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, 1998

                                       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: None  

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. Yes x No 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 26, 1999: None

As of March 26, 1999,  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



<TABLE>
<S>                                                                                                      <C>

            Part I

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

            Part II

                 Item 5. -- Market for the registrant's common equity and related
                               stockholder matters.................................................       7
                 Item 6.-- Selected financial data.................................................       8
                 Item 7.-- Management's discussion and analysis of financial
                               condition and results of operations.................................       9
                 Item 7A. --  Quantitative and qualitative disclosures about market risk...........      14
                 Item 8.-- Financial statements and supplementary data.............................      15
                 Item 9.-- Changes in and disagreements with accountants on
                               accounting and financial disclosure.................................      38

            Part III

                 Item 10.-- Directors and executive officers of the registrant.....................      38
                 Item 11.-- Executive compensation.................................................      38
                 Item 12.-- Security ownership of certain beneficial owners and
                               management..........................................................      38
                 Item 13.-- Certain relationships and related transactions.........................      38

            Part IV

                 Item 14.-- Exhibits, financial statements and reports on Form 8-K.................      39
                 Index to exhibits.................................................................      39
                 Signatures........................................................................      41

</TABLE>

<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").  As such,  the Company is part of PBI's  Mailing and
Integrated Logistics, Office Solutions,  Mortgage Servicing and Capital Services
segments.  The Company is principally engaged in the business of providing lease
financing  for PBI products as well as other  financial  services to the capital
services and mortgage servicing markets.
  The Internal  Financing  Division of PBCC provides  marketing  support to PBI.
Equipment  leased or financed for Internal  Division  programs  include mailing,
paper handling and shipping  equipment,  scales,  copiers,  and facsimile units.
Transaction sizes generally range from $500 to $500,000,  although  historically
most transactions have occurred in the $1,000 to $10,000 range, with lease terms
generally  from  36 to  60  months.  As  part  of  its  focus  on  new  business
initiatives,  the Company  launched a revolving  credit product called  Purchase
PowerSM in August,  1996.  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.  In
1997,  the Company  piloted a  co-branded  credit  card called the Pitney  Bowes
Business RewardsSM Visa(R). The product is designed for the small business owner
and allows the customer to facilitate business  purchases.  PBCC earns income on
membership and  transaction  fees as well as interest on balances from customers
choosing to use the credit  facility.  The business  owners  receive air mileage
points  based on  purchases  made under this,  as well as the  Purchase  PowerSM
program.
  PBCC's  Capital  Services  Division  operates in the commercial and industrial
market  by  offering  financial  services  to its  customers  for  products  not
manufactured or sold by PBI or its subsidiaries. Sales of lease transactions are
part of the Company's  ongoing  strategy to shift the  foundation of the capital
services financing business from asset-based to service-based  revenues.  During
1997, the Company reduced capital  services  finance assets by  approximately $1
billion, which represented approximately 50% of the portfolio balance before the
reductions. (See Note 3 to CONSOLIDATED FINANCIAL STATEMENTS.) Products financed
through Capital Services Division financing programs include both commercial and
non-commercial  aircraft,   over-the-road  trucks  and  trailers,  railcars  and
locomotives,   and  high-technology   equipment  such  as  data  processing  and
communications  equipment.  Transaction sizes (other than aircraft leases) range
from $30,000 to several  million  dollars,  with original lease terms  generally
from 28 to 252  months.  Aircraft  transaction  sizes  range  from  less than $1
million to $25 million  for  non-commercial  aircraft  and up to $57 million for
commercial aircraft. Original lease terms are generally from two to 12 years for
non-commercial  aircraft and from 15 to 23 years for  commercial  aircraft.  The
Company has also  participated  in seven  commercial  aircraft  leveraged  lease
transactions  with a net  investment of $297.5 million at December 31, 1998. 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.
Equipment  financed by former PBI  subsidiaries  Dictaphone  and Monarch is also
reported as a component of the Capital Services Division
  PBCC's Capital Services Division is also responsible for managing Pitney Bowes
Real Estate Financing Corporation ("PREFCO"),  a wholly-owned subsidiary of PBCC
providing lease financing for commercial real estate  properties.  Both PBCC and
Pitney Bowes have provided capital for PREFCO's investments.
  On October 30, 1998, the Company  transferred  the  operations,  employees and
substantially  all  related  assets  of its  wholly-owned  subsidiary,  Colonial
Pacific Leasing  Corporation  ("CPLC"),  to General Electric Capital Corporation
("GECC"),  a subsidiary of the General Electric Company.  CPLC was the Company's
broker-oriented  small-ticket  financing  business.  (See Note 2 to CONSOLIDATED
FINANCIAL STATEMENTS.)
  The Company's Mortgage Servicing Division is responsible for the management of
Atlantic Mortgage & Investment  Corporation ("AMIC"), a wholly-owned  subsidiary
of PBCC,  located in  Jacksonville,  Florida,  which  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.   The  current  interest  rate
environment  and its  effect on  mortgage  prepayment  patterns,  has caused the
Company to  re-examine  the manner in which it manages  its  mortgage  servicing
business.  PBCC is exploring a range of strategic  options  available to address
the changing  profile of the mortgage  servicing  business and its effect on the
Company overall.
  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 leveraged and operating lease structures.


