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

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                                    FORM 10-K

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

                      For the year ended December 31, 1997

                                       OR

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


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                         Commission file number 0-13497

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


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

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


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

          Securities registered pursuant to Section 12 (g) of the Act:
                           Common Stock, No Par Value


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 o

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

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
Registrant at March 27, 1998: None

As of March 27, 1998,  460 shares of common stock,  no par value,  with a stated
value of $100,000 per share, were outstanding, all of which were owned by Pitney
Bowes Inc., the parent of the Registrant

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



<PAGE>
                         PITNEY BOWES CREDIT CORPORATION




Part I

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

Part II

Item 5.-- Market for the registrant's common equity and related
          stockholder matters................................................. 7
Item 6.-- Selected financial data............................................. 8
Item 7.-- Management's discussion and analysis of financial
          condition and results of operations................................. 9
Item 8.-- Financial statements and supplementary data........................ 14
Item 9.-- Changes in and disagreements with accountants on
          accounting and financial disclosure................................ 34

Part III

Item 10.-- Directors and executive officers of the registrant................ 34
Item 11.-- Executive compensation............................................ 34
Item 12.-- Security ownership of certain beneficial owners and
           management ........................................................34
Item 13.-- Certain relationships and related transactions.................... 34

Part IV

Item 14.-- Exhibits, financial statements and reports on Form 8-K............ 35
Index to exhibits............................................................ 36
Signatures................................................................... 37


<PAGE>
                                    Page - 3
                         PITNEY BOWES CREDIT CORPORATION

                                     PART I
                               ITEM 1. -- BUSINESS

GENERAL

Pitney Bowes Credit  Corporation (the "Company" or "PBCC") operates primarily in
the United States and is a wholly-owned  subsidiary of Pitney Bowes Inc.  ("PBI"
or "Pitney  Bowes").  The  Company is  principally  engaged in the  business  of
providing lease  financing for PBI products as well as other financial  services
in the commercial and industrial, and mortgage servicing markets.

The  Internal  Financing  Division of PBCC  provides  marketing  support to PBI.
Equipment  leased or  financed  for these  Internal  Division  programs  include
mailing, paper handling and shipping equipment,  scales,  copiers, and facsimile
units.  The transaction  size for this equipment  generally  ranges from $500 to
$500,000, although historically most transactions have occurred in the $1,000 to
$10,000 range,  with lease terms generally from 36 to 60 months.  As part of the
Company's  focus on new business  initiatives,  the Company  launched in August,
1996, a revolving  credit product called Purchase  Power(SM) This product allows
Pitney  Bowes  customers  to  finance  postage  as well as  mailing,  copier and
facsimile  supplies.  The Company  earns income on balances  from  customers who
elect to use this credit facility.

PBCC's Capital  Services  Division  (formally the External  Financing  Division)
operates in the commercial and industrial market by offering  financial services
to  its  customers  for  products  not  manufactured  or  sold  by  PBI  or  its
subsidiaries.  Sales of lease  transactions  are part of the  Company's  ongoing
strategy to shift the foundation of the external large-ticket financing business
from  asset-based to  service-based  revenues.  During 1997, the Company reduced
external  large-ticket  finance  assets  by  approximately  $1  billion,   which
represents  approximately  50% of the portfolio  balance before the  reductions.
(See Note 2 to CONSOLIDATED FINANCIAL STATEMENTS.) Products financed through the
Capital  Services  large-ticket  financing  programs include both commercial and
non-commercial  aircraft,   over-the-road  trucks  and  trailers,  railcars  and
locomotives,   and  high-technology   equipment  such  as  data  processing  and
communications  equipment.  Transaction sizes (other than aircraft leases) range
from $50,000 to several million  dollars,  with lease terms generally from 36 to
180 months.  Aircraft transaction sizes range from $1 million to $27 million for
non-commercial  aircraft and up to $43 million for  commercial  aircraft.  Lease
terms are generally from three to 12 years for non-commercial  aircraft and from
12 to 25 years for commercial  aircraft.  The Company has also  participated  in
seven commercial  aircraft leveraged lease transactions with a net investment of
$293.5 million at December 31, 1997.  The Company's  Capital  Services  Division
also  participates,  on a select  basis,  in certain  other  types of  financial
transactions  including:  sales of lease  transactions,  senior secured loans in
connection with acquisition,  leveraged buyout and recapitalization  financings,
and certain project financings.

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

Colonial  Pacific Leasing  Corporation  ("CPLC"),  a wholly-owned  subsidiary of
PBCC, located in Portland, Oregon, operates in the small-ticket external market.
CPLC provides lease  financing  services to small- and  medium-sized  businesses
throughout the United States, marketing exclusively through a nationwide network
of brokers and independent  lessors.  Transaction  sizes range from $2,000 to $1
million, with lease terms generally from 24 to 72 months.

CPLC, and equipment financed for former PBI subsidiaries Dictaphone and Monarch,
and the Customer Vendor Finance ("CVF")  operations which PBCC sold in 1996, are
reported as "external  small-ticket  programs" in this Annual  Report.  Prior to
January  1,  1996,  Dictaphone  and  Monarch  had been  reported  as part of the
Company's internal small-ticket financing programs.

Atlantic Mortgage & Investment  Corporation ("AMIC"), a wholly-owned  subsidiary
of PBCC, located in Jacksonville,  Florida, specializes in servicing residential
first  mortgages for a fee.  AMIC does not  generally  hold or assume the credit
risk on mortgages  it services.  In return for a servicing  fee,  AMIC  provides
billing services and collects  principal,  interest and tax and insurance escrow
payments for mortgage  investors such as Federal National Mortgage  Association,
Federal Home Loan Mortgage Corporation, Government National Mortgage Association
and private investors.

Financial Structures Limited ("FSL"),  located in Bermuda, is a wholly-owned and
independent  subsidiary of PBCC.  FSL,  together with its  subsidiary  Financial
Structures  Insurance Company,  provide residual value insurance to unaffiliated
third  parties,  including  manufacturers,  financial  institutions  and leasing
companies  involved in  financing  transactions.  Residual  risk is mitigated by
diversification of the portfolios by both asset type and maturity date.


<PAGE>
                                    Page - 4

Substantially all lease financing is done through full payout leases or security
agreements  whereby PBCC recovers its costs plus a return on investment over the
initial, noncancelable term of the contract. The Company has also entered into a
limited amount of syndicated, leveraged and operating lease structures.

The Company's gross finance assets (contracts receivable plus estimated residual
values) outstanding for the internal and external financing programs at December
31, 1993 through 1997 are  presented in ITEM 6 SELECTED  FINANCIAL  DATA.  Total
Company  gross  finance  assets at December  31, 1997 were $4.4 billion of which
approximately  42 percent were related to mailing,  paper  handling and shipping
products, nine percent to commercial aircraft,  four percent to railcars,  eight
percent to copier and office  equipment,  nine  percent to both data  processing
equipment and manufacturing  products and three percent to over-the-road  trucks
and trailers. Total gross finance contracts acquired amounted to $1.9 billion in
both 1997 and 1996. External  large-ticket  programs accounted for 15 percent of
gross finance contracts acquired in 1997 compared to 17 percent in 1996.

As of December 31, 1997, PBCC had approximately 682,000 active accounts compared
with 648,000 active accounts at December 31, 1996.

At December 31, 1997,  PBCC's largest customer  accounted for $87.1 million,  or
2.2  percent  of  gross  finance  receivables,  and the  Company's  ten  largest
customers  accounted for $439.0  million in gross finance  receivables,  or 11.2
percent of the receivable portfolio.

CREDIT EXPERIENCE

The  percentage  of  receivables  over 30 days  delinquent  was 3.7  percent  at
December  31, 1997  compared to 2.9 percent at December 31, 1996 and 2.3 percent
at December 31, 1995.  Total Company  delinquency at December 31, 1997 increased
over the prior year mainly due to an  increased  number of  bankruptcies  in the
external small-ticket portfolio.

CREDIT POLICIES

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

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

LOSS EXPERIENCE

PBCC has charged  against the allowance for credit losses $60.5  million,  $69.2
million and $52.5 million in 1997, 1996 and 1995, respectively.  The decrease in
write-offs  in 1997 was  primarily  due to lower  write-offs  related  to assets
originated  by the  Company's  German  affiliate,  which totaled $0.7 million in
recoveries in 1997, versus write-offs of $20.9 million in 1996 and $14.2 million
in 1995.  This was offset by write-offs at CPLC of $33.4 million in 1997,  $23.4
million in 1996 and $13.0  million  in 1995.  Excluding  the  losses  related to
assets purchased from the Company's German affiliate,  losses as a percentage of
average net lease receivables were 1.24 percent for 1997 and .94 and .81 percent
for 1996 and 1995,  respectively.  For further  information see Notes 5 and 7 to
the Company's CONSOLIDATED FINANCIAL STATEMENTS.


RELATIONSHIP WITH PITNEY BOWES INC.

PBCC is PBI's domestic  finance  subsidiary  and provides the largest  financing
support of PBI's  business  equipment,  business  services  and  commercial  and
industrial  segments.  Approximately 13 percent of PBI's consolidated revenue in
1997,  1996 and 1995  resulted  from  equipment  sales made to PBCC for lease to
third parties.

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


<PAGE>
                                    Page - 5

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

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

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

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

The Pitney Bowes Copier Division does not  remanufacture  used copier equipment;
therefore  copier equipment is excluded from the buyback  arrangement  described
above.  There  is no AAP  for  copier  equipment.  All  copier  equipment  lease
transactions are subject to the Company's standard credit review investigation.

In 1994,  Pitney  Bowes  announced  that it had refined its  strategic  focus to
capitalize  on its  strengths  and  competitive  position by  concentrating  its
energies  and  resources  on  products  and  services   which   facilitate   the
preparation,  organization,  movement, delivery, tracking, storage and retrieval
of documents,  packages,  letters and other materials,  in hard copy and digital
form  for its  customers.  As a  result,  it sold  its  Dictaphone  and  Monarch
subsidiaries in June 1995 and August 1995, respectively. For the purpose of this
Annual  Report,  Dictaphone  and  Monarch are  included as part of the  internal
small-ticket  financing  program  results  prior to  December  31,  1995 and are
classified as part of the external small-ticket  financing programs for 1996 and
thereafter.  In connection with this change in PBI's business focus,  Dictaphone
paid PBCC $11.2 million in January 1995 to terminate its  obligations  under the
buyback  agreement.  Under  modified  operating  agreements,  PBCC  continues to
provide uninterrupted financing programs to both Dictaphone and Monarch.

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

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

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

Tax  Sharing  Agreement
The  Company's  taxable  results are  included in the  consolidated  Federal and
certain  state  income  tax  returns  of Pitney  Bowes.  Under  the Tax  Sharing
Agreement,  dated April 1, 1977,  between the Company and Pitney Bowes (the "Tax
Sharing Agreement"),  the Company makes payment to Pitney Bowes for its share of
consolidated  income taxes,  or receives cash equal to the benefit of tax losses
utilized in  consolidated  returns in exchange for which it issues  non-interest
bearing  subordinated  notes  with a maturity  one day after all senior  debt is
repaid.  The Tax  Sharing  Agreement  can be canceled by either PBI or PBCC upon
twelve months written notice.
<PAGE>
                                    Page - 6

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

PITNEY BOWES INC.

PBI, a Delaware  corporation  organized in 1920, is listed on the New York Stock
Exchange.  Headquartered  in Stamford,  Connecticut,  PBI employs  approximately
29,900 people throughout the United States, Europe, Canada,  Australia and other
countries.  PBI operates  within three industry  segments:  business  equipment,
business services and commercial and industrial financing.

The business  equipment  segment consists of four product,  supplies and service
classes:  mailing, copier systems,  facsimile systems and related financing. The
products are sold,  rented or financed by PBI,  while  supplies and services are
sold. In accordance with postal  regulations,  postage meters may not be sold in
the United  States;  they are rented to users and  therefore  are not subject to
lease by PBCC. The financial services  operations provide global lease financing
for PBI's products.

The business  services  segment  consists of facilities  management and mortgage
servicing. Facilities management services are provided for a variety of business
support and processing functions. Mortgage servicing is administered by AMIC.

