<PAGE>
 
                                                                           1995
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
(MARK ONE)
  [X]        ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
 
                  For the Fiscal Year Ended December 31, 1995
 
                                      OR
 
  [_]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                               [NO FEE REQUIRED]
 
                         Commission file number 1-6157
 
                            HELLER FINANCIAL, INC.
            (Exact name of registrant as specified in its charter)
 
               Delaware                              36-1208070
    (State or other jurisdiction of     (I.R.S. Employer Identification No.)
    incorporation or organization)
 
 
 
   500 West Monroe Street, Chicago,                     60661
               Illinois                              (Zip Code)
    (Address of principal executive
               offices)
 
      Registrant's telephone number, including area code: (312) 441-7000
 
          Securities registered pursuant to Section 12(b) of the Act:
 
Cumulative Perpetual Senior Preferred Stock, Series A
                                                  New York Stock Exchange, Inc.
 
       Securities registered pursuant to Section 12(g) of the Act: 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 of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
 
     Aggregate market value of voting stock held by non-affiliates: None.
 
    Number of shares of Common Stock outstanding at February 14, 1996: 100.
                  Documents incorporated by reference: None.
 
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<PAGE>
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
 ITEM NO.                           NAME OF ITEM                            PAGE
 --------                           ------------                            ----
 
                                     PART I
 <C>      <S>                                                               <C>
 Item  1. Business.......................................................     3
          Corporate Finance..............................................     3
          Asset Based Finance............................................     3
          Real Estate Finance............................................     4
          International Factoring and Asset Based Finance................     4
          Specialized Finance and Investments............................     4
          Syndication Activities.........................................     5
          Ownership......................................................     5
          Summary of Total Revenues, Lending Assets and Investments......     5
          Rates Charged; Competition; Regulation.........................     5
 Item  2. Properties.....................................................     5
 Item  3. Legal Proceedings..............................................     5
 Item  4. Submission of Matters to a Vote of Security Holders............     6
 
                                    PART II
          Market for Registrant's Common Equity and Related Stockholder
 Item  5.  Matters.......................................................     6
 Item  6. Selected Financial Data........................................     7
          Management's Discussion and Analysis of Financial Condition and
 Item  7.  Results of Operations.........................................     8
          Results of Operations..........................................     8
          Portfolio Composition..........................................    10
          Product Categories.............................................    12
          Credit Management..............................................    18
          Portfolio Quality..............................................    18
          Liquidity and Capital Resources................................    21
          Risk Management................................................    22
          Accounting Developments........................................    23
 Item  8. Financial Statements and Supplementary Data....................    24
          Changes in and Disagreements with Accountants on Accounting and
 Item  9.  Financial Disclosure..........................................    51
 
                                    PART III
 Item 10. Directors and Executive Officers of the Registrant.............    52
 Item 11. Executive Compensation.........................................    56
          Summary Compensation Table.....................................    56
          Retirement and Other Defined Benefit Plans.....................    57
          Compensation of Directors......................................    58
          Employment Contracts and Termination of Employment and Change
           of Control Arrangements.......................................    58
          Compensation Committee Interlocks and Insider Participation....    58
 Item 12. Security Ownership of Certain Beneficial Owners and Management.    59
          Voting Securities..............................................    59
          Equity Securities..............................................    59
 Item 13. Certain Relationships and Related Transactions.................    60
          Keep Well Agreement with Fuji Bank.............................    60
          Tax Allocation Agreements......................................    61
          Certain Transactions with Fuji Bank and with the Parent and Its
           Subsidiaries..................................................    61
          Certain Other Relationships....................................    63
 
                                    PART IV
          Exhibits, Financial Statement Schedules and Reports on Form 8-
 Item 14.  K.............................................................    64
</TABLE>
 
                                       2
<PAGE>
 
                                    PART I
 
ITEM 1. BUSINESS
 
  Heller Financial, Inc. (the "Company") was incorporated in 1919 under the
laws of the State of Delaware and is engaged in various aspects of the
commercial finance business. The Company and its consolidated subsidiaries
employ approximately 1,500 people. The executive offices are located at 500
West Monroe Street, Chicago, Illinois 60661 (telephone: (312) 441-7000).
Unless the context indicates otherwise, references to the Company include
Heller Financial, Inc. and its consolidated subsidiaries.
 
  The Company operates in the middle market segment of the commercial finance
industry, which generally includes entities in the manufacturing and service
sectors with annual sales in the range of $15 million to $200 million and in
the real estate sector with property values generally in the range of $5
million to $40 million. The Company currently provides services in five
product categories: (1) corporate finance, (2) asset based finance, (3) real
estate finance, (4) international factoring and asset based finance and (5)
specialized finance and investments. The asset based finance product category
consists of financing for working capital and receivable management, vendor
finance program loans and leases, secured working capital finance, equipment
loans and leases to end users, small business lending, and indirect consumer
finance.
 
  The Company is continuing the program begun in 1990 to diversify its
portfolio and earnings sources, strengthen earnings, improve asset quality and
maintain its capital strength. The Company is diversifying its portfolio and
earnings sources by growing the asset based businesses, reducing reliance on
the corporate finance and real estate finance businesses, and continuing to
grow its equity investments and international businesses. Earnings quality is
being strengthened by growing the asset based businesses which provide more
consistent earning streams and reduce the level and volatility of credit
quality costs. Asset quality is improving by emphasizing lower risk asset
based business through conservative underwriting practices and the resolution
of pre-1990 problem accounts. The Company is pursuing these goals in the
framework of continued moderate leverage, appropriate reserves and
conservative liquidity.
 
CORPORATE FINANCE
 
  The Corporate Finance Group offers a broad spectrum of services based on the
cash flows underlying a client's business. These services are often provided
through coordination with private equity sponsors and include the financing of
corporate recapitalizations, refinancings, expansions, acquisitions and buy-
outs of publicly and privately held entities in a wide variety of industries.
Loans are provided on both a term and revolving basis for periods of up to ten
years and are typically collateralized by senior liens on the borrower's stock
or assets or both. Corporate Finance transactions may also include some
unsecured or subordinated financings or non-voting equity infusions.
 
ASSET BASED FINANCE
 
  Asset based financing is offered by the Current Asset Management Group,
Vendor Finance Division, Heller Business Credit ("Business Credit"),
Commercial Equipment Finance Division, Heller First Capital ("First Capital")
and Sales Finance Group.
 
  The Current Asset Management Group provides working capital financing,
receivable management, and credit protection to companies in a broad range of
industries. The group offers factoring services to approximately 650 clients
and over 100,000 customers primarily in the apparel, textile, houseware,
transportation, and home furnishings industries. In return for a commission,
the group purchases the client's accounts receivable and provides collection
and management information services. Working capital is provided by advancing
on a formula basis a percentage of the client's factored accounts receivable.
The group also provides advances against inventory on a formula basis.
 
  Vendor Finance Division provides leasing and financing of capital equipment
through approximately 75 manufacturer and vendor programs, financing of
independent leasing companies and direct relationships with end
 
                                       3
<PAGE>
 
users. These transactions generally have partial or full recourse to the
vendor. This division finances the machining, graphic arts, information
technology, energy management, healthcare, communication, and food processing
markets.
 
  Business Credit provides working capital and term financing to middle market
companies for refinancings, recapitalizations and acquisitions. The group
provides financing to manufacturers, retailers, wholesalers, distributors,
exporters, and service firms. The group also serves as co-lender or
participates in transactions agented by other asset based lenders. The
revolving credit facilities and term loans are generally cross-collateralized.
 
  The Commercial Equipment Finance Division provides financing to a diverse
group of middle market companies for equipment acquisition (expansion,
replacement and modernization) or refinancing of existing equipment
obligations. The equipment is typically essential to the operations of the
borrower and the amount financed is generally not a substantial part of the
capital structure for an individual borrower. The markets served include
transportation (rail, air and shipping), supermarket, manufacturing,
restaurant and food processing.
 
  First Capital is a provider of long-term financing to independent small
businesses and franchises under U.S. Small Business Administration loan
guarantee programs. The types of loans include real estate acquisition,
refinancing or construction financing, equipment or business acquisition,
permanent working capital for expansion efforts, and debt consolidation. The
guaranteed portions of these loans are sometimes sold in the secondary market,
with servicing rights retained by First Capital.
 
  The Sales Finance group, recently formed as a stand-alone business unit,
provides financing to under-served market niches in consumer finance by
providing financing lines to consumer receivables originators. The group
provides receivable funding and project finance for vacation ownership, home
improvement, and non-prime auto finance companies.
 
REAL ESTATE FINANCE
 
  The Real Estate Financial Services group provides interim financing to real
estate owners, investors and developers primarily for the acquisition,
refinancing and renovation of commercial income producing properties in a wide
range of property types and geographic areas. The group also offers financing
for discounted loan portfolio acquisitions, participating junior debt and
equity financing to developers of single and multi-family housing, credit
sale-leaseback financing for single tenant properties, as well as standby
commitments. The group also originates loans secured by manufactured housing
communities, self storage facilities, and multi-tenant industrial property
types to be sold through the capital markets via commercial mortgage
securitization.
 
INTERNATIONAL FACTORING AND ASSET BASED FINANCE
 
  The International Group provides factoring, asset based finance, acquisition
finance, leasing, vendor finance and/or trade finance programs primarily to
small and mid-sized businesses outside the United States through investments
in commercial finance companies located in 19 countries in Europe, Asia,
Australia and Latin America. These companies may be wholly or majority-owned
or joint ventures. During 1995, the International Group continued to pursue
new international opportunities and has expanded support of the international
needs of existing domestic customers.
 
SPECIALIZED FINANCE AND INVESTMENTS
 
  Specialized financing and investments are generally originated in three
areas: project investment, aircraft finance, and middle market equity
investing. The Project Investment and Advisory Division offers financing to
independent power producers and industrial projects in the form of senior and
junior secured loans, equity investments and development loans. Aircraft
Finance offers financing for commercial aircraft and aircraft engines through
operating leases or junior secured loans to an operating lessor, with terms
ranging from 4 to 10 years and direct investing in new aircraft through
strategic alliances. Equity Finance provides financing to or invests in middle
market companies and provides capital to companies requiring an operational or
financial turnaround.
 
                                       4
<PAGE>
 
SYNDICATION ACTIVITIES
 
  Heller's strategy continues to focus on managing exposure to individual
credits and industry concentrations. A key part of this strategy has been to
sell participations to control the concentration of credit risk. The Company
has established syndication programs in most of its businesses syndicating
$532 million of receivables during 1995.
 
OWNERSHIP
 
  All of the outstanding Common Stock of the Company is owned by Heller
International Corporation (the "Parent"), a wholly-owned subsidiary of The
Fuji Bank Limited ("Fuji Bank"), headquartered in Tokyo, Japan. Fuji Bank also
directly owns 21% of the outstanding shares of Heller International Group,
Inc., a consolidated subsidiary of the Company engaged in international
factoring and asset based financing activities. Fuji Bank is one of the
largest banks in the world, with total deposits of approximately $378 billion
at September 30, 1995. For a discussion of the "Keep Well Agreement" between
Fuji Bank and the Company, see "Certain Relationships and Related
Transactions--Keep Well Agreement with Fuji Bank."
 
SUMMARY OF TOTAL REVENUES, LENDING ASSETS AND INVESTMENTS
 
  A summary of total revenues, lending assets and investments by product
category is included in the "Portfolio Composition" section of "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 10. This summary closely corresponds to a classification by operating
unit. For information about international operations, see Notes 3 and 15 to
the Consolidated Financial Statements.
 
RATES CHARGED; COMPETITION; REGULATION
 
  Rates charged by the Company vary depending on the risk and maturity of the
loan, competition, current cost of borrowing to the Company, state usury laws
and other governmental regulations. The Company's portfolio of receivables
primarily earns interest at variable rates. These variable rates float in
accordance with various agreed upon reference rates, including the London
Inter-bank Offered Rate, the Prime Rate or corporate based lending rates.
Competition varies by operating group. In general, the Company is subject to
competition from a variety of financial institutions, including commercial
finance companies, banks and leasing companies.
 
  As a subsidiary of Fuji Bank, the Company is subject to the limitations
imposed by the Bank Holding Company Act of 1956, as amended, and related
regulations adopted by the Board of Governors of the Federal Reserve System.
Those regulations restrict the Company to activities that have been defined as
being so closely related to banking as to be incidental thereto and also
restrict certain lending activities. Certain of the Company's equity
investment and small business lending activities are subject to the
supervision and regulation of the Small Business Administration. To date, such
regulations have not had a material adverse effect on the Company.
 
ITEM 2. PROPERTIES
 
  The Company leases executive offices located at 500 West Monroe Street,
Chicago, Illinois 60661 and maintains various offices throughout the United
States, Europe, Asia, Australia and Latin America, all of which are leased
premises. For information concerning the Company's lease obligations, see Note
7 to the Consolidated Financial Statements.
 
ITEM 3. LEGAL PROCEEDINGS
 
  The Company is party to a number of legal proceedings as plaintiff and
defendant, all arising in the ordinary course of its business. The Company
believes that the amounts, if any, which may ultimately be funded or paid with
respect to these matters, will not have a material adverse effect on the
financial condition or results of operations of the Company.
 
                                       5
<PAGE>
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
  No matters were acted upon in the fourth quarter of 1995.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS
 
  The outstanding Common Stock of the Company is owned entirely by the Parent,
which is wholly-owned by Fuji Bank. There is no public trading market for the
Company's Common Stock. The Company is prohibited from paying cash dividends
on Common Stock unless full cumulative dividends on all outstanding shares of
Perpetual Preferred, Convertible Preferred and NW Preferred Stock have been
paid. All Preferred Stock dividends have been paid and in 1995 the Company
declared and paid $52 million in cash dividends on Common Stock to its Parent.
The Company anticipates paying future dividends on Common Stock while
maintaining its conservative capital structure.
 
                                       6
<PAGE>
 
ITEM 6. SELECTED FINANCIAL DATA
 
  The following table presents information from the Company's Consolidated
Financial Statements for the five years ended December 31, 1995, which have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report included herein. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the "Financial Statements and Supplementary
Data."
 
<TABLE>
<CAPTION>
                                          FOR THE YEAR ENDED DECEMBER 31,
                                         --------------------------------------
                                          1995    1994    1993    1992    1991
                                         ------  ------  ------  ------  ------
                                               (DOLLARS IN MILLIONS)
<S>                                      <C>     <C>     <C>     <C>     <C>
INCOME STATEMENT DATA:
Interest income........................  $  851  $  702  $  620  $  634  $  730
Interest expense.......................     464     336     264     295     406
                                         ------  ------  ------  ------  ------
 Net interest income...................     387     366     356     339     324
Fees and other income..................     198     170     138     101      95
Income of international joint ventures.      35      21      23      26      19
                                         ------  ------  ------  ------  ------
 Operating revenues....................     620     557     517     466     438
Operating expenses.....................     216     195     174     169     167
Provision for losses...................     223     188     210     252     201
                                         ------  ------  ------  ------  ------
 Income before income taxes, minority
  interest and change in accounting
  principle............................     181     174     133      45      70
Income tax provision/(benefit).........      49      51      11      (5)      3
Minority interest in income of Heller
 International Group, Inc..............       7       5       5       3       3
                                         ------  ------  ------  ------  ------
 Income before change in accounting
  principle............................     125     118     117      47      64
Cumulative effect of a change in
 accounting principle for income taxes.     --      --      --       41     --
                                         ------  ------  ------  ------  ------
 Net income............................  $  125  $  118  $  117  $   88  $   64
                                         ======  ======  ======  ======  ======
Common dividends paid..................  $   52  $   20  $  --   $  --   $  --
                                         ======  ======  ======  ======  ======
Ratio of earnings to combined fixed
 charges and preferred stock dividends
 (See exhibit 12)......................   1.34x   1.44x   1.43x   1.14x   1.15x
                                         ======  ======  ======  ======  ======
<CAPTION>
                                                    DECEMBER 31,
                                         --------------------------------------
                                          1995    1994    1993    1992    1991
                                         ------  ------  ------  ------  ------
                                               (DOLLARS IN MILLIONS)
<S>                                      <C>     <C>     <C>     <C>     <C>
BALANCE SHEET DATA:
Receivables............................  $8,085  $7,616  $7,062  $7,465  $7,171
Allowance for losses of receivables....     229     231     221     224     170
Investments............................     693     634     370     280     184
Investments in international joint
 ventures..............................     233     174     144     140     129
Total assets...........................  $9,638  $8,476  $7,913  $7,952  $7,529
                                         ======  ======  ======  ======  ======
Senior debt:
 Commercial paper and short-term
  borrowings...........................  $2,223  $2,451  $1,981  $2,422  $2,797
 Notes and debentures..................   5,145   3,930   3,893   3,521   2,809
Subordinated debt......................     --      --      --      --       88
Junior subordinated debt...............     --      --       75     225     230
                                         ------  ------  ------  ------  ------
 Total debt............................  $7,368  $6,381  $5,949  $6,168  $5,924
                                         ======  ======  ======  ======  ======
Total liabilities......................  $8,208  $7,107  $6,625  $6,777  $6,531
Preferred stock........................  $  150  $  150  $  150  $  150  $   25
Common equity..........................   1,234   1,180   1,103     994     943
                                         ------  ------  ------  ------  ------
 Total stockholders' equity............  $1,384  $1,330  $1,253  $1,144  $  968
                                         ======  ======  ======  ======  ======
Ratio of commercial paper and short-
 term borrowings to total debt.........      30%     38%     33%     39%     47%
                                         ======  ======  ======  ======  ======
Ratio of debt (net of short-term
 investments) to total stockholders'
 equity................................    5.0x    4.7x    4.7x    5.4x    6.1x
                                         ======  ======  ======  ======  ======
</TABLE>
 
                                       7
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
  During 1995, the Company remained committed to its four strategies, which
are to strengthen earnings, diversify assets, strengthen asset quality and
maintain a conservative capital structure. Earnings quality improved as
operating revenues continued to show increased diversity among the Company's
various business lines. The Company continued to balance the portfolio by
growing the asset based businesses and reducing the level of corporate finance
and real estate finance lending assets. Asset quality also improved due to the
excellent credit performance in the newer asset based businesses, the
favorable credit experience of the post-1990 financings in the corporate
finance and real estate businesses and the continued resolution of pre-1990
corporate finance and real estate problem accounts. The Company's capital
structure remained conservative as evidenced by a debt to equity ratio (net of
short-term investments) of 5 to 1 and a reduction to 30% of commercial paper
and short term borrowings as a percentage of total debt.
 
RESULTS OF OPERATIONS
 
  The following table summarizes the Company's operating results for the years
ended December 31, 1995, 1994, and 1993.
 
<TABLE>
<CAPTION>
                                              FOR THE YEAR      FOR THE YEAR
                                             ENDED DECEMBER    ENDED DECEMBER
                                                   31,               31,
                                            ----------------- -----------------
                                                      PERCENT           PERCENT
                                            1995 1994 CHANGE  1994 1993 CHANGE
                                            ---- ---- ------- ---- ---- -------
                                            (DOLLARS          (DOLLARS
                                               IN                 IN
                                            MILLIONS)         MILLIONS)
<S>                                         <C>  <C>  <C>     <C>  <C>  <C>
Interest income............................ $851 $702    21%  $702 $620    13%
Interest expense...........................  464  336    38    336  264    27
                                            ---- ----         ---- ----
  Net interest income......................  387  366     6    366  356     3
Fees and other income......................  198  170    16    170  138    23
Income of international joint ventures.....   35   21    67     21   23    (9)
                                            ---- ----         ---- ----
  Operating revenues.......................  620  557    11    557  517     8
Operating expenses.........................  216  195    11    195  174    12
Provision for losses.......................  223  188    19    188  210   (10)
                                            ---- ----         ---- ----
  Income before income taxes and minority
   interest................................  181  174     4    174  133    31
Income tax provision.......................   49   51    (4)    51   11   364
Minority interest in income of Heller
 International Group, Inc..................    7    5    40      5    5   --
                                            ---- ----         ---- ----
  Net income............................... $125 $118     6%  $118 $117     1%
                                            ==== ====         ==== ====
</TABLE>
 
1995 vs. 1994
 
  For the third straight year the Company achieved record net income. Net
income for 1995 increased by $7 million or 6% due to increased net interest
income, higher revenues from fees and other income and increased income of
international joint ventures. These increases were partially offset by
continued spending for developing businesses and a higher provision for losses
related to resolution of pre-1990 accounts.
 
  Net interest income increased 6% from the prior year period due to growth in
earning funds and a moderate increase in net interest margin which exceeded
the costs of carrying higher average levels of equity investments. Average
earning funds grew by 8% during 1995. Rates charged on 81% of average earning
funds for 1995 were based on floating indices such as the average three month
London Inter-bank Offered Rate, which increased to 6.0% in 1995 from 4.7% in
1994 and contributed to the increase in interest income for the year. Interest
expense increased during 1995 partly due to the rise in the average borrowing
rate to 6.9% from 5.5% in 1994 and the higher level of debt used to finance
portfolio growth.
 
                                       8
<PAGE>
 
  Fees and other income increased $28 million or 16% for 1995 due to increased
net gains from sales of investments and increased revenues from real estate
transactions. Net gains on sales of investments increased 51% during 1995
primarily due to the sale of several equity investments at substantial gains.
Realized gains from sales of investments during 1995 were $133 million, which
were partially offset by writedowns and realized losses of $59 million. Due to
the timing and recognition of investment activity, the Company expects net
investment gains to vary from year to year.
 
  Income of international joint ventures increased by $14 million during 1995
primarily due to growth in earnings from European joint ventures in the
Netherlands and France, and benefits from changes in foreign exchange rates
relative to the U.S. dollar.
 
  Operating expenses were higher principally due to increased spending to
support growth of the asset based businesses. This trend is expected to
continue in 1996.
 
  The provision for losses increased by $35 million or 19% over prior year
levels as the Company continued to aggressively resolve pre-1990 real estate
and corporate finance problem accounts through paydown, sale, restructure or
writedown of these accounts. Net writedowns of receivables and repossessed
assets increased by $52 million compared to the prior year due to this
aggressive account management. The Company's newer business portfolios
continued to exhibit strong credit quality resulting in a very low level of
writeoffs for this portfolio during 1995.
 
  The Company's effective tax rate decreased to 27% and was below statutory
rates primarily due to the favorable resolution of certain state tax issues in
1995.
 
1994 vs. 1993
 
  The Company achieved record pre-tax income of $174 million, an increase of
$41 million or 31%. This increase reflects higher fees and other income from
several product categories and a lower provision for losses as portfolio
quality improved. These factors offset increased spending on developing
businesses and a higher provision for income taxes, as net income slightly
exceeded 1993's record level.
 
  Net interest income increased as growth in the level of average earning
funds and a reduction in the cost to carry nonearning assets was partially
offset by modest spread compression. Average earning funds grew 2% and the
portfolio mix shifted towards lower risk, lower priced assets, resulting in
some spread compression. Interest income increased due to higher market
interest rate levels. Rates charged on 81% of average earning funds employed
were based on floating indices such as the three month London Inter-bank
Offered Rate, which increased to 4.7% for 1994 from 3.3%. Interest expense
increased as a result of the rise in the average borrowing rate to 5.5% from
4.4% and the higher level of debt used to finance portfolio growth.
 
  Fees and other income increased $32 million or 23% reflecting revenues from
several sources including higher revenues from certain real estate activities,
higher gains from equity interests and investments and higher revenues from
asset based businesses.
 
  The income of international joint ventures was somewhat lower, while the
income from overall international operations increased primarily due to the
improved performance of wholly-owned subsidiaries. This improvement resulted
from subsidiaries in the Asia/Pacific region as well as gains on Brazilian
investments.
 
  Operating expenses were higher principally due to the increased spending on
developing businesses in the asset based product category.
 
  The provision for losses declined in 1994 as the level of problem assets
continued to recede and the performance of new financings over the past four
years remained strong. The allowance for losses was 3.0% of receivables, which
equaled 81% of nonearning receivables at December 31, 1994. These amounts were
restated to reflect the adoption of Statement of Financial Accounting
Standards No. 114 "Accounting by Creditors for Impairment of a Loan" in order
to conform with the 1995 presentation.
 
                                       9
<PAGE>
 
  The Company's effective tax rate increased to 30% from 8% for the prior
year, in which higher deferred tax benefits were recognized. The Company's
provision for income taxes is lower than the statutory rate due to the
favorable resolution of a tax issue and the recognition of additional deferred
tax benefits during the second quarter.
 
PORTFOLIO COMPOSITION
 
  Lending assets and investments increased $596 million or 7% during 1995 as
the Company continued to build a more balanced portfolio by diversifying its
asset base and sources of income. The growth experienced was primarily from
the domestic asset based businesses. The Company achieved this level of growth
despite a $486 million reduction of the pre-1990 corporate finance and real
estate portfolio. In line with the Company's diversification efforts, lending
assets and investments for both corporate finance and real estate finance have
been reduced as a percentage of total lending assets and investments. The
following tables present lending assets and investments and total revenues by
product category. The asset based finance category includes factoring, vendor
finance program loans and leases, secured working capital finance, equipment
loans and leases to end-users, small business activities, and indirect
consumer finance.
 