<PAGE> 4
     The Company's  gross finance assets  (contracts  receivable  plus estimated
residual values)  outstanding for the internal and capital services  programs at
December 31, 1994 through 1998 are presented in ITEM 6 SELECTED  FINANCIAL DATA.
Total  Company  gross  finance  assets at December 31, 1998 were $3.5 billion of
which  approximately  56 percent  were  related to mailing,  paper  handling and
shipping products,  7 percent to commercial  aircraft,  3 percent to railcars, 9
percent  to copier  and  office  equipment,  1 percent  to both data  processing
equipment and manufacturing  products and 1 percent to over-the-road  trucks and
trailers.  Total gross finance  contracts  acquired  amounted to $1.6 billion in
1998 and $1.9  billion  in 1997.  Capital  services  programs  accounted  for 38
percent of gross  finance  contracts  acquired in 1998 compared to 51 percent in
1997.
  As of December  31,  1998,  PBCC had  approximately  738,000  active  accounts
compared with 682,000 active accounts at December 31, 1997.
  At December 31, 1998, PBCC's largest customer accounted for $78.8 million,  or
2.6  percent  of  gross  finance  receivables,  and the  Company's  ten  largest
customers  accounted for $500.7  million in gross finance  receivables,  or 16.4
percent of the receivable portfolio.

CREDIT EXPERIENCE

  The  percentage  of  receivables  over 30 days  delinquent  was 4.3 percent at
December  31, 1998  compared to 3.7 percent at December 31, 1997 and 2.9 percent
at December 31, 1996.  Total Company  delinquency at December 31, 1998 increased
over the prior year mainly due to a shift in business mix to a higher proportion
of  Internal  Financing  Division  business,  which  exhibits  a higher  average
delinquency rate than the capital services business.

CREDIT POLICIES

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

LOSS EXPERIENCE

  PBCC has charged against the allowance for credit losses $66.8 million,  $60.5
million and $69.2 million in 1998, 1997 and 1996, respectively.  The increase in
write-offs in 1998 was  primarily  due to the  write-off of assets at CPLC.  For
further information see Note 6 to CONSOLIDATED FINANCIAL STATEMENTS.


RELATIONSHIP WITH PITNEY BOWES INC.

  PBCC is PBI's domestic finance  subsidiary and provides the largest  financing
support of PBI's Mailing and Intergrated Logistics,  Office Solutions,  Mortgage
Servicing and Capital Services. Equipment sales to PBCC as a percentage of PBI's
consolidated revenue from continuing operations was 14 percent in 1998 and 1997,
and 13 percent in 1996.
  Business  relationships between PBCC and PBI are defined by several agreements
including an Operating Agreement, Finance Agreement and Tax Sharing Agreement.

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


<PAGE> 5
  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. However, under the Returned Copier Equipment Agreement (the "Agreement"),
the copier  systems  division  issues an annual  blanket  purchase order for the
repurchase of certain copier models. These returns are made under conditions and
at rates  specifically  set forth in the Agreement.  All copier  equipment lease
transactions are subject to the Company's standard credit review procedures.

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

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
31,300 people throughout the United States, Europe, Canada,  Australia and other
countries.  PBI operates within four industry  segments:  Mailing and Integrated
Logistics, Office Solutions, Mortgage Servicing and Capital Services.
  The Mailing and Integrated  Logistics  segment includes revenues from the sale
and  financing of mailing  equipment,  related  supplies and  services,  and the
rental of postage meters. In accordance with postal regulations,  postage meters
may not be sold in the United States; they are rented to users and therefore are
not subject to lease by PBCC.
  Office  Solutions  includes  revenues  from the sale,  financing,  rental  and
service of reprographic and facsimile equipment including related supplies,  and
facilities management services which provides reprographic business support, and
other processing functions.


<PAGE> 6
  Mortgage  Servicing provides billing,  collecting and processing  services for
major investors in residual first mortgages.  Mortgage servicing is administered
by AMIC.
  Capital  Services  provides  large-ticket  financing  and  fee-based  programs
covering a broad range of products and other  financial  services to the capital
services markets in the U.S.
  At December 31, 1998, PBI and its  consolidated  subsidiaries had total assets
of $7.7 billion and  stockholders'  equity of $1.6  billion.  For the year ended
December  31,  1998,  PBI's  consolidated  revenue  and income  from  continuing
operations  were $4.2 billion and $567.9  million,  respectively,  compared with
$3.9 billion and $509.0 million for 1997.

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.