The commercial and industrial financing segment, which is shifting its strategic
focus to fee-based financial services,  provides large-ticket financing programs
covering  a  broad  range  of  products  and  other  financial  services  to the
commercial  and  industrial  markets  in the  United  States.  It also  provides
small-ticket  lease  financing  services to small- and  medium-sized  businesses
throughout  the United  States  through a  nationwide  network  of  brokers  and
independent lessors.

At December 31, 1997, PBI and its consolidated  subsidiaries had total assets of
$7.9  billion  and  stockholders'  equity of $1.9  billion.  For the year  ended
December 31, 1997, PBI's  consolidated  revenue and net income were $4.1 billion
and $526.0 million, respectively,  compared with $3.9 billion and $469.4 million
for 1996.

COMPETITION AND REGULATION

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

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

Several  states  have  ceilings  on  interest  rates  which  may be  charged  to
commercial  customers on secured lending  transactions.  PBCC may be required to
charge lower interest rates in certain  jurisdictions than it charges elsewhere,
or to cease offering secured lending  transactions in such states. PBCC does not
extend consumer credit as defined in the Federal Consumer Credit Protection Act.
Accordingly, PBCC's financing transactions are not subject to that Act.
<PAGE>
                                    Page - 7
FUNDING POLICY

PBCC's borrowing strategy is to use a balanced mix of debt maturities, variable-
and fixed-rate debt and interest rate swap agreements ("interest rate swaps") to
control  its  sensitivity  to interest  rate  volatility.  The Company  utilizes
interest  rate swaps when it considers  the economic  benefits to be  favorable.
Interest  rate swaps have been  principally  utilized to fix  interest  rates on
commercial  paper  and/or  obtain a lower cost on debt than would  otherwise  be
available absent the swap. (See ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL  CONDITION AND RESULTS OF OPERATIONS for information  regarding market
risk.) The Company may borrow  through the sale of commercial  paper,  under its
confirmed  bank  lines  of  credit  and  by  private  and  public  offerings  of
intermediate-  or  long-term  debt  securities.  The Company may also issue debt
securities  having  maturities  ranging  from nine months to 30 years  through a
medium-term note program.

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


EMPLOYEE RELATIONS

At December 31, 1997, there were 1,079  individuals  employed by the Company and
its subsidiaries.  Employee relations are considered to be highly  satisfactory.
Management  follows the policy of keeping  employees  informed of its decisions,
and encourages and implements suggestions whenever practicable.



                              ITEM 2. -- PROPERTIES

PBCC's executive and administrative offices are located in Shelton, Connecticut,
which it leases from its parent, PBI. The lease term is for 15 years, cancelable
upon mutual agreement.  Except for its executive  offices,  all of the Company's
remaining  office space is occupied under  operating  leases with original terms
ranging  from  one to  ten  years.  PBCC  has  three  regional  offices  located
throughout the United States and seven district sales offices located in or near
major metropolitan areas. Colonial Pacific Leasing  Corporation's  executive and
administrative  offices are located in  Portland,  Oregon.  Atlantic  Mortgage &
Investment  Corporation's  executive and  administrative  offices are located in
Jacksonville, Florida.


                          ITEM 3. -- LEGAL PROCEEDINGS

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


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

Omitted pursuant to General Instruction I.




                                     PART II

            ITEM 5. -- MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS

All of the  Company's  common stock is owned by Pitney  Bowes Inc.  Accordingly,
there is no public trading market for the Company's  common stock.  The Board of
Directors  declared  and the Company paid  dividends to PBI in amounts  totaling
$78.0  million in 1997,  $71.2  million in 1996 and $62.0  million in 1995.  The
Company intends to continue to pay dividends to PBI in 1998.


<PAGE>
                                    Page - 8
                         PITNEY BOWES CREDIT CORPORATION
                       ITEM 6. -- SELECTED FINANCIAL DATA

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


<TABLE>

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

       For the Year                                             1997           1996           1995           1994            1993
       ------------                                             ----           ----           ----           ----            ----
<S>                                                      <C>            <C>            <C>            <C>             <C>
       Gross finance contracts acquired.............     $ 1,879,084    $ 1,908,105    $ 2,158,549    $ 1,627,974     $ 1,405,516
                                                            ========       ========       ========       ========        ========

       Finance income...............................     $   778,610    $   745,998    $   673,014    $   560,216     $   513,454
       Equipment sales..............................               -         26,666          2,687         45,747               -
       Selling, general and administrative expenses.         183,292        175,235        149,483        113,453          99,332
       Depreciation and amortization................          42,648         40,447         32,031         26,497          16,545
       Cost of equipment sales......................               -         22,821          2,214         43,039               -
       Provision for credit losses..................          78,320         66,529         58,549         56,133          70,245
       Interest expense.............................         197,234        201,543        202,090        151,239         137,372
       Nonrecurring items, net......................               -              -              -         (3,311)              -
                                                            --------       --------       --------       --------        --------
       Income before income taxes...................         277,116        266,089        231,334        218,913         189,960
       Provision for income taxes...................          82,283         86,855         72,678         71,820          66,475
                                                            --------       --------       --------       --------        --------
       Income before effect of accounting changes...         194,833        179,234        158,656        147,093         123,485
       Effect of accounting changes (1).............               -              -              -         (2,820)              -
                                                            --------       --------       --------       --------        --------
       Net income...................................     $   194,833    $   179,234    $   158,656    $   144,273     $   123,485
                                                            ========       ========       ========       ========        ========
       Ratio of earnings to fixed charges (2).......           2.39X          2.31X          2.14X          2.43X           2.37X

       At Year End
       Gross finance assets
       Internal small-ticket programs...............     $ 2,222,735    $ 2,039,567    $ 1,872,593    $ 1,697,890     $ 1,497,678
       External large-ticket programs...............       1,072,695      2,433,450      2,574,338      2,485,419       2,415,370
       External small-ticket programs...............       1,077,292      1,054,120      1,003,702        746,689         670,771
                                                            --------       --------       --------       --------        --------
       Total gross finance assets...................       4,372,722      5,527,137      5,450,633      4,929,998       4,583,819
       Unearned income..............................        (909,280)    (1,285,778)    (1,333,280)    (1,234,928)     (1,173,297)
                                                            --------       --------       --------       --------        --------
       Finance assets...............................     $ 3,463,442    $ 4,241,359    $ 4,117,353    $ 3,695,070     $ 3,410,522
                                                            ========       ========       ========       ========        ========

       Investment in leveraged leases...............     $   667,779    $   617,970    $   562,500    $   478,650     $   298,914
                                                            ========       ========       ========       ========        ========

       Investment in operating leases, net..........     $    32,112    $    86,634    $   114,587    $    95,684     $    63,899
                                                            ========       ========       ========       ========        ========

       Allowance for credit losses..................     $  (116,588)   $   (98,721)   $  (101,355)   $   (95,271)    $   (98,311)
                                                            ========       ========       ========       ========        ========

       Total assets.................................     $ 5,328,340    $ 5,347,002    $ 5,057,874    $ 4,451,837     $ 3,931,462
                                                            ========       ========       ========       ========        ========
       Senior notes payable
       Within one year..............................     $ 1,970,110    $ 1,901,581    $ 2,122,880    $ 2,075,591     $ 1,735,607
       After one year...............................       1,050,000      1,275,000      1,020,500        745,500         775,295
                                                            --------       --------       --------       --------        --------
       Total senior notes payable...................     $ 3,020,110    $ 3,176,581    $ 3,143,380    $ 2,821,091     $ 2,510,902
                                                            ========       ========       ========       ========        ========

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

       Subordinated notes payable...................     $   270,487    $   229,154    $   170,857    $   133,735     $   108,834
                                                            ========       ========       ========       ========        ========

       Stockholder's equity.........................     $ 1,094,861    $   978,028    $   869,994    $   773,338     $   671,065
                                                            ========       ========       ========       ========        ========

       Debt to equity...............................          3.01:1         3.62:1         3.98:1         3.82:1          3.90:1
</TABLE>

(1)  Effective  January 1, 1994,  the Company  adopted  Statement  of  Financial
Accounting   Standards  No.  112  "Employers'   Accounting  for   Postemployment
Benefits."
(2) In  computing  the ratio of earnings to fixed  charges,  earnings  have been
calculated  by adding  to  earnings  before  income  taxes  the  amount of fixed
charges.  Fixed charges  consist of interest on debt and a portion of net rental
expense deemed to represent interest.

<PAGE>
                                    Page - 9
                         PITNEY BOWES CREDIT CORPORATION
     ITEM 7. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

EVENTS IMPACTING COMPARABILITY

On January 1, 1997,  the  Company  adopted  Statement  of  Financial  Accounting
Standards No. 125,  "Accounting for Transfers and Servicing of Financial  Assets
and Extinguishments of Liabilities." The adoption of this statement did not have
a material impact on the Company's financial condition or results of operations.

RESULTS OF OPERATIONS

The Company's  finance  income  increased 4.4 percent to $778.6  million in 1997
compared  with  $746.0  million in 1996,  which was up 10.8  percent  from 1995.
Finance  income for  internal  small-ticket  financing  programs  increased  7.7
percent to $331.8  million in 1997 compared with $308.1  million in 1996,  which
was up 2.5  percent  from 1995.  These  increases  are  primarily  due to higher
investment  levels for the mailing and copier  portfolios and higher income from
fee-based  programs,  partially offset in 1996 by the transfer of the Dictaphone
and Monarch portfolios to external small-ticket financing programs subsequent to
the sale of these entities by Pitney Bowes in 1995.  Finance income for external
large-ticket  financing programs decreased 8.3 percent to $183.1 million in 1997
compared with $199.7  million in 1996,  which was up 1.9 percent from 1995.  The
decrease  in 1997 is due to  substantially  lower  investment  levels  from  the
transfer of finance assets totaling  approximately $1.0 billion during 1997 (See
Note 2 to CONSOLIDATED FINANCIAL  STATEMENTS.),  partly offset by higher revenue
from income- and  fee-based  programs.  The 1996  increase  resulted from higher
income from fee-based  programs and the sale of $139 million of finance  assets,
largely offset by lower investment levels.  Both 1997 and 1996 growth rates were
affected by lower  lease  rates on new  business.  Finance  income for  external
small-ticket  financing programs increased 2.9 percent to $190.5 million in 1997
compared with $185.2 million in 1996, which was up 32.9 percent from 1995. These
revenues include gains on asset sales of $25.7 million,  $24.5 million and $18.8
million in 1997, 1996 and 1995,  respectively.  These revenues also include $9.9
million  in 1997 and $14.3  million  in 1996  from the  Dictaphone  and  Monarch
portfolios.  Aside from these effects,  revenues increased in both 1997 and 1996
due to higher new lease  volume  and  higher  income  from  fee-based  programs.
Revenue  generated  from  mortgage  servicing  increased  38.2  percent to $73.2
million in 1997 compared  with $53.0 million in 1996,  which was up 42.7 percent
from 1995.  The  increases  for the  current and prior year are due to a growing
mortgage  servicing  portfolio and is consistent with the Company's  strategy to
increase its fee-based programs.

The Company had no equipment sales in 1997 compared to $26.7 million in 1996 and
$2.7 million in 1995. The book value of such equipment sold was $22.8 million in
1996 and $2.2 million in 1995.

Selling,  general and administrative  ("SG&A") expenses increased 4.6 percent to
$183.3 million in 1997 compared with $175.2  million in 1996,  which was up 17.2
percent from 1995. SG&A expenses for internal  small-ticket  financing  programs
increased  7.8 percent to $65.2  million in 1997  compared  to $60.4  million in
1996,  which was 7.7 percent above 1995.  These increases are principally due to
higher  personnel,  professional  and  other  startup  expenses  related  to new
business and  strategic  initiatives.  SG&A  expenses for external  large-ticket
financing programs increased 33.6 percent to $28.7 million in 1997 compared with
$21.5  million in 1996,  up 22.0 percent from 1995.  SG&A for 1997 includes $5.0
million of costs related to the transfer of certain external large-ticket assets
made  during  the  year.  (See  Note 2 to  CONSOLIDATED  FINANCIAL  STATEMENTS.)
Excluding this amount,  increases in SG&A expenses were due to higher  personnel
related costs and higher  utilization of corporate systems and support personnel
and  resources.  SG&A  expenses for  external  small-ticket  financing  programs
decreased  10.6 percent to $66.5  million in 1997 compared with $74.4 million in
1996,  which was up 20.5 percent from 1995.  These  expenses  include asset sale
costs of $12.7 million,  $10.5 million and $12.2 million in 1997, 1996 and 1995,
respectively. Beginning in 1996, these expenses also include expenses related to
the Dictaphone  and Monarch  portfolios of $0.9 million in 1997 and $1.2 million
in 1996. Aside from these effects, increases in expenses resulted from portfolio
growth and higher  marketing fees paid to brokers,  while decreases in expenses,
principally in 1997,  resulted from reduced  expenses related to the liquidation
of  assets  purchased  from  the  Company's  German  affiliate,  Adrema  Leasing
Corporation  ("Adrema"),  and lower legal and consulting expenses. SG&A expenses
related to mortgage  servicing  increased  21.3 percent to $22.9 million in 1997
compared  with  $18.9  million  in 1996,  which  was up 35.1  percent  from 1995
primarily due to a growing mortgage servicing portfolio.

