
Minority interest in partnership........ - 8,751
Other liabilities....................... 45,455 21,044
-------- --------
Total accounts payable and accrued liabilitie $283,361 $182,236
======== ========

Advances and deposits from customers consist mainly of deposits from customers
under the Company's Reserve Account program, which began in April 1999. (See
Item 1, "BUSINESS".)

Due to noteholders represents the principle due to investors on assets
securitized.

Note 11. - Notes Payable

Short-term notes payable totaled approximately $1.0 billion at both December 31,
1999 and 1998. These notes were issued as commercial paper, loans against bank
lines of credit, or to trust departments of banks and others at rates below the
prevailing prime rate.

The composition of the Company's notes payable is as follows:

December 31 1999 1998
in thousands of dollars) ---- ----

<S> <C> <C>
Senior Notes Payable:
Commercial paper at the weighted average
interest rate of 5.55% (4.90% in 1998).......................... $ 404,000 $ 173,700
Notes payable against bank lines of credit and others at a
weighted average interest rate of 1.36% (1.16% in 1998)......... 457,255 618,153
Other notes payable at a weighted average interest rate
of 7.50%....................................................... 8,318 -
Current installment of long-term debt due within one year at
interest rates of 5.95% to 6.11% (6.54% in 1998)................ 175,000 200,000
--------- ---------
Total senior notes payable due within one year.................... 1,044,573 991,853
Senior notes payable due after one year at interest rates of
5.65% to 9.25% in both 1999 and 1998............................ 1,332,000 1,382,000
--------- ---------
Total senior notes payable........................................ 2,376,573 2,373,853
--------- ---------
Notes Payable to Affiliates:
Due within one year at interest rates of 5.38% and 5.55%.......... 37,000 137,000
Due after one year at an interest rate of 5.38%................... 333,000 333,000
--------- ---------
Total notes payable to affiliates................................. 370,000 470,000
--------- ---------
Subordinated Notes Payable:
Non-interest bearing notes due Pitney Bowes Inc................... 299,892 285,886
--------- ---------
Total notes payable............................................... $ 3,046,465 $ 3,129,739
--------- ---------
</TABLE>

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 25 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 11. - Notes Payable (continued)

At December 31, 1999, the Company had unused lines of credit and revolving
credit facilities totaling $1.2 billion largely supporting commercial paper
borrowings.

Total notes payable at December 31, 1999 mature as follows: approximately $1,082
million in 2000, $237 million in 2001, $419 million in 2002, $437 million in
2003, $37 million in 2004 and $834 million thereafter.

Lending Arrangements: Under terms of its senior and subordinated loan
agreements, the Company is required to maintain earnings before taxes and
interest charges at prescribed levels. With respect to such loan agreements,
Pitney Bowes will endeavor to have the Company maintain compliance with such
terms and, under certain loan agreements, is obligated, if necessary, to pay to
the Company amounts sufficient to maintain a prescribed ratio of earnings
available for fixed charges or make approved debt/commercial paper principal,
interest or premium payments in the event that PBCC is unable to. To date, no
such payments have been required to maintain earnings available for fixed charge
coverage or to maintain the Company's contractual liquidity obligations.

On August 30, 1999, the Company established a medium-term note program for the
issuance from time to time of up to $500 million aggregate principal amount of
Medium-Term Notes, Series D. Under this program, in September 1999 the Company
issued $125 million of 5.95% unsecured notes (the "Notes") available under a
shelf registration filed with the Securities and Exchange Commission in July
1998. The proceeds from the Notes were used for general corporate purposes,
including the repayment of short-term debt. The Notes are due September 29,
2000, with interest payable on March 29, 2000 and at maturity.

During August 1999 the Company also entered into three interest rate swaps for
an aggregate notional amount of $350 million.

The floating rates for each swap are based on six month LIBOR plus a spread,
equal to the difference between the fixed rate of the debt and the fixed rate
currently available for similar debt. Under the terms of the swap agreements the
Company is the floating rate payer.

In January 1998, the Company issued $250 million of 5.65% notes due in January
2003.

On September 30, 1998, the Company issued a total of $282 million of Series A
and Series B Secured Floating Rate Senior Notes (the "Notes"), through certain
affiliates. The Notes are due in 2001 and bear interest at a floating rate of
LIBOR plus .65%, set as of the quarterly interest payment dates. The proceeds
from the Notes were used to purchase subordinated debt obligations from Pitney
Bowes (the "PBI Obligations"). The PBI Obligations have a principal amount of
$282 million and bear interest at a floating rate of LIBOR plus one percent, set
as of the quarterly interest payment dates.

In July 1998, the Company filed a shelf registration statement on Form S-3 with
the Securities and Exchange Commission. The registration statement allows PBCC
to offer, in one or more series, its unsecured debt securities at an aggregate
initial offering price not to exceed $750 million. The debt securities will be
offered in amounts, at prices and at terms to be determined at the time of sale
and which will be set forth in supplements to the prospectus forming part of the
shelf registration statement, including the supplement with respect to the
Medium-Term Notes, Series D, described above. At December 31, 1999, $625 million
was available under the shelf registration.

In 1999 and 1998, the Company issued $14.0 million and $15.4 million,
respectively, of non-interest bearing subordinated notes to Pitney Bowes in
exchange for funds equal to tax losses generated by the Company and utilized by
Pitney Bowes in the 1998 and 1997 consolidated tax returns. Any non-interest
bearing subordinated notes payable to Pitney Bowes mature after all senior notes
now outstanding and executed hereafter are paid.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 26 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 12. - Business Segment Information

The Internal Financing Division of PBCC provides marketing support to PBI.
Equipment leased for Internal Financing Division programs include mailing, paper
handling and shipping equipment, scales, copiers, and facsimile units. PBCC's
Capital Services Division operates in the commercial and industrial market by
offering financial services to its customers for products not manufactured or
sold by PBI or its subsidiaries. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies. (See
Note 1 to CONSOLIDATED FINANCIAL STATEMENTS.)