FUNDING POLICY

  PBCC's  borrowing  strategy  is to  use a  balanced  mix of  debt  maturities,
variable- and fixed-rate debt and interest rate swap agreements  ("interest rate
swaps") to control its  sensitivity  to interest  rate  volatility.  The Company
utilizes  interest  rate swaps when it  considers  the  economic  benefits to be
favorable.  Interest rate swaps have been  principally  utilized to fix interest
rates  on  commercial  paper  and/or  obtain  a lower  cost on debt  than  would
otherwise  be  available  absent  the  swap.  (See ITEM  7A.-  QUANTITATIVE  AND
QUALITATIVE  DISCLOSURES  ABOUT  MARKET RISK for  information  regarding  market
risk.) The Company may borrow  through the sale of commercial  paper,  under its
confirmed  bank  lines  of  credit  and  by  private  and  public  offerings  of
intermediate- or long-term debt securities. The Company expects to have in place
shortly, a medium-term note program which will allow it to issue debt securities
having maturities ranging from nine months to 30 years.
  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, 1998, there were 1,040 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.



<PAGE> 7
                         PITNEY BOWES CREDIT CORPORATION
                              ITEM 2. -- PROPERTIES

PBCC's executive and administrative offices are located in Shelton, Connecticut,
which it leases from its parent, PBI. The lease term is for 14 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. 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 contracts;  lawsuits by or against
the Company  relating to equipment,  service or payment disputes with customers;
disputes with employees;  or other matters. The Company is currently a plaintiff
or defendant in a number of lawsuits,  none of which should have, in the opinion
of management  and legal  counsel,  a material  adverse  effect on the Company's
financial condition or results of operations.


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

Omitted pursuant to General Instruction I.




                                     PART II

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

All of the  Company's  common stock is owned by Pitney  Bowes Inc.  Accordingly,
there is no public trading market for the Company's  common stock.  The Board of
Directors  declared  and the Company paid  dividends to PBI in amounts  totaling
$86.0  million in 1998,  $78.0  million in 1997 and $71.2  million in 1996.  The
Company intends to continue to pay dividends to PBI in 1999.


<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,
                                            -------------------------------------------------------------------------------------
<S>                                                      <C>            <C>            <C>            <C>             <C>   
       For the Years Ended (3)                                 1998            1997           1996            1995           1994
       -------------------                                     ----            ----           ----            ----           ----

       Gross finance contracts acquired.............     $ 1,584,864    $ 1,879,084    $ 1,908,105    $ 2,158,549     $ 1,627,974
                                                            ========       ========       ========       ========        ========


       Finance income...............................    $    514,287   $    524,913   $    529,987   $    507,413    $    441,487
       Mortgage servicing revenue...................         132,072         73,246         52,985         37,122          25,012
       Equipment sales..............................               -              -         26,666          2,687          45,747
       Selling, general and administrative expenses.         136,999        121,043        111,217         97,196          81,901
       Depreciation and amortization................          75,051         42,462         40,267         31,862          26,438
       Cost of equipment sales......................               -              -         22,821          2,214          43,039
       Provision for credit losses..................          36,080         34,076         35,617         33,661          36,251
       Interest expense.............................         116,746        151,033        160,841        172,417         128,181
       Non-recurring items, net.....................               -              -              -               -        (3,311)
                                                            --------       --------       --------       --------        --------
       Income from continuing operations
          before income taxes                                281,483        249,545        238,875         209,872        199,747
       Provision for income taxes...................          82,460         71,737         76,445         65,469          64,153
                                                            --------       --------       --------       --------        --------
       Income from continuing operations
         before effect of accounting changes........         199,023        177,808        162,430        144,403         135,594
       Discontinued operations, net of tax..........           8,453         17,025         16,804         14,253          11,499
       Effect of accounting changes (1).............               -              -              -               -        (2,820)
                                                            --------       --------       --------       --------        --------
       Net income...................................    $    207,476   $    194,833   $    179,234   $    158,656    $    144,273
                                                            ========       ========       ========       ========        ========
       Ratio of earnings from continuing
           operations to fixed charges (2)                     3.39X          2.64X           2.47X         2.21X           2.54X

       At Year End

       Gross finance assets
       Internal programs............................     $ 2,560,524    $ 2,222,735    $ 2,039,567    $ 1,872,593     $ 1,697,890
       Capital services.............................         902,617      2,162,083      3,520,395      3,631,757       3,262,141
                                                            --------       --------       --------       --------        --------
       Total gross finance assets...................       3,463,141      4,384,818      5,559,962      5,504,350       4,960,031
       Unearned income..............................       (741,336)      (909,280)     (1,285,778)    (1,333,280)    (1,234,928)
                                                            --------       --------       --------       --------        --------
       Finance assets...............................     $ 2,721,805    $ 3,475,538    $ 4,274,184    $ 4,171,070     $ 3,725,103
                                                            ========       ========       ========       ========        ========

       Investment in leveraged leases...............    $    764,145   $    667,779   $    617,970   $    562,500    $    478,650
                                                            ========       ========       ========       ========        ========

       Investment in operating leases, net..........   $      33,261  $      32,112  $      86,634   $    114,587   $      95,684
                                                            ========       ========       ========       ========        ========

       Allowance for credit losses..................   $   (115,233)  $   (116,588)  $     (98,721)  $   (101,355) $     (95,271)
                                                            ========       ========       ========       ========        ========