<TABLE>
<CAPTION>
                                       LENDING ASSETS AND INVESTMENTS AS OF
                                                   DECEMBER 31,
                                   --------------------------------------------
                                        1995           1994           1993
                                   -------------- -------------- --------------
                                   AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
                                   ------ ------- ------ ------- ------ -------
                                              (DOLLARS IN MILLIONS)
<S>                                <C>    <C>     <C>    <C>     <C>    <C>
BY PRODUCT CATEGORY:
Corporate finance................. $3,092    34%  $3,309    39%  $3,572    46%
Asset based finance...............  3,003    33    2,103    25    1,512    20
Real estate finance...............  1,966    22    2,152    25    1,956    25
International factoring and asset
 based finance....................    506     6      374     5      285     4
Specialized finance and
 investments......................    472     5      505     6      417     5
                                   ------   ---   ------   ---   ------   ---
  Total lending assets and
   investments.................... $9,039   100%  $8,443   100%  $7,742   100%
                                   ======   ===   ======   ===   ======   ===
 
  Lending assets include receivables and repossessed assets.
 
BY ASSET TYPE:
Receivables....................... $8,085    89%  $7,616    90%  $7,062    91%
Repossessed assets................     28     1       19     1      166     2
                                   ------   ---   ------   ---   ------   ---
  Total lending assets............  8,113    90    7,635    91    7,228    93
Investments.......................    693     8      634     7      370     5
International joint ventures......    233     2      174     2      144     2
                                   ------   ---   ------   ---   ------   ---
  Total investments...............    926    10      808     9      514     7
                                   ------   ---   ------   ---   ------   ---
  Total lending assets and
   investments.................... $9,039   100%  $8,443   100%  $7,742   100%
                                   ======   ===   ======   ===   ======   ===
</TABLE>
 
  Lending Assets and Investments. During the last several years, the Company
has developed a more balanced, lower risk portfolio, while maintaining its
market position in business value and real estate finance. During 1995, asset
based lending assets and investments increased $900 million to 33% of total
lending assets and investments and became the second largest product category
of the Company. Corporate finance and real estate lending assets and
investments have decreased to 34% and 22% of the portfolio, respectively,
reflecting the Company's desire to reduce concentration in these businesses
and establish a balanced portfolio. Total lending assets increased $478
million while the ratio of nonearning assets to total lending assets decreased
to 3.6% from 4.0% at the prior year end. Total investments increased $118
million during 1995 due to an increase in real estate transactions and
investments in and undistributed earnings of International joint ventures.
 
                                      10
<PAGE>
 
  Concentrations of lending assets of 5% or more at December 31, 1995 and
1994, based on the standard industrial classification of the borrower, are as
follows:
 
<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                  -----------------------------
                                                       1995           1994
                                                  -------------- --------------
                                                  AMOUNT PERCENT AMOUNT PERCENT
                                                  ------ ------- ------ -------
                                                      (DOLLARS IN MILLIONS)
   <S>                                            <C>    <C>     <C>    <C>
   Food, grocery and other miscellaneous retail..  $568      7%   $443      6%
   Textiles and apparel manufacturing............   529      7     562      7
   Department and general merchandise retail
    stores.......................................   482      6     673      9
   General industrial machines...................   392      5     462      6
</TABLE>
 
  The majority of lending assets in the textiles and apparel manufacturing and
department and general merchandise retail stores categories is comprised of
factored accounts receivable which represent short-term trade receivables from
a large number of customers. The general industrial machines classification is
distributed among machinery used for many different industrial applications.
 
  Total Revenues. Total revenues include interest income, net gains from the
sales of investments, fees and other income from domestic and consolidated
international operations, and the Company's share of the net income of its
international joint ventures.
 
<TABLE>
<CAPTION>
                                    TOTAL REVENUES FOR THE YEAR ENDED DECEMBER
                                                       31,
                                   --------------------------------------------
                                        1995           1994           1993
                                   -------------- -------------- --------------
                                   AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
                                   ------ ------- ------ ------- ------ -------
                                              (DOLLARS IN MILLIONS)
<S>                                <C>    <C>     <C>    <C>     <C>    <C>
Corporate finance................. $  388    36%   $367     41%   $389     50%
Asset based finance...............    296    27     214     24     151     19
Real estate finance...............    253    23     218     25     161     21
Specialized finance and
 investments......................     83     8      48      5      41      5
International factoring and asset
 based finance....................     64     6      46      5      39      5
                                   ------   ---    ----    ---    ----    ---
  Total revenues.................. $1,084   100%   $893    100%   $781    100%
                                   ======   ===    ====    ===    ====    ===
</TABLE>
 
  The growth in total revenues of $191 million or 21% in 1995 is primarily
attributable to growth in interest income from higher variable interest rates
and average earning fund levels, an increase in the net gains on sales of
investments, and growth in income of international joint ventures. Consistent
with the shift in lending assets, corporate finance and real estate revenues
decreased as a percentage of total revenues, while asset based revenues and
revenues from specialized finance and investments increased. Earnings quality
improved for the year as the Company achieved greater diversification of
revenues among all of its product lines.
 
                                      11
<PAGE>
 
PRODUCT CATEGORIES
 
  Corporate finance. The Corporate Finance Group provides senior and
subordinated financing for corporate recapitalizations, refinancings,
expansions, acquisitions and buy-outs of publicly and privately held
companies. Strong credit disciplines were maintained by financing transactions
with smaller retained balances and utilizing syndication capabilities to
reduce customer concentrations as evidenced by an average hold size of $16
million in 1995 versus $18 million in the prior year. While the number of new
transactions during 1995 has increased over the prior year, corporate finance
lending assets and investments decreased $217 million to 34% of the total
portfolio, due to run off or resolution of pre-1990 accounts and a relatively
high level of payoffs in the newer portfolio. Repayments and syndications
totaled $1,457 million and $1,341 million for 1995 and 1994, respectively. The
Corporate Finance Group originated $1,412 million of financings during 1995
compared to $1,153 million in the prior year.
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         ----------------------
                                                          1995    1994    1993
                                                         ------  ------  ------
                                                             (DOLLARS IN
                                                              MILLIONS)
   <S>                                                   <C>     <C>     <C>
   Lending assets....................................... $2,930  $3,116  $3,479
   Investments..........................................    162     193      93
                                                         ------  ------  ------
     Total lending assets and investments............... $3,092  $3,309  $3,572
                                                         ======  ======  ======
   Nonearning assets.................................... $   89  $  124  $  294
                                                         ======  ======  ======
   Ratio of nonearning assets to lending assets.........    3.0%    4.0%    8.5%
                                                         ======  ======  ======
<CAPTION>
                                                          FOR THE YEAR ENDED
                                                             DECEMBER 31,
                                                         ----------------------
                                                          1995    1994    1993
                                                         ------  ------  ------
                                                             (DOLLARS IN
                                                              MILLIONS)
   <S>                                                   <C>     <C>     <C>
   Interest income...................................... $  363  $  330  $  349
   Fees and other income................................     25      37      40
                                                         ------  ------  ------
     Total revenues..................................... $  388  $  367  $  389
                                                         ======  ======  ======
   Net writedowns of lending assets..................... $  113  $   77  $  125
                                                         ======  ======  ======
   Ratio of net writedowns to average lending assets....    3.7%    2.3%    3.1%
                                                         ======  ======  ======
</TABLE>
 
  Interest income increased as higher variable interest rates more than offset
the effect of a decline in the level of average corporate finance funds
employed. Fees and other income decreased during 1995 as realized gains from
sales of equity investments were offset by $37 million of writedowns and
realized losses on several equity investments related primarily to troubled
pre-1990 accounts.
 
  Net writedowns of corporate finance lending assets increased by $36 million
primarily due to net writedowns on pre-1990 assets which comprised 85% of
total corporate finance net writedowns for the year. Nonearning assets
decreased to 3% of total corporate finance lending assets due to the continued
strong credit quality of the receivables originated since 1990 and the
resolution of several pre-1990 problem credits. Approximately 80% of the
group's nonearning assets were originated prior to 1990.
 
  At December 31, 1995, the Corporate Finance Group was contractually
committed to finance an additional $627 million to new and existing borrowers,
generally contingent upon the maintenance of specific credit standards. Since
many of the commitments are expected to remain unused, the total commitment
amounts do not necessarily represent future cash requirements. No significant
commitments exist to provide additional financing related to nonearning
assets.
 
  Corporate financings are generally considered by certain regulatory agencies
as highly leveraged transactions.
 
                                      12
<PAGE>
 
  Asset based finance. The asset based lending portfolio is comprised of
factored accounts receivable, vendor finance program loans and leases, secured
working capital finance, equipment loans and leases to end users, small
business finance activities, and indirect consumer finance. Asset based
lending assets and investments increased by 43% over the prior year as the
group funded $1,696 million and $1,009 million during 1995 and 1994,
respectively. This was offset by repayments and syndications totaling $803
million and $410 million during 1995 and 1994, respectively. Revenues
increased by 38% as a result of the continued growth of these businesses.
 
  Current Asset Management Group provides factoring services that are short-
term trade receivables primarily from department and general merchandise
retailers. These accounts are highly liquid with an average turnover of
approximately 50 days, and are managed continuously by evaluating the
consolidated exposure from all clients to a particular customer. Credit files
are maintained for customers in order to control this credit exposure. In
1995, the group was one of the largest factors in the highly competitive
United States factoring industry with volume in excess of $6 billion.
 
  The Vendor Finance Division provides customized finance and lease programs
to a variety of equipment manufacturing and distribution clients, as well as
independent leasing companies. Loans to purchasers of equipment are generally
made with partial recourse to the vendor. Individual transactions generally
range from $50,000 to approximately $2.5 million with an average transaction
size of approximately $100,000. New business volume this year increased over
1994, while asset quality continued to be strong.
 
  Business Credit provides senior secured revolving and term facilities based
on accounts receivable, inventory, and to a lesser extent, machinery and
equipment. Business Credit provides financing both as agent and on a
participation basis with other traditional asset-based lenders in senior
secured transactions with an average commitment and loan size of $17 million
and $8 million, respectively, as of December 31, 1995. These loans are usually
for periods of 3 to 5 years and consist of revolving credit facilities secured
by accounts receivable and inventory and to a much lesser extent, term loans
secured by property, plant and equipment. New business volume increased
significantly during 1995 while the group also maintained excellent asset
quality.
 
  The Commercial Equipment Finance Division offers general equipment financing
direct to customers in multiple industries for equipment acquisition
(expansion, replacement and modernization), or refinancing of existing
equipment obligations. Transactions financed generally range from $1 million
to $15 million with terms ranging from 3 to 10 years. New business growth for
1995 exceeded 1994 while asset quality continues to be excellent.
 
  First Capital is the third largest lender of Small Business Administration
loans providing loans to a broad range of individual small businesses and
franchises. Types of loans include real estate acquisition, refinancing or
construction financing and equipment or business acquisition. These loans are
guaranteed up to 75% by the U.S. Small Business Administration. These loans
are generally for amounts up to $2 million and have an average transaction
size of $350,000. First Capital has historically sold, and may from time to
time in the future sell, the guaranteed portion of these loans.
 
  Sales Finance, established as a separate division at the end of 1995,
provides senior and subordinate consumer financing on an indirect basis or
through strategic alliances with originator and servicer companies. Financing
is provided primarily for vacation ownership, home improvement, and non-prime
auto finance companies. Transaction sizes generally range from $3 million to
$25 million with terms ranging from three to seven years.
 
                                      13
<PAGE>
 
  The asset based portfolio and revenues are presented below:
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         ----------------------
                                                          1995    1994    1993
                                                         ------  ------  ------
                                                             (DOLLARS IN
                                                              MILLIONS)
   <S>                                                   <C>     <C>     <C>
   Current Asset Management Group....................... $  802  $  762  $  708
   Vendor Finance Division..............................    663     561     438
   Business Credit......................................    601     300     103
   Commercial Equipment Finance Division................    526     344     168
   First Capital........................................    208      98      55
   Sales Finance........................................    183      38      --
   Other................................................    --      --       40
                                                         ------  ------  ------
     Total lending assets............................... $2,983  $2,103  $1,512
   Investments..........................................     20     --      --
                                                         ------  ------  ------
     Total lending assets and investments............... $3,003  $2,103  $1,512
                                                         ======  ======  ======
   Nonearning assets.................................... $   23  $    8  $   16
                                                         ======  ======  ======
   Ratio of nonearning assets to total lending assets...    0.8%    0.4%    1.0%
                                                         ======  ======  ======
</TABLE>
 
  The lending assets in each of the asset based categories grew significantly
as a result of increased emphasis on the development of each of these lines of
business. Disciplined underwriting standards combined with strong collateral
coverage have been key elements resulting in the low level of nonearning
assets as of December 31, 1995. The increase in asset based nonearning assets
is primarily due to two portfolios of workers compensation claims financed by
the healthcare unit of the Current Asset Management Group.
 
<TABLE>
<CAPTION>
                                                                FOR THE YEAR
                                                               ENDED DECEMBER
                                                                    31,
                                                               ----------------
                                                               1995  1994  1993
                                                               ----  ----  ----
                                                                (DOLLARS IN
                                                                 MILLIONS)
   <S>                                                         <C>   <C>   <C>
   Interest income............................................ $232  $143  $ 89
   Fees and other income......................................   64    71    62
                                                               ----  ----  ----
     Total revenues........................................... $296  $214  $151
                                                               ====  ====  ====
   Net writedowns of lending assets........................... $ 15  $ 19  $ 12
                                                               ====  ====  ====
   Ratio of net writedowns to average lending assets..........  0.6%  1.0%  0.9%
                                                               ====  ====  ====
</TABLE>
 
  The revenues generated by asset based businesses increased by $82 million or
38% primarily as the result of an increase in average funds employed and the
effects of higher variable interest rates. These products continued to
demonstrate very favorable credit experience as evidenced by the low levels of
nonearning assets and writedowns during the year. Net writedowns in the asset
based portfolios were concentrated in the Current Asset Management Group and
primarily resulted from several bankruptcies of discount retailers due to
intense competition in this market segment. Business Credit, Commercial
Equipment Finance Division and Sales Finance did not experience any writedowns
during the year.
 
  At December 31, 1995, the asset based groups were contractually committed to
finance an additional $729 million to new and existing borrowers, generally
contingent upon the maintenance of specific credit standards. Since many of
the commitments are expected to remain unused, the total commitment amounts do
not necessarily represent future cash requirements. No significant commitments
exist to provide additional financing related to nonearning assets.
 
  Real estate finance. During 1995, the Real Estate Finance Group continued to
diversify its assets through a number of lending programs, while maintaining
its credit disciplines and the relative size of its portfolio. Real estate
lending assets and investments decreased, as financings of $746 million were
offset primarily by
 
                                      14
<PAGE>
 
repayments and loan sales of $857 million. The majority of the 1995 fundings
in real estate lending assets is attributable to the financing of hotels,
discounted loan portfolio acquisitions, manufactured housing and self storage
facilities. These loans generally range from $1 million to $15 million, have
terms ranging from one to five years and are principally collateralized by
first mortgages. The average retained size of real estate financings was
approximately $5 million at December 31, 1995, which is lower than prior
periods due to the impact of increased investment activity and holding smaller
positions in lending transactions.
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         ----------------------
                                                          1995    1994    1993
                                                         ------  ------  ------
                                                             (DOLLARS IN
                                                              MILLIONS)
   <S>                                                   <C>     <C>     <C>
   Lending assets....................................... $1,701  $2,000  $1,919
   Investments..........................................    265     152      37
                                                         ------  ------  ------
     Total lending assets and investments............... $1,966  $2,152  $1,956
                                                         ======  ======  ======
   Nonearning assets.................................... $  142  $  150  $   98
                                                         ======  ======  ======
   Ratio of nonearning assets to lending assets.........    8.3%    7.5%    5.1%
                                                         ======  ======  ======
</TABLE>
 
  The group originates loans to manufactured housing communities, self storage
facilities, and multi-tenant industrial property types to be sold through the
capital markets via commercial mortgage securitization. The group securitized
$220 million of assets in 1995 of which $44 million was retained resulting in
an increase in investments. The remaining increase in investments is due to
growth in acquisition, development and construction transactions.
 
  The level of nonearning assets decreased as a result of the Real Estate
Finance Group's continued efforts to resolve its pre-1990 problem accounts
combined with strong credit performance in the newer real estate portfolios.
General purpose office building loans originated prior to 1990 accounted for
51% of real estate nonearning assets. The Company's ongoing real estate
lending and investment philosophy includes financing smaller individual
transactions and increasing the diversification of the portfolio in terms of
geographic location and property type. The effectiveness of this strategy is
evidenced by extremely low levels of writedowns and nonearning assets on
transactions originated in the last five years.
 
<TABLE>
<CAPTION>
                                                                FOR THE YEAR
                                                               ENDED DECEMBER
                                                                    31,
                                                               ----------------
                                                               1995  1994  1993
                                                               ----  ----  ----
                                                                (DOLLARS IN
                                                                 MILLIONS)
   <S>                                                         <C>   <C>   <C>
   Interest income............................................ $202  $185  $143
   Fees and other income......................................   51    33    18
                                                               ----  ----  ----
     Total revenues........................................... $253  $218  $161
                                                               ====  ====  ====
   Net writedowns of lending assets........................... $ 89  $ 79  $ 71
                                                               ====  ====  ====
   Ratio of net writedowns to average lending assets..........  4.6%  3.9%  3.8%
                                                               ====  ====  ====
</TABLE>
 
  Interest income increased due to higher variable interest rates and growth
in interest income from securitized assets. Fees and other income increased
primarily due to income from participating interests received in connection
with development loans.
 
  The continued high level of real estate writedowns reflects management's
efforts to resolve pre-1990 problem real estate accounts through sales,
restructures and independent appraisals of accounts in this portfolio. All of
the Real Estate Finance Group's writedowns of lending assets during 1995
related to pre-1990 accounts with the majority of the writedowns being
concentrated in general purpose office buildings.
 
                                      15
<PAGE>
 
  During 1995, the group continued its efforts to diversify the portfolio. At
December 31, 1995 and 1994, real estate lending assets and investments were
distributed as follows:
 
<TABLE>
<CAPTION>
                         1995 1994
                         ---- ----
<S>                      <C>  <C>
California..............  20%  19%
Midwest.................  17   16
Florida.................  13   14
New York................  12   13
Southwest...............  11   12
Mid-Atlantic States.....  10   14
New England.............   9    5
Other...................   8    7
                         ---  ---
                         100% 100%
                         ===  ===
</TABLE>
<TABLE>
<CAPTION>
                         1995 1994
                         ---- ----
<S>                      <C>  <C>
General purpose office
 buildings..............  18%  21%
Hotel...................  14    7
Mobile home parks.......  13   16
Retail..................  13   10
Loan portfolios.........  11   10
Industrial..............  10   11
Apartments..............   9   13
Other...................  12   12
                         ---  ---
                         100% 100%
                         ===  ===
</TABLE>
 
  The real estate portfolio is geographically dispersed throughout the United
States and, as of December 31, 1995, 89% of real estate loans were
collateralized by first mortgages. In an effort to reduce its exposure to
general purpose office buildings, the Company has limited fundings in this
sector since 1990. General purpose office building loans have decreased by $116
million or 26% during 1995. Loan portfolios are financings of borrowers engaged
in the acquisition of discounted residential, commercial and industrial loans.
Other includes several product types that are individually less than 5% of the
portfolio.
 
  At December 31, 1995, the Real Estate Finance Group was contractually
committed to finance an additional $232 million to new and existing borrowers,
generally contingent upon the maintenance of specific credit standards. Since
many of the commitments are expected to remain unused, the total commitment
amounts do not necessarily represent future cash requirements. No significant
commitments exist to provide additional financing related to nonearning assets.
 
  International factoring and asset based finance. The financial information
presented includes majority and wholly-owned subsidiaries and joint ventures in
commercial finance companies in 19 countries. Most of the assets of
consolidated subsidiaries are located in Australia, Singapore and Mexico, while
joint ventures consist of investments in 50% or less owned companies in 16
countries in Europe, Asia and Latin America. Several of these companies hold
leading positions in their served markets.
 
  Consistent with the presentation in the Consolidated Financial Statements,
the investments in and income of international joint ventures set forth below
represents the Company's ownership share of the net assets and income of the
international joint ventures.
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                                     1995
                                                                --------------
                                                                1995 1994 1993
                                                                ---- ---- ----
                                                                 (DOLLARS IN
                                                                  MILLIONS)
   <S>                                                          <C>  <C>  <C>
   Receivables and investments of consolidated international
    subsidiaries............................................... $249 $180 $129
   Investments in international joint ventures.................  233  174  144
   Other investments...........................................   24   20   12
                                                                ---- ---- ----
     Total lending assets and investments...................... $506 $374 $285
                                                                ==== ==== ====
</TABLE>
 
  The increase in receivables and investments of consolidated subsidiaries
reflects the effect of the Company increasing its ownership position in the
Mexican joint venture in December 1995, and growth of asset based and factoring
receivables in Singapore and Australia. The higher level of investments in
international joint ventures
 
                                       16
<PAGE>
 
is the result of undistributed 1995 joint venture income, the benefit from
currency exchange rate movements and additional investments in existing joint
ventures. Other investments are comprised of trading securities in Brazil.
 
<TABLE>
<CAPTION>
                                                          FOR THE YEAR ENDED
                                                             DECEMBER 31,
                                                         ----------------------
                                                          1995    1994    1993
                                                         ------  ------  ------
                                                             (DOLLARS IN
                                                              MILLIONS)
   <S>                                                   <C>     <C>     <C>
   TOTAL REVENUES:
     Income of international joint ventures............. $   35  $   21  $   23
     Revenues from consolidated subsidiaries............     25      17      15
     Other revenues.....................................      4       8       1
                                                         ------  ------  ------
   Total international revenues......................... $   64  $   46  $   39
                                                         ======  ======  ======
   TOTAL INCOME:
     Income of international joint ventures............. $   35  $   21  $   23
     Income of consolidated subsidiaries................      7       7       4
     Other income.......................................      4       7       1
                                                         ------  ------  ------
   Total international income........................... $   46  $   35  $   28
                                                         ======  ======  ======
</TABLE>
 
  Total international revenues grew $18 million in 1995 compared to the prior
year due to growth in income from European joint ventures and increased
interest income from the Australian and Singapore subsidiaries. Income grew
$11 million due to the strong performance of several European companies. The
international income amounts shown above are before costs of financing the
Company's investments and central administration expenses.
 
  At December 31, 1995, the International Group's consolidated subsidiaries
were contractually committed to finance an additional $22 million to new and
existing borrowers, generally contingent upon the maintenance of specific
credit standards. Since many of the commitments are expected to remain unused,
the total commitment amounts do not necessarily represent future cash
requirements.
 
  Specialized finance and investments. Specialized finance and investments are
originated through financing of power producers and industrial projects,
aircraft investment loans and leases, and through middle market equity
investing. Project Investment and Advisory Division offers financing to
independent power producers and industrial projects through senior and junior
secured loans, equity investments and development loans. Aircraft Finance
offers financing of commercial aircraft and equipment through leases or junior
secured loans to operating lessors and invests in new aircraft through
strategic alliances. Substantially all of these assets were under lease at
December 31, 1995. Equity Finance is generally composed of subordinated debt
and investments which are originated either on a direct basis or through
private equity sponsors in established middle market companies or in companies
requiring an operational or financial turnaround. These transactions are
originated either on a direct basis or through private equity sponsors and
generally range from $1 to $9 million.
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                              -----------------
                                                              1995   1994  1993
                                                              -----  ----  ----
                                                                (DOLLARS IN
                                                                 MILLIONS)
   <S>                                                        <C>    <C>   <C>
   Project Investment and Advisory Division.................. $ 186  $156  $ 91
   Aircraft Finance..........................................   154   202   199
   Equity Finance............................................   132   147   127
                                                              -----  ----  ----
     Total lending assets and investments.................... $ 472  $505  $417
                                                              =====  ====  ====
   Nonearning assets......................................... $  26  $ 20  $ 14
                                                              =====  ====  ====
   Ratio of nonearning assets to lending assets..............  10.1%  8.3%  7.3%
                                                              =====  ====  ====
</TABLE>
 
                                      17
<PAGE>
 
  Total lending assets and investments decreased $33 million primarily due to
the sale of an aircraft by Aircraft Finance and the sale of several investments
in Equity Finance. This decrease was partially offset by growth in funds in the
Project Investment and Advisory Division.
 
<TABLE>
<CAPTION>
                                                         FOR THE YEAR ENDED
                                                            DECEMBER 31,
                                                        ------------------------
                                                         1995     1994     1993
                                                        ------   ------   ------
                                                            (DOLLARS IN
                                                             MILLIONS)
   <S>                                                  <C>      <C>      <C>
   Interest income..................................... $   33   $   31   $   29
   Fees and other income...............................     50       17       12
                                                        ------   ------   ------
     Total revenues.................................... $   83   $   48   $   41
                                                        ======   ======   ======
   Net writedowns of lending assets.................... $   14   $    2   $    5
                                                        ======   ======   ======
   Ratio of net writedowns to average lending assets...    5.9%     0.8%     2.9%
                                                        ======   ======   ======
</TABLE>
 
  Interest income increased slightly due to modest growth in average fund
levels and higher variable rates of interest. Fees and other income increased
primarily from realized gains from the sale of several investments totaling $56
million, offset by equity writedowns or losses of $20 million from Equity
Finance, and exit fees generated from Project Investment and Advisory Division
transactions.
 
  At December 31, 1995, the Specialized Finance and Investments Groups were
contractually committed to finance an additional $162 million to new and
existing borrowers, generally contingent upon the maintenance of specific
credit standards. Since many of the commitments are expected to remain unused,
the total commitment amounts do not necessarily represent future cash
requirements. No significant commitments exist to provide additional financing
related to nonearning assets.
 