Operating profit of each segment is determined by deducting from revenue the
costs and expenses directly related to the segment as well as an allocation of
certain corporate expenses. Operating profit excludes income taxes and net
interest attributable to corporate debt. Identifiable assets are those used by
the segment directly in operations and exclude cash and cash equivalents,
short-term investments and general corporate assets. Long-lived assets exclude
finance receivables, investment in leveraged leases and MSRs.

Segmental revenue and income from continuing operations before income taxes for
the years ended 1999, 1998 and 1997 are presented below. All revenue is produced
in the United States.

Revenue
-----------------------------------
Years Ended December 31 1999 1998 1997
---- ---- ----
(in thousands of dollars)
Internal Financing Division...... $ 416,172 $ 358,237 $ 331,811
Capital Services Division........ 160,723 156,050 193,102
------- ------- -------
Total revenue............... $ 576,895 $ 514,287 $ 524,913
======= ======= =======

Income from Continuing
Operations Before Income Taxes
-----------------------------------
Years Ended December 31 1999 1998 1997
(in thousands of dollars) ---- ---- ----

Internal Financing Division...... $ 227,153 $ 196,434 $ 184,279
Capital Services Division........ 25,058 53,052 49,570
------- ------- -------
Total for reportable segments.... 252,211 249,486 233,849
Unallocated amounts:
Corporate interest expense, net. (1,142) (7,567) (9,624)
Corporate (expenses) income..... (446) 2,770 (1,782)
------- ------- -------
Income from continuing operations
before income taxes............. $ 250,623 $ 244,689 $ 222,443
======= ======= =======

Additional segment information is as follows:

Depreciation and Amortization
-----------------------------
Years Ended December 31 1999 1998 1997
---- ---- ----
(in thousands of dollars)
Internal Financing Division............. $ 95 $ 16 $ -
Capital Services Division............... 31,706 9,315 13,822
------- ------ -------
Total for reportable segments........... 31,801 9,331 13,822
Unallocated amount: Corporate.......... 252 709 1,396
------- ------- -------
Total depreciation and amortization.. $ 32,053 $ 10,040 $ 15,218
======= ======= =======

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 27 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 12. - Business Segment Information (continued)

Interest Expense, Net
---------------------------------
Years Ended December 31 1999 1998 1997
---- ---- ----
(in thousands of dollars)
Internal Financing Division......... $ 64,702 $ 57,018 $ 53,742
Capital Services Division........... 55,366 59,826 91,268
------- ------- -------
Total for reportable segments....... 120,068 116,844 145,010
Corporate interest expense, net..... 1,142 7,567 9,624
------- ------- -------
Consolidated interest expense, net.. $ 121,210 $ 124,411 $ 154,634
======= ======= =======

December 31,
-------------------------
Net additions (reductions) to
long-lived assets: 1999 1998
(in thousands of dollars) ---- ----

Internal Financing Division...... $ 408,844 $ 245,665
Capital Services Division........ 169,828 372,725
Mortgage servicing............... - 20,736
------- -------
Total for reportable segments... 578,672 639,126
General corporate assets......... (58,771) 106,746
------- -------
Consolidated additions to
long-lived assets................ $ 519,901 $ 745,872
======= =======

December 31,
-------------------------
Identifiable assets: 1999 1998
---- ----
(in thousands of dollars)
Internal Financing Division........... $ 2,465,977 $ 2,087,845
Capital Services Division............. 2,286,055 2,437,177
Mortgage servicing.................... - 598,771
--------- ---------
Total for reportable segments......... 4,752,032 5,123,793
Cash.................................. 132,914 19,154
Net assets of discontinued operations. 491,763 -
General corporate assets.............. 6,267 150,723
--------- ---------
Consolidated assets................... $ 5,382,976 $ 5,293,670
========= =========

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 28 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 13. - Derivative Instruments

PBCC's principal objective in holding derivatives is the management of
interest-rate risk. The Company uses various financial instruments, particularly
interest rate swaps to manage these risks. The Company is exclusively an end
user of these instruments and does not engage in any derivatives trading or
market-making activities in the derivative markets.

The major source of the Company's interest-rate risk is its exposure to changes
in interest rates as they relate to its notes payable. To manage this exposure,
the Company periodically enters into interest rate swaps. The interest rate
differential to be paid or received is recognized over the life of the
agreements as an adjustment to interest expense.

The aggregate amount of interest rate swaps as of December 31, 1999 categorized
by type, and the related weighted average interest rate paid and received
assuming current market conditions is reflected below:

Total
Major Type Notional
of Interest Amount Weighted Average Interest Rates
Rate Swap Hedged Liability (000's) Fixed Variable(1)
--------- ---------------- ------- ----- -----------
Pay fixed Commercial paper $200,000 8.88% 5.19%
Pay variable Medium-term notes $350,000 8.81% 7.61%

(1) The variable rate is indexed from the 30 day Fed AA composite commercial
paper rate. The Fed AA composite rate at December 31, 1999 was used to
calculate the weighted average interest rate.