Depreciation on operating  leases was $11.6 million in 1997 and $15.4 million in
1996 reflecting a lower operating lease average  investment balance during 1997.
Amortization of mortgage servicing rights and acquisition fees was $28.3 million
in 1997 compared to $22.2 million in 1996. This increase is principally due to a
larger mortgage  servicing  portfolio in 1997. The amortization of fees incurred
in connection with the 1993 majority-owned  commercial aircraft  partnership was
$2.6 million in 1997 and $2.5 million in 1996.
<PAGE>
                                   Page - 10

The provision for credit losses in 1997  increased 17.7 percent to $78.3 million
compared to $66.5 million for 1996,  which increased 13.6 percent from 1995. The
provision for the internal small-ticket financing programs increased 2.4 percent
to $31.7 million in 1997 compared to $31.0 million in 1996,  which had decreased
9.5 percent from 1995.  These  provisions  reflect  increased  portfolio  growth
offset by continuing favorable collection experience. The provision for external
large-ticket  financing  programs  was $0.5  million in 1997  compared  with $.7
million in 1996,  reflective of the continuing minimal credit losses experienced
in this  portfolio.  The  provision  for  the  external  small-ticket  financing
programs  increased  32.4 percent to $46.1  million in 1997  compared with $34.8
million in 1996, which increased 32.9 percent from 1995. Provisions for external
small-ticket  asset sales were $8.9  million,  $6.6 million and $5.4 million for
1997,  1996 and 1995,  respectively,  while  provisions  for the  Dictaphone and
Monarch portfolios were $1.8 million in 1997 and $2.6 million in 1996. Exclusive
of these effects,  the higher  provision levels are reflective of higher earning
asset  levels,   increasing  levels  of  bankruptcies  in  this  portfolio,  and
management's evaluations of expected losses.

The  Company's  allowance  for  credit  losses  as a  percentage  of  net  lease
receivables  (net  investments  before  allowance  for  credit  losses  plus the
uncollected  principal balance of receivables sold, exclusive of assets held for
sale) was 2.55 percent at December  31, 1997,  1.88 percent at December 31, 1996
and 2.03 percent at December 31, 1995. PBCC charged $60.5 million, $69.2 million
and $52.5 million  against the  allowance  for credit  losses in 1997,  1996 and
1995,  respectively.  These  included  recoveries  of $0.7  million  in 1997 and
write-offs of $20.9  million and $14.2  million in 1996 and 1995,  respectively,
which were related to assets purchased from Adrema.

Interest  expense was $197.2  million in 1997  compared  with $201.6  million in
1996, a decrease of 2.1 percent.  The decrease in 1997  reflects  lower  average
borrowings  partly offset by higher  short-term  interest  rates.  The effective
interest rate on short-term average borrowings was 5.00 percent in 1997 compared
to 4.89  percent in 1996 and 5.50  percent in 1995.  The Company  does not match
fund its financing  investments and does not apply  different  interest rates to
its various financing programs.

The  effective  tax rate for 1997 was 29.7 percent  compared to 32.6 percent for
1996 and 31.4 percent in 1995. The lower  effective tax rate is principally  due
to lower state tax requirements  related to certain leveraged lease transactions
as well as a higher level of tax exempt income.

Net income  increased 8.7 percent to $194.8 million in 1997 compared with $179.2
million in 1996,  which was up 13.0 percent  from 1995.  The increase in 1997 is
primarily  attributable to higher Internal Financing Division investment levels,
additional  fee-based  income and lower borrowing levels partly offset by higher
SG&A and depreciation and amortization expenses.

The  Company's  ratio of  earnings  to fixed  charges  was 2.39  times  for 1997
compared with 2.31 times for 1996 and 2.14 times for 1995. The increase reflects
the disposition of external large-ticket assets,  proceeds from which, were used
for debt reduction.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of funds are from operations and borrowings.  It
has been PBCC's practice to use a balanced mix of debt maturities,  variable-and
fixed-rate  debt and interest rate swap agreements to control its sensitivity to
interest  rate  volatility.  PBCC's  debt mix was 60 percent  short-term  and 40
percent long-term at December 31, 1997 and 58 percent  short-term and 42 percent
long-term at December 31, 1996. The Company utilizes interest rate swaps when it
considers the economic  benefits to be favorable.  Interest rate swaps have been
principally  utilized to fix interest rates on commercial  paper and/or obtain a
lower cost on debt than would  otherwise be available  without the interest rate
swap. PBCC's  swap-adjusted  interest rate debt mix was 47 percent variable rate
and 53 percent fixed rate at December 31, 1997 and 43 percent  variable rate and
57 percent fixed rate at December 31, 1996.  The Company may borrow  through the
sale of  commercial  paper,  under its  confirmed  bank lines of credit,  and by
private and public offerings of intermediate- or long-term debt securities.

The  Company is exposed to credit  loss in the event of  non-performance  by the
counterparties  to the  interest  rate swaps to the  extent of the  differential
between  fixed- and  variable-rates;  such exposure is considered  minimal.  The
Company  has  entered  into  foreign  currency  contracts  for  the  purpose  of
minimizing  its risk of loss from  fluctuations  in exchange rates in connection
with certain  intercompany loans and certain transfers to the Company by foreign
affiliates of foreign currency  denominated  lease  receivables.  The Company is
exposed to credit loss in the event of  non-performance by the counterparties to
the foreign currency  contracts to the extent of the difference between the spot
rate at the date of the contract delivery and the contracted rate; such exposure
is considered minimal. (See Note 12 to CONSOLIDATED FINANCIAL STATEMENTS.)

At December 31, 1997,  the Company had $250 million of unissued debt  securities
remaining  under a shelf  registration  statement  filed with the Securities and
Exchange Commission in September 1995. In January 1998, PBCC issued $250 million
of debt  securities  available under the shelf  registration.  Proceeds from the
debt issuance will be used to help meet the  Company's  financing  needs for the
next year.  (See Note 19 to  CONSOLIDATED  FINANCIAL  STATEMENTS.)  The  Company
intends to file a new shelf registration statement during 1998. The Company also
entered into a interest rate swap  agreement for $125 million to better  control
its  sensitivity  to interest  rate  volatility.  Including the new debt and the
interest rate swap, PBCC's swap-adjusted  interest rate debt mix at December 31,
1997 would have been 41 percent  variable  rate and 59 percent  fixed rate.  The
Company also had unused lines of credit and revolving credit facilities totaling
$1.5 billion at December 31,  1997,  largely  supporting  its  commercial  paper
borrowings.
<PAGE>
                                   Page - 11

The Company  continues  to actively  pursue a strategy of external  large-ticket
asset sales,  thereby  allowing  the Company to focus on fee- and  service-based
revenue rather than asset-based  income.  In keeping with this strategy,  during
1997 the Company entered into a transaction with GATX Capital  Corporation which
reduced external  large-ticket  finance assets by  approximately $1 billion.  As
part of this same transaction,  the Company holds  approximately $158 million of
equity  investment in a limited liability  company.  (See Note 2 to CONSOLIDATED
FINANCIAL   STATEMENTS.)   During  1997,   1996  and  1995,   the  Company  sold
approximately  $178  million,  $270 million and $100 million,  respectively,  of
external small-ticket finance assets. The Company also sold $86 million and $139
million of external  large-ticket  finance assets during 1997 and 1996. Sales of
these asset  portfolios  were made with  limited  recourse  in  privately-placed
transactions  with third-party  investors.  The proceeds from the sales of these
assets  were  used  to  repay  a  portion  of  the  Company's  commercial  paper
borrowings.  The uncollected  principal  balance of receivables sold at December
31, 1997 and 1996 was $391 million and $270 million, respectively.

The Company's  liquidity  ratio  (finance  contracts  receivable  plus residuals
expected to be realized in cash over the next 12 months to current maturities of
debt over the same  period) was .89 and .78 times at December 31, 1997 and 1996,
respectively.

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

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

MARKET RISK

In the normal  course of  business,  PBCC is exposed to the impact of changes in
interest rates and fluctuations in foreign  currency  exchange rates. As part of
its established policies and procedures,  the Company uses financial instruments
in an attempt to better manage this exposure.

The Company's  objectives with regard to managing its interest rate exposure are
to limit the impact of interest  rate  changes on earnings  and cash flow and to
lower its overall  borrowing costs. To achieve these objectives the Company uses
a balanced mix of debt  maturities  and  variable-  and  fixed-rate  debt and by
entering into interest rate swaps.

PBCC's  objective with regard to managing its foreign currency  exposure,  which
principally involve loans to foreign affiliates,  is to reduce the volatility in
earnings and cash flow associated with foreign  currency  exchange rate changes.
Accordingly,  the Company enters into foreign  currency  contracts in connection
with certain  intercompany loans and certain transfers to the Company by foreign
affiliates of foreign  currency  denominated  lease  receivables.  The principal
currencies  hedged are the British pound, the Canadian dollar and the Australian
dollar.  The gains and losses on these contracts  offset changes in the value of
the related exposures.

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

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

The VaR model is a risk analysis  tool and does not purport to represent  actual
losses in fair value that will be  incurred by PBCC,  nor does it  consider  the
potential effect of favorable  changes in market factors.  At December 31, 1997,
the Company's  maximum potential one-day loss in fair value on the interest rate
swaps and foreign currency contracts,  using a  variance/co-variance  technique,
was not material to the Company's financial  position,  results of operations or
cash flows.
<PAGE>
                                   Page - 12
YEAR 2000
The Company is working to resolve the  potential  impact of the year 2000 on the
processing  of   date-sensitive   information  by  the  Company's   computerized
information  systems. As part of its ongoing investment in advanced  information
technology,  the Company's systems and applications acquired in recent years are
year 2000 compliant.  The Company has committed  internal and external resources
to  identify  systems and  applications  that are not year 2000  compliant,  has
developed a plan and timetable for implementation and testing,  and continuously
monitors  its progress in ensuring  timely  resolution  of year 2000  issues.  A
substantial  portion  of this  work is  planned  to be  completed  in 1998  with
remaining work expected to be completed in 1999.

At this time,  the  Company is not aware of any reason or  situation  that would
impede the  achievement of its plan and timetable,  nor does it anticipate  that
the cost of  addressing  this issue will have a material  adverse  impact on its
financial  condition,  results of  operations  or cash flows in future  periods.
However,  the Company  recognizes its  limitations  in  influencing  third-party
constituents (i.e., vendors,  customers,  financial institutions,  etc.) and the
complexity  of the year 2000 issue.  There can be no  assurance  that such third
parties will convert  their  systems in a timely manner nor that such failure to
do so will not have a  material  effect on the  Company's  financial  condition,
results of operations or cash flows.


LEGAL, ENVIRONMENTAL AND REGULATORY MATTERS

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

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

In June 1995,  the United States Postal  Service  ("USPS")  finalized and issued
regulations  governing the manufacture,  distribution and use of postage meters.
These regulations cover four general categories: meter security,  administrative
controls,  Computerized  Meter Resetting Systems and other issues.  Pitney Bowes
continues  to  comply  with  these  regulations  in its  ongoing  postage  meter
operations.