CREDIT MANAGEMENT
 
  The Company manages credit risk through its underwriting procedures,
centralized approval of individual transactions and active portfolio and
account management. Underwriting procedures have been developed for each
product category which enable the Company to assess a prospective borrower's
ability to perform in accordance with established loan terms. These procedures
may include analyzing business or property cash flows and collateral values,
performing financial sensitivity analyses and assessing potential exit
strategies. Financing and restructuring transactions over a certain amount are
reviewed by an independent corporate credit function and require approval by a
centralized credit committee.
 
  The Company manages the portfolio by monitoring transaction size and
diversification by industry, geographic area and property type. Through these
methods, management identifies and limits exposure to unfavorable risks, and
seeks favorable financing opportunities. Loan grading systems are used to
monitor the performance of loans by product category and an overall risk
classification system is used to monitor the risk characteristics of the total
portfolio. These systems generally consider debt service coverage, the
relationship of loan to underlying business or collateral value, industry
characteristics, principal and interest risk and credit enhancements such as
guarantees, irrevocable letters of credit and recourse provisions. When problem
accounts are identified, professionals that specialize in various industries
formulate strategies to optimize and accelerate the resolution process. A
centralized department, independent of operations, periodically reviews the
ongoing credit management of the individual portfolios and reports its findings
to senior management and the Audit Committee of the Board of Directors.
 
PORTFOLIO QUALITY
 
  The overall credit quality of the portfolio continued to improve as portfolio
growth was concentrated in the Company's lower risk asset based product areas.
These portfolios and those in corporate finance and real estate
 
                                       18
<PAGE>
 
finance funded under the Company's revised lending strategies continued to
exhibit strong credit quality. In addition, the Company has continued to be
aggressive in resolving the pre-1990 corporate finance and real estate
portfolios as evidenced by a 24% reduction in these assets in 1995 and
considerable writedowns taken on these portfolios.
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         ----------------------
                                                          1995    1994    1993
                                                         ------  ------  ------
                                                             (DOLLARS IN
                                                              MILLIONS)
   <S>                                                   <C>     <C>     <C>
   LENDING ASSETS AND INVESTMENTS:
   Receivables.........................................  $8,085  $7,616  $7,062
   Repossessed assets..................................      28      19     166
                                                         ------  ------  ------
       Total lending assets............................  $8,113  $7,635  $7,228
   Investments.........................................     926     808     514
                                                         ------  ------  ------
       Total lending assets and investments............  $9,039  $8,443  $7,742
                                                         ======  ======  ======
   NONEARNING ASSETS:
   Impaired receivables................................  $  261  $  284  $  264
   Repossessed assets..................................      28      19     166
                                                         ------  ------  ------
       Total nonearning assets.........................  $  289  $  303  $  430
                                                         ======  ======  ======
   Ratio of nonearning impaired receivables to
    receivables........................................     3.2%    3.7%    3.7%
                                                         ======  ======  ======
   Ratio of total nonearning assets to total lending
    assets.............................................     3.6%    4.0%    5.9%
                                                         ======  ======  ======
   ALLOWANCES FOR LOSSES:
   Allowance for losses of receivables.................  $  229  $  231  $  221
   Valuation allowance for repossessed assets..........       2       6       5
                                                         ------  ------  ------
       Total allowance for losses......................  $  231  $  237  $  226
                                                         ======  ======  ======
   Ratio of allowance for losses of receivables to:
     Receivables.......................................     2.8%    3.0%    3.1%
                                                         ======  ======  ======
     Nonearning impaired receivables...................      88%     81%     84%
                                                         ======  ======  ======
   DELINQUENCIES:
   Earning loans delinquent 60 days or more............  $  117  $  103  $  145
                                                         ======  ======  ======
   Ratio of earning loans delinquent 60 days or more to
    receivables........................................     1.4%    1.4%    2.1%
                                                         ======  ======  ======
<CAPTION>
                                                          FOR THE YEAR ENDED
                                                             DECEMBER 31,
                                                         ----------------------
                                                          1995    1994    1993
                                                         ------  ------  ------
                                                             (DOLLARS IN
                                                              MILLIONS)
   <S>                                                   <C>     <C>     <C>
   NET WRITEDOWNS OF LENDING ASSETS:
   Net writedowns on receivables.......................  $  215  $  163  $  211
   Net writedowns on repossessed assets................      16      16       2
                                                         ------  ------  ------
       Total net writedowns............................  $  231  $  179  $  213
                                                         ======  ======  ======
   Ratio of net writedowns to average lending assets...     2.9%    2.4%    2.8%
                                                         ======  ======  ======
   Net writedowns on post-1990 lending assets..........  $   45  $   26  $   19
                                                         ======  ======  ======
   Ratio of post-1990 net writedowns to average total
    lending assets.....................................    0.56%   0.34%   0.25%
                                                         ======  ======  ======
</TABLE>
 
                                      19
<PAGE>
 
  Pre-1990 Portfolio. The Company continued its efforts to reduce the pre-1990
corporate finance and real estate portfolios. These pre-1990 portfolios are
diminishing in size and in the level of nonearning assets. The following table
provides a breakdown of the pre-1990 portfolio.
 
<TABLE>
<CAPTION>
                                                         PRE-1990 PORTFOLIO
                                                              PROFILE
                                                        ----------------------
                                                         1995    1994    1993
                                                        ------  ------  ------
                                                            (DOLLARS IN
                                                             MILLIONS)
   <S>                                                  <C>     <C>     <C>
   Pre-1990 lending assets and investments............. $1,526  $2,012  $2,547
                                                        ======  ======  ======
   Pre-1990 nonearning assets.......................... $  202  $  274  $  392
                                                        ======  ======  ======
   Net writedowns on pre-1990 lending assets........... $  186  $  153  $  194
                                                        ======  ======  ======
   Ratio of pre-1990 net writedowns to average total
    lending assets.....................................    2.3%    2.0%    2.6%
                                                        ======  ======  ======
   Ratio of pre-1990 lending assets and investments to
    total lending assets and investments...............   16.9%   23.8%   32.9%
                                                        ======  ======  ======
</TABLE>
 
  The Company reduced the level of the pre-1990 portfolio by $486 million
during 1995. The decrease was primarily attributable to the run-off of
accounts and the significant amount of writedowns taken on troubled pre-1990
accounts.
 
  Nonearning Assets. Receivables are classified as nonearning when there is
significant doubt as to the ability of the debtor to meet current contractual
terms as evidenced by loan delinquency, reduction of cash flows, deterioration
in the loan to value relationship or other considerations. Nonearning assets
decreased $14 million, from 4.0% to 3.6% of total lending assets at December
31, 1995. This decrease reflects the Company's continued efforts to resolve
its pre-1990 corporate finance and real estate troubled accounts combined with
the strong credit performance in its newer portfolios. The table below
presents nonearning assets by product category.
 
<TABLE>
<CAPTION>
                                      NONEARNING ASSETS BY PRODUCT CATEGORY
                                   --------------------------------------------
                                        1995           1994           1993
                                   -------------- -------------- --------------
                                   AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
                                   ------ ------- ------ ------- ------ -------
                                              (DOLLARS IN MILLIONS)
<S>                                <C>    <C>     <C>    <C>     <C>    <C>
Real estate finance...............  $142     49%   $150     50%   $ 98     23%
Corporate finance.................    89     31     124     41     294     68
Specialized finance and
 investments......................    26      9      20      6      14      3
Asset based finance...............    23      8       8      3      16      4
International factoring and asset
 based finance....................     9      3       1    --        8      2
                                    ----    ---    ----    ---    ----    ---
Total nonearning assets...........  $289    100%   $303    100%   $430    100%
                                    ====    ===    ====    ===    ====    ===
</TABLE>
 
  Corporate finance and real estate nonearning assets decreased $43 million
from December 31, 1994 to December 31, 1995 due to the sale or restructure of
several large pre-1990 credits during the year combined with considerable
writedowns taken on these portfolios. Corporate finance and real estate
nonearning assets are principally comprised of accounts which were
underwritten prior to 1990. The increase in asset based nonearning assets is
primarily due to two portfolios of workers compensation claims financed by the
healthcare unit of the Current Asset Management Group.
 
  The level of nonearning assets in the developing asset based businesses has
remained very low. Commercial Equipment Finance Division, Business Credit and
Sales Finance had no nonearning assets at December 31, 1995. Vendor Finance
Division and First Capital had $5 million of combined nonearning assets at
December 31, 1995.
 
  The increase in nonearning assets in international factoring and asset based
finance is related to the consolidation of the Mexican subsidiary.
 
  Allowances for Losses. The allowance for losses of receivables is a general
reserve available to absorb losses in the entire portfolio. This allowance is
established through direct charges to income, and losses are charged to
 
                                      20
<PAGE>
 
the allowance when all or a portion of a receivable is deemed uncollectible.
The allowance is reviewed periodically and adjusted when necessary given the
size and loss experience of the overall portfolio, the effect of current
economic conditions and the collectibility and workout potential of identified
risk accounts. For repossessed assets, if the fair value declines after the
time of repossession, a writedown is recorded or a valuation allowance is
established to reflect this reduction in value.
 
  The allowance for losses of receivables totals $229 million or 2.8% of
receivables at December 31, 1995 versus $231 million or 3.0% of receivables at
December 31, 1994. The decrease as a percentage of receivables reflects the
strong credit profile of the post-1990 portfolios and the continued decrease
in the pre-1990 portfolio.
 
  Delinquent Earning Accounts and Loan Modifications. The level of delinquent
earning accounts changes between periods based on the timing of payments and
the effects of changes in general economic conditions on the Company's
borrowers. Troubled debt restructurings have decreased to $14 million at
December 31, 1995 from $54 million at December 31, 1994 primarily due to the
sale of one large pre-1990 corporate finance credit and the transfer of
another credit to nonearning status.
 
  The Company had $151 million of receivables at December 31, 1995 that were
restructured at market rates of interest, written down from the original loan
balance and returned to earning status. The recorded investment of these
receivables is expected to be fully recoverable.
 
  Writedowns. Total net writedowns increased during 1995 reflecting the
significant amount of resolutions and reductions of exposures on pre-1990
corporate finance and real estate troubled accounts during the year.
Approximately 80% of net writedowns during the year were attributable to pre-
1990 strategy accounts.
 
<TABLE>
<CAPTION>
                                         FOR THE YEAR ENDED DECEMBER 31,
                                   --------------------------------------------
                                        1995           1994           1993
                                   -------------- -------------- --------------
                                   AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
                                   ------ ------- ------ ------- ------ -------
                                              (DOLLARS IN MILLIONS)
<S>                                <C>    <C>     <C>    <C>     <C>    <C>
NET WRITEDOWNS OF LENDING ASSETS:
Corporate finance.................  $113     49%   $ 77     43%   $125     59%
Real estate finance...............    89     39      79     44      71     33
Asset based finance...............    15      6      19     11      12      6
Specialized finance and
 investments......................    14      6       2      1       5      2
International factoring and asset
 based finance....................   --     --        2      1     --     --
                                    ----    ---    ----    ---    ----    ---
Total net writedowns..............  $231    100%   $179    100%   $213    100%
                                    ====    ===    ====    ===    ====    ===
</TABLE>
 
  Due to the aggressive management and considerable writedowns recorded on the
pre-1990 corporate finance and real estate portfolio, the Company expects
writedowns on this portfolio to decline in future periods. In addition, the
mix of writedowns should shift to post-1990 assets as credit performance on
those portfolios approaches normalized levels. The combined effect of these
items is expected to result in a lower level of writedowns than in the
Company's past experience.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  During 1995, lending assets and investments increased by $596 million,
levels of commercial paper and short-term borrowings were reduced by $228
million, notes and debentures totaling $459 million were retired, and
dividends of $64 million were paid to common and preferred stockholders. To
meet these funding requirements, the Company supplemented its cash flow from
operations by issuing $1,674 million of senior notes and debentures. The
Company has continued to demonstrate the liquidity of the loan portfolio
through the syndication of $532 million in assets and the securitization of
$220 million of mobile home park, self storage facilities and limited service
hotel receivables during 1995.
 
  Leverage and the level of commercial paper and short-term borrowings are
within the ranges targeted by the Company to maintain a strong financial
position. Consistent with the Company's desire to maintain a
 
                                      21
<PAGE>
 
conservative liquidity posture, the Company increased its level of short term
investments by $392 million at December 31, 1995. The ratio of commercial
paper and short-term borrowings to total debt decreased to 30% at December 31,
1995, compared with 38% and 33% at December 31, 1994 and 1993, respectively,
reflecting the Company's decision to reduce the level of short-term funding
during 1995. The ratio of debt (net of short-term investments) to total
stockholders' equity at December 31, 1995, remains conservative at 5.0x,
compared with 4.7x at December 31, 1994 and 1993.
 
  The Company plans to continue to be active in issuing senior debt during
1996 to support the replacement of $1,192 million of maturing term debt as
well as the combined growth of the asset based and other portfolios. In 1995,
the Company renewed its medium-term note program by filing a new shelf
registration for the sale of $2.5 billion in debt to be issued from time to
time. The Company had issued $175 million under this new registration as of
December 31, 1995.
 
  The Company revised its bank credit facilities during 1995 to provide $2.2
billion in liquidity support. These arrangements include a $1,105 million one-
year credit facility, a $1,105 million five-year credit facility as well as a
$25 million foreign currency revolving credit agreement entered into during
1995. The one-year credit facility includes a term loan option which expires
one year after the option exercise date. The terms of the revised bank credit
facilities, which require the Company to maintain stockholders' equity of $900
million, also include reduced pricing and the elimination of any funding
covenant based on material adverse change in the financial condition of the
Company.
 
  The bank credit facilities together with $494 million available under a
factored accounts receivable sale program, of which $394 million are provided
from unaffiliated entities, provide the Company with an aggregate amount of
$2.6 billion of committed credit and sale facilities representing 118% of
outstanding commercial paper and short-term borrowings at December 31, 1995
from unaffiliated entities.
 
  The consolidated international subsidiaries are funded primarily through
committed and uncommitted foreign bank credit facilities in local currencies
totaling $88 million and $200 million (U.S. dollar equivalent), respectively,
at December 31, 1995.
 
  On May 3, 1995 the Company and Fuji Bank agreed to extend the "Keep Well
Agreement," which provides $500 million of additional liquidity support, for
an additional two years from December 31, 2000 to December 31, 2002.
 
RISK MANAGEMENT
 
  The Company uses derivatives as an integral part of its asset/liability
management program to reduce its overall level of financial risk arising from
normal business operations. These derivatives, particularly interest rate swap
agreements, are used to lower funding costs, diversify sources of funding or
alter interest rate exposure arising from mismatches between assets and
liabilities. All of the Company's derivative instruments are related to
accomplishing these risk management objectives. The Company is not an interest
rate swap dealer nor is it a trader in derivative securities, and it has not
used speculative derivative products for the purpose of generating earnings
from changes in market conditions.
 
  Before entering into a derivative agreement, management determines that an
inverse correlation exists between the value of a hedged item and the value of
the derivative. At the inception of each agreement, management designates the
derivative to specific assets, pools of assets or liabilities. The risk that a
derivative will become an ineffective hedge is generally limited to the
possibility that an asset being hedged will prepay before the related
derivative expires. Accordingly, after inception of a hedge, asset/liability
managers monitor its effectiveness through an ongoing review of the amounts
and maturities of asset, liability and swap positions. This information is
reported to the Financial Risk Management Committee ("FRMC"), which determines
the direction the Company will take with respect to its asset/liability
position. This position and the related activities of the FRMC are reported
regularly to the Executive Committee of the Board of Directors and to the
Board of Directors.
 
                                      22
<PAGE>
 
  The Company has numerous swap agreements with commercial banks and
investment banking firms with notional amounts aggregating approximately $5.1
billion at December 31, 1995. This includes $1 billion of basis swaps entered
into during 1995, effective January 2, 1996, which have the effect of changing
the index on an equivalent amount of debt from the three month London Inter-
bank Offered Rate ("LIBOR") to a rate based on Prime. Before the effect of
these swap agreements, the Company's variable rate assets exceeded variable
rate liabilities by $1.7 billion. After the effect of these interest rate swap
agreements, variable rate liabilities exceeded variable rate assets by
approximately $234 million. The average interest rates paid by the Company on
outstanding indebtedness, before and after the effect of swap agreements,
during the three years ended December 31, 1995 are summarized below. These
swap agreements increased interest expense by $14 million during 1995. If no
management actions were taken to alter the gap position existing at December
31, 1995, a one percent parallel shift in the yield curve would have a $1
million annual effect on interest income.
 
<TABLE>
<CAPTION>
                                     INTEREST      INTEREST    WEIGHTED AVERAGE
                                       RATES         RATES      INTEREST RATES
                                   ON OTHER DEBT ON OTHER DEBT  ON TOTAL DEBT
                         INTEREST  EXCLUDING THE INCLUDING THE  INCLUDING THE
                         RATES ON    EFFECT OF     EFFECT OF      EFFECT OF
                        COMMERCIAL     SWAP          SWAP            SWAP
   YEAR                   PAPER     AGREEMENTS    AGREEMENTS      AGREEMENTS
   ----                 ---------- ------------- ------------- ----------------
   <S>                  <C>        <C>           <C>           <C>
   1995................    6.1%         7.0%          7.4%           6.9%
   1994................    4.6          7.1           6.0            5.5
   1993................    3.4          7.0           4.9            4.4
</TABLE>
 
  In order to minimize the effect of movements in exchange rates on its
financial results, the Company periodically enters into forward contracts and
purchases options. The Company held $243 million of forward contracts and $20
million of purchased options at December 31, 1995. These financial instruments
serve as hedges of its foreign investment in international subsidiaries and
joint ventures or effectively hedge the translation of the related foreign
currency income. The Company invests in and operates commercial finance
companies throughout the world. Over the course of time, reported results from
the operations and investments in foreign countries may fluctuate in response
to exchange rate movements in relation to the U.S. dollar. While the Western
European operations and investments are the largest areas of the Company's
activities, reported results will be influenced to a lesser extent by the
exchange rate movements in the currencies of other countries in which our
subsidiaries and investments are located.
 
ACCOUNTING DEVELOPMENTS
 
  The Financial Accounting Standards Board has released Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" effective for
financial statements for fiscal years beginning after December 15, 1995. SFAS
No. 121 requires that long-lived assets and certain identifiable intangibles
held and used by an entity be reviewed for impairment. Whenever events
indicate that the carrying amount of an asset may not be recoverable, an
impairment loss should be recorded based on the fair value of the asset. The
statement also requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell.
 
  The Financial Accounting Standards Board has released Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights,"
effective for financial statements for fiscal years beginning after December
15, 1995. This statement requires that a separate asset be recognized for
rights to service mortgage loans for others, however those servicing rights
are acquired. The total cost of the mortgage loan should be allocated between
the servicing rights and the loans (without the servicing rights) based on
their relative fair values.
 
  The Company does not expect the adoption of these pronouncements to have a
material effect on its results of operations or financial position.
 
                                      23
<PAGE>
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
          MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
 
  The management of Heller Financial, Inc. and its subsidiaries has the
responsibility for preparing the accompanying consolidated financial statements
and is responsible for their integrity and objectivity. The statements were
prepared in accordance with generally accepted accounting principles and are
not misstated due to material fraud or error. The consolidated financial
statements include amounts that are based on management's best estimates and
judgments. Management also prepared the other information in the December 31,
1995 annual report filed on Form 10-K and is responsible for its accuracy and
consistency with the consolidated financial statements.
 
  The Company's consolidated financial statements have been audited by Arthur
Andersen LLP, independent public accountants selected by the holder of the
common stock. Management has made available to Arthur Andersen LLP all the
Company's financial records and related data, as well as the minutes of the
stockholders' and directors' meetings. Furthermore, management believes that
all representations made to Arthur Andersen LLP during its audit were valid and
appropriate.
 
  Management of the Company has established and maintains a system of internal
control that provides reasonable assurance as to the integrity and reliability
of the consolidated financial statements, the protection of assets from
unauthorized use or disposition, and the prevention and detection of fraudulent
financial reporting. The system of internal control provides for appropriate
division of responsibility and is documented by written policies and procedures
that are communicated to employees with significant roles in the financial
reporting process and updated as necessary. Management monitors the system of
internal control for compliance. The Company maintains an internal auditing
program that independently assesses the effectiveness of internal controls and
recommends possible improvements. The Company's independent public accountants
have developed an overall understanding of our accounting and financial
controls and have conducted other tests they consider necessary to support
their opinion on the consolidated financial statements. Management has
considered the internal auditors' and Arthur Andersen LLP's recommendations
concerning the Company's system of internal control and has taken actions that
it believes are cost-effective in the circumstances to respond appropriately to
these recommendations. Management believes that, as of December 31, 1995, the
Company's system of internal control is adequate to accomplish the objectives
discussed above.
 
  Management also recognizes its responsibility for fostering a strong ethical
climate so that the Company's affairs are conducted according to the highest
standards of personal and corporate conduct. This responsibility is
characterized and reflected in the Company's code of ethical business
practices, which is publicized throughout the Company. The code of ethical
business practices addresses, among other things, the necessity of ensuring
open communication within the Company, potential conflicts of interest,
compliance with all domestic and foreign laws, including those relating to
financial disclosure, and the confidentiality of proprietary information.
 
                                          Richard J. Almeida
                                          Chairman and Chief Executive Officer
 
                                          Lawrence G. Hund
                                          Senior Vice President, Controller
                                           and Chief Accounting Officer
 
                                       24
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Heller Financial, Inc.:
 
  We have audited the accompanying consolidated balance sheets of HELLER
FINANCIAL, INC. (a Delaware corporation) AND SUBSIDIARIES as of December 31,
1995 and 1994, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Heller Financial Inc. and
Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
 
  We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1993,
1992 and 1991, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the two years in the period
ended December 31, 1992 (none of which are presented herein), and we have
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the selected financial data for each of
the five years in the period ending December 31, 1995, appearing on page 7 is
fairly stated in all material respects in relation to the consolidated
financial statements from which it has been derived.
 
                                                            ARTHUR ANDERSEN LLP
 
Chicago, Illinois,
January 25, 1996
 
                                      25
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                (IN MILLIONS, EXCEPT FOR INFORMATION ON SHARES)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                  -------------
                                                                   1995   1994
                                                                  ------ ------
<S>                                                               <C>    <C>
Cash and cash equivalents........................................ $  599 $   99
Receivables (Note 2)
  Commercial loans
    Term loans...................................................  2,743  2,786
    Revolving loans..............................................  1,425  1,033
  Real estate loans..............................................  1,677  2,031
  Equipment loans and leases.....................................  1,241    943
  Factored accounts receivable...................................    816    785
  Indirect consumer loans........................................    183     38
                                                                  ------ ------
      Total receivables..........................................  8,085  7,616
  Less: Allowance for losses of receivables (Note 2).............    229    231
                                                                  ------ ------
      Net receivables............................................  7,856  7,385
Investments (Note 3).............................................    693    634
Investments in international joint ventures (Note 3).............    233    174
Other assets (Note 3)............................................    257    184
                                                                  ------ ------
      Total assets............................................... $9,638 $8,476
                                                                  ====== ======
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 
Senior debt (Note 4)
  Commercial paper and short-term borrowings..................... $2,223 $2,451
  Notes and debentures...........................................  5,145  3,930
                                                                  ------ ------
      Total debt.................................................  7,368  6,381
Credit balances of factoring clients.............................    497    452
Other payables and accruals......................................    343    274
                                                                  ------ ------
      Total liabilities..........................................  8,208  7,107
Minority interest in equity of Heller International Group, Inc...     46     39
Stockholders' equity (Notes 8 and 9)
  Cumulative Perpetual Senior Preferred Stock, Series A
   ("Perpetual Preferred Stock") ($.01 Par Value; stated value,
   $25; 8.125%; 5,000,000 shares authorized and outstanding).....    125    125
  Cumulative Convertible Preferred Stock, Series D (No Par Value;
   1/2% under prime; 1,000 shares authorized and outstanding)....     25     25
  Common Stock ($.25 Par Value; 1,000 shares authorized; 100
   shares outstanding) and additional paid-in capital............    663    663
  Retained earnings..............................................    571    517
                                                                  ------ ------
      Total stockholders' equity.................................  1,384  1,330
                                                                  ------ ------
      Total liabilities and stockholders' equity................. $9,638 $8,476
                                                                  ====== ======
</TABLE>
  The accompanying Notes to Consolidated Financial Statements are an integral
                           part of these statements.
 
 
                                       26
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                                   FOR THE YEAR
                                                                  ENDED DECEMBER
                                                                       31,
                                                                  --------------
                                                                  1995 1994 1993
                                                                  ---- ---- ----
<S>                                                               <C>  <C>  <C>
Interest income.................................................  $851 $702 $620
Interest expense................................................   464  336  264
                                                                  ---- ---- ----
  Net interest income...........................................   387  366  356
Fees and other income...........................................   198  170  138
Income of international joint ventures..........................    35   21   23
                                                                  ---- ---- ----
  Operating revenues............................................   620  557  517
Operating expenses (Note 10)....................................   216  195  174
Provision for losses (Note 2)...................................   223  188  210
                                                                  ---- ---- ----
  Income before taxes and minority interest.....................   181  174  133
Income tax provision (Note 12)..................................    49   51   11
Minority interest in income of Heller International Group, Inc..     7    5    5
                                                                  ---- ---- ----
  Net income....................................................  $125 $118 $117
                                                                  ==== ==== ====
</TABLE>
 
 
 
 
 
          The accompanying Notes to Consolidated Financial Statements
                   are an integral part of these statements.
 