       Total assets.................................     $ 5,293,670    $ 5,328,340    $ 5,347,002    $ 5,057,874     $ 4,451,837
                                                            ========       ========       ========       ========        ========

       Senior notes payable
       Within one year..............................       $ 991,853    $ 1,970,110    $ 1,901,581    $ 2,122,880     $ 2,075,591
       After one year...............................       1,382,000      1,050,000      1,275,000      1,020,500         745,500
                                                            --------       --------       --------       --------        --------

       Total senior notes payable...................     $ 2,373,853    $ 3,020,110    $ 3,176,581    $ 3,143,380     $ 2,821,091
                                                            ========       ========       ========       ========        ========

       Short-term notes payable to affiliates.......    $    137,00    $          -   $    139,400   $    149,709    $          -
                                                            ========       ========       ========       ========        ========

       Subordinated notes payable...................    $    285,886   $    270,487   $    229,154   $    170,857    $    133,735
                                                            ========       ========       ========       ========        ========

       Stockholder's equity.........................     $ 1,216,337    $ 1,094,861   $    978,028   $    869,994    $    773,338
                                                            ========       ========       ========       ========        ========

       Debt to equity...............................          2.33:1         3.01:1         3.62:1         3.98:1          3.82:1

(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 from continuing  operations 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.
(3)  Due to its sale, CPLC has been accounted for as discontinued  operations on the income statement for the year ended
     December 31, 1998.  Consequently, prior years'  income statements have been  restated to conform to current year presentation.
</TABLE>

<PAGE> 9
                         PITNEY BOWES CREDIT CORPORATION
Item 7. --  Management's  discussion  and  analysis of financial  condition  and
results of operations

RESULTS OF OPERATIONS

  On October 30, 1998, the Company's wholly-owned  subsidiary,  Colonial Pacific
Leasing  Corporation  ("CPLC"),   transferred  the  operations,   employees  and
substantially  all  assets  related  to  its  broker-oriented  capital  services
financing  business  to General  Electric  Capital  Corporation  ("GECC").  As a
result,  CPLC  has  been  accounted  for  as  discontinued   operations  in  the
accompanying Consolidated Statements of Income. Accordingly, the discussion that
follows concerns only the results of continuing operations. The Company received
approximately $790 million at closing,  which approximates the book value of net
assets sold or otherwise disposed of together with related transaction costs. As
part of the sale, the Company retained certain non-performing  accounts of CPLC.
(See Note 6 to CONSOLIDATED FINANCIAL STATEMENTS.) The transaction is subject to
post-closing  adjustments  pursuant to the terms of the purchase  agreement with
GECC executed on October 12, 1998. The Company does not expect the effect of any
adjustments to be significant.
  The Company's finance income from continuing  operations decreased 2.0 percent
to $514.3 million in 1998 compared with $524.9  million in 1997,  which was down
1.0 percent from 1996.  Finance income for internal financing programs increased
8.0 percent to $358.3  million in 1998  compared  with  $331.8  million in 1997,
which was up 7.7 percent from 1996.  These increases are primarily due to higher
income from fee-based  programs and higher investment levels for the mailing and
copier  programs.   Finance  income  for  capital  services  financing  programs
decreased 19.2 percent to $156.0 million in 1998 compared with $193.1 million in
1997,  which  decreased  22.3 percent from 1996. The decreases for both 1998 and
1997 are primarily due to lower capital services investment levels in accordance
with the  Company's  strategy to shift the  foundation  of the capital  services
financing  business from  asset-based to fee- and service- based revenues.  (See
Note 3 to CONSOLIDATED FINANCIAL STATEMENTS.) This is partially offset by higher
revenue  from income- and  fee-based  programs.  Included in these  revenues are
gains on asset  sales of $7.7  million  in 1998,  $1.0  million in 1997 and $4.0
million in 1996.  Also  included are revenues  from the  Dictaphone  and Monarch
portfolios of $9.2 million,  $9.9 million,  and $14.3 million in 1998,  1997 and
1996,  respectively.  Revenue generated from mortgage  servicing  increased 80.3
percent to $132.1 million in 1998 compared with $73.2 million in 1997, which was
up 38.2 percent from 1996.  The increases in both the current and prior year are
due to a larger mortgage servicing  portfolio,  the sale of selected investments
and mortgage  refinancing  fees in keeping with the Company's  fee-based  income
growth strategy.
The Company had no equipment sales in 1998 and 1997 compared to $26.7 million in
1996. The book value of such equipment sold was $22.8 million in 1996.  Selling,
general and  administrative  ("SG&A") expenses  increased 13.2 percent to $137.0
million in 1998 compared with $121.0  million in 1997,  which was up 8.8 percent
from 1996. SG&A expenses for internal  financing  programs increased 8.9 percent
to $71.0  million  in 1998  compared  to $65.2  million  in 1997,  which was 7.8
percent above 1996.  These increases are principally due to higher  professional
fees and  outsourcing  expenses  related to new business  initiatives as well as
consulting services in support of strategic  initiatives such as improvements to
information  technology and customer service. SG&A expenses for capital services
financing programs decreased 16.0 percent to $27.7 million in 1998 compared with
$32.9  million in 1997,  up 3.4  percent  from 1996.  Included in the prior year
amount is a charge of  approximately  $5.0  million  for  costs  related  to the
transfer of certain capital services finance assets made in 1997.
(See  Note 3 to  CONSOLIDATED  FINANCIAL  STATEMENTS.)  Also  included  in these
amounts are  expenses  related to asset sales of $0.4  million in 1998,  none in
1997,  and $.3 million in 1996, as well as SG&A expenses of the  Dictaphone  and
Monarch portfolios of $0.7 million, $0.9 million and $1.2 million in 1998, 1997,
and 1996,  respectively.  SG&A expenses related to mortgage servicing  increased
67.4 percent to $38.3 million in 1998 compared with $22.9 million in 1997, which
was up 21.3 percent from 1996  primarily due to the  administration  of a larger
mortgage servicing portfolio.
  Depreciation on operating leases was $6.0 million in 1998 and $11.4 million in
1997 reflecting a lower operating lease average  investment balance during 1998.
Amortization of mortgage servicing rights and acquisition fees was $63.4 million
in 1998 compared to $28.3 million in 1997. This increase is principally due to a
larger  mortgage  servicing  portfolio and a valuation  allowance  adjustment of
$10.2 million  recorded in 1998. The current  interest rate  environment and its
effect on mortgage prepayment patterns,  has caused the Company to reexamine the
manner in which it manages its mortgage servicing business.  PBCC is exploring a
range of strategic  options  available  to address the  changing  profile of the
mortgage  servicing  business  and its  effect  on the  Company  overall.  Costs
associated with the Company's  participation  in partnership  transactions  were
$5.6 million in 1998 compared to $2.6 million in 1997. The increase is primarily
due to a partnership  created in connection  with an asset  transfer made during
the fourth quarter of 1997.
  The provision for credit losses in 1998 increased 5.9 percent to $36.1 million
compared to $34.1 million for 1997,  which  decreased 4.3 percent from 1996. The
provision  for the internal  financing  programs  increased 2.5 percent to $32.5
million in 1998  compared  to $31.7  million in 1997,  which had  increased  2.4
percent from 1996. The increases are mainly due to increased  provisions for the
Company's Purchase PowerSM and Business RewardsSM programs.
  The provision for capital services financing programs was $3.6 million in 1998
compared  with $2.4 million in 1997 and $4.7 million in 1996.  Included in these
amounts  were credit loss  provisions  related to asset sales of $1.1 million in
1998,  none in 1997 and $0.9 million in 1996.  Also included are  provisions for
the  Dictaphone  and Monarch  portfolios of $1.3 million,  $1.8 million and $2.6
million for 1998, 1997 and 1996, respectively.