The aggregate notional amount of interest rate swaps as of December 31, 1999
categorized by annual maturity is reflected below:

Pay Pay
(in thousands of dollars) Fixed Variable
-----

2000.......................... $ - $ -
2001.......................... - -
2002.......................... 100,000 -
2003.......................... - -
2004.......................... 100,000 -
Thereafter.................... - 350,000
-------- --------
Notional Amount............... $ 200,000 $350,000
======== ========

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 29 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 13. - Derivative Instruments (continued)

The following is a reconciliation of interest rate swap activity by major type
of swap:

Annual Maturity
--------------------------------
Pay
---------------------
(in thousands of dollars) Fixed Variable Total
----- -------- -----

Balance December 31, 1997..... $ 200,000 $ 23,524 $ 223,524
New contracts................. 125,000 - 125,000
Assigned contracts............ - (23,524) (23,524)
-------- -------- --------

Balance December 31, 1998..... 325,000 - 325,000
New contracts................. - 350,000 350,000
Terminated contracts.......... (125,000) - (125,000)
-------- -------- --------

Balance December 31, 1999..... $ 200,000 $ 350,000 $ 550,000
======== ======== ========

Interest rate swaps are used in the majority of circumstances to either convert
variable rate commercial paper interest payments to fixed rate interest payments
or to convert fixed rate public debt interest payments to variable rate interest
payments.

The impact of interest rate swaps on interest expense and the weighted average
borrowing rate is as follows

1999 1998 1997
---- ---- ----
Impact of interest rate swaps
on interest expense (000's).......... $ 5,049 $ 4,500 $ 6,268
Weighted average borrowing rate
excluding interest rate swaps........ 5.45% 5.53% 5.89%
Weighted average borrowing rate
including interest rate swaps........ 5.64% 5.69% 6.09%

Interest rate swap agreements involve the exchange of fixed rate and variable
rate interest payments based on a notional principal amount and maturity date.

The Company is exposed to credit loss in the event of non-performance by the
counterparties to the interest-rate swap to the extent of the differential
between fixed- and variable-rates; such exposure is considered minimal.

The Company periodically enters into foreign currency contracts for the purpose
of minimizing its risk of loss from fluctuations in exchange rates in connection
with certain intercompany loans and certain sales of receivables with recourse
of foreign currency denominated lease receivables. The Company had no foreign
currency contracts outstanding as of December 31, 1999 and 1998.

Since the Company normally enters into derivative transactions only with members
of its banking group, the credit risk of these transactions is monitored as part
of the normal credit review of the banking group. The Company monitors the
market risk of derivative instruments through periodic review of the fair market
values.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 30 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 14. - Stockholder's Equity

The following is a reconciliation of stockholder's equity:

Common Capital Retained Stockholder's
(in thousands of dollars) Stock Surplus Earnings Equity
----- ------- -------- ------

Balance December 31, 1996.. $ 46,000 $ 41,725 $ 890,303 $ 978,028
Net income - 1997.......... - - 194,833 194,833
Dividends paid to PBI...... - - (78,000) (78,000)
-------- -------- -------- ---------

Balance December 31, 1997.. 46,000 41,725 1,007,136 1,094,861
Net income - 1998.......... - - 207,476 207,476
Dividends paid to PBI...... - - (86,000) (86,000)
-------- -------- --------- ---------

Balance December 31, 1998.. 46,000 41,725 1,128,612 1,216,337
Net income - 1999.......... - - 167,472 167,472
Dividends paid to PBI...... - - (85,000) (85,000)
-------- -------- --------- ---------

Balance December 31, 1999.. $ 46,000 $ 41,725 $1,211,084 $1,298,809
======== ======== ========= =========

At December 31, 1999, 10,000 shares of common stock, no-par with a stated value
of $100,000 per share were authorized and 460 shares were issued and outstanding
and amounted to $46.0 million at December 31, 1999 and 1998. All of the
Company's stock is owned by Pitney Bowes.

When the Company entered into real estate lease financing, PBI made capital
contributions to provide a portion of the financing for such transactions. A
total of $13.8 million has been received to date. There is no formal agreement
in place and PBI is under no obligation to continue with capital contributions.
No capital contributions have been received since 1993.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 31 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 15. - Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:

Cash, assets held for sale, accounts payable and senior notes payable within one
- --------------------------------------------------------------------------------
year. Due to the short maturity of these instruments, the carrying amounts
- ----
approximate fair value.

Investment securities. The fair value of investment securities is estimated
- ---------------------
based on quoted market prices, dealer quotes and other estimates.

Loans receivable. The fair value of loans receivable is estimated based on
- ----------------
quoted market prices, dealer quotes or by discounting the future cash flows
using current interest rates at which similar loans would be made to borrowers
with similar credit ratings and similar remaining maturities.

Senior notes payable. The fair value of long-term debt is estimated based on
- --------------------
quoted dealer prices for the same or similar issues.

Interest rate swaps. The fair values of interest rate swaps are obtained from
- -------------------
dealer quotes. These values represent the estimated amount the Company would
receive or pay to terminate the agreements taking into consideration current
interest rates and the creditworthiness of the counterparties.

MSR hedge. The fair values of the MSR hedge are obtained from dealer quotes. The
- ---------
interest rate swap portion represents the estimated amount the Company would
receive or pay to terminate the agreements taking into consideration current
interest rates and the creditworthiness of the counterparties. The interest rate
floor portion represents the market value of the contracts.

Transfers of receivables with recourse. The fair value of the recourse liability
- --------------------------------------
represents the estimate of expected future losses. The Company periodically
evaluates the adequacy of reserves and estimates of expected losses; if the
resulting evaluation of expected losses differs from the actual reserve,
adjustments are made to the reserve.

Residual and conditional commitment guarantee contracts. The fair value of
- -------------------------------------------------------
residual and conditional commitment guarantee contracts is based on the
projected fair market value of the collateral as compared to the guaranteed
amount plus a commitment fee generally required by the counterparty to assume
the guarantee.