                                       27
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                          FOR THE YEAR
                                                       ENDED DECEMBER 31,
                                                     -------------------------
                                                      1995     1994     1993
                                                     -------  -------  -------
<S>                                                  <C>      <C>      <C>
OPERATING ACTIVITIES
  Net income........................................ $   125  $   118  $   117
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Provision for losses............................     223      188      210
    Losses from equity investments..................      59       15        2
    (Increase) decrease in net deferred tax asset...     (50)      46      (49)
    Loans originated for resale.....................     (39)     (90)     (39)
    Net proceeds from sales of loans originated for
     resale.........................................      42       81       30
    Increase in accounts payable and accrued
     liabilities....................................      34       11        7
    Undistributed income of international joint
     ventures.......................................     (26)     (12)     (17)
    Increase (decrease) in interest payable.........      12       14       (4)
    Other...........................................       4        8       21
                                                     -------  -------  -------
      Net cash provided by operating activities.....     384      379      278
INVESTING ACTIVITIES
  Longer-term loans funded..........................  (3,202)  (2,796)  (1,930)
  Collections of principal..........................   2,248    1,836    1,825
  Sales of longer-term loans........................     708      583      248
  Net (increase) decrease in short-term loans and
   advances to factoring clients....................    (510)    (343)      32
  Investment in equity interests, equipment on
   lease, and other investments.....................    (186)    (158)    (103)
  Sales of investments and equipment on lease.......     148       55       29
  Other.............................................     (17)     (29)       9
                                                     -------  -------  -------
      Net cash (used for) provided by investing
       activities...................................    (811)    (852)     110
FINANCING ACTIVITIES
  Senior note issues................................   1,674      841    1,020
  Retirement of notes and debentures................    (459)    (878)    (799)
  (Decrease)increase in commercial paper and other
   short-term borrowings............................    (228)     470     (441)
  Net decrease (increase) in advances to affiliates.       4        2      (25)
  Dividends paid on preferred and common stock......     (64)     (32)     (12)
  Other.............................................     --        (1)      (9)
                                                     -------  -------  -------
      Net cash provided by (used for) financing
       activities...................................     927      402     (266)
Increase(decrease) in cash and cash equivalents.....     500      (71)     122
Cash and cash equivalents at the beginning of the
 year...............................................      99      170       48
                                                     -------  -------  -------
Cash and cash equivalents at the end of the year.... $   599  $    99  $   170
                                                     =======  =======  =======
</TABLE>
 
          The accompanying Notes to Consolidated Financial Statements
                   are an integral part of these statements.
 
                                       28
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                         CUMULATIVE    COMMON
                                         CONVERTIBLE STOCK AND
                               PERPETUAL  PREFERRED  ADDITIONAL
                               PREFERRED   STOCK,     PAID IN   RETAINED
                                 STOCK    SERIES D    CAPITAL   EARNINGS TOTAL
                               --------- ----------- ---------- -------- ------
<S>                            <C>       <C>         <C>        <C>      <C>
BALANCE AT DECEMBER 31, 1992.    $125        $25        $663      $331   $1,144
Net income...................     --         --          --        117      117
Preferred stock dividends
 (Notes 8 and 9).............     --         --          --        (12)     (12)
Unrealized gains on
 securities available for
 sale, net of tax (Note 3)...     --         --          --          9        9
Deferred translation
 adjustment, net of tax......     --         --          --         (5)      (5)
                                 ----        ---        ----      ----   ------
BALANCE AT DECEMBER 31, 1993.     125         25         663       440    1,253
Net income...................     --         --          --        118      118
Preferred stock dividends
 (Notes 8 and 9).............     --         --          --        (12)     (12)
Common stock dividends (Note
 9)..........................     --         --          --        (20)     (20)
Changes in unrealized gains
 on securities available for
 sale, net of tax (Note 3)...     --         --          --         (4)      (4)
Deferred translation
 adjustment, net of tax......     --         --          --         (5)      (5)
                                 ----        ---        ----      ----   ------
BALANCE AT DECEMBER 31, 1994.     125         25         663       517    1,330
Net income...................     --         --          --        125      125
Preferred stock dividends
 (Notes 8 and 9).............     --         --          --        (12)     (12)
Common stock dividends (Note
 9)..........................     --         --          --        (52)     (52)
Changes in unrealized gains
 and losses on securities
 available for sale, net of
 tax (Note 3)................     --         --          --        (10)     (10)
Deferred translation
 adjustment, net of tax......     --         --          --          3        3
                                 ----        ---        ----      ----   ------
BALANCE AT DECEMBER 31, 1995.    $125        $25        $663      $571   $1,384
                                 ====        ===        ====      ====   ======
</TABLE>
--------
The retained earnings balance included $5 of unrealized losses and $5 of
unrealized gains on securities available for sale at December 31, 1995 and
1994, respectively. Retained earnings also included deferred foreign currency
translation adjustments of $(14), $(17), $(12), and $(7) at December 31, 1995,
1994, 1993 and 1992, respectively.
          The accompanying Notes to Consolidated Financial Statements
 
                   are an integral part of these statements.
 
 
                                      29
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. SUMMARY OF ACCOUNTING POLICIES
 
 Description of the Reporting Entity and Basis of Presentation--
 
  Heller Financial, Inc. and its subsidiaries ("The Company") are engaged
principally in furnishing commercial finance services to businesses in the
United States and investing in and operating commercial finance companies
throughout the world. The Company operates in the middle market segment of the
commercial finance industry, which generally includes entities in the
manufacturing and service sectors with annual sales in the range of $15 to
$200 million and in the real estate sector with property values generally in
the range of $5 to $40 million. The Company currently provides services in
five product categories: 1) corporate finance, 2) asset based finance, 3) real
estate finance, 4) international factoring and asset based finance and 5)
specialized finance and investments.
 
  All of the common stock of the Company is owned by Heller International
Corporation (the "Parent"), which is a wholly-owned subsidiary of The Fuji
Bank, Limited ("Fuji Bank") of Tokyo, Japan. Fuji Bank also directly owns 21%
of the outstanding shares of Heller International Group, Inc. ("International
Group"), a consolidated subsidiary, through which the Company holds its
international operations. The remaining 79% of the outstanding shares of
International Group are owned by the Company. The accompanying consolidated
financial statements include the accounts of the Company and its majority-
owned subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation. Investments in affiliated companies owned 50% or
less are accounted for by the equity method. Certain temporary interests are
included in investments and carried at cost.
 
 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 and cash equivalents consist of cash deposits maintained in banks and
short-term debt securities with original maturities of less than 60 days. The
fair value of cash equivalents approximates their carrying value.
 
 Receivables--
 
  Receivables are presented net of unearned income which generally includes
deferred loan origination and commitment fees, direct loan origination costs
and other amounts attributed to the fair value of equity interests and other
investments received in connection with certain financings. These amounts are
amortized to interest income using the effective interest method over the life
of the related loan or commitment period. From time to time, the Company
finances certain loans which it may elect to sell if the aggregate amount of
these loans reaches a sufficient size and market conditions are favorable.
These receivables are also presented net of unearned income. In the event the
Company sells a portion of a loan that it had originated, any deferred fees or
discounts relating to the portion of the loan sold are recognized in interest
income. For loan sales that qualify as syndications, fees received are
generally recognized in income, subject to certain yield tests, when the
syndication is complete.
 
  As a commercial finance company, income recognition is reviewed on an
account by account basis. Collateral is evaluated regularly primarily by
assessing the related current and future cash flow streams. Loans are
classified as nonearning and all interest and unearned income amortization is
suspended when there is significant doubt as to the ability of the debtor to
meet current contractual terms. Numerous factors including loan covenant
defaults, deteriorating loan-to-value relationships, delinquencies greater
than 90 days, the sale of
 
                                      30
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
major income generating assets or other major operational or organizational
changes may lead to income suspension. An account taken nonearning may be
restored to earning status either when all delinquent principal and interest
have been paid under the original contractual terms or the account has been
restructured and has demonstrated both the capacity to service the amended
terms of the debt and adequate loan to value coverage.
 
 Allowance for Losses--
 
  The allowance for losses of receivables is established through direct
charges to income. Losses are charged to the allowance when all or a portion
of a receivable is deemed impaired and uncollectible as determined by account
management procedures. These procedures include assessing how the borrower is
affected by economic and market conditions, evaluating operating performance
and reviewing loan-to-value relationships.
 
  Management evaluates the allowance for losses on a quarterly basis.
Nonearning assets and all loans with certain loan grading characteristics are
reviewed to determine if there is a potential risk of loss under varying
scenarios of performance. The estimates of potential loss for these individual
loans are aggregated and added to a general allowance requirement, which is
based on the total of all other loans in the portfolio. This total allowance
requirement is then compared to the existing allowance for losses and
adjustments are made, if necessary.
 
  Effective January 1, 1995, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors
for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan--Income Recognition and Disclosures," an amendment to
SFAS No. 114. These pronouncements require that impaired receivables be
measured based on the present value of expected future cash flows discounted
at the receivable's effective interest rate, at the observable market price of
the receivable, or at the fair value of the collateral if the receivable is
collateral dependent. When the recorded balance of an impaired receivable
exceeds the relevant measure of value, impairment is recorded through an
increase in the provision for losses. The Company had previously measured
receivable impairment using methods consistent with those prescribed in SFAS
No. 114. Accordingly, upon adoption of these statements, there was no effect
to total nonearning assets nor to the total allowance for losses as previously
reported at December 31, 1994.
 
 Securitized receivables--
 
  From time to time certain receivables are securitized and sold to investors
with limited recourse. Upon sale of the loans, a gain is recognized for the
difference between the net carrying value of the receivables and the fair
value of the securities sold. The gain on the sale is reduced by a reserve
established for estimated future losses. The gain recognized is recorded in
fees and other income. Income from the acceleration of discounts and deferred
fees attributed to the loans sold is recorded as interest income. The Company
may choose to retain a portion of the securitized receivables. Under these
circumstances, the amount of the gain related to the retained portion is
deferred and amortized over the life of the securities. The retained
securities are recorded as debt securities available for sale. To date, the
servicing rights to securitized receivables have been retained by the Company.
 
 Investments in Joint Ventures--
 
  Investments in unconsolidated joint ventures represent investments in
companies in 16 foreign countries. The Company accounts for its investments in
joint ventures under the equity method of accounting. Under this method, the
Company recognizes its share of the earnings or losses of the joint venture in
the period in which they are earned by the joint venture. Dividends received
from joint ventures reduce the carrying amount of the investment.
 
                                      31
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 Investments--
 
  Equity interests and investments--Investments in warrants, certain common
and preferred stocks and other equity investments, which are not subject to
the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," are carried at cost. The valuation of these
investments is periodically reviewed and the investment balance is written
down to reflect declines in value determined to be other than temporary. Gains
or losses recognized upon sale or write-down of these investments are recorded
as a component of fees and other income.
 
  Equipment on lease--Aircraft and related equipment under lease are recorded
at cost and depreciated over their estimated useful lives principally using
the straight line method for financial reporting purposes and accelerated
methods for tax purposes. Rental revenue is reported over the lease term as it
becomes receivable according to the provisions of the lease.
 
  Available for sale, trading, and held to maturity securities--Investments
designated as available for sale securities are carried at fair value using
the specific identification method with unrealized gains or losses included in
stockholders' equity, net of related taxes. Trading securities are carried at
fair value with the related unrealized gains or losses included currently in
fees and other income. Securities that are held to maturity are recorded at
amortized cost, but are written down to fair value to reflect declines in
value determined to be other than temporary.
 
  Real Estate Investments--The Company provides financing through certain real
estate loan arrangements that are recorded as investments by the Company.
Income is generally recognized only to the extent that cash received exceeds
the investment carrying amount.
 
 Other Assets--
 
  Repossessed Assets--Assets which have been legally acquired in satisfaction
of receivables are carried at fair value less selling costs and are included
in other assets, net of the related valuation allowance. After repossession,
operating costs are expensed and cash receipts are applied to reduce the asset
balance. In connection with the adoption of SFAS No. 114 in 1995, an in-
substance repossessed receivable is presented as an impaired receivable until
the related collateral is physically possessed or legally foreclosed by the
Company, at which time it will be accounted for as a repossessed asset.
 
 Income Taxes--
 
  The Company and its wholly-owned domestic subsidiaries are included in the
consolidated United States federal income tax return of the Parent. The
International Group files a separate United States federal income tax return.
The Company reports income tax expense as if it were a separate taxpayer and
records future tax benefits as soon as it is more likely than not that such
benefits will be realized.
 
 Derivative Financial Instruments--
 
  The Company is a party to interest rate swaps and cross currency and basis
swap agreements which have been designated by the Company to hedge its
exposure to interest rate risk on specific assets, pools of assets or
liabilities. The swap agreements are generally held to maturity and the
differential paid or received under these agreements is recognized over the
life of the related agreement.
 
 
  The Company periodically enters into forward currency exchange contracts
which are designated as hedges of its exposure to foreign currency
fluctuations from the translation of its foreign currency denominated
 
                                      32
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
investments in certain European and Asian joint ventures and subsidiaries.
Through these contracts, the Company primarily sells the local currency and
buys U.S. dollars. Gains and losses resulting from translation of foreign
currency financial statements and the related effects of the hedges of net
investments in joint ventures and subsidiaries outside the United States are
accumulated in stockholders' equity, net of related taxes, until the
international investment is sold or substantially liquidated.
 
  The Company also periodically enters into forward contracts or purchases
options. These financial instruments serve as hedges of its foreign investment
in international subsidiaries and joint ventures or effectively hedge the
translation of the related foreign currency income. These contracts are
carried at fair value, with gains or losses included in the determination of
net income.
 
 Reclassifications--
 
  Certain prior year amounts have been reclassified in order to conform to the
current year's presentation.
 
2. LENDING ASSETS
 
  Lending assets include receivables and repossessed assets.
 
 Diversification of Credit Risk--
 
  Concentrations of lending assets of 5% or more at December 31, 1995 and
1994, based on the standard industrial classification of the borrower, are as
follows:
 
<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                  -----------------------------
                                                       1995           1994
                                                  -------------- --------------
                                                  AMOUNT PERCENT AMOUNT PERCENT
                                                  ------ ------- ------ -------
                                                          (IN MILLIONS)
   <S>                                            <C>    <C>     <C>    <C>
   Food, grocery and other miscellaneous retail..  $568      7%   $443      6%
   Textiles and apparel manufacturing............   529      7     562      7
   Department and general merchandise retail
    stores.......................................   482      6     673      9
   General industrial machines...................   392      5     462      6
</TABLE>
 
  The majority of lending assets in the textiles and apparel manufacturing
category and the department and general merchandise retail stores category is
comprised of factored accounts receivable which represent short-term trade
receivables from numerous customers. The general industrial machines
classification is distributed among machinery used for many different
industrial applications.
 
 
 Contractual Maturity of Loan Receivables--
 
  The contractual maturities of the Company's receivables at December 31,
1995, which are presented in the table below, should not be regarded as a
forecast of cash flows (in millions):
 
<TABLE>
<CAPTION>
                                                                   AFTER
                                   1996   1997   1998   1999  2000  2000  TOTAL
                                  ------ ------ ------ ------ ---- ------ ------
   <S>                            <C>    <C>    <C>    <C>    <C>  <C>    <C>
   Commercial loans.............  $  876 $  629 $  721 $  673 $514 $  755 $4,168
   Real estate loans............     388    262    343    306  210    168  1,677
   Equipment loans and leases...     279    246    209    154  118    235  1,241
   Factored accounts receivable.     814      1      1    --   --     --     816
   Consumer loans...............      14    --     123      6   22     18    183
                                  ------ ------ ------ ------ ---- ------ ------
       Total....................  $2,371 $1,138 $1,397 $1,139 $864 $1,176 $8,085
                                  ====== ====== ====== ====== ==== ====== ======
</TABLE>
 
  Commercial loans consist principally of corporate finance and asset based
receivables. Corporate finance receivables are predominantly collateralized by
senior loans on the borrower's stock, or assets, or both. Asset
 
                                      33
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
based receivables are collateralized by inventory, receivables and property,
plant and equipment of the borrowers. Real estate loans are principally
collateralized by first mortgages on commercial and residential real estate.
Equipment loans and leases are secured by the underlying equipment and the
Company often has partial recourse to the equipment vendor. Factored accounts
receivable are purchased from clients in return for a commission.
 
 Impaired Receivables, Repossessed Assets, and Troubled Debt Restructurings--
 
  The Company does not recognize interest and fee income on impaired
receivables classified as nonearning and on repossessed assets, which are set
forth in the following table:
 
<TABLE>
<CAPTION>
                                                                     DECEMBER
                                                                        31,
                                                                     ----------
                                                                     1995  1994
                                                                     ----  ----
                                                                        (IN
                                                                     MILLIONS)
   <S>                                                               <C>   <C>
   Impaired receivables............................................. $261  $284
   Repossessed assets...............................................   28    19
                                                                     ----  ----
       Total nonearning assets...................................... $289  $303
                                                                     ====  ====
   Ratio of total nonearning assets to total lending assets.........  3.6%  4.0%
                                                                     ====  ====
</TABLE>
 
  Nonearning assets have decreased $14 million to 3.6% from 4.0% of total
lending assets during 1995 due to the favorable performance of loans
originated since 1990 in all businesses and the resolution and writedown of
problem accounts in the pre-1990 corporate finance and real estate portfolios.
Nonearning assets are principally comprised of $142 million from real estate
and $89 million from corporate finance which are primarily attributed to
accounts underwritten prior to 1990.
 
  SFAS No. 114 requires changes in the presentation and disclosure of certain
impaired receivables. Receivables that were considered in-substance
repossessions of collateral are now presented as impaired receivables until
the underlying collateral is physically possessed or legally foreclosed. Upon
adoption, this requirement was retroactively applied resulting in the
reclassification of $31 million of in-substance repossessed assets to impaired
receivables and $4 million of related valuation allowance to the allowance for
losses of receivables at December 31, 1994.
 
  The average investment in impaired receivables was $344 million for the year
ended December 31, 1995.
 
  The Company had $14 million and $54 million of loans that are considered
troubled debt restructures at December 31, 1995 and 1994, respectively. The
following table indicates the effect on income if interest on nonearning
impaired receivables and troubled debt restructurings outstanding at year-end
had been recognized at original contractual rates during the year.
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                                  --------------
                                                                  1995 1994 1993
                                                                  ---- ---- ----
                                                                  (IN MILLIONS)
   <S>                                                            <C>  <C>  <C>
   Interest income which would have been recorded................ $43  $36  $33
   Interest income recorded......................................  21   16   12
                                                                  ---  ---  ---
   Effect on interest income..................................... $22  $20  $21
                                                                  ===  ===  ===
</TABLE>
 
 Loan Modifications--
 
  The Company had $151 million of receivables at December 31, 1995 that were
restructured at a market rate of interest and written down from the original
loan balance. The recorded investment of these receivables is expected to be
fully recoverable. Interest income of approximately $5 million has been
recorded on these
 
                                      34
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
receivables under the modified terms, along with cash interest collections of
the same amount. At December 31, 1995, the Company was not committed to lend
significant additional funds under the restructured agreements.
 
 Allowance for Losses--
 
  The changes in the allowance for losses of receivables and in the valuation
allowance for repossessed assets were as follows:
 
<TABLE>
<CAPTION>
                                                              ALLOWANCE FOR
                                                                 LOSSES
                                                             OF RECEIVABLES
                                                            -------------------
                                                            1995   1994   1993
                                                            -----  -----  -----
                                                              (IN MILLIONS)
   <S>                                                      <C>    <C>    <C>
   Balance at the beginning of the year.................... $ 231  $ 221  $ 224
   Provision for losses....................................   211    171    209
   Writedowns..............................................  (243)  (185)  (232)
   Recoveries..............................................    28     22     21
   Transfers and other.....................................     2      2     (1)
                                                            -----  -----  -----
   Balance at the end of the year.......................... $ 229  $ 231  $ 221
                                                            =====  =====  =====
</TABLE>
 
  Writedowns occurring at the time of repossession are considered writedowns
of receivables.
 
<TABLE>
<CAPTION>
                                                                 VALUATION
                                                               ALLOWANCE FOR
                                                                REPOSSESSED
                                                                   ASSETS
                                                               ----------------
                                                               1995  1994  1993
                                                               ----  ----  ----
                                                               (IN MILLIONS)
   <S>                                                         <C>   <C>   <C>
   Balance at the beginning of the year....................... $  6  $  5  $ 6
   Provision for losses.......................................   12    17    1
   Writedowns.................................................  (16)  (16)  (2)
                                                               ----  ----  ---
   Balance at the end of the year............................. $  2  $  6  $ 5
                                                               ====  ====  ===
</TABLE>
 
  Impaired receivables with identified reserve requirements were $234 million
and $195 million at December 31, 1995 and 1994, respectively.
 
<TABLE>
<CAPTION>
                                                                     DECEMBER
                                                                        31,
                                                                     ----------
                                                                     1995  1994
                                                                     ----  ----
                                                                        (IN
                                                                     MILLIONS)
   <S>                                                               <C>   <C>
   Identified reserve requirements for impaired receivables........  $ 57  $ 66
   Additional allowance for losses of receivables..................   172   165
                                                                     ----  ----
       Total allowance for losses of receivables...................  $229  $231
                                                                     ====  ====
   Ratio of total allowance for losses of receivables to nonearning
    impaired receivables...........................................    88%   81%
                                                                     ====  ====
</TABLE>
 
  The valuation allowance for repossessed assets of $2 million and $6 million
at December 31, 1995 and 1994 is included in other assets on the balance
sheet.
 
  The Company maintains an allowance for losses of receivables based upon
management's best estimate of future possible losses in the portfolio of
receivables. Management's estimate is based upon current economic conditions,
previous loss history, and knowledge of clients' financial position. Changes
in these estimates could result in an increase or decrease in the reserve
maintained.
 
                                      35
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
3. INVESTMENTS AND OTHER ASSETS
 
 Investments in International Joint Ventures--
 
  The international joint ventures, which are independently financed, on a
combined basis had total receivables of $5.2 billion at December 31, 1995,
factoring volume and net income of $27.2 billion and $74 million,
respectively, for the year ended December 31, 1995. The Company owns interests
from 40% to 50% of these joint ventures. The comparable amounts for 1994 for
receivables, factoring volume and net income were $4.0 billion, $20.7 billion
and $55 million, respectively. The Company's two largest investments in
international joint ventures are Factofrance Heller, S.A. and NMB-Heller
Holding N.V., which account for 66% of the total investments in and 86% of
income from unconsolidated joint ventures.
 
 Other Investments and Assets--
 
  The following table sets forth a summary of the major components of
investments and other assets (in millions):
 
<TABLE>
<CAPTION>
                                                                       DECEMBER
                                                                          31,
                                                                       ---------
                                                                       1995 1994
                                                                       ---- ----
   <S>                                                                 <C>  <C>
   Investments:
     Equity interests and investments................................  $256 $275
     Real estate investments.........................................   155  101
     Equipment on lease..............................................   113  166
     Available for sale securities
       Debt securities...............................................   128   49
       Equity securities.............................................    17   23
     Trading securities..............................................    24   20
                                                                       ---- ----
         Total investments...........................................  $693 $634
                                                                       ==== ====
   Other Assets:
     Repossessed assets, net of allowance of $2 and $6 in 1995 and
      1994, respectively.............................................  $ 26 $ 13
     Deferred income tax benefits, net of allowance of $15 and $11 in
      1995 and 1994, respectively....................................   121   63
     Prepaid expenses and other assets...............................    64   56
     Net advances to affiliates......................................    25   29
     Furniture, fixtures and equipment...............................    21   23
                                                                       ---- ----
         Total other assets..........................................  $257 $184
                                                                       ==== ====
</TABLE>
 
  Equity interests and investments principally include common and preferred
stocks received in connection with certain financings, investments in limited
partnerships and warrants.
 
  Real estate investments are acquisition, development and construction
investment transactions. At December 31, 1995, the Company held investments in
91 projects with balances ranging from $1 million to $5 million.
 
  Equipment on lease is comprised of aircraft and related equipment.
Noncancellable future minimum rental receipts under the leases are $18
million, $12 million, $8 million, $4 million and $3 million for 1996 through
2000. Substantially all equipment was under lease as of December 31, 1995.
 
  The available for sale debt securities principally consist of subordinated
securities retained in connection with the securitization of certain
receivables on mobile home parks, self storage facilities, and limited service
 
                                      36
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
hotels. These securities mature on dates ranging to 2005 based on the related
stated maturity dates of the underlying receivables. The Company has
established a reserve of $2 million for possible losses related to these
securities, which is included in other payables and accruals on the balance
sheet. Net unrealized holding losses on these securities amounted to $7
million and $9 million at December 31, 1995 and 1994, respectively, and are
recorded in stockholder's equity on a net of tax basis. Available for sale
debt securities also includes $55 million of short-term debt securities at
December 31, 1995 which are included in cash equivalents.
 
  The available for sale equity securities are principally comprised of common
stocks. Net unrealized holding losses on these securities were $2 million and
net unrealized holding gains were $16 million at December 31, 1995 and 1994,
respectively. These amounts are recorded in stockholders' equity on a net of
tax basis.
 
  The Company had realized gains from sales of equity investments of $133
million and $64 million during the year ended December 31, 1995 and 1994,
respectively, and had realized losses and writedowns totaling $59 million and
$15 million for 1995 and 1994, respectively. Sales proceeds on equity
investments may be subject to normal post-closing adjustments, the impact of
which is estimated at the time of closing.
 