<PAGE> 10
  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 2.87 percent at December  31, 1998,  2.55 percent at December 31, 1997
and 1.88 percent at December 31, 1996. PBCC charged $66.8 million, $60.5 million
and $69.2 million  against the  allowance  for credit  losses in 1998,  1997 and
1996, respectively.
  Interest  expense was $116.7  million in 1998 compared with $151.0  million in
1997, a decrease of 22.7 percent.  The decrease in 1998  reflects  lower average
borrowings combined with lower short-term interest rates. The effective interest
rate on short-term  average borrowings was 4.00 percent in 1998 compared to 5.00
percent in 1997 and 4.89  percent in 1996.  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 1998 was 29.3 percent  compared to 28.8 percent for
1997 and 32.0 percent in 1996. The higher  effective tax rate is principally due
to  higher  state  tax   requirements   related  to  certain   leveraged   lease
transactions.
  Net income from continuing operations increased 11.9 percent to $199.0 million
in 1998  compared  with $177.8  million in 1997,  which was up 9.5 percent  from
1996.  The  increase  in 1998  is  primarily  attributable  to  higher  Internal
Financing Division  investment levels,  additional  fee-based income,  increased
mortgage  servicing  revenue and lower borrowing  levels partly offset by higher
SG&A and depreciation and amortization expenses.
  The Company's  ratio of earnings from  continuing  operations to fixed charges
was 3.39  times for 1998  compared  with 2.64  times for 1997 and 2.47 times for
1996. The increase  reflects the  disposition of capital  services  assets,  the
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  sensitivity to
interest  rate  volatility.  PBCC's  debt mix was 45 percent  short-term  and 55
percent long-term at December 31, 1998 and 60 percent  short-term and 40 percent
long-term  at December  31,  1997.  PBCC's  swap-adjusted  variable-rate  versus
fixed-rate debt mix was 35 percent  variable-rate  and 65 percent  fixed-rate at
December  31, 1998 and 47 percent  variable-rate  and 53 percent  fixed-rate  at
December 31, 1997. The Company may borrow through the sale of commercial  paper,
under its confirmed bank lines of credit, and by private and public offerings of
intermediate- or long-term debt securities.
  In 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 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.
  On September 30, 1998,  certain  partnerships  controlled by affiliates of the
Company issued a total of $282 million of Series A and Series B Secured Floating
Rate Senior Notes (the "Notes").  The Notes are due in 2001 and bear interest at
a floating  rate of LIBOR plus .65%,  set as of the quarterly  interest  payment
dates.  The  proceeds  from the Notes were used to  purchase  subordinated  debt
obligations from Pitney Bowes Inc. ("PBI Obligations"). The PBI Obligations have
a principal amount of $282 million and bear interest at a floating rate of LIBOR
plus one percent,  set as of the quarterly  interest payment dates. (See Note 11
to CONSOLIDATED FINANCIAL STATEMENTS).
  In July 1998, the Company filed a new shelf registration statement on Form S-3
with the Securities and Exchange Commission.  The registration  statement allows
PBCC to offer,  in one or more  series,  its  unsecured  debt  securities  at an
aggregate initial offering price not to exceed $750 million. The Company expects
to have in place  shortly,  a  medium-term  note program  which will allow it to
issue debt securities  having  maturities  ranging from nine months to 30 years.
(See Note 10 to CONSOLIDATED FINANCIAL STATEMENTS).  The Company also had unused
lines of credit  and  revolving  credit  facilities  totaling  $1.2  billion  at
December 31, 1998, largely supporting its commercial paper borrowings.
  The Company's  utilization of derivative  instruments  is normally  limited to
interest  rate swap  agreements  ("interest  rate  swaps") and foreign  currency
exchange  forward  contracts   ("foreign  currency   contracts").   The  Company
periodically  enters into  interest  rate swaps as a means of managing  interest
rate exposure.  The interest rate differential paid or received is recognized as
an adjustment to interest expense. The interest differential on the swap will be
offset against  changes in valuation of the assets  resulting from interest rate
movements.
  The  Company  is  periodically   exposed  to  credit  loss  in  the  event  of
non-performance  by the  counterparties to the interest rate swaps to the extent
of  the  differential  between  fixed-  and  variable-rates;  such  exposure  is
considered  minimal.  The Company  periodically  enters into a foreign  currency
contract for the purpose of  minimizing  its risk of loss from  fluctuations  in
exchange rates in connection  with certain  intercompany  transactions.  When in
effect, the Company is exposed to credit loss in the event of non-performance by
the  counterparties  to the  foreign  currency  contracts  to the  extent of the
difference  between the spot rate at the date of the  contract  delivery and the
contracted rate; such exposure is also considered  minimal. At December 31, 1998
there were no foreign currency contracts outstanding.