In May 1996, the USPS issued a proposed  schedule for the phaseout of mechanical
meters in the United  States.  Between May 1996 and March 1997,  PBI worked with
the USPS to negotiate a revised mechanical meter migration schedule which better
reflected  the  needs of  existing  mechanical  meter  users and  minimized  any
potential  negative financial impact. The final schedule agreed to with the USPS
is as follows:

as of June 1, 1996,  new  placements  of  mechanical  meters  would no longer be
permitted;  replacements of mechanical meters  previously  licensed to customers
would be permitted prior to the applicable  suspension date for that category of
mechanical meter

-as of March 1, 1997,  use of mechanical  meters by persons or firms who process
mail for a fee would be suspended and would have to be removed from service

-as of December 31, 1998,  use of  mechanical  meters that  interface  with mail
machines or processors  ("systems  meters") would be suspended and would have to
be removed from service

-as of March 1, 1999, use of all other mechanical meters ("stand-alone  meters")
would be suspended and have to be removed from service

Based on the  foregoing  schedule,  PBI believes that the phaseout of mechanical
meters will not have a material adverse financial impact.

As a result of the PBI's  aggressive  efforts to meet the USPS mechanical  meter
migration  schedule  combined  with its ongoing  and  continuing  investment  in
advanced postage  evidencing  technologies,  mechanical  meters represent 25% of
PBI's installed U.S. meter base as of December 31, 1997, compared with 40% as of
December 31, 1996. At December 31, 1997, 75% of PBI's  installed U.S. meter base
is electronic or digital, as compared to 60% at December 31, 1996.


<PAGE>
                                   Page - 13

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

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

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

-a Host specification

-a Vendor Infrastructure specification

In July 1996, the USPS published for public comment draft specifications for the
Indicium, Postal Security Device and Host specifications. Pitney Bowes submitted
extensive   comments  to  these   specifications   in  November  1996.   Revised
specifications  were  then  published  in 1997  which  incorporated  many of the
changes  recommended by PBI in its prior comments,  including the recommendation
that IBIP apply only to the personal  computer ("PC")  environment and not apply
at the present time to other digital postage  evidencing  systems.  Pitney Bowes
submitted comments to these revised specifications. Also, in March 1997 the USPS
published for public comment the Vendor Infrastucture specification to which PBI
responded  on June 27,  1997.  As of  December  31,  1997,  the USPS had not yet
finalized the four IBIP  specifications;  however PBI has developed a PC product
which  satisfies  the proposed  IBIP  specifications.  This product is currently
undergoing testing by the USPS and is expected to be ready for market when final
approval of the specifications is issued.


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


<PAGE>
                                   Page - 14
                         PITNEY BOWES CREDIT CORPORATION
             ITEM 8. -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



REPORT OF INDEPENDENT ACCOUNTANTS


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

In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing under Item 14(a)(1) and (2) on page 35 present fairly, in all material
respects,  the  financial  position of Pitney Bowes Credit  Corporation  and its
subsidiaries  (the  "Company") at December 31, 1997 and 1996, and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 1997,  in  conformity  with  generally  accepted  accounting
principles.  These financial  statements are the responsibility of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.


PRICE WATERHOUSE LLP



Stamford, Connecticut
January 26, 1998




<PAGE>
                                   Page - 15
                        PITNEY BOWES CREDIT CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
                            (in thousands of dollars)


<TABLE>

         Years Ended December 31                                                  1997              1996             1995
                                                                                  ----              ----             ----
         Revenue:
<S>                                                                          <C>               <C>              <C>
           Finance income......................................              $ 778,610         $ 745,998        $ 673,014
           Equipment sales.....................................                      -            26,666            2,687
                                                                               -------           -------          -------

             Total revenue.....................................                778,610           772,664          675,701
                                                                               -------           -------          -------

         Expenses:
           Selling, general and administrative.................                183,292           175,235          149,483
           Depreciation and amortization.......................                 42,648            40,447           32,031
           Cost of equipment sales.............................                      -            22,821            2,214
           Provision for credit losses.........................                 78,320            66,529           58,549
           Interest............................................                197,234           201,543          202,090
                                                                               -------           -------          -------
             Total expenses....................................                501,494           506,575          444,367
                                                                               -------           -------          -------
         Income before income taxes............................                277,116           266,089          231,334
         Provision for income taxes............................                 82,283            86,855           72,678
                                                                               -------           -------          -------

         Net income............................................              $ 194,833         $ 179,234        $ 158,656
                                                                               =======           =======          =======

</TABLE>



                   CONSOLIDATED STATEMENT OF RETAINED EARNINGS
                            (in thousands of dollars)

<TABLE>

         Years Ended December 31                                                  1997              1996             1995
                                                                                  ----              ----             ----

<S>                                                                       <C>                  <C>              <C>
         Retained earnings at beginning of year................           $    890,303         $ 782,269        $ 685,613
         Net income for the year...............................                194,833           179,234          158,656
         Dividends paid to Pitney Bowes Inc....................                (78,000)          (71,200)         (62,000)
                                                                              --------           -------          -------

         Retained earnings at end of year......................           $  1,007,136         $ 890,303        $ 782,269
                                                                              ========           =======          =======

</TABLE>






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



<PAGE>
                                   Page - 16
                         PITNEY BOWES CREDIT CORPORATION
                           CONSOLIDATED BALANCE SHEET
                            (in thousands of dollars)
<TABLE>


                                                                                            December 31,

                                                                                       1997             1996
                                                                                       ----             ----
Assets:
<S>                                                                            <C>               <C>
Cash.....................................................................      $     36,320      $    20,937
                                                                                  ---------        ---------
Investments:
  Finance assets.........................................................         3,463,442        4,241,359
  Investment in leveraged leases.........................................           667,779          617,970
  Assets transferred from affiliate......................................            12,096           32,825
  Investment in operating leases, net of accumulated depreciation........            32,112           86,634
  Allowance for credit losses............................................          (116,588)         (98,721)
                                                                                  ---------        ---------
    Net investments......................................................         4,058,841        4,880,067
                                                                                  ---------        ---------

  Mortgage servicing rights, net of accumulated amortization.............           220,912          138,146
  Assets held for sale...................................................           305,228          140,420
  Investment in partnership..............................................           158,327                -
  Loans and advances to affiliates.......................................           290,488            8,711
  Other assets...........................................................           258,224          158,721
                                                                                  ---------        ---------
     Total assets........................................................      $  5,328,340      $ 5,347,002
                                                                                  =========        =========

Liabilities:
  Senior notes payable within one year...................................      $  1,970,110      $ 1,901,581
  Short-term notes payable to affiliates.................................                 -          139,400
  Accounts payable to affiliates.........................................           232,917          168,558
  Accounts payable and accrued liabilities...............................           199,905          176,657
  Deferred taxes.........................................................           510,060          478,624
  Senior notes payable after one year....................................         1,050,000        1,275,000
  Subordinated notes payable.............................................           270,487          229,154
                                                                                  ---------        ---------
      Total liabilities..................................................         4,233,479        4,368,974
                                                                                  ---------        ---------
Stockholder's Equity:
  Common stock...........................................................            46,000           46,000
  Capital surplus........................................................            41,725           41,725
  Retained earnings......................................................         1,007,136          890,303
                                                                                  ---------        ---------
     Total stockholder's equity..........................................         1,094,861          978,028
                                                                                  ---------        ---------
     Total liabilities and stockholder's equity..........................      $  5,328,340      $ 5,347,002
                                                                                  =========        =========


</TABLE>



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



<PAGE>
                                   Page - 17
                         PITNEY BOWES CREDIT CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                            (in thousands of dollars)

<TABLE>

Years Ended December 31                                                         1997           1996            1995
                                                                                ----           ----            ----

Operating Activities
<S>                                                                      <C>            <C>            <C>
Net income...........................................................    $   194,833    $   179,234    $   158,656
Adjustments to reconcile net income to net cash provided by
 operating activities:
  Provision for credit losses........................................         78,320         66,529         58,549
  Depreciation and amortization......................................         42,648         40,447         32,031
  Cost of equipment sales............................................              -         22,821          2,214
 Increase in deferred taxes..........................................         31,436         37,300         99,290
 Increase in other receivables.......................................        (37,782)        (8,315)        (3,936)
 Increase in foreclosure claims receivable...........................        (24,155)        (3,673)        (3,783)
 Increase in advances and deposits...................................        (23,351)        (6,168)        (4,702)
 Increase (decrease) in accounts payable to affiliates...............         64,359         41,551        (26,353)
 Increase (decrease) in accounts payable and accrued liabilities.....         23,248         21,054        (72,676)
 Increase in assets transferred from affiliates......................         (6,202)        (6,226)       (35,582)
 Other, net..........................................................            (65)       (18,748)        (2,326)
                                                                           ---------      ---------       --------
Net cash provided by operating activities                                    343,289        365,806        201,382
                                                                           ---------      ---------       --------
Investing Activities
  Investment in net finance assets...................................     (1,414,207)    (1,488,380)    (1,527,065)
  Investment in leveraged leases.....................................        (46,390)       (22,446)       (43,509)
  Investment in operating leases.....................................        (16,023)       (20,348)       (35,067)
  Investment in assets held for sale.................................       (650,951)      (326,691)      (151,640)
  Cash receipts collected under lease contracts, net of finance
     income recognized...............................................      2,538,321      1,557,822      1,142,254
  Investment in mortgage service rights..............................       (110,014)       (50,407)       (64,310)
  Loans and advances to affiliated companies, net....................       (281,777)        (2,001)        38,991
  Additions to equipment and leasehold improvements..................        (14,327)       (12,536)        (9,277)
                                                                           ---------      ---------       --------
Net cash provided by (used in) investing activities..................          4,632       (364,987)      (649,623)
                                                                           ---------      ---------       --------
Financing Activities
   Increase (decrease) in short-term debt............................         89,029       (466,799)        76,789
   Short-term loans from affiliates..................................       (139,400)       (10,309)       149,709
   Proceeds from issuance of senior notes payable after one year.....              -        500,000        275,000
   Proceeds from issuance of subordinated debt.......................         41,333         58,297         37,862
   Settlement of long-term debt......................................       (245,500)             -        (29,500)
   Payments to settle subordinated debt..............................              -              -           (740)
   Dividends paid to Pitney Bowes, Inc...............................        (78,000)       (71,200)       (62,000)
                                                                           ---------      ---------       --------
Net cash (used in) provided by financing activities..................       (332,538)         9,989        447,120
                                                                           ---------      ---------       --------

Increase (decrease) in cash..........................................         15,383         10,808         (1,121)
Cash at beginning of year............................................         20,937         10,129         11,250
                                                                           ---------      ---------       --------
Cash at end of year..................................................   $     36,320   $     20,937   $     10,129
                                                                           =========      =========       ========

Interest paid........................................................   $    196,968   $    197,256   $    199,346
                                                                           =========      =========       ========
Income taxes refunded, net...........................................   $    (21,773)  $    (44,397)  $    (36,360)
                                                                           =========      =========       ========
</TABLE>

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

<PAGE>
                                   Page - 18
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. - Summary of Significant Accounting Policies

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

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

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

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

The Company has, from  time-to-time,  sold selected  finance  assets.  Beginning
January 1, 1997, the Company adopted Statement of Financial Accounting Standards
No.  125  "Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
Extinguishments  of Liabilities",  to account for the sale of these assets.  All
assets  obtained or  liabilities  incurred in  consideration  are  recognized as
proceeds  of the sale and any  resulting  gain or loss is  recognized  in income
currently. Prior to January 1, 1997, the Company followed Statement of Financial
Accounting  Standards  No.  77,  "Reporting  by  Transferors  for  Transfers  of
Receivables with Recourse", when accounting for its sale of finance assets.

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

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

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

Investment in operating leases
Equipment  under  operating  leases is depreciated  over the initial term of the
lease to its  estimated  residual  value.  Rental  revenue  is  recognized  on a
straight-line basis over the related lease term.
<PAGE>
                                   Page - 19
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1. - Summary of Significant Accounting Policies (continued)

Mortgage  servicing rights
The Company recognizes as separate assets - mortgage servicing rights ("MSRs") -
rights to service mortgage loans for others,  whether those servicing rights are
originated  or  purchased.  Servicing  rights  originated  by  others  purchased
separately  from loans are recorded at cost The Company  assesses  impairment of
MSRs based on the fair value of those  rights.  The Company  estimates  the fair
value of MSRs based on estimated future net servicing income,  using a valuation
model which considers such factors as market discount rates and loan repayments.
The  Company's  policy  for  evaluating  MSRs is based on the  predominant  risk
characteristics  of the underlying loans,  which for the Company's MSRs includes
adjustable  rate  versus  fixed  rate,  segregated  into strata by loan type and
interest rate bands. The amount of impairment  recognized is the amount by which
the capitalized  MSRs for a stratum exceed  estimated fair value.  Impairment is
recognized through a valuation allowance.