  Securities that are held to maturity consist of $409 million and $72 million
of short-term debt securities which are included in cash and cash equivalents
at December 31, 1995 and 1994, respectively.
 
  The Company holds certain foreign investments which are classified as
trading securities. Net gains of $4 million and $7 million related to these
investments were recorded in income for the years ended December 31, 1995 and
1994, respectively.
 
  Noncash investing activities which occurred during the period ended December
31, 1995 include $62 million of receivables which were classified as
repossessed assets and $31 million of insubstance repossessed assets which
were classified as impaired receivables in accordance with SFAS No. 114.
Receivables of $34 million were exchanged for investments of the same amount,
and a $12 million gain was realized on an exchange of available for sale
equity securities. During the comparable 1994 period, $117 million of
positions in two repossessed companies were converted to equity investments.
In addition, $59 million of receivables were classified as repossessed assets
and $51 million of repossessed assets were resolved and returned to
receivables. The comparable amounts for 1993 were $87 million and $25 million,
respectively.
 
4. SENIOR DEBT
 
  Commercial Paper and Short-Term Borrowings--The table below sets forth
information concerning commercial paper. The average amounts are computed
based on the average daily balances outstanding during the year. The Company
issues commercial paper with maturities ranging up to 270 days.
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                        ----------------------
                                                         1995    1994    1993
                                                        ------  ------  ------
                                                           (IN MILLIONS)
<S>                                                     <C>     <C>     <C>
Commercial Paper:
  End of period borrowings............................. $2,067  $2,338  $1,912
  Average borrowings................................... $2,483  $2,228  $2,177
  Maximum month-end borrowings......................... $2,860  $2,486  $2,538
  Average interest rate--
    During the year....................................   5.96%   4.30%   3.16%
    During the year, including the effect of commitment
     fees..............................................   6.10%   4.57%   3.42%
    At year-end, including the effect of commitment
     fees..............................................   5.96%   5.83%   3.30%
</TABLE>
 
  Commercial paper borrowings have been reduced at December 31, 1995 to more
conservative levels, reflecting the Company's decision to temporarily reduce
its level of short-term funding. In addition to
 
                                      37
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
commercial paper, the consolidated international subsidiaries had short-term
borrowings of $156 million, $113 million and $69 million at December 31, 1995,
1994 and 1993, respectively, which are used to finance international
operations.
 
  Available credit and asset sale facilities--At December 31, 1995, the
Company had committed credit and asset sale facilities from unaffiliated
entities which totaled $2,629 million. This total includes $2,235 million in
bank facilities and $394 million of additional liquidity available under a
receivables purchase agreement. The receivables purchase agreement, which
expires March 24, 1999, provides that the Company may sell to Freedom Asset
Funding Corporation ("Freedom"), with limited recourse, an undivided interest
of up to $500 million in a designated pool of its factored accounts
receivable. The amount of liquidity provided by Fuji Bank to Freedom is $100
million. The Company had sold $6 million of receivables for cash as of
December 31, 1995.
 
  In April of 1995, the Company replaced its existing bank credit facilities
with a new agreement at more favorable terms to the Company. The terms of
these facilities primarily include reduced pricing, an increase in the term
for $1.1 billion of the facilities to five years, required stockholders'
equity of $900 million, and the elimination of any funding covenant based on
material adverse change in the financial condition of the Company. Under the
terms of the debt covenants of these agreements, the Company could have
borrowed an additional $6 billion of debt at December 31, 1995.
 
  The Company and Fuji Bank are parties to a "Keep Well Agreement" which
cannot be terminated by either party prior to December 31, 2002. The Agreement
provides that Fuji Bank will maintain the Company's net worth in an amount
equal to $500 million. The Agreement further provides that if the Company
should lack sufficient cash, other liquid assets or credit facilities to meet
its payment obligations on its commercial paper, then Fuji Bank will lend the
Company up to $500 million which the Company may use only for the purpose of
meeting such payment obligations. No loans have been made by Fuji Bank under
this agreement.
 
  Notes and debentures--The scheduled maturities of debt outstanding at
December 31, 1995, other than commercial paper and short-term borrowings and
excluding unamortized discount, are as follows:
 
<TABLE>
<CAPTION>
                              SCHEDULED MATURITIES AT DECEMBER 31,
                              -----------------------------------------
                                                                  AFTER
                               1996    1997    1998   1999  2000  2000   TOTAL
                              ------  ------  ------  ----  ----  -----  ------
                                             (IN MILLIONS)
   <S>                        <C>     <C>     <C>     <C>   <C>   <C>    <C>
   Various fixed rate notes
    and debentures........... $  225  $  359  $  730  $508  $706  $171   $2,699
     Fixed weighted average
      rate...................   8.83%   6.13%   9.01% 8.28% 4.85% 7.03%    7.26%
   Various floating rate
    notes and debentures..... $  967  $  872  $  272  $260  $ 78   --    $2,449
     Floating weighted
      average rate...........   6.05%   5.56%   3.53% 6.04% 6.03%  --      5.59%
   Total notes and
    debentures............... $1,192  $1,231  $1,002  $768  $784  $171   $5,148
</TABLE>
 
  The Company had fixed rate debt of $2,699 million and $2,510 million at
December 31, 1995 and 1994 respectively. At December 31, 1995, total fixed
rate debt included $452 million of debt denominated in Japanese yen for which
the Company pays a combined weighted average contractual rate of interest of
3.4%. The Company has fixed the exchange rate of Japanese yen to U.S. dollars
on the yen denominated debt using cross currency interest rate swap agreements
resulting in an effective rate of interest of 6.46% at December 31, 1995.
 
  The contractual interest rates for remaining U.S. dollar denominated fixed
rate debt range between 5.63% and 9.63% at December 31, 1995 and 5.63% and
9.70% at December 31, 1994. Excluding swaps, the weighted
 
                                      38
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
average interest rate on this debt is 8.03% and 8.06% at December 31, 1995 and
1994, respectively. The weighted average interest rates of the U.S. dollar
denominated fixed rate debt at December 31, 1995 and 1994 are 7.0% and 7.12%,
after the effect of related swap agreements, which converted certain of the
Company's fixed rate debt to floating rate debt. The combined U.S. dollar and
yen denominated fixed rate debt had an effective interest rate of 6.91% at
December 31, 1995 after the effects of the cross currency interest rate swap
agreements.
 
  The Company had floating rate debt of $2,449 million and $1,423 million at
December 31, 1995 and 1994, respectively. At December 31, 1995, total floating
rate debt included $330 million of debt denominated in primarily Japanese yen
which has a weighted average contractual rate of 2.5%. The Company had fixed
the exchange rate of yen denominated debt to U.S. dollars using cross currency
interest rate swap agreements resulting in an effective interest rate on this
debt of 8.06% at December 31, 1995.
 
  The contractual rates on the remaining U.S. dollar denominated floating rate
debt are based primarily on indices such as the Constant Maturity Treasury
Index less a range of .12% to .40%, the Federal Funds rate plus .18% to .38%,
the three month Treasury bill rate plus .46%, the London Inter-bank Offered
Rate plus .05% to .95%, or the Prime rate less 2.56% to 2.75%. Excluding the
effect of swaps, the weighted average rate on U.S. dollar denominated floating
rate debt is 6.07% and 6.46% at December 31, 1995 and 1994. The weighted
average interest rates on this debt at December 31, 1995 and 1994 including
the effect of basis swap agreements, were 6.10% and 6.39%, respectively. The
combined variable rate debt had an effective interest rate of 6.36% at
December 31, 1995 due to cross currency interest rate swap agreements.
 
  Notes redeemable solely at the option of the Company prior to the final
maturity date are reflected in the table above as maturing on the final
maturity date.
 
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
 
  The Company is a party to several agreements involving financial instruments
with off-balance sheet risk. These instruments are used to meet the financing
needs of borrowers and to manage the Company's own exposure to interest rate
and currency exchange rate fluctuations. These instruments principally include
interest rate swap agreements, forward currency exchange contracts, purchased
options, loan commitments, letters of credit, and guarantees.
 
  Derivative financial instruments used for risk management purposes--The
Company utilizes derivatives as an integral part of its asset/liability
management program to reduce its overall level of financial risk. These
derivatives, particularly interest rate swap agreements, are used to lower
funding costs, diversify sources of funding or alter interest rate exposure
arising from mismatches between assets and liabilities. All of the Company's
derivative instruments are entirely related to accomplishing these risk
management objectives which arise from normal business operations. The Company
is not an interest rate swap dealer nor is it a trader in derivative
securities, and it has not used speculative derivative products for the
purpose of generating earnings from changes in market conditions.
 
  Before entering into a derivative agreement, management determines that an
inverse correlation exists between the value of the hedged item and the value
of the derivative. At the inception of each agreement, management designates
the derivative to specific assets, pools of assets or liabilities. The risk
that a derivative will become an ineffective hedge is generally limited to the
possibility that an asset or liability being hedged will prepay before the
related derivative expires. Accordingly, after inception of a hedge,
asset/liability managers monitor its effectiveness through an ongoing review
of the amounts and maturities of assets, liabilities and swap positions. This
information is reported to the Financial Risk Management Committee (FRMC)
which determines the direction the Company will take with respect to its
asset/liability position. The asset/liability position of the
 
                                      39
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company and the related activities of the FRMC are reported regularly to the
Executive Committee of the Board of Directors and to the Board of Directors.
 
  The following table summarizes the notional amounts of the Company's
interest rate swap agreements, foreign exchange contracts, purchased options
and interest rate cap agreements. The credit risk associated with these
instruments is limited to amounts earned but not collected and to any
additional amounts which may be incurred to replace the instrument under then
current market conditions. These amounts are substantially less than the
notional amounts of these agreements. The Company manages this risk by
establishing minimum credit ratings for each counterparty and by limiting the
exposure to individual counterparties as measured by the total notional amount
and the current replacement cost of existing agreements. The Company has not
experienced nonperformance by any counterparty related to its derivative
financial instruments.
 
<TABLE>
<CAPTION>
                                                                   CONTRACT OR
                                                                    NOTIONAL
                                                                     AMOUNT
                                                                  -------------
                                                                   1995   1994
                                                                  ------ ------
                                                                  (IN MILLIONS)
   <S>                                                            <C>    <C>
   Interest rate swap agreements................................. $2,681 $3,102
   Cross currency interest rate swap agreements..................    780    474
   Basis swap agreements.........................................  1,614    347
   Spot and forward currency exchange contracts..................    243    212
   Purchased options.............................................     20    --
   Interest rate cap agreements..................................      4    --
</TABLE>
 
  Interest rate swaps are primarily used to convert fixed rate financings to
variable rate debt. Less frequently, when the issuance of debt denominated in
a foreign currency is deemed more cost effective, cross currency interest rate
swaps are employed to convert foreign currency denominated debt to U.S. dollar
denominated debt and U.S. based indices. The Company also uses swap agreements
to alter the characteristics of specific asset pools to more closely match the
interest terms of the underlying financing. These agreements enhance the
correlation of the interest rate and currency characteristics of the Company's
assets and liabilities and thereby mitigate its exposure to interest rate
volatility. Basis swap agreements involve the exchange of two different
floating rate interest payment obligations and are used to manage the basis
risk between different floating rate indices. The Company has also entered
into $1 billion of basis swaps effective January 2, 1996, which have the
effect of changing the index on an equivalent amount of debt from the three
month London Inter-bank Offered Rate ("LIBOR") to a rate based on Prime. The
amount of these basis swaps is included in the table above.
 
  Forwards are contracts for the delivery of an item in which the buyer agrees
to take delivery of an instrument or currency at a specified price and future
date. To minimize the effect of exchange rate movements in the currencies of
foreign countries, in which certain of our subsidiaries and investments are
located, the Company will periodically enter into forward currency exchange
contracts and purchase options. These financial instruments serve as hedges of
its foreign investment in international subsidiaries and joint ventures or
effectively hedge the translation of the related foreign currency income. The
Company also periodically enters into forward contracts to hedge receivables
denominated in foreign currencies or may purchase foreign currencies in the
spot market in order to settle a foreign currency denominated liability.
 
  Commitments, letters of credit and guarantees--The Company generally enters
into various commitments, letters of credit and guarantees in response to the
financing needs of its customers. As many of the agreements are expected to
expire unused, the total commitment amount does not necessarily represent
future cash
 
                                      40
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
requirements. The credit risk involved in issuing these instruments is
essentially the same as that involved in extending loans to borrowers and the
credit quality and collateral policies are similar to those involved in the
Company's normal lending transactions. The contractual amount of the Company's
commitments, letters of credit and guarantees are shown below:
 
<TABLE>
<CAPTION>
                                                                    CONTRACT
                                                                     AMOUNT
                                                                  -------------
                                                                   1995   1994
                                                                  ------ ------
                                                                  (IN MILLIONS)
   <S>                                                            <C>    <C>
   Loan commitments.............................................. $1,772 $1,479
   Letters of credit and financial guarantees....................    513    490
   Factoring credit guarantees...................................    300    334
</TABLE>
 
  Commitments to fund new and existing borrowers generally have fixed
expiration dates and termination clauses and typically require payment of a
fee. Letters of credit and financial guarantees are conditional commitments
issued by the Company to guarantee the performance of a borrower or an
affiliate to a third party. At December 31, 1995, the contractual amount of
guarantees includes $32 million related to affiliates. For factoring credit
guarantees, the Company receives a fee for guaranteeing the collectibility of
certain factoring clients' accounts receivable. Under this arrangement,
clients generally retain the responsibility for collection and bookkeeping.
Losses related to these services have historically not been significant.
 
  Other financial instruments with off-balance sheet risk--As of December 31,
1995 and 1994 the Company had sold $6 million of factored receivables for
cash, under a receivables purchase agreement with limited recourse. As the
average maturity of factored accounts receivable is approximately 50 days and
the historical loss experience is substantially less than 1%, the Company's
recourse exposure is considered minimal.
 
6. LEGAL PROCEEDINGS
 
  The Company is party to a number of legal proceedings as plaintiff and
defendant, all arising in the ordinary course of its business. The Company
believes that the amounts, if any, which may ultimately be funded or paid with
respect to these matters will not have a material adverse effect on the
financial condition or results of operations of the Company.
 
7. RENTAL COMMITMENTS
 
  The Company and its consolidated subsidiaries have minimum rental
commitments under noncancellable operating leases at December 31, 1995, as
follows (in millions):
 
<TABLE>
             <S>                                   <C>
             1996................................. $16
             1997.................................  15
             1998.................................  12
             1999.................................  12
             2000.................................  10
             Thereafter...........................  10
                                                   ---
                                                   $75
                                                   ===
</TABLE>
 
  The total rent expense, net of rental income from subleases, was $18
million, $17 million and $15 million for the year ended December 31, 1995,
1994 and 1993, respectively.
 
                                      41
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
8. PREFERRED STOCK
 
  Perpetual Preferred Stock--The Company's Cumulative Perpetual Senior
Preferred Stock, Series A, ("Perpetual Preferred Stock") is not redeemable
prior to September 22, 2000. On or after that date, the Perpetual Preferred
Stock will be redeemable at the option of the Company, in whole or in part at
a redemption price of $25 per share, plus accrued and unpaid dividends. The
Perpetual Preferred Stock has an annual dividend rate of 8.125%. Dividends are
cumulative and payable quarterly. The Perpetual Preferred Stock ranks senior
with respect to payment of dividends and liquidation to other outstanding or
authorized preferred stock of the Company.
 
  Convertible Preferred Stock--The Company's Cumulative Convertible Preferred
Stock, Series D (no par value) ("Convertible Preferred Stock") is held by the
Parent. The Convertible Preferred Stock has a dividend yield established
quarterly at a rate of 1/2% less than the announced prime commercial lending
rate of Morgan Guaranty Trust Company of New York, payable quarterly. Under
the terms of the Convertible Preferred Stock, the Company is prohibited from
paying cash dividends on Common Stock unless full cumulative dividends on all
outstanding shares of Convertible Preferred Stock for all past dividend
periods have been paid. The Convertible Preferred Stock is convertible into
Common Stock of the Company at the conversion price of one share of Common
Stock for each 200 shares of Convertible Preferred Stock. Subject to certain
conditions, the Convertible Preferred Stock is redeemable at any time at the
option of the Company at a redemption price equal to the price paid for such
stock plus accumulated dividends.
 
  Redeemable Preferred Stock--The Company has authorized the issuance of
100,000 shares of a series of preferred stock designated NW Preferred Stock,
Class B (No Par Value) ("NW Preferred Stock"), pursuant to the "Keep Well
Agreement" between the Company and Fuji Bank wherein, among other things, Fuji
Bank has agreed to purchase NW Preferred Stock in an amount required to
maintain the Company's net worth at $500 million. The Company's net worth was
$1,384 million at December 31, 1995. If and when issued, dividends will be
paid quarterly on NW Preferred Stock at a rate per annum equal to 1% over the
three-month London Inter-bank Offered Rate. Subject to certain conditions, NW
Preferred Stock will be redeemable at the option of the holder within a
specified period of time after the end of a calendar quarter in an aggregate
amount not greater than the excess of the net worth of the Company as of the
end of such calendar quarter over $500 million and at a redemption price equal
to the price paid for such stock plus accumulated dividends. No purchases of
NW Preferred Stock have been made by Fuji Bank under this agreement.
 
9. DIVIDEND RESTRICTIONS AND PAYMENTS
 
  Dividends may legally be paid only out of the Company's surplus, as
determined under the provisions of the Delaware General Corporation Law, or
net profits for either the current or preceding fiscal year, or both. In
addition, the Company is prohibited from paying cash dividends on Common Stock
or any other preferred stock that ranks, with respect to payment of dividends,
equal or junior to the Perpetual Preferred Stock, unless full cumulative
dividends on the Perpetual Preferred Stock have been paid.
 
  The Company declared and paid dividends on the Perpetual Preferred Stock of
$10 million in 1995, 1994 and 1993. Dividends declared and paid on the
Company's Convertible Preferred Stock amounted to $2 million each year during
1995, 1994 and 1993. The Company also declared and paid cash dividends of $52
and $20 million on Common Stock in 1995 and 1994, respectively.
 
                                      42
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
10. OPERATING EXPENSES
 
  The following table sets forth a summary of the major components of
operating expenses:
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                                  --------------
                                                                  1995 1994 1993
                                                                  ---- ---- ----
                                                                  (IN MILLIONS)
   <S>                                                            <C>  <C>  <C>
   Employee salaries............................................. $ 88 $ 79 $ 69
   Other compensation............................................   52   48   43
   Space costs...................................................   18   17   18
   Equipment costs...............................................   13   13   10
   Travel and entertainment......................................   10   10    9
   Other.........................................................   35   28   25
                                                                  ---- ---- ----
       Total..................................................... $216 $195 $174
                                                                  ==== ==== ====
</TABLE>
 
  The Parent performs services for the Company and charges the Company for the
related costs incurred. These charges are reflected in certain of the above
captions.
 
11. BENEFIT PLANS AND OTHER POST RETIREMENT BENEFITS
 
  The Company has various incentive compensation plans and a savings and
profit-sharing plan which provide for annual contributions to eligible
employees based on the Company's achievement of certain financial objectives
and employee achievement of certain objectives.
 
  In addition, the Company has noncontributory defined benefit pension plans
covering substantially all of its domestic employees. Certain foreign
employees are covered by contributory or noncontributory defined contribution
plans. The Company's policy is to fund, at a minimum, pension contributions as
required by the Employee Retirement Income Security Act of 1974. Benefits are
based on an employee's years of service and average earnings for the five
highest consecutive years of compensation occurring during the last ten years
before retirement.
 
  The following table summarizes the funded status of the defined benefit
pension plans at December 31, 1995 and 1994:
 
<TABLE>
<CAPTION>
                                                                 1995  1994
                                                                 ----  ----
                                                                    (IN
                                                                 MILLIONS)
   <S>                                                           <C>   <C>  <C>
   Actuarial present value of vested benefit obligations........ $19   $11
                                                                 ===   ===
   Plan assets at fair value.................................... $34   $28
   Projected benefit obligations for service rendered to date...  36    23
                                                                 ---   ---
     Plan assets in excess of (less than) projected benefit
      obligation................................................ $(2)  $ 5
                                                                 ===   ===
   Accrued pension cost......................................... $(1)  $--
                                                                 ===   ===
</TABLE>
 
  In accordance with the provisions of SFAS No. 87 "Employers' Accounting for
Pensions" and SFAS No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions," the Company adjusts the discount, salary and health care
cost trend rates, as well as the rates of return on assets, to reflect market
conditions at the measurement date. Changes in these assumptions will impact
the amount of the pension and net periodic postretirement benefit expense in
future years. At December 31, 1995, the Company decreased the discount rate
used to calculate the projected pension benefit obligation to 7.25%,
reflecting the change in the interest rate environment. The decrease in the
discount rate had no effect on 1995 pension expense, which was
 
                                      43
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$1 million compared to $2 million in 1994 and $1 million in 1993. The discount
rate change is expected to increase 1996 pension expense by approximately $1
million. Due to market conditions, the Company had increased the discount rate
at December 31, 1994 to 8.5%, which decreased 1995 pension expense by
approximately $1 million. The Company maintained the salary rate assumption at
6% at December 31, 1995, based on the Company's experience. The Company had
reduced the salary assumption from 7% to 6% at December 31, 1993. This rate
reduction had no effect on 1993 pension expense but reduced 1994 pension
expense by less than $1 million.
 
  The Company also provides health care benefits for eligible retired
employees and their eligible dependents. At December 31, 1995 and 1994, $6
million of the transition obligation remains unamortized. The accumulated
postretirement benefit obligation, under the terms of the amended healthcare
plan, was calculated using relevant actuarial assumptions and health care cost
trend rates projected at annual rates ranging from 10% in 1995 to 5.5% in 2004
and thereafter. The effect of a 1.0% annual increase in these assumed cost
trend rates would increase the accumulated postretirement benefit obligation
by less than $1 million, while annual service and interest cost components in
the aggregate would not be materially affected. Consistent with the changes in
the pension plan discount rate at December 31, 1995 and 1994, the discount
rate used to calculate the accumulated postretirement benefit obligation was
decreased to 7.25% at December 31, 1995 from 8.5% at December 31, 1994. The
decrease in the discount rate at December 31, 1995 had no effect on the 1995
expense and it is expected to increase 1996 expense by less than $1 million.
The increase in the discount rate at December 31, 1994 to 8.5% from 7.5% at
December 31, 1993 decreased 1995 expense by less than $1 million. The net
postretirement benefit liability was $2 million at December 31, 1995 and $1
million at December 31, 1994 and 1993. The net periodic postretirement benefit
cost was $1 million for the years ended December 31, 1995, 1994 and 1993.
 
  The Parent has established the Executive Deferred Compensation Plan (the
"Plan"), a nonqualified deferred compensation plan, in which certain employees
of the Parent and the Company may elect to defer a portion of their annual
compensation on a pre-tax basis. The amount deferred remains an asset of the
Company and may be invested in any of certain mutual funds at the
participant's direction. Payment of amounts deferred are made in a lump sum or
in annual installments over a five, ten or fifteen year period as determined
by the participant. Plan assets were approximately $10 million and $3 million
at December 31, 1995 and 1994, respectively.
 
                                      44
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
12. INCOME TAXES
 
  Although the Company files a consolidated U.S. tax return with its Parent,
the Company reports income tax expense as if it were a separate taxpayer and
records deferred tax benefits for deductible temporary differences if it is
more likely than not that these benefits will be realized. Included in income
tax expense are amounts relating to the International Group, which files a
separate United States federal income tax return. United States federal income
taxes paid by the International Group amounted to $1 million in both 1995 and
1994.
 
  The provision for income taxes is summarized in the following table:
 
<TABLE>
<CAPTION>
                                                               1995  1994  1993
                                                               ----  ----  ----
                                                               (IN MILLIONS)
   <S>                                                         <C>   <C>   <C>
   Current:
     Federal.................................................. $116  $ 33  $ 75
     Utilization of investment and foreign tax credits........  (22)  (29)  (32)
                                                               ----  ----  ----
       Net federal............................................   94     4    43
     State....................................................    2    (2)   16
     Foreign..................................................    3     1     1
                                                               ----  ----  ----
       Total current..........................................   99     3    60
                                                               ----  ----  ----
   Deferred:
     Federal..................................................  (43)   41   (41)
     State....................................................   (7)    7    (6)
     Effect of change in tax rates............................  --    --     (2)
                                                               ----  ----  ----
       Total deferred.........................................  (50)   48   (49)
                                                               ----  ----  ----
                                                               $ 49  $ 51  $ 11
                                                               ====  ====  ====
</TABLE>
 
  In accordance with the provisions of the current tax allocation agreement,
net payments of $70 million were made to the Parent in 1995 and $25 million
were made in January 1996 for the Company's estimated current federal and
state income tax liability. In 1994 and 1993, income taxes paid amounted to $1
million and $56 million, respectively.
 