<PAGE> 11
  Since the Company  normally  enters  into  derivative  transactions  only with
members of its banking group, the credit risk of these transactions is monitored
as part of the normal credit review of the banking group.  The Company  monitors
the market risk of derivative instruments through periodic review of fair market
values.
  The Company  continues to actively  pursue a strategy of asset sales,  thereby
allowing it to focus on fee- and  service-based  revenue rather than asset-based
income.  In keeping with this strategy,  during 1997 the Company  entered into a
transaction with GATX Capital Corporation which reduced capital services finance
assets by approximately  $1 billion.  As part of this  transaction,  the Company
holds  approximately  $166 million of equity  investment in a limited  liability
company. (See Note 3 to CONSOLIDATED  FINANCIAL  STATEMENTS.)  Additionally,  in
1998, 1997 and 1996, the Company sold approximately  $384 million,  $264 million
and $409 million,  respectively,  of capital services  finance assets.  Sales of
these asset  portfolios  were made with  limited  recourse  in  privately-placed
transactions  with third-party  investors.  The proceeds from the sales of these
assets  were  used  to  repay  a  portion  of  the  Company's  commercial  paper
borrowings.  The uncollected  principal  balance of receivables sold at December
31, 1998 and 1997 was $501.2 million and $391.0 million, respectively.
  The Company's  liquidity  ratio (finance  contracts  receivable plus residuals
expected to be realized in cash over the next 12 months to current maturities of
debt over the same period) was 1.47 and .89 times at December 31, 1998 and 1997,
respectively.
  Under the Finance Agreement between Pitney Bowes and the Company, Pitney Bowes
is obligated on a quarterly basis to make payments, to the extent necessary,  so
that the  Company's  earnings  available for fixed charges for the preceding one
year period  shall not be less than 1.25 times its fixed  charges.  Pitney Bowes
has also agreed to make any past due principal,  interest or premium payments on
behalf of PBCC in respect to all approved debt and/or  commercial  paper, in the
event that PBCC is unable to make such payments.  To date, no such payments from
Pitney Bowes have been required.
  The  Company  will  continue  to use cash to invest  in  finance  assets  with
emphasis on internal leasing  transactions and controlled  investment in capital
services financing  transactions.  The Company believes that cash generated from
operations and collections on existing lease contracts will provide the majority
of cash needed for such investment  activities.  Borrowing  requirements will be
dependent  on the level of  equipment  purchases  from PBI, the level of capital
services financing activity,  capital requirements for new business initiatives,
intercompany loans and the refinancing of maturing debt. Additional cash, to the
extent needed, is expected to be provided from commercial  paper,  intermediate-
or long-term debt securities and intercompany  funds, when available.  While the
Company  expects that market  acceptance of its short- and  long-term  debt will
continue to be strong,  additional  liquidity  is  available,  if needed,  under
revolving credit facilities and credit lines.