The estimated fair value of the Company's financial instruments is as follows:

<TABLE>
<CAPTION>
December 31 1999 1998
(in thousands of dollars) ------------------------- ---------------------------
Carrying Fair Carrying Fair
Value (1) Value Value (1) Value
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Investment securities ............... $ 683 $ 683 $ 683 $ 683
Loans receivable (1) ................ 614,712 625,582 453,558 469,159
Senior notes payable (2) ............ (1,531,932) (1,556,808) (1,607,454) (1,722,151)
Interest rate swaps ................. (234) (10,662) (2,051) (29,730)
MSR hedge ........................... - - 2,864 2,864
Transfers of receivables
with recourse ..................... (64,662) (64,662) (42,805) (42,805)
Residual and conditional
commitment guarantee contracts .... - - (545) (48)
</TABLE>

(1) Carrying value for loans receivable is net of applicable allowance for
credit losses.
(2) Carrying value includes accrued interest and deferred fee income, where
applicable.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 32 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 16. - Taxes on Income from Continuing Operations

Income from continuing operations before income taxes and the provision for
income taxes were as follows:

Years Ended December 31 1999 1998 1997
(in thousands of dollars) ---- ---- ----

Income from continuing operations
before income taxes......... $ 250,623 $ 244,689 $222,443
======== ======== =======
Provision for income taxes:
Federal:
Current.................... $ (27,385) $ (7,509) $(32,440)
Deferred................... 79,314 67,561 95,976
------- ------- -------
Total federal.......... 51,929 60,052 63,536
------- ------- -------
State and local:
Current.................... 466 2,495 10,276
Deferred................... 7,809 7,399 (12,527)
------- ------- -------
Total state and local.. 8,275 9,894 (2,251)
------- ------- -------

Total......................... $ 60,204 $ 69,946 $ 61,285
======= ======= =======

Including discontinued operations, the provision for income taxes consists of
the following:

Years Ended December 31 1999 1998 1997
---- ---- ----
(in thousands of dollars)
Federal....................... $ 39,199 $ 76,773 $ 81,668
State and local............... 4,800 10,924 615
------- ------- -------
Total.................. $ 43,999 $ 87,697 $ 82,283
======= ======= =======

Deferred tax liabilities and (assets):

December 31 1999 1998 1997
(in thousands of dollars) ---- ---- ----

Deferred tax liabilities:
Lease revenue and
related depreciation $ 526,838 $ 511,172 $ 531,195
Deferred tax assets:
Alternative minimum tax
credit carryforwards...... 0 (24,266) (21,135)
-------- -------- --------
Total......................... $ 526,838 $ 486,906 $ 510,060
======== ======== ========

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 33 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 16. - Taxes on Income from Continuing Operations (continued)

The reconciliation of the U.S. Federal statutory rate to the Company's effective
income tax rate for continuing operations is as follows:

Years Ended December 31 1999 1998 1997
---- ---- ----
(Percent of pretax income)
U.S. Federal statutory rate... 35.0% 35.0% 35.0%
State and local income taxes . 1.6 2.6 (0.8)
Partnership leasing transactions (9.9) (0.8) (1.0)
Tax-exempt foreign trade income (1.6) (1.9) (2.4)
Tax-exempt finance income .... (0.7) (1.3) (0.7)
Residual portfolio and
equipment acquisition....... (1.3) (0.6) (0.6)
Other, net ................... .9 (4.4) (2.0)
-------- -------- --------
Effective income tax rate .... 24.0% 28.6% 27.5%
======== ======== ========

The difference between the statutory tax rate and the effective tax rate for
discontinued operations is primarily due to state and local income taxes.

Note 17. - Retirement and Nonpension Postretirement Benefit Plans

The Company participates in the Pitney Bowes retirement plan which covers the
majority of PBCC employees. The assets of this plan fully fund vested benefits.
Pitney Bowes' plan assumptions for 1999 were 7.75 percent for the discount rate,
4.25 percent for the expected rate of increase in future compensation levels and
9.30 percent for the expected long-term rate of return on plan assets. Plan
assumptions for 1998 were 7.00 percent for the discount rate, 4.25 percent for
the expected rate of increase in future compensation levels and 9.30 percent for
the expected long-term rate of return on plan assets. The Company's pension
expense was $0.3 million in 1999, $0.5 million in 1998 and $0.4 million in 1997.

The Company participates in the Pitney Bowes nonpension postretirement benefit
plan, which provides certain health care and life insurance benefits to eligible
retirees and their dependents. The Company's nonpension postretirement expense
was $.02 million in 1999, $0.1 million in each of 1998 and 1997.

Note 18. - Commitments, Contingencies and Regulatory Matters

The Company is the lessee under noncancelable operating leases for office space
and automobiles. Future minimum lease payments under these leases are as
follows: $2.8 million in 2000, $2.5 million in 2001, $2.3 million in 2002, $2.3
million in 2003, $2.3 million in 2004 and $16.8 million thereafter. Rental
expense under operating leases was $1.6 million, $2.8 million and $4.3 million
in 1999, 1998 and 1997, respectively.

At December 31, 1999, the Company had $451.8 million of unfunded commitments to
extend credit to customers in its Small Business Solutions programs and none for
its Capital Service programs. The Company evaluates each customer's
creditworthiness on a case-by-case basis. Upon extension of credit, the amount
and type of collateral obtained, if deemed necessary by the Company, is based on
management's credit assessment of the customer. Fees received under the
agreements are recognized over the commitment period. The maximum risk of loss
arises from the possible non-performance of the customer to meet the terms of
the credit agreement. As part of the Company's review of its exposure to risk,
adequate provisions are made for finance assets which may be uncollectible.