  The reconciliation between the statutory federal income tax provision and
the actual effective tax provision for each of the three years ended December
31 is as follows:
 
<TABLE>
<CAPTION>
                                                              1995  1994  1993
                                                              ----  ----  ----
                                                              (IN MILLIONS)
   <S>                                                        <C>   <C>   <C>
   Tax provision at statutory rate........................... $ 63  $ 61  $ 47
   State and foreign income taxes, net of federal income tax
    effects..................................................    4     9    12
   Income of foreign subsidiaries............................  (12)  (12)   (9)
   Net foreign tax rate differential.........................    4     4     1
   Resolution of tax issues..................................  (13)   (6)  --
   Change in valuation allowance.............................  --     (2)  (42)
   Change in tax rate........................................  --    --     (2)
   Other, net................................................    3    (3)    4
                                                              ----  ----  ----
                                                              $ 49  $ 51  $ 11
                                                              ====  ====  ====
</TABLE>
 
 
                                      45
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
  The significant components of the deferred tax assets and deferred tax
liabilities at December 31, 1995 and 1994 are shown below:
 
<TABLE>
<CAPTION>
                                                                    DECEMBER
                                                                       31,
                                                                    ----------
                                                                    1995  1994
                                                                    ----  ----
                                                                       (IN
                                                                    MILLIONS)
   <S>                                                              <C>   <C>
   Deferred Tax Assets:
     Allowance for loan losses..................................... $ 87  $103
     Repossessed properties........................................   13   --
     Foreign tax credits...........................................   13     8
     Alternative minimum tax credit carryforward...................    2     3
     Unrealized depreciation of securities available for sale......    3   --
     Terminated swap income........................................   32   --
     Accrued expenses..............................................    9     8
                                                                    ----  ----
   Gross deferred tax assets.......................................  159   122
   Valuation allowance.............................................  (15)  (11)
                                                                    ----  ----
   Gross deferred tax assets, net of valuation allowance...........  144   111
   Deferred Tax Liabilities:
     Equity interests and other investments........................ $ (6) $(25)
     Repossessed properties........................................  --     (3)
     Fixed assets and deferred income from lease financing.........  (17)  (17)
     Unrealized appreciation of securities available for sale......  --     (3)
                                                                    ----  ----
   Gross deferred tax liabilities..................................  (23)  (48)
                                                                    ----  ----
   Net deferred tax asset.......................................... $121  $ 63
                                                                    ====  ====
</TABLE>
 
  The tax benefits of deductible temporary differences are shown net of a
valuation allowance of $15 million and $11 million, as of December 31, 1995
and 1994, respectively. The valuation allowance was reduced in 1994 as a
result of management's increased confidence in the recognition of the benefit
of deductible temporary differences.
 
  Provision has not been made for United States or additional foreign taxes on
$94 million of undistributed earnings of subsidiaries outside the United
States, as those earnings are intended to be reinvested. Such earnings would
become taxable upon the sale or liquidation of these international operations
or upon the remittance of dividends. Given the availability of foreign tax
credits and various tax planning strategies, management believes any tax
liability which may ultimately be paid on these earnings would be
substantially less than that computed at the statutory federal income tax
rate. Upon remittance, certain foreign countries impose withholding taxes that
are then available, subject to certain limitations, for use as credits against
the Company's U.S. tax liability, if any. The amount of withholding tax that
would be payable upon remittance of the entire amount of undistributed
earnings would be approximately $11 million.
 
  During 1994, the Company utilized alternative minimum tax credit and
investment tax credit carryforwards of $5 million. The Company had unused
foreign tax credit carryforwards of $13 million and $8 million at December 31,
1995 and 1994, respectively. Due to substantial restrictions on the
utilization of foreign tax credits imposed by the Tax Reform Act of 1986, the
Company may not be able to utilize a significant portion of foreign tax credit
carryforwards prior to expiration. Accordingly, the Company has recognized a
valuation allowance for the amount of foreign tax credits recorded at December
31, 1995 and 1994.
 
  The Company has recorded a net deferred tax asset of $121 million as of
December 31, 1995. Although realization is not assured, management believes it
is more likely than not that the deferred tax assets will be
 
                                      46
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
realized. The amount of the deferred tax assets considered realizable, however,
could be reduced if estimates of future taxable income are reduced.
 
13. RELATED PARTIES
 
  Several financial, administrative or other service arrangements exist between
the Company and Fuji Bank, the Parent or related affiliates. In management's
opinion, the terms of these arrangements are similar to those the Company would
have been able to obtain in like agreements with unaffiliated entities in an
arms-length transaction.
 
  Services Provided by Fuji Bank and the Parent for the Company. Certain
employees of Fuji Bank and the Parent perform managerial and administrative and
other related functions for the Company. The amounts paid to Fuji Bank and the
Parent for these services were $2 million and $53 million, respectively for
1995, and $2 million and $47 million for 1994. Additionally, certain
subsidiaries of Fuji Bank periodically serve as managers for various offerings
of the Company's debt securities and the Fuji Bank and Trust Company may act as
registrar and paying agent for certain debt issuances by the Company.
 
  Services Provided by the Company for Fuji and the Parent. The Company
performs services for its affiliates and charges them for the cost of the work
performed. The Company may also guarantee the obligations of its clients or the
clients of certain joint ventures, under letters of credit issued by financial
institutions, some of which are affiliates of the Company. Additionally, the
Company guarantees payment under a deferred compensation arrangement between
the Parent and certain of its employees. The Company has agreements with the
Parent and certain other subsidiaries of the Parent which provide for the
Company to receive an annual negotiated fee for servicing assets which have
been sold by the Company to the Parent and these affiliates. The Company
continues to service these assets and all other direct costs and expenses,
including any additional advances made after the date of the agreement, are
borne by the subsidiaries of the Parent. The amount of fees for servicing these
assets in 1995, 1994 and 1993, was approximately $1 million, $2 million and $4
million, respectively. These amounts are recorded as a reduction of operating
expenses in the consolidated statements of income.
 
  Intercompany Receivables, Payables, Transactions and Financial Instruments.
At December 31, 1995 and 1994, other assets included net amounts due from
affiliates of $25 million and $29 million, respectively. The amounts are
comprised principally of interest bearing demand notes representing amounts due
to the Company arising from the interest rate swap agreement with the Parent,
advances, administrative fees and costs charged to other subsidiaries of the
Parent. The notes bear interest at rates which approximate the average rates on
the Company's commercial paper obligations or short-term bank borrowing rates
outstanding during the period.
 
  In the ordinary course of its business, the Company participates in joint
financings with Fuji Bank or certain affiliates. During 1995, the Company sold
to Fuji Bank its $25 million interest in a joint financing with Fuji Bank.
During 1994, the Company paid $17 million to repurchase loan participations
which it had previously sold to Fuji Bank.
 
  The Company is a party to a $200 million interest rate swap agreement with
the Parent, which expires December 15, 2000, and was a party with the Parent
for a $250 million interest rate swap agreement which expired on July 31, 1995.
The purpose of these agreements is to manage the Company's exposure to interest
rate fluctuations. Under these agreements, the Company pays interest to the
Parent at a variable rate based on the commercial paper rate published by the
Board of Governors of the Federal Reserve System and the Parent pays interest
to the Company at fixed rates of 5.57% and 5.0%, respectively. These agreements
had the effect of increasing the Company's interest expense by $3 million in
1995, and reducing the Company's interest expense by $3 million in 1994 and $5
million in 1993.
 
                                       47
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  During 1995, the Company terminated two cross-currency basis swap agreements
with a subsidiary of Fuji Bank. Fuji Bank paid to the Company net amounts
approximately $1 million and received approximately $7 million under these
agreements during the years ended December 31, 1995 and 1994, respectively.
 
  The Company and Fuji Bank are parties to a "Keep Well Agreement," which
provides that if the Company should lack sufficient cash or credit facilities
to meet its commercial paper obligations, Fuji Bank will lend the Company up
to $500 million. That loan would be payable on demand and the proceeds from
the loan could only be used by the Company to meet its commercial paper
obligations. The Keep Well Agreement further provides that Fuji Bank will
maintain the Company's net worth in an amount equal to $500 million.
Accordingly, if the Company should determine, at the close of any month, that
its net worth is less than $500 million, then Fuji Bank will purchase, or
cause one of its subsidiaries to purchase, shares of the Company's NW
Preferred Stock in an amount necessary to increase the Company's net worth to
$500 million. Commitment fees paid by the Company to Fuji Bank under the Keep
Well Agreement amounted to less than $1 million in 1995, 1994 and 1993.
Interest on any loans will be charged at the prime rate of Morgan Guaranty
Trust Company of New York plus .25% per annum. No loans or purchases of NW
Preferred Stock have been made by Fuji Bank under this agreement.
 
  The Keep Well Agreement cannot be terminated by either party prior to
December 31, 2002. After December 31, 2002, either Fuji Bank or the Company
may terminate the agreement upon 30 business days prior written notice. As
long as the Perpetual Preferred Stock is outstanding and held by third parties
other than Fuji Bank, the agreement may not be terminated by either party
unless the Company has received written certifications from Moody's Investors
Services, Inc. and Standard and Poor's Corporation that, upon such
termination, the Perpetual Preferred Stock will be rated no lower than "a3"
and "A-", respectively.
 
  On March 30, 1994, the Company entered into a receivables purchase agreement
with Freedom Asset Funding Corporation ("Freedom"). Under this agreement,
which expires March 24, 1999, the Company may sell to Freedom with limited
recourse an undivided interest of up to $500 million in a designated pool of
its factored accounts receivable. As of December 31, 1995, the Company had
sold a $6 million interest to Freedom for cash. Freedom has entered into a
revolving liquidity facility and an operating agreement with Fuji Bank and one
of its affiliates. The amount of liquidity provided by Fuji Bank under this
facility is $100 million at December 31, 1995.
 
  Fuji Bank and one of its subsidiaries provided uncommitted lines of credit
to consolidated international subsidiaries totaling $14 million and $15
million at December 31, 1995 and 1994, respectively. Borrowings under these
facilities totaled $10 million and $5 million at both December 31, 1995 and
1994, respectively. In addition, Fuji Bank provides uncommitted lines of
credit to certain international joint ventures.
 
14. FAIR VALUE DISCLOSURES
 
  SFAS No. 107 "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information for certain financial
instruments, for which it is practicable to estimate that value. These values
must be estimated as there is no well established market for many of the
Company's assets and financial instruments. Fair values are based on estimates
using present value, property yield, historical rate of return and other
valuation techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. These assumptions are inherently judgmental and changes in such
assumptions could significantly affect fair value calculations. The derived
fair value estimates may not be substantiated by comparison to independent
markets and may not be realized in immediate liquidation of the instrument.
 
                                      48
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The book values and estimated fair market values of the Company's financial
instruments at December 31, 1995 and 1994, are as follows:
 
<TABLE>
<CAPTION>
                                                        1995           1994
                                                    -------------  -------------
                                                     BOOK   FAIR    BOOK   FAIR
                                                    VALUE  VALUE   VALUE  VALUE
                                                    ------ ------  ------ ------
                                                           (IN MILLIONS)
   <S>                                              <C>    <C>     <C>    <C>
   Net receivables................................  $7,856 $7,984  $7,385 $7,423
   Total investments..............................     693    749     634    694
   Debt...........................................   7,368  7,527   6,381  6,412
   Interest rate swap agreements:
     Interest rate swap agreements in a receivable
      position....................................       9     93      11      5
     Interest rate swap agreements in a payable
      position....................................       2    (34)      2      7
</TABLE>
 
  The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments. Carrying values
approximate fair values for all financial instruments which are not
specifically addressed.
 
  For variable rate receivables that reprice frequently and have no significant
credit risk, fair values were assumed to equal carrying values. All other
receivables were pooled by loan type and risk rating. The fair value for these
receivables was estimated by discounted cash flow analyses, using interest
rates equal to the London Inter-bank Offered Rate or the Prime Rate offered as
of December 31, 1995 and 1994, plus an adjustment for normal spread, credit
quality and the remaining terms of the loans.
 
  Book and fair values of the trading securities and securities available for
sale are based on quoted market prices. The fair values of equity interests and
other investments are calculated by first using the Company's business
valuation model to determine the estimated value of these investments as of the
anticipated exercise date. The business valuation model analyzes the cash flows
of the related company and considers values for similar equity investments. The
determined value is then discounted back to December 31, 1995 and 1994, using a
rate appropriate for returns on equity investments. Although the investments in
international joint ventures accounted for by the equity method are not
considered financial instruments and as such are not included in the above
table, management believes that the fair values of these investments
significantly exceed the carrying value of these investments.
 
  The fair values of the debt and swap agreements were estimated using
discounted cash flow analyses, based on current incremental borrowing and swap
rates for arrangements with similar terms and remaining maturities, as quoted
by independent financial institutions as of December 31, 1995 and 1994. As
market interest rates are lower at December 31, 1995 compared to the prior year
end, the fair value of debt increased relative to book value. Accordingly, the
fair value of the interest rate swap agreements moved toward a net mark to
market gain of $127 million at December 31, 1995 as compared to a net mark to
market loss of $2 million at December 31, 1994. The fair values of loan
commitments, letters of credit and guarantees are negligible.
 
                                       49
<PAGE>
 
                    HELLER FINANCIAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
15. FINANCIAL DATA BY REGION
 
  The following table shows certain financial information by geographic region
for the years ended December 31, 1995, 1994 and 1993.
 
<TABLE>
<CAPTION>
                                          FOR THE YEAR ENDED DECEMBER 31,
                                      ----------------------------------------
                                      UNITED         ASIA-
                                      STATES EUROPE PACIFIC OTHER CONSOLIDATED
                                      ------ ------ ------- ----- ------------
                                                   (IN MILLIONS)
<S>                                   <C>    <C>    <C>     <C>   <C>
Assets
  1995............................... $8,981  $295   $265    $97     $9,638
  1994...............................  7,913   271    241     51      8,476
  1993...............................  7,457   238    183     35      7,913
Interest income, fees and other
 income, and income of international
 joint ventures
  1995............................... $1,009  $ 39   $ 28    $ 8     $1,084
  1994...............................    839    24     19     11        893
  1993...............................    742    26     11      2        781
Income before taxes and minority
 interest
  1995............................... $  148  $ 23   $  7    $ 3     $  181
  1994...............................    145    12      7     10        174
  1993...............................    104    24      4      1        133
Net income
  1995............................... $   95  $ 21   $  5    $ 4     $  125
  1994...............................     92    11      6      9        118
  1993...............................     89    24      3      1        117
</TABLE>
 
16. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
  The following financial information for the calendar quarters of 1995, 1994
and 1993, is unaudited. In the opinion of management, all adjustments necessary
to present fairly the results of operations for such periods have been
included.
 
<TABLE>
<CAPTION>
                                                         QUARTER ENDED
                                               ---------------------------------
                                               MARCH 31 JUNE 30 SEPT. 30 DEC. 31
                                               -------- ------- -------- -------
                                                         (IN MILLIONS)
<S>                                            <C>      <C>     <C>      <C>
Net interest income--
  1995........................................   $ 94    $ 95     $ 98    $100
  1994........................................     82      90       99      95
  1993........................................     86      90       92      88
Operating revenues--
  1995........................................   $146    $132     $161    $181
  1994........................................    140     125      145     147
  1993........................................    118     137      127     135
Provision for losses--
  1995........................................   $ 50    $ 28     $ 56    $ 89
  1994........................................     50      40       48      50
  1993........................................     48      57       53      52
Net income--
  1995........................................   $ 30    $ 34     $ 35    $ 26
  1994........................................     28      35       30      25
  1993........................................     25      37       28      27
</TABLE>
 
                                       50
<PAGE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
       FINANCIAL DISCLOSURE
 
  None.
 
                                       51
<PAGE>
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
  The names and ages of all directors and all persons nominated or chosen to
become directors and executive officers of the Company as of December 31, 1995,
and a biographical summary for each such person appear in the following pages.
No family relationship exists among the persons named below.
 
                                   DIRECTORS
 
<TABLE>
<CAPTION>
NAME, AGE & POSITIONS                                    FROM           TO
---------------------                                    ----           --
<S>                                                      <C>            <C>
RICHARD J. ALMEIDA (53)
 Chairman of the Board and Chief Executive Officer,
  the Company, Parent, International and Holdings....... November, 1995 Present
 Director, the Company, Parent and International........ November, 1987 Present
 Director, Holdings..................................... December, 1992 Present
 Executive Vice President and Chief Financial Officer,
  the Company, Parent and International................. November, 1987 1995
 Executive Vice President and Chief Financial Officer,
  Holdings.............................................. December, 1992 1995
HAJIME MAEDA (54)
 Director, the Company, Parent, International and
  Holdings.............................................. January, 1995  Present
 Managing Director, Fuji Bank........................... November, 1994 Present
 Director and General Manager, Fuji Bank, Head Office
  Corporate Banking Division I.......................... 1992           1994
 General Manager, Fuji Bank, Business Information
  Division.............................................. 1990           1992
MITCHELL F. VERNICK (40)
 Vice Chairman, the Company, Parent, International and
  Holdings.............................................. November, 1995 Present
 Director, International and Holdings................... November, 1995 Present
 Director, the Company and Parent....................... May, 1991      Present
 Senior Group President, the Company.................... October, 1990  1995
 Executive Vice President, International................ June, 1989     1995
 Executive Vice President, Holdings..................... December, 1992 1995
HIDEHIKO IDE (48)
 Director, the Company and Parent....................... May, 1995      Present
 General Manager, Fuji Bank, Chicago Branch............. May, 1995      Present
 Chief Representative, Fuji Bank, Washington D.C.
  Representative Office................................. October, 1991  1995
 Special Assistant to the President and Chairman, Fuji
  Bank, Executive Secretariat........................... August, 1987   1991
MINORU ITOSAKA (46)
 Director, the Company, Parent, International and
  Holdings.............................................. July, 1993     Present
 General Manager, Fuji Bank, Credit Division for the
  Americas.............................................. May, 1995      Present
 General Manager, Fuji Bank, Americas Division.......... July, 1993     1995
 Deputy General Manager, Fuji Bank, International
  Planning Division..................................... 1989           1993
MARK KESSEL (54)
 Director, the Company and Parent....................... July, 1992     Present
 Partner, Shearman & Sterling........................... December, 1977 Present
 Director, CEI Holdings Corporation, a subsidiary of
  Graseby p.l.c......................................... 1983           1991
</TABLE>
 
                                       52
<PAGE>
 
<TABLE>
<CAPTION>
NAME, AGE & POSITIONS                                    FROM           TO
---------------------                                    ----           --
<S>                                                      <C>            <C>
TOMONORI KOBAYASHI (46)
 Director, the Company, Parent, International and
  Holdings.............................................. May, 1995      Present
 General Manager, Fuji Bank, Americas Division.......... May, 1995      Present
 Senior Vice President, Corporate Planning &
  Administration,
  the Company and Parent................................ 1991           1995
 Senior Vice President, Parent.......................... 1990           1991
MICHAEL J. LITWIN (48)
 Director, the Company and Parent....................... April, 1990    Present
 Senior Group President, the Company.................... October, 1990  Present
 Executive Vice President, International................ January, 1989  Present
 Executive Vice President, Holdings..................... December, 1992 Present
DENNIS P. LOCKHART (48)
 Director, the Company, Parent and International;
  President, International; Executive Vice President,
  Parent................................................ January, 1988  Present
 Director and President, Holdings....................... December, 1992 Present
 Director, Tri Valley Corporation....................... April, 1981    Present
LAURALEE E. MARTIN (45)
 Director, the Company and Parent....................... May, 1991      Present
 Senior Group President, the Company.................... October, 1990  Present
 Director and President, Heller Financial Leasing, Inc.. December, 1993 Present
 Director, Gables Residential Trust..................... January, 1994  Present
KENJI MIYAMOTO (48)
 Director, the Company, Parent, International and
  Holdings;
  Executive Vice President, Parent...................... May, 1994      Present
 General Manager, Fuji Bank, Atlanta Agency............. May, 1992      1994
 Senior Vice President, Fuji Investment Management Co.,
  Ltd................................................... May, 1987      1992
OSAMU OGURA (38)
 Director, the Company and Parent....................... November, 1994 Present
 Deputy General Manager, Fuji Bank, Americas Division... November, 1994 Present
 Senior Manager, Fuji Bank, Americas Division........... 1993           1994
 Manager, Fuji Bank, International Division............. 1992           1993
 Manager, Fuji Bank, Personnel Affairs Division......... 1987           1992
MASAHIRO SAWADA (42)
 Director, the Company, Parent, International and
  Holdings.............................................. December, 1995 Present
 Senior Vice President, Parent.......................... May, 1995      Present
 Joint General Manager, Fuji Bank, Paris Branch......... May, 1992      1995
 Deputy General Manager, Systems Planning Division, Fuji
  Bank.................................................. October, 1990  1992
ATSUSHI TAKANO (50)
 Director, the Company and Parent....................... July, 1992     Present
 Director, International and Holdings................... May, 1994      Present
 Director and General Manager, Fuji Bank, New York
  Branch................................................ June, 1995     Present
 General Manager, Fuji Bank, New York Branch............ June, 1994     1995
 General Manager, Fuji Bank, Los Angeles Agency......... June, 1992     1994
 General Manager, Fuji Bank, International Treasury
  Division.............................................. 1989           1992
 Joint General Manager, Fuji Bank, New York Branch...... 1984           1992
</TABLE>
 
                                       53
<PAGE>
 
<TABLE>
<CAPTION>
NAME, AGE & POSITIONS                                   FROM            TO
---------------------                                   ----            --
<S>                                                     <C>             <C>
KENJI WATANABE (49)
 Director, the Company and Parent...................... May, 1994       Present
 General Manager, Fuji Bank, Los Angeles Agency........ May, 1994       Present
 General Manager, Fuji Bank, Hamamatsucho Branch....... 1992            1994
 Deputy General Manager, Fuji Head Office, Corporate
  Banking Planning..................................... 1987            1992
 
                               EXECUTIVE OFFICERS
 
ANTHONY O'B. BEIRNE (47)
 Senior Vice President and Treasurer, the Company and
  Parent............................................... May, 1995       Present
 Senior Vice President and Controller, Holdings........ December, 1992  1995
 Senior Vice President and Controller, the Company,
  Parent and International............................. March, 1988     1995
LAWRENCE P. CHAPMAN (37)
 Senior Vice President and Senior Credit Officer, the
  Company and Parent................................... January, 1995   Present
 Vice President, Manager of Corporate Credit, the
  Company and Parent................................... July, 1993      1995
 Vice President, Aircraft Finance Division, the
  Company.............................................. June, 1990      1993
MICHAEL P. GOLDSMITH (42)
 Group President, Heller Real Estate Financial
  Services, the Company................................ April, 1994     Present
 Executive Vice President, Division Manager, Project
  Management Organization.............................. May, 1990       1994
JOHN L. GUY, JR. (43)
 Senior Vice President, Heller First Capital Division,
  the Company; President, Heller First Capital Corp.... May, 1995       Present
 Senior Vice President and Treasurer, the Company and
  Parent............................................... July, 1992      1995
 Senior Vice President, Internal Audit, the Company.... April, 1992     1992
 Vice President, Internal Audit, the Company........... November, 1989  1992
JAY S. HOLMES (49)
 Group President, Equipment Finance and Leasing Group,
  the Company.......................................... December, 1995  Present
 Executive Vice President, Commercial Equipment Finance
  Division, the Company................................ September, 1992 1995
 Senior Vice President and Director, Chrysler Capital
  Corporation.......................................... May, 1990       1992
LAWRENCE G. HUND (39)
 Senior Vice President and Controller, the Company,
  Parent, International
  and Holdings......................................... May, 1995       Present
 Senior Vice President, Liability Management &
  Assistant Treasurer, the Company and Parent.......... January, 1995   1995
 Senior Vice President, Accounting & Operations, the
  Company and Parent................................... January, 1993   1994
 Vice President, Finance & Planning, the Company and
  International........................................ August, 1990    1992
DAVID J. KANTES (52)
 Group President, Heller Business Credit Group, the
  Company.............................................. December, 1995  Present
 Executive Vice President, Heller Business Credit
  Division, the Company................................ June, 1993      1995
 Executive Vice President, NatWest Credit Corp......... July, 1986      1993
 Executive Vice President & Chief Credit Officer,
  NatWest Bancorp...................................... November, 1991  1992
</TABLE>
 
                                       54
<PAGE>
 
<TABLE>
<CAPTION>
NAME, AGE & POSITIONS                                   FROM            TO
---------------------                                   ----            --
<S>                                                     <C>             <C>
CHALLIS M. LOWE (50)
 Executive Vice President, Human Resources, the Company
  and Parent........................................... December, 1995  Present
 Senior Vice President, Human Resources, the Company
  and Parent........................................... November, 1993  1995
 Senior Vice President, Administrative Services, Sanwa
  Business Credit Corporation.......................... January, 1985   1993
MICHAEL J. ROCHE (44)
 Group President, Current Asset Management Group, the
  Company.............................................. November, 1994  Present
 Senior Vice President and Chief Information Officer,
  Information Technology, the Company.................. October, 1990   1994
 Senior Vice President and Chief Information Officer,
  Information Technology, Parent....................... May, 1991       1994
DEBRA H. SNIDER (41)
 General Counsel, the Company, Parent, International
  and Holdings......................................... October, 1995   Present
 Executive Vice President and Secretary, the Company,
  Parent, International and Holdings................... April, 1995     Present
 Acting General Counsel, the Company, Parent,
  International and Holdings........................... April, 1995     1995
 Partner, Katten Muchin & Zavis........................ February, 1991  1995
ROBERT J. SZAMBELAN (40)
 Senior Vice President and Chief Information and
  Technology Officer, the Company and Parent........... May, 1995       Present
 Associate Partner, Andersen Consulting................ September, 1994 1995
 Senior Manager, Andersen Consulting................... January, 1991   1994
</TABLE>
 
  Each of the officers and directors of the Company are elected at the annual
meeting for a term of one year or until their successors are duly elected and
qualified.
 