MSRs are amortized in proportion to and over the period of the estimated  future
net servicing income stream of the underlying mortgages.  The Company may adjust
amortization  prospectively  in  response  to changes in actual and  anticipated
prepayments, foreclosure, delinquency and cost experience.

Assets held for sale
Certain high quality external large-ticket  transactions are funded and held for
a short period of time pending sale to prospective buyers.  Assets held for sale
are segregated from the Company's net investment amounts and are recorded at net
carrying  value (cost plus accrued  interest less finance  receipts).  Income is
recognized when the contract for the sale of the asset is executed, representing
the excess of sale proceeds over net asset carrying value.  The Company does not
maintain  a  separate  loss  reserve  for  assets  held  for  sale  due to their
relatively short holding period and valuation method.

Note 2. - Finance Assets

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

<TABLE>
            December 31                                                            1997           1996
                                                                                  ----           ----
            (in thousands of dollars)
<S>                                                                        <C>            <C>
            Gross finance receivables..................................    $ 3,911,671    $ 4,826,361
            Unguaranteed residual valuation............................        461,051        700,776
            Initial direct costs deferred..............................         85,497         91,588
            Unearned income............................................       (994,777)    (1,377,366)
                                                                             ---------      ---------
              Total finance assets.....................................    $ 3,463,442    $ 4,241,359
                                                                             =========      =========
</TABLE>

Gross finance receivables represent earning assets held by the Company which are
generally due in monthly,  quarterly or semi-annual  installments  over original
periods ranging from 36 to 180 months.  In addition,  gross finance  receivables
for the Company's external large-ticket programs include commercial jet aircraft
transactions  with original lease terms up to 25 years and other  non-commercial
jet aircraft  transactions  with lease terms ranging from three to 12 years. The
balance due at December 31, 1997,  including estimated residual value realizable
at the end of the lease term, is payable as follows:

   <TABLE>
                                                 Gross Finance Assets
                           --------------------------------------------------------------------------
                             Internal             External             External
                           small-ticket         large-ticket         small-ticket
                             programs             programs             programs               Total

<S>      <C>                <C>                  <C>                  <C>                  <C>
         1998               $  897,215           $  118,870           $  430,908           $1,446,993
         1999                  608,844               89,930              303,376            1,002,150
         2000                  433,251               93,304              203,941              730,496
         2001                  225,156               89,062              104,971              419,189
         2002                   54,300              101,589               33,896              189,785
         Thereafter              3,969              579,940                  200              584,109
                              --------             --------             --------             --------

         Total              $2,222,735           $1,072,695           $1,077,292           $4,372,722
                              ========             ========             ========             ========
</TABLE>

<PAGE>
                                   Page - 20
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2. - Finance Assets (continued)

Net equipment  financed for Pitney Bowes  products were $611.2  million,  $571.6
million and $545.6 million in 1997, 1996, and 1995, respectively.

During 1997, the Company entered into an agreement with GATX Capital Corporation
which reduced external large-ticket finance assets by approximately 50%, or $958
million.  This was accomplished  through a sale of approximately $800 million of
assets and an investment of  approximately  $158 million in a limited  liability
company.

In addition,  PBCC sold finance assets with limited  recourse,  of approximately
$264  million,   $409  million  and  $100  million  in  1997,   1996  and  1995,
respectively.  The uncollected principal balance of receivables sold at December
31, 1997 and 1996 was $391 million and $270 million,  respectively.  The maximum
risk of loss in these transactions  arises from the possible  non-performance of
lessees to meet the terms of their  contracts  and from  changes in the value of
the  underlying  equipment.  Conversely,  these  contracts  are supported by the
underlying  equipment value and  creditworthiness  of customers.  As part of the
review of its exposure to risk, the Company  believes  adequate  provisions have
been made for sold receivables which may become uncollectible.

As of December 31, 1997,  $373.7 million (10.8 percent) of the Company's finance
assets and $521.0 million (11.9  percent) of the Company's  gross finance assets
were related to aircraft leased to commercial  airlines.  The Company  considers
its credit risk for these  leases to be minimal  since all  commercial  aircraft
lessees are making  payments in accordance  with lease  agreements.  The Company
believes any potential exposure in commercial  aircraft  investment is mitigated
by the value of the collateral as the Company retains a security interest in the
leased aircraft.

Note 3. - Net Investment in Leveraged Leases

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

<TABLE>
            December 31                                                            1997           1996
                                                                                  ----           ----
            (in thousands of dollars)
<S>                                                                          <C>            <C>
            Net rents receivable.......................................      $ 627,655      $ 532,205
            Unguaranteed residual valuation............................        599,741        640,978
            Unearned income............................................       (559,617)      (555,213)
                                                                             ---------      ---------
            Investment in leveraged leases.............................        667,779        617,970
            Deferred taxes arising from
             leveraged leases (1) .....................................       (308,746)      (257,760)
                                                                             ---------      ---------
            Net investment in leveraged leases.........................      $ 359,033      $ 360,210
                                                                             =========      =========
</TABLE>

 (1) Includes amounts reclassified to subordinated debt.

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

<TABLE>
           Year Ended December 31                                  1997          1996            1995
                                                                   ----          ----            ----
           (in thousands of dollars)
<S>                                                            <C>           <C>            <C>
           Pretax leveraged lease income...............        $  4,467      $   7,145      $  11,236
           Income tax benefit..........................          17,110          7,080          4,609
                                                                -------        -------        -------
            Net income from leveraged leases...........        $ 21,577       $ 14,225      $  15,845
                                                                =======        =======        =======
</TABLE>

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

<PAGE>
                                   Page - 21
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. - Net Investment in Leveraged Leases (continued)

Leveraged lease  investments  totaling $289.2 million (43.3 percent) are related
to commercial real estate facilities, with original lease terms ranging up to 25
years.  Also  included are seven  aircraft  transactions  with major  commercial
airlines,  with a total  investment of $293.5  million  (43.9  percent) and with
original  lease terms  ranging from 22 to 25 years;  one  transaction  involving
locomotives  with a total  investment  of $35.3  million (5.3  percent)  with an
original  lease term of 38 years and three  transactions  involving rail and bus
facilities  with a total  investment of $48.6 million (7.3 percent) and original
lease terms of 37 to 44 years.

Note 4. - Transfer of Assets from Affiliate

As disclosed in previous filings, in December 1992, as part of the restructuring
of the Company's German affiliate,  Adrema Leasing Corporation  ("Adrema"),  the
Company  purchased  certain  finance  receivables  and other assets from Adrema.
Based on the  evaluation of these assets,  Pitney Bowes and the Company  believe
that sufficient reserves for credit losses are in place to provide for currently
expected  losses.  As part of the orderly  liquidation  of assets  from  leasing
non-Pitney  Bowes  products in  Germany,  Adrema  continues  to bill and collect
accounts and repossess and remarket collateral where possible over the remainder
of the lease terms.

Note 5. - Investment in Operating Leases, Net

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

Minimum  future  rental  payments  to be received in each of the next five years
under  noncancelable  operating leases are $2.1 million in 1998, $1.2 million in
1999,  $0.8 million in 2000, $0.4 million in 2001, $0.2 million in 2002 and $0.4
million thereafter.

Note 6. - Allowance for Credit Losses

The following is a summary of the allowance for credit losses, substantially all
of which relates to lease financing:

<TABLE>
           December 31                                             1997           1996           1995
                                                                   ----           ----           ----
           (in thousands of dollars)
<S>                                                           <C>           <C>             <C>
            Beginning balance..........................       $  98,721     $  101,355      $  95,271

            Additions charged to operations............          78,320         66,529         58,549

            Amounts written-off:
               Internal small-ticket programs..........         (27,182)       (22,879)       (24,330)
               External large-ticket programs..........              40           (101)          (356)
               External small-ticket programs..........         (33,311)       (46,183)       (27,779)
                                                                -------        -------        -------
                   Total write-offs....................         (60,453)       (69,163)       (52,465)
                                                                -------        -------        -------

            Ending balance.............................       $ 116,588      $  98,721      $ 101,355
                                                                =======        =======        =======
</TABLE>

The increase in the amount of additions  charged to operations in 1997, 1996 and
1995 is the  result of  higher  investment  levels  in all of  PBCC's  financing
programs and the impact of finance asset sales in 1997, 1996 and 1995, partially
offset by  favorable  adjustments  to the  internal  small-ticket  and  external
large-ticket  financing  programs  provisions  reflecting  management's  current
evaluation of expected losses.

Recoveries related to assets purchased from Adrema totaled $0.7 million in 1997,
and   write-offs   of  $20.9  million  and  $14.2  million  in  1996  and  1995,
respectively.  Excluding the impact of the recoveries and write-offs  related to
assets purchased from Adrema,  external  small-ticket  write-offs increased $9.8
million.  This increase is due to a 10.6 percent increase in the lease portfolio
at Colonial Pacific Leasing  Corporation  ("CPLC")  combined with a 51.6 percent
increase  in  bankruptcies.  The  Company has  implemented  various  measures to
control this  increase  including  modifying  new credit  policies and improving
collection and recovery procedures.



<PAGE>
                                   Page - 22
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. - Allowance for Credit Losses (continued)

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

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

Finance  receivables  are  written-off  to the allowance for credit losses after
collection  efforts are exhausted and the account is deemed  uncollectible.  For
internal and external small-ticket financing  transactions,  this usually occurs
near the point in time when the  transaction is placed in a non-earning  status.
For external large-ticket financing  transactions,  write-offs are normally made
after efforts are made to repossess the underlying  collateral,  the repossessed
collateral is sold, and efforts to recover remaining balances are exhausted.  On
external large-ticket financing  transactions,  periodic adjustments also may be
made and/or a cost recovery  approach for cash  proceeds  utilized to reduce the
face value to an estimated  present value of the future expected  recovery.  All
write-offs and adjustments are recorded on a transaction by transaction basis.

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

The carrying values of  non-performing  and troubled finance assets are outlined
below. There are no leveraged leases classified under these categories.
<TABLE>
           December 31                                             1997           1996           1995
                                                                   ----           ----           ----
            (in thousands of dollars)
            Non-performing (non-accrual) transactions
<S>                                                           <C>            <C>            <C>
               Internal small-ticket programs..........       $  11,394      $  12,614      $  12,248
               External large-ticket programs..........           1,148          1,248          1,448
               External small-ticket programs..........          38,579         25,161          8,874
                                                                -------        -------        -------
                   Total...............................       $  51,121      $  39,023      $  22,570
                                                                =======        =======        =======
            Troubled (potential problem) transactions
               External large-ticket programs..........       $  13,446      $  13,810      $   5,892
                                                                =======        =======        =======
</TABLE>

The  increase in  non-performing  transactions  in 1997 and 1996 in the external
small-ticket  programs  reflects  higher  volumes  together  with an increase in
bankruptcy  levels among lease customers.  Management has taken various measures
to  counter  non-performing  growth  such  as  revalidating  credit  scorecards,
modifying audit procedures and improving transaction verification processes. The
increase  in   troubled/potential   problem   transactions   for  the   external
large-ticket  programs is due to a real estate transaction which is currently in
the  process of being  restructured.  The  Company  believes  it has  sufficient
reserves to provide for any losses which may result from the final resolution of
the above transactions.

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

<PAGE>
                                   Page - 23
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. - Allowance for Credit Losses (continued)

However, for non-performing  external large-ticket financing  transactions,  the
Company has adjusted the face value of these  receivables  through the following
adjustments:

<TABLE>
           December 31                                             1997           1996           1995
                                                                   ----           ----           ----
           (in thousands of dollars)
<S>                                                          <C>            <C>            <C>
            Face value of receivables..................      $    2,500     $    2,500     $    4,511
            Cash collections applied to principal......          (1,352)        (1,252)        (2,436)
            Write-offs to allowance for credit losses..               -              -           (627)
                                                                -------        -------        -------
            Carrying value.............................      $    1,148     $    1,248     $    1,448
                                                                =======        =======        =======

</TABLE>

Note 7. - Mortgage Servicing Rights

The Company  purchased  rights to service loans with aggregate  unpaid principal
balances of  approximately  $6.9 billion in 1997, $5.3 billion in 1996, and $4.1
billion  in  1995.  The  costs  associated  with  acquiring  these  rights  were
capitalized and recorded as MSRs.