From time to time, the Company is a party to lawsuits that arise in the ordinary
course of its business. These lawsuits may involve litigation by or against the
Company to enforce contractual rights under contracts; lawsuits by or against
the Company relating to equipment, service or payment disputes with customers;
disputes with employees; or other matters. The Company is currently a defendant
in a number of lawsuits, none of which should have, in the opinion of management
and legal counsel, a material adverse effect on the Company's financial
condition, results of operations or cash flows.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 34 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 18. - Commitments, Contingencies and Regulatory Matters (continued)

Pitney Bowes is subject to Federal, state and local laws and regulations related
to the environment, and is currently named as a member of various groups of
potentially responsible parties in administrative or court proceedings. Based on
facts presently known, PBI believes that the outcome of any current proceeding
will not have a material adverse effect on its financial condition, results of
operations or cash flows.

In January 2000, the U.S. Postal Services ("USPS") issued a proposed schedule
for the phase out of manually reset electronic meters in the U.S. as follows:

Based on the proposed schedule, PBI believes that the phase out of manually
reset electronic meters will not cause a material adverse financial impact on
it.

. the Indicium specification - the technical specifications for the indicium to
be printed

. a Postal Security Device specification - the technical specification for the
devise that would contain the accounting and security features of the system

. a Host specification

. a Vendor Infrastructure specification

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 35 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
Notes to Consolidated Financial Statements

Note 19. - Quarterly Financial Information (Unaudited)

Summarized quarterly financial data for 1999 and 1998 follows (in thousands of
dollars):

Three Months Ended
----------------------------------------
1999 March 31 June 30 Sept. 30 Dec. 31
---- -------- ------- -------- --------

Total revenue $135,124 $141,955 $140,119 $159,697
-------- -------- -------- --------
Expenses:
Selling, general and
administrative 25,871 33,511 29,833 33,671
Depreciation and amortization 7,717 7,165 7,427 9,744
Cost of equipment sales - - - 8,206
Provision for credit losses 12,299 7,714 8,030 13,874
Interest 31,780 32,781 26,606 30,043
Provision for income taxes 16,710 17,982 14,783 10,729
-------- -------- -------- --------
Total expenses 94,377 99,153 86,679 106,267
-------- -------- -------- --------
Income from continuing operations 40,747 42,802 53,440 53,430
Discontinued operations (net of
taxes of $2,140, $(19,025), $0
and $680) 3,700 (27,667) - 1,020
-------- -------- -------- --------
Net income $ 44,447 $ 15,135 $ 53,440 $54,450
======== ======== ======== ========

1998
----

Total revenue $119,529 $126,728 $127,644 $140,386
-------- -------- -------- --------
Expenses:
Selling, general and administrative 22,831 23,824 23,977 28,435
Depreciation and amortization 3,125 3,041 3,795 79
Provision for credit losses 8,849 8,933 8,307 9,991
Interest 30,311 31,968 31,099 31,033
Provision for income taxes 14,916 16,118 17,108 21,804
-------- -------- -------- --------
Total expenses 80,032 83,884 84,286 91,342
-------- -------- -------- --------
Income from continuing operations 39,497 42,844 43,358 49,044
Discontinued operations (net of taxes
of $4,591, $5,785, $6,384 and $991) 7,352 9,248 10,201 5,932
-------- -------- -------- --------
Net income $ 46,849 $ 52,092 $ 53,559 $ 54,976
======== ======== ======== ========

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 36 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION

Item 9. -- Changes in and disagreements with accountants on accounting and
financial disclosure

None.

PART III

ITEM 10. -- Directors and executive officers of the registrant

Omitted pursuant to General Instruction I.

Item 11. -- executive compensation

Omitted pursuant to General Instruction I.

Item 12. -- security ownership of certain beneficial owners and management

Omitted pursuant to General Instruction I.

Item 13. -- certain relationships and related transactions

Omitted pursuant to General Instruction I.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 37 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION

Part IV

Item 14. -- exhibits, financial statement SCHEDULES and reports on form 8-k

(a) Index of documents filed as part of this report: Page(s)
-------

1. Consolidated financial statements
Included in Part II of this report
Report of independent accountants.......................... 14
Consolidated statements of income and of retained
earnings for each of the three years in the period
ended December 31, 1999.................................... 15
Consolidated balance sheet at December 31, 1999 and 1998... 16
Consolidated statement of cash flows for each of the
three years in the period ended December 31, 1999.......... 17
Notes to consolidated financial statements................. 18-36
2. Financial statement schedules
Valuation and qualifying accounts and reserves (Schedule II). 42

The additional financial data should be read in conjunction with the
financial statements included in Item 8 to this Form 10-K. Schedules not
included with this additional financial data have been omitted because
they are not applicable or the required information is shown in the
financial statements or notes thereto.

3. Index to Exhibits (numbered in accordance with Item 601 of Regulation S-K)

<TABLE>
<CAPTION>
Reg S-K State or Incorporation
Exhibits Description by Reference
-------- ----------- ------------

<S> <C> <C>
(3) 1. Certificate of Incorporation, as amended Incorporated by reference to
Exhibit (3.1) to Form 10-K
(No. 01-13497) as filed with
the Commission on March 21, 1996.

2. By-Laws, as amended Incorporated by reference to
Exhibit (3.2) to Form 10 on
Registration Statement
(No. 01-13497) as filed with the
Commission on May 1, 1985.