  During 1995, an Initial Statement of Beneficial Ownership of Securities on
Form 3 was filed by: (i) Hajime Maeda (elected January 9, 1995 as Director) on
January 13, 1995; (ii) Lawrence P. Chapman (elected January 1, 1995 as Senior
Vice President) on February 1, 1995; (iii) Debra H. Snider (elected April 25,
1995 as Executive Vice President, Acting General Counsel and Secretary) on May
1, 1995; (iv) Lawrence G. Hund (elected May 8, 1995 as Senior Vice President
and Controller) on May 17, 1995; (v) Hidehiko Ide (elected May 25, 1995 as
Director) on August 21, 1995; (vi) Robert J. Szambelan (elected May 15, 1995
as Senior Vice President and Chief Information and Technology Officer) on
August 25, 1995; (vii) Jay S. Holmes (elected December 1, 1995 as Group
President) on December 6, 1995; (viii) David J. Kantes (elected December 1,
1995 as Group President) on December 6, 1995; and (ix) Masahiro Sawada
(elected December 18, 1995 as Director) on December 20, 1995. No Forms 4 or
Forms 5 were filed during the year. In all filings, there were no reported
holdings of the Registrant's equity securities.
 
                                      55
<PAGE>
 
ITEM 11. EXECUTIVE COMPENSATION
 
  The following information is furnished as to all plan and non-plan
compensation awarded to, earned by, or paid to each Chief Executive Officer of
the Company and the four next most highly compensated executive officers of
the Company (as determined at December 31, 1995) for services rendered in all
capacities to the Company and its subsidiaries during the years ended December
31, 1995, 1994 and 1993.
 
                       SUMMARY COMPENSATION TABLE (1)(2)
 
<TABLE>
<CAPTION>
                                                   OTHER ANNUAL      ALL OTHER
   NAME AND PRINCIPAL                             COMPENSATION($) COMPENSATION($)
        POSITION         YEAR SALARY($) BONUS($)        (4)             (6)
   ------------------    ---- --------- --------  --------------- ---------------
<S>                      <C>  <C>       <C>       <C>             <C>
Richard J. Almeida...... 1995  318,375       (3)      141,758          4,620
 (Chairman of the Board
  and Chief              1994  291,000  175,000       229,026          4,620
 Executive Officer)      1993  268,000  150,000       104,435          4,487
Michael S. Blum......... 1995  624,333       (3)      340,819          1,886
 (former Chairman of the
  Board and              1994  731,250  474,040       811,706          4,617
 Chief Executive
  Officer)               1993  656,250  408,713       330,750          4,481
Mitchell F. Vernick..... 1995  257,750       (3)      130,292(5)       4,620
 (Vice Chairman)         1994  245,667  175,000       300,574(5)       4,620
                         1993  230,833  130,000       155,476(5)       4,497
Lauralee E. Martin...... 1995  254,417       (3)      104,896          4,620
 (Senior Group
  President)             1994  245,667  175,000       197,418          4,620
                         1993  227,292  150,000        86,632          4,497
Dennis P. Lockhart...... 1995  254,417       (3)      104,896          4,620
 (President, Heller
  International          1994  246,667  120,000       197,418          4,620
 Group, Inc.)            1993  233,000  115,000        88,808          4,496
Michael J. Litwin....... 1995  240,333       (3)       99,089          4,620
 (Senior Group
  President)             1994  232,584  115,000       186,904          4,620
                         1993  219,966  100,000        83,567          3,787
</TABLE>
--------
(1) All numbers are rounded to the nearest whole dollar.
(2) Certain executive officers of the Company whose compensation is included
    above are employed and paid by the Parent. Pursuant to a management
    agreement between the Company and the Parent, the Company reimburses the
    Parent for their services.
(3) The cash bonus under the management incentive plan for services rendered
    to the Company and its subsidiaries during the year ended December 31,
    1995 was not calculable as of the date of this report. Such amounts will
    be disclosed in the Company's annual report for the subsequent fiscal year
    in the appropriate column for the year in which earned. Annual bonus
    amounts are earned and accrued for the year shown and paid subsequent to
    the end of such year.
(4) Accruals under the Company's Long Term Incentive Plans ("LTIPs") are
    earned and recorded annually during the plan period based upon the
    Company's performance during each applicable year. Once determined,
    accruals are not affected by the Company's performance in subsequent
    years. As a result, the Company reports annual accruals under its LTIPs as
    other annual compensation as defined by the SEC. During 1995, the Company
    had an LTIP that commenced on January 1, 1994 and will terminate on
    December 31, 1996 ("1994-96 LTIP"). Accruals under the 1994-96 LTIP for
    calendar year 1995 are reflected in the Summary Compensation Table.
  Under the terms of the 1994-96 LTIP, payouts of all accruals will be made
  after the termination of the 1994-96 LTIP to officers who are active
  employees of the Company and participants in the 1994-96 LTIP through
 
                                      56
<PAGE>
 
  its termination date (subject to exceptions in the case of disability,
  death or retirement). Due to Mr. Blum's death in October, 1995, his 1994
  and 1995 accruals under the 1994-96 LTIP will be distributed in early 1996.
  In March, 1995, payouts were made to the named executive officers of
  previously reported accruals under an LTIP that commenced January 1, 1992
  and terminated December 31, 1994.
 
  Perquisites and other personal benefit amounts for each of the named
  executive officers fall below the minimum level for disclosure and
  therefore have been excluded.
 
(5) Mr. Vernick received the following special payments, attributable to the
    performance of specific business units and investments in 1995, 1994 and
    1993, respectively: $22,500, $103,156 and $67,494.
 
(6) Amounts reported reflect the Company's contribution made in the form of a
    match on amounts deferred by the officer in the Company's Savings and
    Profit Sharing Plan, that is qualified under Section 501(a) of the
    Internal Revenue Code. This Plan is available to all employees who work at
    least 900 hours per year. The Company makes matching contributions equal
    to 50% of the employee's contribution provided, however, that the
    Company's contribution will not exceed 2.5% of the employee's base salary.
 
RETIREMENT AND OTHER DEFINED BENEFIT PLANS
 
  The Company has a defined benefit retirement income plan (the "Retirement
Plan") for the benefit of its employees that is a qualified plan under Section
401 of the Internal Revenue Code. Substantially all domestic employees of the
Company who have one year of service, including executive officers and
directors of the Company, and also certain executive officers and directors of
International, participate in the Retirement Plan. Non-employee directors are
not eligible for retirement benefits. Under a defined benefit plan, such as
the Company's, contributions are not specifically allocated to individual
participants.
 
  The Company adopted a Supplemental Executive Retirement Plan ("SERP"),
effective October 28, 1987, which provides to all officers at the level of
Senior Vice President and above who participate in the Company's LTIP and the
Retirement Plan, benefits which are in excess of the limitations imposed by
Sections 401(a)(17) and 415 of the Internal Revenue Code, as amended from time
to time.
 
  The table below shows estimated annual retirement benefits for executives in
specified remuneration and service classifications.
 
                     ESTIMATED ANNUAL RETIREMENT BENEFITS
 
<TABLE>
<CAPTION>
                                              YEARS OF CREDITED SERVICE
                                     -------------------------------------------
                                                                         25 AND
FINAL AVERAGE PAY                       5       10       15       20      OVER
-----------------                    ------- -------- -------- -------- --------
<S>                                  <C>     <C>      <C>      <C>      <C>
$200,000............................ $26,000 $ 52,000 $ 78,000 $104,000 $130,000
 225,000............................  29,250   58,500   87,750  117,000  146,250
 250,000............................  32,500   65,000   97,500  130,000  162,500
 275,000............................  35,750   71,500  107,250  143,000  178,750
 300,000............................  39,000   78,000  117,000  156,000  195,000
 400,000............................  52,000  104,000  156,000  208,000  260,000
 450,000............................  58,500  117,000  175,500  234,000  292,500
 500,000............................  65,000  130,000  195,000  260,000  325,000
 600,000............................  78,000  156,000  234,000  312,000  390,000
</TABLE>
 
  In general, remuneration covered by the Retirement Plan consists of the
annual base salary determined before any salary reduction contributions to the
Company's Savings and Profit Sharing Plan. The figures shown in the table
above include benefits payable under the Retirement Plan and SERP as described
above. However, the figures shown are prior to offsets for Social Security and
Company match benefits (under its Savings and Profit Sharing Plan). The
estimates assume that benefits commence at age 65 under a straight life
annuity form.
 
                                      57
<PAGE>
 
  The number of years of credited service as of December 31, 1995, and the
actual average remuneration for their respective years of credited service
with the Company for those individuals listed on the Summary Compensation
Table are as follows: Richard J. Almeida, 8 years 5 months, $276,475; Michael
S. Blum, 9 years 4.5 months, $623,550; Mitchell F. Vernick, 9 years 4.5
months, $228,353; Lauralee E. Martin, 9 years 4.5 months, $222,240; Dennis P.
Lockhart, 8 years, $233,417; and Michael J. Litwin, 24 years 2 months,
$219,303.
 
COMPENSATION OF DIRECTORS
 
  Directors of the Company are not compensated for provision of services as
directors.
 
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
 
  Richard J. Almeida has an employment contract with the Parent which became
effective as of November 13, 1995, the date on which he was elected Chairman,
and expires on December 31, 1997. The contract provides that if Mr. Almeida's
employment is terminated by the Parent without cause (as defined in the
contract), or if he resigns with cause (as specified in the contract), he will
be entitled to receive full salary through the later of December 31, 1997 or
the date fifteen months from the date of termination. In the event of a
termination under either of the situations described above, Mr. Almeida is
also entitled to receive a pro rata portion of his incentive plan payments and
will continue to be covered under certain benefit plans through the later of
December 31, 1997 or the date fifteen months from the date of termination.
Additionally, if Mr. Almeida and the Parent do not reach an agreement
regarding the terms of an extension or renewal of his contract, Mr. Almeida is
entitled to full salary until the later of December 31, 1997 or the date
fifteen months from the date the Parent informs him that it does not intend to
extend his employment. Under this circumstance, Mr. Almeida would also receive
incentive compensation until December 31, 1997 and coverage under certain
benefit plans during the period he receives salary continuation.
 
  Mitchell Vernick participates in special incentive arrangements with the
Company pursuant to which he is eligible to receive payments based upon the
performance of specific business units and investments.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
  Kenji Miyamoto served as a member of the Compensation Committee of the Board
of Directors of the Company throughout calendar year 1995. Hajime Maeda served
as a member of the Compensation Committee of the Company from January 9, 1995
through December 31, 1995. Messrs. Miyamoto and Maeda also served concurrently
as members of the Compensation Committees of the Parent, International and
Holdings. Richard J. Almeida served on the Compensation Committee of the
Company from November 13, 1995 through December 31, 1995. Michael S. Blum
served on the Compensation Committee of the Company from January 1, 1995 until
his death on October 29, 1995.
 
  Until his death, Mr. Blum also served as Chairman and Chief Executive
Officer of the Company and its subsidiaries, International and Holdings. In
addition, Mr. Blum served as the Chairman of the Board, Chief Executive
Officer and President of the Parent and as a member of the Compensation
Committees of the Parent, International, and Holdings. Mr. Almeida succeeded
Mr. Blum as Chairman and Chief Executive Officer and a member of the
Compensation Committees of the named companies as of November 13, 1995.
Messrs. Miyamoto and Maeda each also served as executive officers of the
Parent during their tenure as members of the Compensation Committees.
 
  As identified below, several directors of the Company also served as
executive officers of one or more of the other companies for whom Mr. Blum,
and subsequently Mr. Almeida, served as a member of the Compensation Committee
of the Board of Directors: Mr. Lockhart, Parent, International and Holdings;
and Mr. Vernick, International and Holdings.
 
  No other relationships exist between the members of the Compensation
Committee of the Company, the Parent, International or Holdings and the
directors and executive officers of those companies.
 
                                      58
<PAGE>
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
VOTING SECURITIES
 
  The following table sets forth the ownership of all of the outstanding
common stock of the Company, as of February 1, 1996:
 
<TABLE>
<CAPTION>
   NAME AND ADDRESS                                AMOUNT AND NATURE    PERCENT
   OF BENEFICIAL OWNER                          OF BENEFICIAL OWNERSHIP OF CLASS
   -------------------                          ----------------------- --------
   <S>                                          <C>                     <C>
   Heller International Corporation (Parent)...       100 Shares          100%
   500 West Monroe Street
   Chicago, Illinois 60661
</TABLE>
 
EQUITY SECURITIES
 
  All of the outstanding common stock of the Parent is owned by Fuji Bank. As
of December 31, 1995, certain directors and executive officers of the Company
owned beneficially certain amounts of Fuji Bank's common stock, all as
indicated below.
 
<TABLE>
<CAPTION>
                                                                     AMOUNT OF
    NAME AND                                                        BENEFICIAL
    BENEFICIAL OWNER                                                 OWNERSHIP
    ----------------                                               -------------
   <S>                                                             <C>
   Richard J. Almeida.............................................       0
   Hajime Maeda................................................... 21,716 Shares
   Mitchell F. Vernick............................................       0
   Hidehiko Ide...................................................  3,210 Shares
   Minoru Itosaka.................................................  2,848 Shares
   Mark Kessel....................................................       0
   Tomonori Kobayashi.............................................  1,000 Shares
   Michael J. Litwin..............................................       0
   Dennis P. Lockhart.............................................       0
   Lauralee E. Martin.............................................       0
   Kenji Miyamoto.................................................  2,192 Shares
   Osamu Ogura....................................................       0
   Masahiro Sawada................................................  2,205 Shares
   Atsushi Takano................................................. 12,714 Shares
   Kenji Watanabe.................................................  5,410 Shares
                                                                   -------------
       Total Shares............................................... 51,295 Shares
                                                                   =============
</TABLE>
 
  In addition, Messrs. Ide, Itosaka, Kobayashi, Miyamoto, Ogura, Sawada, and
Watanabe participate in a Fuji Bank employee stock purchase plan and, as of
December 31, 1995, beneficially held, in aggregate, approximately 24,000
shares.
 
  The aggregate number of shares of Fuji Bank common stock that are
beneficially owned by the Company's directors and officers, considered as a
group, including those shares held in the Fuji Bank employee stock purchase
plan, does not exceed 1% of the outstanding shares of such stock.
 
                                      59
<PAGE>
 
  The following table sets forth the ownership by all directors, nominees and
executive officers, of all outstanding equity securities of the Company, and
its subsidiaries, as of February 1, 1996:
 
<TABLE>
<CAPTION>
                                                            AMOUNT OF
                                         NAME OF            BENEFICIAL  PERCENT
         TITLE OF CLASS             BENEFICIAL OWNER        OWNERSHIP   OF CLASS
         --------------             ----------------       ------------ --------
   <S>                         <C>                         <C>          <C>
   HELLER FINANCIAL, INC.
     Cumulative Convertible
      Preferred Stock, Series  Heller International
      D......................   Corporation (Parent)       1,000 Shares   100%
     8 1/8% Cumulative
      Perpetual Senior
      Preferred Stock, Series
      A......................  Richard J. Almeida               0          0
                               Hajime Maeda                     0          0
                               Mitchell F. Vernick              0          0
                               Hidehiko Ide                     0          0
                               Minoru Itosaka                   0          0
                               Mark Kessel                      0          0
                               Tomonori Kobayashi               0          0
                               Michael J. Litwin                0          0
                               Dennis P. Lockhart               0          0
                               Lauralee E. Martin               0          0
                               Kenji Miyamoto                   0          0
                               Osamu Ogura                      0          0
                               Masahiro Sawada                  0          0
                               Atsushi Takano                   0          0
                               Kenji Watanabe                   0          0
                               All Directors and Executive
                                Officers as a Group             0          0
</TABLE>
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
KEEP WELL AGREEMENT WITH FUJI BANK
 
  The Company entered into a Keep Well Agreement (the "Agreement") with Fuji
Bank on April 23, 1983 in order to assist the Company in maintaining its
credit rating. The Agreement was amended and supplemented on January 26, 1984,
in connection with the consummation of the purchase of the Company by Fuji
Bank and has been amended since that date from time to time. Most recently, on
May 3, 1995, the Company and Fuji Bank agreed to extend the term of the Keep
Well Agreement for an additional two years from December 31, 2000 to December
31, 2002.
 
  The Agreement provides that Fuji Bank will maintain the Company's net worth
in an amount equal to $500 million. Accordingly, if the Company should
determine, at the close of any month, that its net worth is less than $500
million, then Fuji Bank will purchase, or cause one of its subsidiaries to
purchase, shares of the Company's NW Preferred Stock, Class B (No Par Value)
("NW Preferred Stock") in an amount necessary to increase the Company's net
worth to $500 million. If and when issued, dividends will be paid quarterly on
the NW Preferred Stock at a rate per annum equal to 1% over the three-month
London Inter-bank Offered Rate. Such dividends will not be paid during a
default in the payment of principal or interest on any of the outstanding
indebtedness for money borrowed by the Company. Subject to certain conditions,
the NW Preferred Stock will be redeemable at the option of the holder within a
specified period of time after the end of a calendar quarter, in an aggregate
amount not greater than the excess of the net worth of the Company as of the
end of such calendar quarter over $500 million.
 
  The Agreement further provides that if the Company should lack sufficient
cash, other liquid assets or credit facilities to meet its payment obligations
on its commercial paper, then Fuji Bank will lend the Company up to $500
million (the "Liquidity Commitment"), payable on demand, which the Company may
use only for the
 
                                      60
<PAGE>
 
purpose of meeting such payment obligations. Any such loan by Fuji Bank to the
Company (a "Liquidity Advance") will bear interest at a fluctuating interest
rate per annum equal to the announced prime commercial lending rate of Morgan
Guaranty Trust Company of New York plus .25% per annum. Each Liquidity Advance
will be repayable on demand at any time after the business day following the
29th day after such Liquidity Advance was made. No repayment of the Liquidity
Advance will be made during a period of default in the payment of the
Company's senior indebtedness for borrowed money.
 
  No Liquidity Advances or purchases of NW Preferred Stock have been made by
Fuji Bank under the Agreement; other infusions of capital in the Company have
been made by Parent.
 
  Under the Agreement, the Company has covenanted to maintain, and Fuji Bank
has undertaken to assure that the Company will maintain, unused short-term
lines of credit and committed credit facilities in an amount approximately
equal to 75% of the amount of its commercial paper obligations from time to
time outstanding. In addition, under the Agreement, neither Fuji Bank nor any
of its subsidiaries can sell, pledge or otherwise dispose of any shares of the
Company's Common Stock or permit the Company to issue shares of its Common
Stock except to Fuji Bank or a Fuji Bank affiliate.
 
  Neither Fuji Bank nor the Company may terminate the Agreement for any reason
prior to December 31, 2002. After December 31, 2002 either Fuji Bank or the
Company may terminate the Agreement upon 30 business days prior written
notice. So long as the Perpetual Preferred Stock is outstanding and held by
third parties other than Fuji Bank, the Agreement may not be terminated by
either party unless the Company has received written certifications from
Moody's Investors Services, Inc. and Standard & Poor's Corporation that upon
termination the Perpetual Preferred Stock will be rated by them no lower than
a3 and A-, respectively. For these purposes the Perpetual Preferred Stock will
no longer be deemed outstanding at such time as an effective notice of
redemption of all of the Perpetual Preferred Stock shall have been given by
the Company and funds sufficient to effectuate such redemption shall have been
deposited with the party designated for such purpose in the notice. In
addition, any termination of the Keep Well Agreement by the Company must be
consented to by Fuji Bank. Any such termination will not relieve the Company
of its obligations in respect of any NW Preferred Stock outstanding on the
date of termination or the dividends thereon, any amounts owed in respect of
Liquidity Advances on the date of termination or the unpaid principal or
interest on those Liquidity Advances or Fuji Bank's fee relating to the
Liquidity Commitment. Any such termination will not adversely affect the
Company's commercial paper obligations outstanding on the date of termination.
The Agreement can be modified or amended by a written agreement of Fuji Bank
and the Company. However, no such modification or amendment may change the
prohibition against termination before December 31, 2002 or adversely affect
the Company's then-outstanding commercial paper obligations.
 
  Under the Agreement, the Company's commercial paper obligations and any
other debt instruments are solely the obligations of the Company. The
Agreement is not a guarantee by Fuji Bank of the payment of the Company's
commercial paper obligations, indebtedness, liabilities or obligations of any
kind.
 
TAX ALLOCATION AGREEMENTS
 
  Under the terms of the tax allocation agreement between the Parent and the
Company, as amended, each company covered by the agreement calculates its
current and deferred income taxes based on its separate company taxable income
or loss, utilizing separate company net operating losses, tax credits, capital
losses and deferred tax assets or liabilities. Under the terms of other tax
allocation agreements with certain of the Company's subsidiaries, the Company
and the Parent, in calculating their current income taxes, can utilize the
taxable income or loss of the subsidiaries.
 
CERTAIN TRANSACTIONS WITH FUJI BANK AND WITH THE PARENT AND ITS SUBSIDIARIES
 
  Several financial, administrative or other service arrangements exist
between the Company and Fuji Bank, the Parent or related affiliates. In
management's opinion, the terms of these arrangements are similar to those the
 
                                      61
<PAGE>
 
Company would have been able to obtain in like agreements with unaffiliated
entities in an arms-length transaction.
 
  Services Provided by Fuji Bank and the Parent for the Company. Certain
employees of Fuji Bank and the Parent perform managerial, administrative and
other related functions for the Company. The Company compensates Fuji Bank and
the Parent for the use of such individuals' services at a rate which reflects
current costs to Fuji Bank and the Parent. The amounts paid to Fuji Bank and
the Parent for these services in 1995 were $2 million and $53 million,
respectively. Additionally, certain subsidiaries of Fuji Bank periodically
serve as managers for various offerings of the Company's debt securities and
the Fuji Bank and Trust Company may act as registrar and paying agent for
certain debt issuances by the Company.
 
  Services Provided by the Company for Affiliates. The Company performs
services for its affiliates and charges them for the cost of the work
performed. The Company may also guarantee the obligations of its clients or
the clients of certain joint ventures under letters of credit issued by
financial institutions, some of which are affiliates of the Company.
Additionally, the Company guarantees payment under a deferred compensation
arrangement between the Parent and certain of its employees. The Company has
agreements with the Parent and certain other subsidiaries of the Parent which
provide for the Company to receive an annual negotiated fee for servicing
assets which have been sold by the Company to the Parent and these affiliates.
The Company continues to service these assets and all other direct costs and
expenses, including any additional advances made after the date of the
agreement, are borne by the subsidiaries of the Parent. The amount of fees for
servicing these assets in 1995 was approximately $1 million.
 
  Heller Capital Markets Group, Inc. ("CMG"), a wholly-owned subsidiary of the
Company, acts as placement agent for the sale of commercial paper issued by
the Parent. CMG receives compensation, based upon the face amount of the
commercial paper notes sold. For the year ending December 31, 1995, the Parent
paid $.2 million to CMG as compensation pursuant to this arrangement.
 
  Intercompany Receivables, Payables, Transactions and Financial Instruments.
At December 31, 1995, the net amount due from affiliates was $25 million. The
amounts are comprised principally of interest bearing demand notes
representing amounts due to the Company arising from the interest rate swap
agreement with the Parent, advances, administrative fees and costs charged to
other subsidiaries of the Parent. The notes bear interest at rates which
approximate the average rates on the Company's commercial paper obligations or
short-term bank borrowing rates outstanding during the period.
 
  In the ordinary course of its business, the Company participates in joint
financings with certain affiliates. During 1995, the Company sold to Fuji Bank
its $25 million interest in a joint financing with Fuji Bank.
 
  Fuji Bank and one of its subsidiaries provided uncommitted lines of credit
to consolidated international subsidiaries totaling approximately $14 million
at December 31, 1995. Borrowings under these facilities totaled $10 million at
December 31, 1995. In addition, Fuji Bank provides uncommitted lines of credit
to certain international joint ventures.
 
  The Company is a party to a $200 million interest rate swap agreement with
the Parent, which expires December 15, 2000, and was a party with the Parent
for a $250 million interest rate swap agreement which expired on July 31,
1995. The purpose of these agreements is to manage the Company's exposure to
interest rate fluctuations. Under these agreements, the Company pays interest
to the Parent at a variable rate based on the commercial paper rate published
by the Board of Governors of the Federal Reserve System and the Parent pays
interest to the Company at fixed rates of 5.57% and 5.0%, respectively. These
agreements had the effect of increasing the Company's interest expense by $3
million in 1995.
 
  During 1995, the Company terminated two cross-currency basis swap agreements
with a subsidiary of Fuji Bank. Net amounts received from Fuji Bank under
these agreements during 1995 were approximately $1 million.
 
 
                                      62
<PAGE>
 
  On February 15, 1985, the Company issued to the Parent 1,000 shares of
previously subscribed Cumulative Convertible Preferred Stock, Series D (No Par
Value) ("Convertible Preferred Stock"), which has a dividend yield established
quarterly at the rate of 1/2% under the announced prime commercial lending
rate of Morgan Guaranty Trust Company of New York, cumulative from March 30,
1984 and payable quarterly commencing on March 31, 1989. During 1995, the
Company declared and paid $2 million of dividends on the Convertible Preferred
Stock. The Convertible Preferred Stock is convertible into Common Stock of the
Company at the conversion price of one share of Common Stock for each 200
shares of Convertible Preferred Stock. Subject to certain conditions, the
Convertible Preferred Stock is redeemable, in whole or in part, at any time at
the option of the Company at a redemption price equal to the price paid for
such stock plus accumulated dividends. Upon voluntary or involuntary
liquidation, the holder of the Convertible Preferred Stock is entitled to be
paid an amount equal to the price paid for each share plus accumulated
dividends.
 