The following summarizes the Company's capitalized MSR activity:

<TABLE>
           December 31                                             1997           1996           1995
                                                                   ----           ----           ----
           (in thousands of dollars)
<S>                                                           <C>            <C>           <C>
           Beginning balance...........................       $ 138,146      $ 108,851     $   59,506
           MSR acquisitions............................         110,014         50,407         64,310
           MSR amortization............................         (27,248)       (21,112)       (14,965)
                                                                -------        -------        -------
           Ending balance..............................       $ 220,912      $ 138,146      $ 108,851
                                                                =======        =======        =======
</TABLE>


The fair value of MSRs was approximately $247.5 million at December 31, 1997 and
$158.8 million at December 31, 1996. There were no valuation allowances for MSRs
at December 31, 1997, 1996 or 1995.

Note 8. - Assets Held for Sale

The Company funded transactions  totaling $650.9 million in 1997, $326.7 million
in 1996,  and  $151.6  million  in  1995,  relating  to  assets  held for  sale.
Transactions  totaling  $445.5 million in 1997 and $257.8 million in 1996,  were
sold for a net gain  before  taxes of $6.3  million in 1997 and $8.5  million in
1996,  which is  recorded  as part of finance  income.  Twenty-one  transactions
relating to assets held for sale remain in inventory  with a net carrying  value
of $305.2 million at December 31, 1997 compared with fourteen  transactions with
a net carrying value of $140.4 million at December 31, 1996.

<PAGE>
                                   Page - 24
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. - Other Assets

<TABLE>
           December 31                                                            1997           1996
                                                                                  ----           ----
           (in thousands of dollars)
<S>                                                                         <C>            <C>
           Other receivables...........................................     $   60,191     $   22,409
           Loans held for investment...................................         41,545         29,590
           Foreclosure claims receivable, net..........................         34,057          9,902
           Equipment and leasehold improvements, net of accumulated
             depreciation and amortization: 1997-$21,975; 1996-$18,123.         30,612         22,873
           Billed meter rental receivables ............................         29,582         23,399
           Mortgage escrow advances....................................         25,634         19,413
           Other advances and deposits.................................         19,141          2,011
           Deferred partnership fees...................................          5,290          7,250
           Deferred debt placement fees................................          3,308          4,791
           Interest discount on commercial paper.......................          2,672          9,603
           Goodwill, net of accumulated amortization:
             1997-$2,132; 1996-$1,744..................................          2,518          2,906
           Prepaid expenses and other assets...........................          3,674          4,574
                                                                              --------       --------
            Total other assets.........................................      $ 258,224      $ 158,721
                                                                              ========       ========
</TABLE>

Other  receivables  increased  over the prior year  mainly due to higher  billed
receivables at AMIC and proceeds due on syndication transactions.

Loans held for investment consist primarily of purchased mortgage loans, secured
by first real estate  mortgages,  and are held to maturity.  Mortgage loans held
for  investment  are  stated at the  lower of cost or  market  value at the date
acquired.  The amount of discount, if any, recorded to reduce the carrying value
of loans to market value is  amortized  to income over the expected  life of the
investment.  The Company periodically evaluates the credit risks associated with
these loans.  Any provision  for possible  losses is included in the reserve for
possible losses associated with foreclosure claims receivables.

Foreclosure  claims receivable include loans and related advances in the process
of  foreclosure.  Such loans are  insured or  guaranteed  by either the  Federal
Housing   Administration,   the  Veterans  Administration  or  private  mortgage
insurance  and will be repaid when the  foreclosure  process is  completed.  The
Company has  established  reserves for  possible  losses in excess of insured or
guaranteed  amounts of  approximately  $5.5 million and $3.1 million at December
31, 1997 and 1996, respectively,  which have been netted against the foreclosure
claims receivable balances.

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

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

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

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

Deferred   partnership  fees  relate  to  a  transaction   whereby  the  Company
contributed certain commercial aircraft,  subject to direct financing leases, to
a majority-owned partnership.  Partnership fees incurred in connection with this
transaction are amortized over the term of the transaction.

Deferred debt  placement  fees incurred in  connection  with placing  senior and
subordinated notes are amortized on a straight-line basis over the related terms
of the notes.

<PAGE>
                                   Page - 25
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 10. - Accounts Payable and Accrued Liabilities

<TABLE>
           December 31                                                            1997           1996
                                                                                  ----           ----
           (in thousands of dollars)
<S>                                                                           <C>            <C>
           Advances and deposits from customers........................       $ 51,616       $ 45,131
           Accounts payable............................................         48,572         36,653
           Accrued interest payable....................................         23,081         30,488
           Sales and use, property and sundry taxes....................         14,663         12,879
           Portfolio purchase price payable............................         12,800          8,319
           Accrued salary and benefits payable.........................          8,662          7,120
           Minority interest in partnership............................          8,130          7,512
           Other liabilities...........................................         32,381         28,555
                                                                              --------       --------
            Total accounts payable and accrued liabilities.............       $199,905       $176,657
                                                                              ========       ========
</TABLE>



Note 11. - Notes Payable

Short-term  notes  payable  totaled  $2.0  billion at December 31, 1997 and $1.9
billion at December 31, 1996. These notes were issued as commercial paper, loans
against  bank lines of credit,  or to trust  departments  of banks and others at
rates below the prevailing prime rate.

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

<TABLE>
         December 31                                                              1997           1996
                                                                                  ----           ----
         (in thousands of dollars)
         Senior Notes Payable:
           Commercial paper at the weighted average
<S>                                                                        <C>             <C>
             interest rate of 5.66% (5.54% in 1996)....................    $ 1,361,110    $ 1,359,200
           Notes payable against bank lines of credit and others at a
             weighted average interest rate of 1.68% (2.11% in 1996)...        384,000        296,881
           Current installment of long-term debt due within one year at
             interest rates of 5.84% to 6.31% (5.63% to 7.48% in 1996).        225,000        245,500
                                                                             ---------      ---------
            Total senior notes payable due within one year.............      1,970,110      1,901,581
            Senior notes payable due after one year at interest rates of
              6.06% to 9.25% (5.63% to 9.25% in 1996)..................      1,050,000      1,275,000
                                                                             ---------      ---------
            Total senior notes payable.................................      3,020,110      3,176,581
                                                                             ---------      ---------
         Short-term Notes Payable to Affiliates:
           Notes payable to Pitney Bowes Inc. at a weighted
             average interest rate of 5.40% in 1996....................              -        139,400
         Subordinated Notes Payable:
           Non-interest bearing notes due Pitney Bowes Inc.............        270,487        229,154
                                                                             ---------      ---------


            Total notes payable........................................   $  3,290,597    $ 3,545,135
                                                                             =========      =========

</TABLE>

At December  31,  1997,  the Company  had unused  lines of credit and  revolving
credit  facilities  totaling $1.5 billion largely  supporting  commercial  paper
borrowings.  The Company recorded commitment fees of $0.6 million,  $1.3 million
and $1.4  million in 1997,  1996 and 1995 to maintain  its lines of credit.  The
reduction in 1997  commitment  fees is a result of reductions in commitment  fee
rates in January 1997.
<PAGE>
                                   Page - 26
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. - Notes Payable (continued)

Total notes  payable at December  31, 1997 mature as follows:  approximately  $2
billion in 1998,  $200  million in 1999,  $50 million in 2000,  $200  million in
2001; $100 million in 2002 and $770 thereafter.

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

In July 1996, the Company  issued $200 million of medium-term  notes due in July
1999 and $100 million of medium-term notes due in July 2001 with coupon rates of
6.54 percent and 6.78 percent, respectively.

In September  1996, the Company issued $100 million of medium-term  notes due in
October  1998 and $100  million of  medium-term  notes due in October  2001 with
coupon rates of 6.31 percent and 6.80 percent, respectively.

At December  31, 1997 the Company had $250 million of unissued  debt  securities
remaining  from a shelf  registration  statement  filed with the  Securities and
Exchange  Commission  in September  1995.  On January 16, 1998,  PBCC issued the
entire $250 million of debt securities  available under the shelf  registration.
Proceeds from the debt  issuance  will be used to meet the  Company's  financing
needs for the next year. (See Note 19 to CONSOLIDATED FINANCIAL STATEMENTS.)

In  1997  and  1996,  the  Company  issued  $41.3  million  and  $58.3  million,
respectively,  of  non-interest  bearing  subordinated  notes to Pitney Bowes in
exchange for funds equal to tax losses  generated by the Company and utilized by
Pitney Bowes in the 1996 and 1995  consolidated  tax returns.  Any  non-interest
bearing subordinated notes payable to Pitney Bowes mature after all senior notes
now outstanding and executed hereafter are paid.

Note 12. - Derivative Instruments

The Company's  utilization  of derivative  instruments  is currently  limited to
interest  rate swap  agreements  ("interest  rate  swaps") and foreign  currency
exchange  forward  contracts   ("foreign  currency   contracts").   The  Company
periodically enters into interest rate swaps as a means of managing its interest
rate  exposure.  The  interest  rate  differential  to be  paid or  received  is
recognized over the life of the agreements as an adjustment to interest expense.
The  Company is exposed to credit  loss in the event of  non-performance  by the
counterparties  to the  interest  rate swaps to the  extent of the  differential
between  fixed- and  variable-rates;  such exposure is considered  minimal.  The
Company  has  entered  into  foreign  currency  contracts  for  the  purpose  of
minimizing  its risk of loss from  fluctuations  in exchange rates in connection
with certain  intercompany loans and certain transfers to the Company by foreign
affiliates of foreign currency  denominated  lease  receivables.  The Company is
exposed to credit loss in the event of  non-performance by the counterparties to
the foreign currency  contracts to the extent of the difference between the spot
rate at the date of the contract delivery and the contracted rate; such exposure
is considered minimal.

<PAGE>
                                   Page - 27
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 12. - Derivative Instruments (continued)

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

<TABLE>
                                                               Total
     Major Type                                              Notional
     of Interest                                              Amount           Weighted Average Interest Rates
     Rate Swap      Hedged Liability                          (000's)              Fixed        Variable(1)

<S>                                                           <C>                  <C>               <C>
     Pay fixed      Commercial paper                          $200,000             8.88%             6.10%

     Pay variable   Senior notes payable after one year         23,524             7.98%             5.95%
                                                              --------            ------            ------
                    Total                                     $223,524             8.78%             6.08%
                                                              ========            ======            ======

</TABLE>

(1) The variable  rate is indexed  from the 30 day Fed AA  composite  commercial
paper rate. The Fed AA composite rate at December 31, 1997 was used to calculate
the weighted average interest rate.

The  aggregate  notional  amount of interest  rate swaps  categorized  by annual
maturity is reflected below:


 <TABLE>
                                                                           Annual Maturity
                                                               ---------------------------------------
                                                                          Pay
                                                                   -------------------
            (in thousands of dollars)                             Fixed       Variable          Total
                                                                  -----       --------          -----
<S>         <C>                                                <C>           <C>            <C>
            1998.......................................               -      $  23,524      $  23,524
            1999.......................................        $100,000              -        100,000
            2000.......................................               -              -              -
            2001.......................................               -              -              -
            2002.......................................               -              -              -
            Thereafter.................................         100,000              -        100,000
                                                                -------        -------        -------
            Carrying value.............................        $200,000      $  23,524      $ 223,524
                                                                =======        =======        =======


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


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

<S>                                                           <C>            <C>            <C>
           Balance December 31, 1995...................       $ 305,700      $  24,100      $ 329,800
           New contracts...............................               -         26,048         26,048
           Expired contracts...........................          (5,700)       (24,100)       (29,800)
                                                               --------       --------       --------

           Balance December 31, 1996...................         300,000         26,048        326,048
           Expired contracts...........................        (100,000)        (2,524)      (102,524)
                                                               --------       --------       --------

           Balance December 31, 1997...................       $ 200,000      $  23,524      $ 223,524
                                                               ========       ========       ========
</TABLE>

<PAGE>
                                   Page - 28
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 12. - Derivative Instruments (continued)

Interest  rate  swaps  are used in the  majority  of  circumstances  to  convert
variable  rate  commercial  paper  interest  payments  to  fixed  rate  interest
payments. The impact of interest rate swaps on interest expense and the weighted
average borrowing rate is as follows:
<TABLE>
                                                                            1997             1996              1995
                                                                            ----             ----              ----

<S>                                               <C>                    <C>              <C>               <C>
Impact of interest rate swaps on interest expense (000's)..............  $ 6,268          $ 7,346           $ 9,376
Weighted average borrowing rate excluding interest rate swaps..........    5.89%            5.81%             6.14%
Weighted average borrowing rate including interest rate swaps..........    6.09%            6.03%             6.45%
</TABLE>

The Company has  entered  into  foreign  currency  contracts  for the purpose of
minimizing  its risk of loss from  fluctuations  in exchange rates in connection
with certain  intercompany  loans and certain sales of receivables with recourse
of foreign currency  denominated lease  receivables.  The Company had no foreign
currency contracts outstanding as of December 31, 1997.