(4) (a) Form of Indenture dated as of May 1, 1985 Incorporated by reference to
between the Company and Bankers Trust Exhibit (4a) to Registration
Company, as Trustee Statement on Form S-3
(No. 2-97411) as filed with the
Commission on May 1, 1985.

(b) Form of First Supplemental Indenture Incorporated by reference to
dated as of December 1, 1986 between Exhibit (4b) to Registration
the Company and Bankers Trust Company, Statement on Form S-3 (No.
as Trustee. 33-10766) as filed with the
Commission on December 12,
1986.

(c) Form of Second Supplemental Indenture Incorporated by reference to
dated as of February 15, 1989 between Exhibit (4c) to Registration
the Company and Bankers Trust Company, Statement on Form S-3 (No.33-27244)
as Trustee. as filed with the Commission on
February 24, 1989.
</TABLE>

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 38 of 47

<PAGE>

PITNEY BOWES CREDIT CORPORATION

3. Index to Exhibits (numbered in accordance with Item 601 of Regulation S-K)
[continued]

<TABLE>
<CAPTION>
Reg S-K State or Incorporation
Exhibits Description by Reference
-------- ----------- ------------
<S> <C> <C>

(d) Form of Third Supplemental Indenture Incorporated by reference to
dated as of May 1, 1989 between the Exhibit (1) on Form 8-K
Company and Bankers Trust Company, (No. 0-13497) as filed with
as Trustee. the Commission on
May 16, 1989.

(e) Letter Agreement between Pitney Bowes Inc. Incorporated by reference to
and Bankers Trust Company, as Trustee. Exhibit (4b) to Registration
Statement on Form S-3 (No.
2-97411) as filed with the
Commission on May 1, 1985.

(f) Indenture dated as of November 1, 1995 Incorporated by reference to
between the Company and Chemical Bank, Exhibit (4a) to Amendment
as Trustee. No.1 to Registration statement
on Form S-3 (No. 33-62485) as
filed with the Commission on
November 2, 1995.

(g) Indenture dated as of July 31, 1999 between Incorporated by reference to
Pitney Bowes Credit Corporation and Exhibit 3 to Form 8-K of
Sun Trust Bank, Atlanta, as Trustee. Pitney Bowes Credit Corporation
(No. 0-13497), as filed with the
Commission on September 3, 1999.

(h) Form of Medium Term Note, Series D Incorporated by reference to
(Global Fixed Rate). Exhibit 2.a to Form 8-K of
Pitney Bowes Credit
Corporation (No. 0-13497),
as filed with the Commission
on September 3, 1999.

(i) Form of Medium Term Note, Series D Incorporated by reference to
(Global Floating Rate). Exhibit 2.b to Form 8-K of
Pitney Bowes Credit
Corporation (No. 0-13497),
as filed with the Commission
on September 3, 1999.

(j) Form of Medium Term Note, Series D Incorporated by reference to
(Certificated Fixed Rate). Exhibit 2.c to Form 8-K of
Pitney Bowes Credit
Corporation (No. 0-13497),
as filed with the Commission
on September 3, 1999.

(k) Form of Medium Term Note, Series D Incorporated by reference to
(Certificated Floating Rate). Exhibit 2.d to Form 8-K of
Pitney Bowes Credit
Corporation (No. 0-13497),
as filed with the Commission
on September 3, 1999.
</TABLE>

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 39 of 47
<PAGE>

<TABLE>
<CAPTION>
Reg S-K State or Incorporation
Exhibits Description by Reference
-------- ----------- ------------
<S> <C> <C>

(10) Material Contracts
1. First Amended and Restated Operating Incorporated by reference to
Agreement dated November 6, 1996, Exhibit (i) on Form 10-Q
between the Company and Pitney Bowes Inc. (No. 01-13497) as filed with the
Commission on November 13, 1996.

2. Tax Sharing Agreement dated April 1, 1977 Incorporated by reference to
between the Company and Pitney Bowes Inc. Exhibit (10.3) to Form 10 as
filed with the Commission
on May 1, 1985.

3. Amended and Restated Finance Agreement, Incorporated by reference to
dated June 12, 1995 between the Company Exhibit (i) on Form 8-K
and Pitney Bowes Inc. (No. 01-13497) as filed with
the Commission on
June 12, 1995.

4. Distribution Agreement dated August 30, Incorporated by reference to
1999, among Pitney Bowes Credit Exhibit 1 to Form 8-K of
Corporation, Salomon Smith Barney Inc., Pitney Bowes Credit
Banc of America Securities LLC, Bear, Corporation (No. 0-13497),
Stearns & Co. Inc. and J. P. Morgan as filed with the Commission
Securities Inc. on September 3, 1999.

5. Form of Underwriting Agreement. Incorporated by reference to
Exhibit 1 to Registration
Statement on Form S-3 of
Pitney Bowes Credit
Corporation (No. 333-59181),
as filed with the Commission
on July 15, 1998.

(12) Computation of ratio of earnings from continuing Exhibit (i)
operations to fixed charges

(21) Subsidiaries of the registrant Exhibit (ii)

(23) Consent of Independent Accountants Exhibit (iii)

(27) Financial Data Schedule Exhibit (iv)

(b) Reports on Form 8-K

</TABLE>

(b) Reports on Form 8-K

On July 20, 1999, the Company filed a current Report on Form 8-K, dated July
26, 1999, pursuant to Item 5 thereof, reporting the decision to dispose of
AMIC.

On August 30, 1999, the Company filed a Current Report on Form 8-K, dated
August 13, 1999, pursuant to Item 5 thereof, reporting the adoption of a
formal plan to dispose of the operations and assets of its mortgage
servicing business at AMIC and filing the following financial statements
(restated for the treatment of AMIC as discontinued operations):
consolidated financial statements as of December 31,1999 and 1998 and for
the three years ended December 31, 1999 and unaudited condensed
consolidating financial statements as of March 31, 1999 and 1998 and for the
three-month periods then ended.