CERTAIN OTHER RELATIONSHIPS
 
  Mr. Kessel, a director of the Company and Parent, is a partner of the law
firm of Shearman & Sterling, which from time to time acts as counsel in
certain matters for Fuji Bank, the Company and the Parent.
 
  On March 30, 1994, the Company entered into a receivables purchase agreement
with Freedom Asset Funding Corporation ("Freedom"). Under this agreement,
which expires March 24, 1999, the Company may sell to Freedom with limited
recourse an undivided interest of up to $500 million in a designated pool of
its factored accounts receivable. As of December 31, 1995, the Company had
sold a $6 million interest to Freedom for cash. Freedom has entered into a
revolving liquidity facility and an operating agreement with Fuji Bank and one
of its affiliates. The amount of liquidity provided by Fuji Bank under this
facility is $100 million at December 31, 1995.
 
                                      63
<PAGE>
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
  (a) Documents Filed as Part of This Report:
 
    1. Financial Statements:
 
      Heller Financial, Inc. and Subsidiaries--
 
      Report of Independent Public Accountants--Arthur Andersen LLP
 
      Consolidated Balance Sheets--December 31, 1995 and 1994
 
      Consolidated Statements of Income for the Years Ended December 31,
      1995, 1994 and 1993
 
      Consolidated Statements of Cash Flows for the Years Ended December
      31, 1995, 1994 and 1993
 
      Consolidated Statements of Changes in Stockholders' Equity for the
      Years Ended December 31, 1995, 1994 and 1993
 
      Notes to Consolidated Financial Statements
 
    2. Financial Statement Schedules:
 
      Schedules are omitted because they are not applicable or because the
      required information appears in the financial statements or the
      notes thereto.
 
    3. Exhibits:
 
<TABLE>
<CAPTION>
 
     <C>       <S>                                                          <C>
     (3)(a)    Amended and Restated Certificate of Incorporation of the
               Company as amended on September 2, 1992 [Incorporated by
               reference to Exhibits 4(a) and 4(b) to the Company's Reg-
               istration Statement on Form S-3 filed September 4, 1992
               (File No. 33-51692)]
     (3)(b)    By-laws of the Company, as amended on June 2, 1992 [Incor-
               porated by reference to Exhibit 3(b) to the Company's An-
               nual Report on Form 10-K for the Fiscal Year Ended Decem-
               ber 31, 1992 (File No. 1-6157)]
     (4)(a)    Certificate of Designation, Preferences and Rights of Cu-
               mulative Perpetual Senior Preferred Stock, Series A, filed
               September 16, 1992 [Incorporated by reference to Exhibit
               4(a) to the Company's Annual Report on Form 10-K for the
               Fiscal Year Ended December 31, 1992 (File No. 1-6157)]
     (4)(b)    Heller Financial, Inc. Standard Multiple-Series Indenture
               Provisions dated February 5, 1987 [Incorporated by refer-
               ence to Exhibit (4)(a) to the Company's Registration
               Statement on Form S-3 dated February 5, 1987 (File No. 33-
               11757)]
<CAPTION>
 
     <C>       <S>                                                          <C>
     (4)(c)    Form of Indenture dated as of February 5, 1987 between the
               Company and The First National Bank of Chicago, Trustee,
               with respect to Senior Securities [Incorporated by refer-
               ence to Exhibit (4)(b) to the Company's Registration
               Statement on Form S-3 dated February 5, 1987 (File No. 33-
               11757)]
     (4)(d)    Form of Indenture dated as of February 5, 1987 between the
               Company and Chemical Bank, Trustee, with respect to Senior
               Securities [Incorporated by reference to Exhibit (4)(c) to
               the Company's Registration Statement on Form S-3 dated
               February 5, 1987 (File No. 33-11757)]
     (4)(e)    First Supplemental Indenture dated as of December 1, 1989
               to the Indenture dated as of February 5, 1987 between
               Chemical Bank, as Trustee and the Company [Incorporated by
               reference to Exhibit (4)(e) to the Company's Annual Report
               on Form 10-K for the Fiscal Year Ended December 31, 1994
               (File No. 1-6157)]
</TABLE>
 
                                       64
<PAGE>
 
<TABLE>
<CAPTION>
 
     <C>       <S>                                                          <C>
     (4)(f)    Form of Indenture dated as of September 30, 1991 between
               the Company and The Bank of New York, Trustee, with re-
               spect to Senior Securities [Incorporated by reference to
               Exhibit (4)(h) to the Company's Registration Statement on
               Form S-3 dated September 30, 1991 (File No. 33-43020)]
     (4)(g)    Form of Indenture dated as of September 30, 1991 between
               the Company and Chemical Bank, Trustee, with respect to
               the Subordinated Securities [Incorporated by reference to
               Exhibit (4)(h) to the Company's Registration Statement on
               Form S-3 dated September 30, 1991 (File No. 33-43020)]
     (4)(h)    Form of Indenture dated as of September 1, 1995 between
               the Company and Shawmut Bank Connecticut, National Associ-
               ation, as Trustee, with respect to Senior Securities [In-
               corporated by reference to Exhibit (4)(b) to the Company's
               Registration Statement on Form S-3 dated September 8, 1995
               (File No. 33-62479)]
     (4)(i)    Form of Indenture dated as of September 1, 1995 between
               the Company and Shawmut Bank Connecticut, National Associ-
               ation, as Trustee, with respect to Subordinated Securities
               [Incorporated by reference to Exhibit (4)(c) to the
               Company's Registration Statement on Form S-3 dated Septem-
               ber 8, 1995 (File No. 33-62479)]
     (4)(j)    Form of Indenture dated as of September 1, 1995 between
               the Company and Shawmut Bank Connecticut, National Associ-
               ation, as Trustee, with respect to Junior Subordinated Se-
               curities [Incorporated by reference to Exhibit (4)(d) to
               the Company's Registration Statement on Form S-3 dated
               September 8, 1995 (File No. 33-62479)]
     (4)(k)    First Supplemental Indenture with respect to Senior Secu-
               rities between Heller Financial, Inc. and Shawmut Bank
               Connecticut, National Association ("Shawmut") dated Sep-
               tember 29, 1995 [Incorporated by reference to Exhibit
               (4)(a) to the Company's Current Report on Form 8-K dated
               October 3, 1995 (File No. 1-6157)]
     (4)(l)    First Supplemental Indenture with respect to Junior Subor-
               dinated Securities between Heller Financial, Inc. and
               Shawmut Bank Connecticut, National Association dated Sep-
               tember 29, 1995 [Incorporated by reference to Exhibit
               (4)(b) to the Company's Current Report on Form 8-K dated
               October 3, 1995 (File No. 1-6157)]
     (4)(m)    First Supplemental Indenture dated October 13, 1995 be-
               tween Heller Financial, Inc. and Shawmut Bank Connecticut,
               National Association with respect to Senior Securities
               [Incorporated by reference to Exhibit 4(b)(i) to the
               Company's Current Report on Form 8-K filed October 17,
               1995 (File No. 1-6157)]
     (4)(n)    First Supplemental Indenture dated October 13, 1995 be-
               tween Heller Financial, Inc. and Shawmut Bank Connecticut,
               National Association with respect to Subordinated Securi-
               ties [Incorporated by reference to Exhibit 4(c)(i) to the
               Company's Current Report on Form 8-K filed October 17,
               1995 (File No. 1-6157)]
     (4)(o)    First Supplemental Indenture dated October 13, 1995 be-
               tween Heller Financial, Inc. and Shawmut Bank Connecticut,
               National Association with respect to Junior Subordinated
               Securities [Incorporated by reference to Exhibit 4(d)(i)
               to the Company's Current Report on Form 8-K filed October
               17, 1995 (File No. 1-6157)]
     (10)(a)   Amended and Restated Keep Well Agreement between Fuji Bank
               and the Company dated as of August 28, 1992 (including, as
               Appendix A, the Keep Well Agreement dated as of April 23,
               1983 between Fuji Bank and the Company) [Incorporated by
               reference to Exhibit 28(a) to the Company's Registration
               Statement on Form S-3 filed September 4, 1992 (File No.
               33-51692)]
</TABLE>
 
 
                                       65
<PAGE>
 
<TABLE>
<CAPTION>
 
     <C>       <S>                                                          <C>
     (10)(b)   First Amendment to Amended and Restated Keep Well Agree-
               ment between Fuji Bank and the Company dated as of May 3,
               1995 [Incorporated by reference to Exhibit 10 to the
               Company's Quarterly Report on Form 10-Q for the period
               ended March 31, 1995 (File No. 1-6157)]
     (10)(c)   Nonrecourse Participation Agreement dated September 30,
               1985 between the Company and Heller Interstate, Inc. [In-
               corporated by reference to Exhibit 10(b) to the Company's
               Annual Report on Form 10-K for the Fiscal Year Ended De-
               cember 31, 1992 (File No. 1-6157)]
     (10)(d)   Service Agreement dated January 1, 1985 between the Parent
               and Fuji Bank [Incorporated by reference to Exhibit
               (10)(e) to the Company's Annual Report on Form 10-K for
               the Fiscal Year Ended December 31, 1992 (File No. 1-6157)]
     (10)(e)   Supplemental Retirement Benefit Plan, effective October
               28, 1987 [Incorporated by reference to Exhibit (10)(h) to
               the Company's Annual Report on Form 10-K for the Fiscal
               Year Ended December 31, 1992 (File No. 1-6157)]
     (10)(f)   Management Agreement dated as of January 1, 1991 between
               Heller International Corporation and Heller Financial,
               Inc. [Incorporated by reference to Exhibit (10)(m) to the
               Company's Quarterly Report on Form 10-Q for the period
               ending March 31, 1991 (File No. 1-6157)]
     (10)(g)   Agreement for the Allocation of Federal, State and Foreign
               Tax Liability and Benefits Among the Members of the Heller
               International Corporation Affiliated Group, effective as
               of January 1, 1993 [Incorporated by reference to Exhibit
               (10)(j) to the Company's Annual Report on Form 10-K for
               the Fiscal Year Ended December 31, 1993 (File No. 1-6157)]
     (10)(h)   Heller Financial Inc., Capital Markets Group/Merchant
               Banking Division Equity Investment Compensation Plan ef-
               fective August 1, 1988 and letter amendment dated April
               18, 1989 [Incorporated by reference to Exhibit 10(k) to
               the Company's Annual Report on Form 10-K for the Fiscal
               Year Ended December 31, 1992 (File No. 1-6157)]
     (10)(i)   Summary of Special Long Term Incentive Plan [Incorporated
               by reference to Exhibit (10)(l) to the Company's Annual
               Report on Form 10-K for the Fiscal Year Ended December 31,
               1993 (File No. 1-6157)]
     (10)(j)   Long Term Incentive Plan of Heller International Corpora-
               tion, effective January 1, 1994 [Incorporated by reference
               to Exhibit 10 (n) to the Company's Annual Report on Form
               10-K for the Fiscal Year Ended December 31, 1994 (File No.
               1-6157)]
     (10)(k)   Executive Deferred Compensation Plan, dated January 1,
               1994 as amended on October 1, 1994 [Incorporated by refer-
               ence to Exhibit 10(o) to the Company's Annual Report on
               Form 10K for the Fiscal Year Ended December 31, 1994 (File
               No.1 1-6157)]
     (10)(l)   Cross Guaranty for the Deferred Compensation Plan [Incor-
               porated by reference to Exhibit 10(p) to the Company's An-
               nual Report on Form 10K for the Fiscal Year Ended December
               31, 1994 (File No. 1-6157)]
     *(10)(m)  Management Incentive Plan (the Parent) (Effective January
               1, 1987, Revised January 1, 1989)
     *(10)(n)  Second Amendment to the Executive Deferred Compensation
               Plan, dated December 29, 1995
</TABLE>
 
 
                                       66
<PAGE>
 
<TABLE>
<CAPTION>
 
     <C>       <S>                                                          <C>
     *(10)(o)  Employment Letter Agreement, dated February 1, 1996 be-
               tween the Parent and Richard J. Almeida
     *(12)     Computation of Ratio of Earnings to Combined Fixed Charges
               and Preferred Stock Dividends
     *(21)     Subsidiaries of the Registrant
     *(23)     Consent of independent public accountants
     *(24)     Powers of Attorney
     *(27)     Financial Data Schedule
</TABLE>
--------
   *Filed herewith.
 
    Instruments defining the rights of holders of certain issues of long-
    term debt of the Company have not been filed as exhibits to this Report
    because the authorized principal amount of any one of such issues does
    not exceed 10% of the total assets of the Company. In accordance with
    paragraph (b)(4)(iii) of Item 601 of Regulation S-K, the Company hereby
    agrees to furnish to the Securities and Exchange Commission, upon
    request, a copy of each instrument that defines the rights of holders
    of the Company's long-term debt.
 
  (b) Current Reports on Form 8-K:
 
      During the fourth quarter of 1995, the Company filed Current Reports
    on Form 8-K dated October 17, 1995, October 24, 1995, October 30, 1995
    and November 14, 1995.
 
      On January 29, 1996, the Company filed with the U.S. Securities and
    Exchange Commission a Current Report on Form 8-K, dated January 26,
    1996, to announce the Company's earnings for the year ended December
    31, 1995.
 
                                      67
<PAGE>
 
                                  SIGNATURES
 
  PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
 
                                          Heller Financial, Inc.
 
                                                       R. J. Almeida
                                          By: _________________________________
                                                    Richard J. Almeida
                                               (Chairman and Chief Executive
                                                         Officer)
 
                                                      February 14, 1996
                                          Dated: ______________________________
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
 
            R. J. Almeida                                    *
By: _________________________________     By: _________________________________
         Richard J. Almeida                          Michael J. Litwin
  (Director and Principal Financial                     (Director)
              Officer)
 
 
                                                             *
                  *                       By: _________________________________
By: _________________________________               Dennis P. Lockhart
            Hajime Maeda                                (Director)
              (Director)
 
 
                                                             *
                  *                       By: _________________________________
By: _________________________________               Lauralee E. Martin
         Mitchell F. Vernick                            (Director)
             (Director)
 
 
                                                             *
          Lawrence G. Hund                By: _________________________________
By: _________________________________                 Kenji Miyamoto
          Lawrence G. Hund                              (Director)
Senior Vice President, Controller and(
      Chief Accounting Officer)
 
 
                  *                                          *
By: _________________________________     By: _________________________________
            Hidehiko Ide                                Osamu Ogura
             (Director)                                 (Director)
 
 
                  *                                          *
By: _________________________________     By: _________________________________
           Minoru Itosaka                             Masahiro Sawada
             (Director)                                 (Director)
 
 
                  *                                          *
By: _________________________________     By: _________________________________
             Mark Kessel                              Atsushi Takano
             (Director)                                 (Director)
 
 
                  *                                          *
By: _________________________________     By: _________________________________
         Tomonori Kobayashi                           Kenji Watanabe
             (Director)                                 (Director)
 
 
                                                       D. H. Snider
                                          *By: ________________________________
                                                      Debra H. Snider
                                                     Attorney-in-Fact
Dated: February 14, 1996
 
                                      68
<PAGE>
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
  EXHIBIT                                                           SEQUENTIAL
  NUMBER                         DESCRIPTION                        PAGE NUMBER
  -------                        -----------                        -----------
 <C>       <S>                                                      <C>
  (3)(a)   Amended and Restated Certificate of Incorporation of
            the Company as amended on September 2, 1992
            [Incorporated by reference to Exhibits 4(a) and 4(b)
            to the Company's Registration Statement on Form S-3
            filed September 4, 1992 (File No. 33-51692)]
  (3)(b)   By-laws of the Company, as amended on June 2, 1992
            [Incorporated by reference to Exhibit 3(b) to the
            Company's Annual Report on Form 10-K for the Fiscal
            Year Ended December 31, 1992 (File No. 1-6157)]
  (4)(a)   Certificate of Designation, Preferences and Rights of
            Cumulative Perpetual Senior Preferred Stock, Series
            A, filed September 16, 1992 [Incorporated by
            reference to Exhibit 4(a) to the Company's Annual
            Report on Form 10-K for the Fiscal Year Ended
            December 31, 1992 (File No. 1-6157)]
  (4)(b)   Heller Financial, Inc. Standard Multiple-Series
            Indenture Provisions dated February 5, 1987
            [Incorporated by reference to Exhibit (4)(a) to the
            Company's Registration Statement on Form S-3 dated
            February 5, 1987 (File No. 33-11757)]
  (4)(c)   Form of Indenture dated as of February 5, 1987 between
            the Company and The First National Bank of Chicago,
            Trustee, with respect to Senior Securities
            [Incorporated by reference to Exhibit (4)(b) to the
            Company's Registration Statement on Form S-3 dated
            February 5, 1987 (File No. 33-11757)]
  (4)(d)   Form of Indenture dated as of February 5, 1987 between
            the Company and Chemical Bank, Trustee, with respect
            to Senior Securities [Incorporated by reference to
            Exhibit (4)(c) to the Company's Registration
            Statement on Form S-3 dated February 5, 1987 (File
            No. 33-11757)]
  (4)(e)   First Supplemental Indenture dated as of December 1,
            1989 to the Indenture dated as of February 5, 1987
            between Chemical Bank, as Trustee and the Company
            [Incorporated by reference to Exhibit (4)(e) to the
            Company's Annual Report on Form 10-K for the Fiscal
            Year Ended December 31, 1994 (File No. 1-6157)]
  (4)(f)   Form of Indenture dated as of September 30, 1991
            between the Company and The Bank of New York,
            Trustee, with respect to Senior Securities
            [Incorporated by reference to Exhibit (4)(h) to the
            Company's Registration Statement on Form S-3 dated
            September 30, 1991 (File No. 33-43020)]
  (4)(g)   Form of Indenture dated as of September 30, 1991
            between the Company and Chemical Bank, Trustee, with
            respect to the Subordinated Securities [Incorporated
            by reference to Exhibit (4)(h) to the Company's
            Registration Statement on Form S-3 dated September
            30, 1991 (File No. 33-43020)]
  (4)(h)   Form of Indenture dated as of September 1, 1995
            between the Company and Shawmut Bank Connecticut,
            National Association, as Trustee, with respect to
            Senior Securities [Incorporated by reference to
            Exhibit (4)(b) to the Company's Registration
            Statement on Form S-3 dated September 8, 1995 (File
            No. 33-62479)]
  (4)(i)   Form of Indenture dated as of September 1, 1995
            between the Company and Shawmut Bank Connecticut,
            National Association, as Trustee, with respect to
            Subordinated Securities [Incorporated by reference to
            Exhibit (4)(c) to the Company's Registration
            Statement on Form S-3 dated September 8, 1995 (File
            No. 33-62479)]
  (4)(j)   Form of Indenture dated as of September 1, 1995
            between the Company and Shawmut Bank Connecticut,
            National Association, as Trustee, with respect to
            Junior Subordinated Securities [Incorporated by
            reference to Exhibit (4)(d) to the Company's
            Registration Statement on Form S-3 dated September 8,
            1995 (File No. 33-62479)]
</TABLE>
 
<PAGE>
 
<TABLE>
<CAPTION>
  EXHIBIT                                                           SEQUENTIAL
  NUMBER                         DESCRIPTION                        PAGE NUMBER
  -------                        -----------                        -----------
 <C>       <S>                                                      <C>
  (4)(k)   First Supplemental Indenture with respect to Senior
            Securities between Heller Financial, Inc. and Shawmut
            Bank Connecticut, National Association ("Shawmut")
            dated September 29, 1995 [Incorporated by reference
            to Exhibit (4)(a) to the Company's Current Report on
            Form 8-K dated October 3, 1995 (File No. 1-6157)]
  (4)(l)   First Supplemental Indenture with respect to Junior
            Subordinated Securities between Heller Financial,
            Inc. and Shawmut Bank Connecticut, National
            Association dated September 29, 1995 [Incorporated by
            reference to Exhibit (4)(b) to the Company's Current
            Report on Form 8-K dated October 3, 1995 (File No. 1-
            6157)]
  (4)(m)   First Supplemental Indenture dated October 13, 1995
            between Heller Financial, Inc. and Shawmut Bank
            Connecticut, National Association with respect to
            Senior Securities [Incorporated by reference to
            Exhibit 4(b)(i) to the Company's Current Report on
            Form 8-K filed October 17, 1995 (File No. 1-6157)]
  (4)(n)   First Supplemental Indenture dated October 13, 1995
            between Heller Financial, Inc. and Shawmut Bank
            Connecticut, National Association with respect to
            Subordinated Securities [Incorporated by reference to
            Exhibit 4(c)(i) to the Company's Current Report on
            Form 8-K filed October 17, 1995 (File No. 1-6157)]
  (4)(o)   First Supplemental Indenture dated October 13, 1995
            between Heller Financial, Inc. and Shawmut Bank
            Connecticut, National Association with respect to
            Junior Subordinated Securities [Incorporated by
            reference to Exhibit 4(d)(i) to the Company's Current
            Report on Form 8-K filed October 17, 1995 (File No.
            1-6157)]
 (10)(a)   Amended and Restated Keep Well Agreement between Fuji
            Bank and the Company dated as of August 28, 1992
            (including, as Appendix A, the Keep Well Agreement
            dated as of April 23, 1983 between Fuji Bank and the
            Company) [Incorporated by reference to Exhibit 28(a)
            to the Company's Registration Statement on Form S-3
            filed September 4, 1992 (File No. 33-51692)]
 (10)(b)   First Amendment to Amended and Restated Keep Well
            Agreement between Fuji Bank and the Company dated as
            of May 3, 1995 [Incorporated by reference to Exhibit
            10 to the Company's Quarterly Report on Form 10-Q for
            the period ended March 31, 1995 (File No. 1-6157)]
 (10)(c)   Nonrecourse Participation Agreement dated September
            30, 1985 between the Company and Heller Interstate,
            Inc. [Incorporated by reference to Exhibit 10(b) to
            the Company's Annual Report on Form 10-K for the
            Fiscal Year Ended December 31, 1992 (File No. 1-
            6157)]
 (10)(d)   Service Agreement dated January 1, 1985 between the
            Parent and Fuji Bank [Incorporated by reference to
            Exhibit (10)(e) to the Company's Annual Report on
            Form 10-K for the Fiscal Year Ended December 31, 1992
            (File No. 1-6157)]
 (10)(e)   Supplemental Retirement Benefit Plan, effective
            October 28, 1987 [Incorporated by reference to
            Exhibit (10)(h) to the Company's Annual Report on
            Form 10-K for the Fiscal Year Ended December 31, 1992
            (File No. 1-6157)]
 (10)(f)   Management Agreement dated as of January 1, 1991
            between Heller International Corporation and Heller
            Financial, Inc. [Incorporated by reference to Exhibit
            (10)(m) to the Company's Quarterly Report on Form 10-
            Q for the period ending March 31, 1991 (File No. 1-
            6157)]
 (10)(g)   Agreement for the Allocation of Federal, State and
            Foreign Tax Liability and Benefits Among the Members
            of the Heller International Corporation Affiliated
            Group, effective as of January 1, 1993 [Incorporated
            by reference to Exhibit (10)(j) to the Company's
            Annual Report on Form 10-K for the Fiscal Year Ended
            December 31, 1993 (File No. 1-6157)]
</TABLE>
 
<PAGE>
 
<TABLE>
<CAPTION>
  EXHIBIT                                                           SEQUENTIAL
  NUMBER                         DESCRIPTION                        PAGE NUMBER
  -------                        -----------                        -----------
 <C>       <S>                                                      <C>
 (10)(h)   Heller Financial Inc., Capital Markets Group/Merchant
            Banking Division Equity Investment Compensation Plan
            effective August 1, 1988 and letter amendment dated
            April 18, 1989 [Incorporated by reference to Exhibit
            10(k) to the Company's Annual Report on Form 10-K for
            the Fiscal Year Ended December 31, 1992 (File No. 1-
            6157)]
 (10)(i)   Summary of Special Long Term Incentive Plan
            [Incorporated by reference to Exhibit (10)(l) to the
            Company's Annual Report on Form 10-K for the Fiscal
            Year Ended December 31, 1993 (File No. 1-6157)]
 (10)(j)   Long Term Incentive Plan of Heller International
            Corporation, effective January 1, 1994 [Incorporated
            by reference to Exhibit 10(n) to the Company's Annual
            Report on Form 10-K for the Fiscal Year Ended
            December 31, 1994 (File No. 1-6157)]
 (10)(k)   Executive Deferred Compensation Plan, dated January 1,
            1994 as amended on October 1, 1994 [Incorporated by
            reference to Exhibit 10(o) to the Company's Annual
            Report on Form 10K for the Fiscal Year Ended December
            31, 1994 (File No.1 1-6157)]
 (10)(l)   Cross Guaranty for the Deferred Compensation Plan
            [Incorporated by reference to Exhibit 10(p) to the
            Company's Annual Report on Form 10K for the Fiscal
            Year Ended December 31, 1994 (File No. 1-6157)]
 *(10)(m)  Management Incentive Plan (the Parent) (Effective
            January 1, 1987, Revised January 1, 1989)
 *(10)(n)  Second Amendment to the Executive Deferred
            Compensation Plan, dated December 29, 1995
 *(10)(o)  Employment Letter Agreement, dated February 1, 1996
            between the Parent and Richard J. Almeida
 *(12)     Computation of Ratio of Earnings to Combined Fixed
            Charges and Preferred Stock Dividends
 *(21)     Subsidiaries of the Registrant
 *(23)     Consent of independent public accountants
 *(24)     Powers of Attorney
 *(27)     Financial Data Schedule
</TABLE>
--------
*Filed herewith.