YEAR 2000

  In 1997,  the  Company's  parent,  Pitney  Bowes  Inc.,  established  a formal
worldwide  program  to  identify  and  resolve  the impact of the Year 2000 date
processing   issue   on  its   business   systems,   products   and   supporting
infrastructure.  PBCC is included as part of this program. This program includes
a  comprehensive  review of  information  technology  (IT) and  non-IT  systems,
software,  and embedded  processors.  The program structure has strong executive
sponsorship and consists of a Year 2000 steering  committee  comprised of senior
business and  technology  management,  a Year 2000 program  office  staffed with
full-time project management,  and subject matter experts and dedicated business
unit project  teams.  The Company has also engaged  independent  consultants  to
perform periodic program reviews and assist in systems  assessment and test plan
development.
  The  program  encompasses  the  following  phases:  an  inventory  of affected
technology  and  critical  third party  suppliers,  an  assessment  of Year 2000
readiness, resolution, unit and integrated testing and contingency planning. The
Company has  completed its  worldwide  inventory and  assessment of all business
systems  and  supporting  infrastructure.  Required  modifications  are still in
progress but were substantially  completed by year-end 1998. Tests are performed
as software is remediated, upgraded, or replaced. Integrated testing is expected
to be complete by mid-1999.
  PBCC relies on third  parties for many  systems,  products and  services.  The
Company  could be  adversely  impacted  if third  parties do not make  necessary
changes to their own systems and products  successfully  and in a timely manner.
The Company has established a formal process to identify, assess and monitor the
Year 2000 readiness of critical third parties. Critical third parties with which
the Company  interacts  include,  among others,  customers and business partners
(supply chains, technology vendors and service providers);  the global financial
market   infrastructure   (payment  and  clearing  systems);   and  the  utility
infrastructure   (power,   transportation,   telecommunications)  on  which  all
corporations rely. However,  the Company is unable to predict whether such third
parties will be able to address their Year 2000 problems on a timely basis.
  PBCC  estimates  the total cost of the program from  inception in 1997 through
the Year  2000 to be  approximately  $2  million,  of which  approximately  $1.3
million was incurred through  December 31, 1998.  These costs,  which are funded
through the Company's  cash flows,  include both internal labor costs as well as
consulting  and  other  external  costs.  These  costs are  incorporated  in the
Company's budgets and current forecasts and are being expensed as incurred.

<PAGE> 12
  The  failure  to  correct a  material  Year 2000  problem  could  result in an
interruption  in,  or a  failure  of,  certain  normal  business  activities  or
operations.  Such failures could  materially and adversely  affect the Company's
results of  operations,  liquidity and financial  condition.  Due to the general
uncertainty  inherent  in  the  Year  2000  problem,   resulting  in  part  from
uncertainty  about the Year 2000 readiness of third  parties,  PBCC is unable to
determine at this time whether the  consequences of Year 2000 failures will have
a  material  impact  on  its  results  of  operations,  liquidity  or  financial
condition. However, the Company continues to evaluate its Year 2000 risks and is
developing  contingency  plans to mitigate the impact of any potential Year 2000
disruptions. PBCC expects to complete contingency plans by the second quarter of
1999.

OTHER MATTERS

In 1998, the Company  adopted  Statement of Financial  Accounting  Standards No.
131,  "Disclosures  about  Segments of an  Enterprise  and Related  Information"
("SFAS  131").  Under  SFAS 131,  the  Company  has three  reportable  segments:
Internal Financing  programs,  Capital Services programs and Mortgage Servicing.
(See Note 12 to CONSOLIDATED  FINANCIAL STATEMENTS.) In June 1998, the Financial
Accounting  Standards Board issued Statement of Financial  Accounting  Standards
No. 133,  "Accounting for Derivative  Instruments and Hedging Activities" ("SFAS
133").  SFAS 133 requires an entity  recognize  all  derivative  instruments  as
either assets or liabilities on its balance sheet and measure those  instruments
at fair market  value.  Changes in the fair value of those  instruments  will be
reflected as gains or losses.  The accounting for the gains or losses depends on
the intended use of the  derivative  instrument  and the resulting  designation.
PBCC will be required to implement this statement beginning January 1, 2000. The
Company is currently  in the process of  evaluating  the impact of  implementing
this statement.



LEGAL, ENVIRONMENTAL AND REGULATORY MATTERS

  From  time to time,  the  Company  is a party to  lawsuits  that  arise in the
ordinary  course of its business.  These  lawsuits may involve  litigation by or
against the Company to enforce  contractual rights under contracts;  lawsuits by
or against the Company  relating to equipment,  service or payment disputes with
customers; disputes with employees; or other matters. The Company is currently a
defendant in a number of lawsuits,  none of which should have, in the opinion of
management  and legal  counsel,  a  material  adverse  effect  on the  Company's
financial condition, results of operations or cash flows.
  Pitney  Bowes is subject  to  Federal,  state and local  laws and  regulations
related to the environment, and is currently named as a member of various groups
of potentially responsible parties in administrative or court proceedings. Based
on  facts  presently  known,  PBI  believes  that  the  outcome  of any  current
proceeding will not have a material  adverse effect on its financial  condition,
results of operations or cash flows.
  In 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:

o    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
o 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 o 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
o 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 less than
10% of PBI's  installed U.S.  meter base as of December 31, 1998,  compared with
25% as of December 31, 1997.