On September 3, 1999, the Company filed a Current Report on Form 8-K, dated
August 30, 1999, pursuant to Item 5 thereof, reporting the establishment of
a medium-term note program for the issuance from time to time of up to $500
million aggregate principal amount of Medium-Term Notes, Series D.

On November 22, 1999, the Company filed a current Report on Form 8-K, dated
November 19, 1999, pursuant to Item 5 thereof, reporting a definitive
agreement between the Company and ABN AMRO North America, Inc., a subsidiary
of ABN AMRO Bank N.V., for the sale of AMIC.

[LOGO] PBCC 1999 Form10-K
Pitney Bowes Credit Corporation Page 40 of 47
<PAGE>

SIGNATURES

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

PITNEY BOWES CREDIT CORPORATION

By /s/ MATTHEW S. KISSNER
----------------------
Matthew S. Kissner
President and Chief Executive Officer

Dated: March 30, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.

By /s/ MATTHEW S. KISSNER Dated: March 30, 2000
---------------------------
Matthew S. Kissner
President and Chief Executive Officer

By /s/ NANCY E. COOPER Dated: March 30, 2000
---------------------------
Nancy E. Cooper
Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)

By /s/ R. JEFFREY MACARTNEY Dated: March 30, 2000
---------------------------
R. Jeffrey Macartney
Controller
(Principal Accounting Officer)

By /s/ MARC C. BRESLAWSKY Dated: March 30, 2000
---------------------------
Marc C. Breslawsky
Director

By /s/ MICHAEL J. CRITELLI Dated: March 30, 2000
---------------------------
Michael J. Critelli
Director

By /s/ SARA E. MOSS Dated: March 30, 2000
---------------------------
Sara E. Moss
Director

By /s/ MURRAY L. REICHENSTEIN Dated: March 30, 2000
---------------------------
Murray L. Reichenstein
Director

By /s/ HARRY W. NEINSTEDT Dated: March 30, 2000
---------------------------
Harry W. Neinstedt
Director

By /s/ DOUGLAS A. RIGGS Dated: March 30, 2000
---------------------------
Douglas A. Riggs
Director

By /s/ JOHN N.D. MOODY Dated: March 30, 2000
---------------------------
John N.D. Moody
Director

By /s/ ARLEN F. HENOCK Dated: March 30, 2000
---------------------------
Arlen F. Henock
Director

By /s/ DENNIS M. RONEY Dated: March 30, 2000
---------------------------
Dennis M. Roney
Director

[LOGO] PBCC 1999 Form 10-K
Pitney Bowes Credit Corporation Page 41 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1997 TO 1999

<TABLE>
<CAPTION>
Allowance for credit losses (shown on balance sheet as deduction
from net investments)
-------------------------------------------------------------------
Additions Additions Deductions -
Balance at charged to charged to uncollectible
beginning costs and discontinued accounts Balance at
of year expenses operations written off (1)end of year
---------- ---------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
1999 $115,233 $41,917 $ 9,300 $85,795 $ 80,655

1998 $116,588 $36,080 $29,324 $66,759 $115,233

1997 $ 98,721 $34,076 $44,244 $60,453 $116,588
</TABLE>

(1) Principally uncollectible accounts written off.
(2) Amounts include the write-off of finance receivable retained in connection
with the disposal of the external small-ticket leasing business against
previously established allowance for credit losses.

[LOGO] PBCC 1999 Form 10-K
Pitney Bowes Credit Corporation Page 42 of 47

<PAGE>
Exhibit 12

PITNEY BOWES CREDIT CORPORATION

Exhibit (i)
Computation of Ratio of Earnings from Continuing Operations to Fixed Charges

(in thousands of dollars)

<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1999(2) 1998(2) 1997(2) 1996(2) 1995(2)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income from continuing operations
before income taxes .................. $250,623 $244,689 $222,443 $222,463 $199,965
-------- -------- -------- -------- --------
Fixed charges:
Interest on debt ..................... 121,210 124,411 154,634 163,860 173,745
One-third of rent expense ............ 585 520 1,107 1,149 1,246
-------- -------- -------- -------- --------
Total fixed charges .................... 121,795 124,931 155,741 165,009 174,991
-------- -------- -------- -------- --------

Earnings from continuing
operations before fixed charges ...... $372,418 $369,620 $378,184 $387,472 $374,956
======== ======== ======== ======== ========

Ratio of earnings from continuing
operations to fixed charges (1) ...... 3.06X 2.96X 2.43X 2.35X 2.14X
======== ======== ======== ======== ========
</TABLE>

(1) The ratio of earnings from continuing operations to fixed charges is
computed by dividing earnings from continuing operations before fixed
charges by fixed charges. Fixed charges consist of interest on debt and
one-third of rent expense as representative of the interest portion.

(2) Amounts reclassified to reflect CPLC and AMIC as discontinued operations.
Interest expense and the portion of rents representative of the interest
factor of these discontinued operations have been excluded from fixed
charges in the computation.

Including these amounts in fixed changes, the ratio of earnings to fixed
charges would be 2.96, 2.50, 2.09, 2.08 and 1.98 for the years ended
December 31, 1999, 1998, 1997, 1996 and 1995, respectively.