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

There were no deferred  gains or losses  relating to  terminated  interest  rate
swaps or foreign  currency  contracts  at December  31, 1997 and 1996.  The fair
value of interest rate swaps and foreign currency contracts is presented in Note
15 to the CONSOLIDATED FINANCIAL STATEMENTS.


Note 13. - Stockholder's Equity

The following is a reconciliation of stockholder's equity:
<TABLE>

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

<S>                                          <C>             <C>            <C>            <C>
         Balance December 31, 1994......     $   46,000      $   41,725     $  685,613     $  773,338
         Net income - 1995..............              -               -        158,656        158,656
         Dividends paid to PBI..........              -               -        (62,000)       (62,000)
                                               --------        --------       --------       --------
         Balance December 31, 1995......         46,000          41,725        782,269        869,994
         Net income - 1996..............              -               -        179,234        179,234
         Dividends paid to PBI..........              -               -        (71,200)       (71,200)
                                               --------        --------       --------       --------
         Balance December 31, 1996......         46,000          41,725        890,303        978,028
         Net income - 1997..............              -               -        194,833        194,833
         Dividends paid to PBI..........              -               -        (78,000)       (78,000)
                                               --------        --------       --------       --------
         Balance December 31, 1997......     $   46,000     $    41,725     $1,007,136     $1,094,861
                                               ========        ========       ========       ========

</TABLE>


At December 31, 1997, 10,000 shares of common stock,  no-par with a stated value
of $100,000 per share were authorized and 460 shares were issued and outstanding
and  amounted  to $46.0  million  at  December  31,  1997 and  1996.  All of the
Company's stock is owned by Pitney Bowes.

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

<PAGE>
                                   Page - 29
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 14. - Fair Value of Financial Instruments

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

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

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

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

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

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

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

Financial  guarantee   contracts.   The  Company  has  recourse  obligations  in
connection with certain mortgages it services,  as well as certain finance asset
sales to  third-parties.  Aggregate  exposure at December  31, 1997 and 1996 was
$213 million and $115  million  respectively.  The fair value of the  guarantees
under these obligations represents the estimate of expected future losses.

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

Commitments to extend credit.  The fair value of commitments to extend credit is
estimated  by  comparing  current  market  conditions  taking  into  account the
remaining  terms  of  existing  agreements  and  the   creditworthiness  of  the
counterparties.

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

<TABLE>
         December 31                                     1997                         1996
                                               ------------------------       -----------------------
         (in thousands of dollars)              Carrying        Fair          Carrying         Fair
                                                Value (1)       Value         Value (1)        Value

<S>                                         <C>            <C>             <C>            <C>
         Investment securities              $    15,822    $    15,715     $     1,031    $     1,031
         Loans receivable (2)                   357,227        358,941         381,789        365,560
         Senior notes payable after one year (1,068,662)    (1,143,402)     (1,298,074)    (1,346,255)
         Interest rate swaps                       (935)       (24,524)         (1,327)       (25,435)
         Foreign currency contracts                   -              -               -             15
         Transfers of receivables
           with recourse                         (7,765)        (7,765)        (10,489)       (10,489)
         Financial guarantee contracts           (1,656)        (3,265)           (601)          (601)
         Residual and conditional
           commitment guarantee contracts        (4,750)        (4,253)         (3,759)        (4,694)
</TABLE>


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

<PAGE>
                                   Page - 30
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 15. - Taxes on Income

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

<TABLE>

           Year Ended December 31                                  1997           1996           1995
                                                                   ----           ----           ----
           (in thousands of dollars)
<S>                                                           <C>            <C>            <C>
            Income before income taxes.................       $ 277,116      $ 266,089      $ 231,334
                                                               ========       ========       ========
           Provision for income taxes:
             Federal:
               Current.................................       $  (6,212)     $ (22,772)     $ (70,605)
               Deferred................................          87,880         92,908        130,521
                                                                -------        -------        -------
                   Total federal.......................          81,668         70,136         59,916
                                                                -------        -------        -------
             State and local:
               Current.................................          13,565         (8,120)        (9,302)
               Deferred................................         (12,950)        24,839         22,064
                                                                -------        -------        -------
                   Total state and local...............             615         16,719         12,762
                                                                -------        -------        -------

            Total......................................       $  82,283      $  86,855      $  72,678
                                                                =======        =======        =======

Deferred tax liabilities and (assets):

           December 31                                             1997           1996           1995
                                                                   ----           ----           ----
           (in thousands of dollars)
           Deferred tax liabilities:
<S>                                                            <C>            <C>            <C>
             Lease revenue and related depreciation....        $531,195       $553,206       $491,467

           Deferred tax assets:
             Alternative minimum tax
               credit carryforwards....................         (21,135)       (74,582)       (50,143)
                                                               --------       --------       --------
            Total......................................        $510,060       $478,624       $441,324
                                                               ========       ========       ========


A reconciliation of the U.S. Federal  statutory rate to the Company's  effective
income tax rate follows:

           Year Ended December 31                                  1997           1996           1995
                                                                   ----           ----           ----
           (Percent of pretax income)
<S>                                                               <C>             <C>            <C>
           U.S. Federal statutory rate.................           35.0%           35.0%          35.0%

           State and local income taxes ...............            0.1             4.0            3.9
           Partnership tax benefits....................           (0.8)           (0.9)          (1.1)
           Tax-exempt foreign trade income.............           (1.9)           (2.2)          (2.7)
           Tax-exempt finance income ..................           (0.6)           (0.5)          (0.8)
           Residual portfolio acquisition..............           (0.5)           (0.6)          (1.1)
           Other, net .................................           (1.6)           (2.2)          (1.8)
                                                               --------       --------       --------
            Effective income tax rate .................           29.7%           32.6%          31.4%
                                                               ========       ========       ========
</TABLE>

<PAGE>
                                   Page - 31
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 16. - Retirement Plan

The Company  participates  in the Pitney Bowes  retirement plan which covers the
majority of PBCC employees.  The assets of this plan fully fund vested benefits.
Pitney  Bowes'  plan  assumptions  for 1997 and 1996  remained  constant at 7.25
percent for the discount rate, 4.25 percent for the expected rate of increase in
future  compensation  levels and 9.50 percent for the expected long-term rate of
return on plan assets.  The Company's  pension expense was $0.4 million in 1997,
$1.6 million in 1996 and $1.3 million in 1995.

The Company participates in the Pitney Bowes nonpension  postretirement  benefit
plan, which provides certain health care and life insurance benefits to eligible
retirees and their dependents.


Note 17. - Commitments, Contingencies and Regulatory Matters

The Company is the lessee under noncancelable  operating leases for office space
and  automobiles.  Future  minimum  lease  payments  under  these  leases are as
follows:  $3.3 million in 1998, $2.1 million in 1999, $1.4 million in 2000, $1.3
million  in 2001,  $1.2  million  in 2002 and $6.2  million  thereafter.  Rental
expense under operating  leases was $4.7 million,  $4.6 million and $4.7 million
in 1997, 1996 and 1995, respectively.

At December 31, 1997,  the Company had no unfunded  commitments to extend credit
to  customers.  The Company  evaluates  each  customer's  creditworthiness  on a
case-by-case  basis. Upon extension of credit, the amount and type of collateral
obtained,  if deemed necessary by the Company,  is based on management's  credit
assessment of the customer.  Fees received  under the  agreements are recognized
over the  commitment  period.  The maximum risk of loss arises from the possible
non-performance  of the customer to meet the terms of the credit  agreement.  As
part of the Company's  review of its exposure to risk,  adequate  provisions are
made for finance assets which may be uncollectible.

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

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

In June 1995,  the United States Postal  Service  ("USPS")  finalized and issued
regulations  governing the manufacture,  distribution and use of postage meters.
These regulations cover four general categories: meter security,  administrative
controls,  Computerized  Meter Resetting Systems and other issues.  Pitney Bowes
continues  to  comply  with  these  regulations  in its  ongoing  postage  meter
operations.

In May 1996, the USPS issued a proposed  schedule for the phaseout of mechanical
meters in the United  States.  Between May 1996 and March 1997,  PBI worked with
the USPS to negotiate a revised mechanical meter migration schedule which better
reflected  the  needs of  existing  mechanical  meter  users and  minimized  any
potential  negative financial impact. The final schedule agreed to with the USPS
is as follows:

-as of June 1, 1996,  new  placements  of  mechanical  meters would no longer be
permitted;  replacements of mechanical meters  previously  licensed to customers
would be permitted prior to the applicable  suspension date for that category of
mechanical meter

-as of March 1, 1997,  use of mechanical  meters by persons or firms who process
mail for a fee would be suspended and would have to be removed from service

-as of December 31, 1998,  use of  mechanical  meters that  interface  with mail
machines or processors  ("systems  meters") would be suspended and would have to
be removed from service

-as of March 1, 1999, use of all other mechanical meters ("stand-alone  meters")
would be suspended and have to be removed from service

<PAGE>
                                   Page - 32
                         PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 17. - Commitments, Contingencies and Regulatory Matters (continued)

Based on the  foregoing  schedule,  PBI believes that the phaseout of mechanical
meters will not have a material adverse financial impact.

As a result of the PBI's  aggressive  efforts to meet the USPS mechanical  meter
migration  schedule  combined  with its ongoing  and  continuing  investment  in
advanced postage  evidencing  technologies,  mechanical  meters represent 25% of
PBI's installed U.S. meter base as of December 31, 1997, compared with 40% as of
December 31, 1996. At December 31, 1997, 75% of PBI's  installed U.S. meter base
is electronic or digital, as compared to 60% at December 31, 1996.

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

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

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

-a Host specification

-a Vendor Infrastructure specification

In July 1996, the USPS published for public comment draft specifications for the
Indicium, Postal Security Device and Host specifications. Pitney Bowes submitted
extensive   comments  to  these   specifications   in  November  1996.   Revised
specifications  were  then  published  in 1997  which  incorporated  many of the
changes  recommended by PBI in its prior comments,  including the recommendation
that IBIP apply only to the personal  computer ("PC")  environment and not apply
at the present time to other digital postage  evidencing  systems.  Pitney Bowes
submitted comments to these revised specifications. Also, in March 1997 the USPS
published for public comment the Vendor Infrastucture specification to which PBI
responded  on June 27,  1997.  As of  December  31,  1997,  the USPS had not yet
finalized the four IBIP  specifications;  however PBI has developed a PC product
which  satisfies  the proposed  IBIP  specifications.  This product is currently
undergoing testing by the USPS and is expected to be ready for market when final
approval of the specifications is issued.