[LOGO] PBCC 1999 Form 10-K
Pitney Bowes Credit Corporation Page 43 of 47

<PAGE>
Exhibit 21

PITNEY BOWES CREDIT CORPORATION

Exhibit (ii)
Subsidiaries of the Registrant

The Registrant, Pitney Bowes Credit Corporation, a Delaware corporation, is a
subsidiary of Pitney Bowes Inc.

The following are subsidiaries of the Registrant as of December 31, 1999:

Country or State
Company Name of Incorporation
- ------------ ----------------
<S> <C> <C>
Atlantic Mortgage & Investment Corporation ("AMIC") Florida
Waterview Resolution Corporation Massachusetts
FSL Holdings Inc. Connecticut
FSL Risk Managers Inc. (Subsidiary of FSL Holdings Inc.) New York
PB CFSC I Inc. US Virgin Islands
PB Funding Corporation Delaware
PB Global Holdings Inc. Connecticut
PBA Foreign Sales Corporation (Subsidiary of PB Global Holdings Inc.) Barbados
PB Global Holdings II Inc. Connecticut
Tower FSC Ltd. (Subsidiary of PB Global Holdings II Inc.) Bermuda
PB Global Holdings III Inc. Connecticut
PB Nikko FSC Ltd. (Subsidiary of PB Global Holdings III Inc.) Bermuda
PB Global Holdings IV Inc. Connecticut
PB Nihon FSC Ltd. (Subsidiary of PB Global Holdings IV Inc.) Bermuda
PB Leasing Services Inc. Nevada
The Pitney Bowes Bank, Inc. Utah
Pitney Bowes Insurance Agency, Inc. Connecticut
PB Public Finance Inc. Delaware
Pitney Structured Funding I Inc. Delaware
PB Municipal Funding Inc. (Subsidiary of PBCC) Nevada
PB Miles Delaware
PB Lease Holdings Inc. (Subsidiary of PBCC) Nevada
PB Air Inc. (Subsidiary of PBCC) Nevada
PB Equipment Management Inc. (Subsidiary of PBCC) Delaware
Harlow Aircraft Inc. Delaware
PREFCO XII Holdings Inc. (Subsidiary of Harlow Aircraft Inc.) Delaware
Pitney Bowes Real Estate Financing Corporation ("PREFCO") Delaware
PB/PREFCO Real Estate Holdings Inc. (Subsidiary of PREFCO) Delaware
PREFCO I LP Inc (Subsidiary of PREFCO) Delaware
PREFCO II Inc. (Subsidiary of PREFCO) Delaware
PREFCO III LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO IV Inc. (Subsidiary of PREFCO) Delaware
PREFCO IV LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO V LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO VI Inc. (Subsidiary of PREFCO) Delaware
PREFCO VI LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO VII Inc. (Subsidiary of PREFCO) Delaware
PREFCO VII LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO VIII LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO IX LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XI Inc. (Subsidiary of PREFCO) Delaware
PREFCO XI LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XII LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XIII Inc. (Subsidiary of PREFCO) Delaware
PREFCO XIII LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XIV LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XV Inc. (Subsidiary of PREFCO) Delaware
PREFCO XV LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XVI Inc. (Subsidiary of PREFCO) Delaware
PREFCO - Dayton Community
Urban Redevelopment Corporation (Subsidiary of PREFCO XVI Inc.) Ohio
PREFCO XVI LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XVII Inc. (Subsidiary of PREFCO) Delaware
PREFCO XVII LP Inc. (Subsidiary of PREFCO) Delaware
</TABLE>

[LOGO] PBCC 1999 Form 10-K
Pitney Bowes Credit Corporation Page 44 of 47
<PAGE>

PITNEY BOWES CREDIT CORPORATION

Exhibit (ii)
Subsidiaries of the Registrant (continued)

<TABLE>
<CAPTION>
Country or State
Company Name of Incorporation
- ------------ ----------------
<S> <C> <C>
PREFCO XVIII Inc. (Subsidiary of PREFCO) Delaware
PREFCO XVIII LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XIX Inc. (Subsidiary of PREFCO) Delaware
PREFCO XIX LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XX Inc. (Subsidiary of PREFCO) Delaware
PREFCO XXI Inc. (Subsidiary of PREFCO) Delaware
PREFCO XXI LP Inc. (Subsidiary of PREFCO) Delaware
PREFCO XXII Inc. (Subsidiary of PREFCO) Delaware
PREFCO XXII LP Inc. (Subsidiary of PREFCO) Delaware
</TABLE>

[LOGO] PBCC 1999 Form 10-K
Pitney Bowes Credit Corporation Page 45 of 47

<PAGE>
Exhibit 23

Exhibit (iii)
Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-59181) of Pitney Bowes Credit Corporation of our
report dated January 20, 2000 relating to the financial statements and financial
statement schedule, which appears in this Form 10-K.

PricewaterhouseCoopers LLP

Stamford, Connecticut
March 30, 2000

[LOGO] PBCC 1999 Form 10-K
Pitney Bowes Credit Corporation Page 46 of 47

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 12/31/99
INCOME STATEMENT AND BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 132,914
<SECURITIES> 0
<RECEIVABLES> 3,879,853
<ALLOWANCES> (80,655)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,382,976
<CURRENT-LIABILITIES> 1,592,437
<BONDS> 0
46,000
0
<COMMON> 0
<OTHER-SE> 1,252,809
<TOTAL-LIABILITY-AND-EQUITY> 5,382,976
<SALES> 0
<TOTAL-REVENUES> 576,895
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 163,145
<LOSS-PROVISION> 41,917
<INTEREST-EXPENSE> 121,210
<INCOME-PRETAX> 250,623
<INCOME-TAX> 60,204
<INCOME-CONTINUING> 190,419
<DISCONTINUED> (22,947)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167,472
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>