<PAGE>
                                   Page - 33
                        PITNEY BOWES CREDIT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 18. - Quarterly Financial Information (Unaudited)

Summarized  quarterly  financial data for 1997 and 1996 follows (in thousands of
dollars):
<TABLE>

                                                                 Three Months Ended
                                                       ----------------------------------------------

         1997                                  March 31         June 30       Sept. 30        Dec. 31
         ----                                  --------         -------       --------        -------

<S>                                           <C>             <C>            <C>            <C>
         Total revenue                        $ 183,394       $ 183,159      $ 189,445      $ 222,612
                                               --------        --------       --------       --------
         Expenses:
         Selling, general and administrative     41,601          42,140         47,902         51,649
         Depreciation and amortization           10,504           9,833         11,556         10,755
         Provision for credit losses             15,055          15,911         13,386         33,968
         Interest                                49,895          51,098         51,172         45,069
         Provision for income taxes              21,101          19,391         17,940         23,851
                                               --------        --------       --------       --------
         Total expenses                         138,156         138,373        141,956        165,292
                                               --------        --------       --------       --------
         Net income                           $  45,238       $  44,786      $  47,489      $  57,320
                                               ========        ========       ========       ========



         1996

         Total revenue                        $ 177,276       $ 179,991      $ 191,475      $ 223,922
                                               --------        --------       --------       --------
         Expenses:
         Selling, general and administrative     39,282          38,982         47,814         49,157
         Depreciation and amortization            8,927          10,186         10,563         10,771
         Cost of equipment sales                      -             283              -         22,538
         Provision for credit losses             16,695          13,875         17,547         18,412
         Interest                                50,315          48,954         50,394         51,880
         Provision for income taxes              20,489          22,636         21,081         22,649
                                               --------        --------       --------       --------
         Total expenses                         135,708         134,916        147,399        175,407
                                               --------        --------       --------       --------
         Net income                           $  41,568       $  45,075      $  44,076      $  48,515
                                               ========        ========       ========       ========

</TABLE>



Note 19. - Subsequent Events

During January 1998, the Company  issued $250 million of 5.65%  unsecured  notes
(the "Notes") available under a shelf registration filed with the Securities and
Exchange  Commission in September 1995. The Notes are due January 15, 2003, with
interest  payable on January  15 and July 15 of each year,  commencing  July 15,
1998.  The Notes are not redeemable at the option of the Company or repayable at
the option of any holder prior to maturity. The net proceeds of these Notes will
be used for general  corporate  purposes  including  the repayment of short-term
debt, the acquisition of finance  contracts and to reduce or retire from time to
time other indebtedness of the Company.  (See Note 12 to CONSOLIDATED  FINANCIAL
STATEMENTS.)  The Company also entered into an interest rate swap for a notional
amount of $125  million,  at a fixed  interest rate of 5.83% and a floating rate
equal to the Money  Market  Yield of  Commercial  Paper-Nonfinancial.  Under the
terms of the  interest  rate swap the  Company  is the  fixed  rate  payer.  The
interest rate swap is effective through February 2, 2005.

<PAGE>
                                   Page - 34
                         PITNEY BOWES CREDIT CORPORATION


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

None.


                                    Part III


         ITEM 10. -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Omitted pursuant to General Instruction I.


                       ITEM 11. -- EXECUTIVE COMPENSATION

Omitted pursuant to General Instruction I.


   ITEM 12. -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Omitted pursuant to General Instruction I.


           ITEM 13. -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Omitted pursuant to General Instruction I.

<PAGE>
                                   Page - 35
                         PITNEY BOWES CREDIT CORPORATION

                                     PART IV

       ITEM 14. -- EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
<TABLE>

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

1.    Consolidated financial statements
         Included in Part II of this report
<S>                                                                                                     <C>
           Report of independent accountants.................................................           14
           Consolidated statements of income and of retained earnings for each of
           the three years in the period ended December 31, 1997.............................           15
           Consolidated balance sheet at December 31, 1997 and 1996..........................           16
           Consolidated statement of cash flows for each of the three years in
           the period ended December 31, 1997................................................           17
           Notes to consolidated financial statements........................................        18-33
2.    Financial statement schedules
         Valuation and qualifying accounts and reserves (Schedule II)........................           38

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

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

         REG S-K                                                                    STATE OR INCORPORATION
         EXHIBITS                            DESCRIPTION                                   BY REFERENCE
         --------          --------------------------------------------             ----------------------------
             (3)           1.  Certificate of Incorporation, as amended             Incorporated by reference to
                                                                                    Exhibit (3.1) to Form 10-K
                                                                                    (No. 01-13497) as filed with
                                                                                    the Commission on
                                                                                    March 21, 1996.

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

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

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

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

<PAGE>
                                   Page - 36
                         PITNEY BOWES CREDIT CORPORATION
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

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

         REG S-K                                                                     STATE OR INCORPORATION
         EXHIBITS                            DESCRIPTION                                 BY REFERENCE
         --------          ------------------------------------------               ------------------------------

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

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

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

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

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

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

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

             (21)          Subsidiaries of the registrant                           Exhibit (ii)

             (27)          Financial Data Schedule                                  Exhibit (iii)

</TABLE>

(b) A report on Form 8-K was filed during the first quarter of fiscal 1998. Such
report related to the issuance during January 1998, of the Company's 5.65% Notes
due January 15, 2003.

<PAGE>
                                   Page - 37
                                   SIGNATURES

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


                         PITNEY BOWES CREDIT CORPORATION

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

Dated:  March 27, 1998


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

         By       /s/  MATTHEW S. KISSNER                 Dated:  March 27, 1998
                  -----------------------
                  Matthew S. Kissner
                  President and Chief Executive Officer

         By       /s/  G. KIRK HUDSON                     Dated:  March 27, 1998
                  ----------------------
                  G. Kirk Hudson
                  Vice President-Finance
                  (Principal Financial and Accounting Officer)

         By       /s/  MARC C. BRESLAWSKY                 Dated:  March 27, 1998
                  -----------------------
                  Marc C. Breslawsky
                  Director

         By       /s/  MICHAEL J.  CRITELLI               Dated:  March 27, 1998
                  -------------------------
                  Michael J. Critelli
                  Director

         By       /s/  SARA E. MOSS                       Dated:  March 27, 1998
                  ----------------------
                  Sara E. Moss
                  Director

         By       /s/  MURRAY L. REICHENSTEIN             Dated:  March 27, 1998
                  ---------------------------
                  Murray L. Reichenstein
                  Director

         By       /s/  HARRY W. NEINSTEDT                 Dated:  March 27, 1998
                  -----------------------
                  Harry W. Neinstedt
                  Director

         By       /s/  DOUGLAS A. RIGGS                   Dated:  March 27, 1998
                  ----------------------
                  Douglas A. Riggs
                  Director

         By       /s/  JOHN N.D. MOODY                    Dated:  March 27, 1998
                  ----------------------
                  John N.D. Moody
                  Director

         By       /s/  ARLEN F. HENOCK                    Dated:  March 27, 1998
                  ----------------------
                  Arlen F. Henock
                  Director


<PAGE>
                                   Page - 38
                         PITNEY BOWES CREDIT CORPORATION
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                  FOR THE YEARS ENDED DECEMBER 31, 1995 TO 1997

<TABLE>

                              Allowance for credit loss (shown on balance sheet as deduction from
                                                       net investments)
                         ------------------------------------------------------------------------------
                                                  Additions          Deductions -
                            Balance at           charged to          uncollectible
                             beginning            costs and            accounts            Balance at
                              of year             expenses            written off          end of year

<S>      <C>                <C>                   <C>                  <C>                  <C>
         1997               $   98,721            $  78,320            $  60,453            $ 116,588

         1996               $  101,355            $  66,529            $  69,163            $  98,721

         1995               $   95,271            $  58,549            $  52,465            $ 101,355

</TABLE>
<PAGE>
                                   Page - 39
                         PITNEY BOWES CREDIT CORPORATION

                                   Exhibit (i)
                Computation of Ratio of Earnings to Fixed Charges

                            (in thousands of dollars)

<TABLE>
                                                           Years Ended December 31,
                                    --------------------------------------------------------------------------
                                             1997         1996         1995         1994         1993
                                             ----         ----         ----         ----         ----


<S>                                     <C>          <C>          <C>          <C>          <C>
Income before income taxes..........    $ 277,116    $ 266,089    $ 231,334    $ 218,913    $ 189,960
                                          -------      -------      -------      -------      -------
Fixed charges:
  Interest on debt..................      197,234      201,543      202,090      151,239      137,372
  One-third of rent expense.........        1,686        1,530        1,519        1,463        1,575
                                          -------      -------      -------      -------      -------
Total fixed charges.................      198,920      203,073      203,609      152,702      138,947
                                          -------      -------      -------      -------      -------

Earnings before fixed charges.......    $ 476,036    $ 469,162    $ 434,943    $ 371,615    $ 328,907
                                          =======      =======      =======      =======      =======

Ratio of earnings to
  fixed charges (1).................        2.39X        2.31X        2.14X        2.43X        2.37X
                                          =======      =======      =======      =======      =======
</TABLE>






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

<PAGE>
                                   Page - 40
                        PITNEY BOWES CREDIT CORPORATION

                                  Exhibit (ii)
                         Subsidiaries of the Registrant

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

The following are subsidiaries of the Registrant as of December 31, 1997:
<TABLE>
                                                                                             Country or State
Company Name                                                                                 of Incorporation

<S>     <C>    <C>    <C>    <C>    <C>    <C>
Atlantic Mortgage & Investment Corporation   (AMIC)                                          Florida
     RE Properties Management Corporation   (Subsidiary of AMIC)                             Delaware
Colonial Pacific Leasing Corporation (CPLC)                                                  Massachusetts
     Colonial Asset Funding Company I, Inc. (Subsidiary of CPLC)
FSL Holdings Inc.                                                                            Connecticut
    FSL Risk Managers (Subsidiary of FSL Holdings Inc.)                                      New York
    FSL Valuation Services Inc. (Subsidiary of FSL Holdings Inc.)                            Connecticut
    Financial Structures Limited (Subsidiary of FSL Holdings Inc.)                           Bermuda
       Financial Structures Insurance Company (Subsidiary of Financial Structures Limited)   New York
PB CFSC I Inc.                                                                               US Virgin Islands
PB Funding Corporation                                                                       Delaware
PB Global Holdings Inc.                                                                      Connecticut
     PBA Foreign Sales Corporation (Subsidiary of PB Global Holdings Inc.)                   Barbados
PB Global Holdings II Inc.                                                                   Connecticut
     Tower FSC Ltd. (Subsidiary of PB Global Holdings II Inc.)                               Bermuda
PB Global Holdings III Inc.                                                                  Connecticut
     PB Nikko FSC Ltd. (Subsidiary of PB Global Holdings III Inc.)                           Bermuda
PB Global Holdings IV Inc.                                                                   Connecticut
     PB Nihon FSC Ltd. (Subsidiary of PB Global Holdings IV Inc.)                            Bermuda
PB Leasing Services Inc.                                                                     Nevada
PBL Holdings Inc.                                                                            Nevada
The Pitney Bowes Bank, Inc.                                                                  Utah
Pitney Bowes Insurance Agency, Inc.                                                          Connecticut
PB Public Finance Inc.                                                                       Delaware
Pitney Bowes Business to Business Inc.                                                       Delaware
Pitney Structured Funding I Inc.                                                             Delaware
Pitney Bowes Real Estate Financing Corporation (PREFCO)                                      Delaware
     PREFCO I Inc.                          (Subsidiary of PREFCO)                           Delaware
     PREFCO I LP Inc                        (Subsidiary of PREFCO)                           Delaware
     PREFCO II Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO III Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO III LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO IV Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO IV LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO V Inc.                          (Subsidiary of PREFCO)                           Delaware
     PREFCO V LP Inc.                       (Subsidiary of PREFCO)                           Delaware
     PREFCO VI Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO VI LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO VII Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO VII LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO VIII Inc.                       (Subsidiary of PREFCO)                           Delaware
     PREFCO VIII LP Inc.                    (Subsidiary of PREFCO)                           Delaware
     PREFCO IX Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO IX LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO X Inc.                          (Subsidiary of PREFCO)                           Delaware
     PREFCO XI Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO XI LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO XII Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO XII LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO XIII Inc.                       (Subsidiary of PREFCO)                           Delaware
     PREFCO XIII LP Inc.                    (Subsidiary of PREFCO)                           Delaware
     PREFCO XIV Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO XIV LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO XV Inc.                         (Subsidiary of PREFCO)                           Delaware
</TABLE>

<PAGE>
                                   Page - 41
                        PITNEY BOWES CREDIT CORPORATION

                                  Exhibit (ii)
                   Subsidiaries of the Registrant (continued)
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                             Country or State
Company Name                                                                                 of Incorporation


     PREFCO XV LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO XVI Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO - Dayton Community Urban Redevelopment Corporation
                                            (Subsidiary of PREFCO XVI Inc.)                  Ohio
     PREFCO XVI LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO XVII Inc.                       (Subsidiary of PREFCO)                           Delaware
     PREFCO XVII LP Inc.                    (Subsidiary of PREFCO)                           Delaware
     PREFCO XVIII Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO XVIII LP Inc.                   (Subsidiary of PREFCO)                           Delaware
     PREFCO XIX Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO XX Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO XXI Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO XXI LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO XXII Inc.                       (Subsidiary of PREFCO)                           Delaware
     PREFCO XXII LP Inc.                    (Subsidiary of PREFCO)                           Delaware

</TABLE>