<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:

o the Indicium  specification- the technical  specifications for the Indicium to
be printed
o a Postal Security Device specification- the technical specification
for the device that would contain the  accounting  and security  features of the
system
o a Host specification
o 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 March 1997, the USPS
published for public comment the vendor infrastructure specification.
  On August 26, 1998, the USPS  published for public comment a consolidated  and
revised  set  of  IBIP  specifications   entitled   "Performance   Criteria  for
Information  Based indicia and Security  Architecture  for IBI Postage  Metering
Systems"  (the  "IBI  Performance  Criteria").   The  IBI  Performance  Criteria
consolidated the aforementioned IBIP specifications and incorporated many of the
comments previously  submitted by the Company. PBI submitted comments to the IBI
Performance Criteria on November 30, 1998.
  As of December 31, 1998, PBI is in the process of finalizing  the  development
of a PC project,  which  satisfies the proposed IBI Performance  Criteria.  This
product is  currently  undergoing  beta  testing and is expected to be ready for
market upon final approval from the USPS.





















--------------------------------------------------------------------------------
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;  and the impact of the Year 2000 issue,
including  the  effects of third  parties'  inability  to address  the Year 2000
problem, as well as the Company's own readiness.


<PAGE> 14
                         PITNEY BOWES CREDIT CORPORATION
     ITEM 7A. -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



MARKET RISK

  In the  normal  course of  business,  PBCC is  exposed to the impact of market
risk.  Market risk is the sensitivity of income to variations in interest rates,
foreign exchange rates, and other market-driven rates or prices.
  Interest-rate   risk,   including  mortgage   prepayment  risk,  is  the  most
significant  market risk to which the Company is exposed.  Interest-rate risk is
the sensitivity of income to variations in interest rates.
  The  Company  manages  its  interest-rate  risk  mainly by using a variety  of
off-balance  sheet  instruments.  The most  frequently  used  off-balance  sheet
instruments  are  interest-rate  swaps and options  (particularly  interest-rate
floors).
  At December 31, 1998,  interest-rate  swaps  totaling  $325 million  (notional
amount) were being used to manage risk due to interest-rate risk.
  A second major source of the Company's  interest-rate  risk is the sensitivity
of its mortgage servicing rights ("MSRs") to prepayments.  The mortgage borrower
has the option to repay the mortgage loan at any time.  When  mortgage  interest
rates  decline,  borrowers  have a greater  incentive to prepay  mortgage  loans
through a  refinancing;  when mortgage  interest  rates rise,  this incentive is
reduced or eliminated. Since MSRs represent the right to service mortgage loans,
a decline in  interest  rates and an actual (or  probable)  increase in mortgage
prepayments shortens the expected life of the MSR asset and reduces its economic
value.  Correspondingly,  an  increase  in  interest  rates  and an  actual  (or
probable) decline in mortgage  prepayments lengthen the expected life of the MSR
asset and enhance its economic value.  The expected income from and,  therefore,
economic  value of MSRs is sensitive to movements in interest  rates due to this
sensitivity to mortgage prepayments.
  To   mitigate   the   risk   of   declining    long-term    interest    rates,
higher-than-expected  mortgage prepayments,  and the potential impairment of the
MSRs, the Company uses  interest-rate  swaps and floors.  These instruments gain
value as interest rates decline,  mitigating the impairment of MSRs. At December
31, 1998, the Company had approximately $275 million of interest-rate  swaps and
$1.3 billion of interest-rate  floors  outstanding  (notional amounts) to manage
risk to the MSRs' valuation.
  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.  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, 1998,
the Company's  maximum potential one-day loss in fair value on the interest rate
swaps, using a variance/co-variance technique, was not material to the Company's
financial  condition,  results  of  operations  or cash  flows.  (See Note 13 to
CONSOLIDATED FINANCIAL STATEMENTS.)


<PAGE> 15
                         PITNEY BOWES CREDIT CORPORATION
             Item 8. -- Financial statements and supplementary data



REPORT OF INDEPENDENT ACCOUNTANTS


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

In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing  under  Item  14(a)(1)  on page 39  present  fairly,  in all  material
respects,  the  financial  position of Pitney Bowes Credit  Corporation  and its
subsidiaries  (the  "Company") at December 31, 1998 and 1997, and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 1998,  in  conformity  with  generally  accepted  accounting
principles. In addition, in our opinion, the financial statement schedule listed
in the index appearing under Item 14(a)(2) on page 39, presents  fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated  financial statements.  These financial statements
and the financial  statement  schedule are the  responsibility  of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  and  the  financial  statement  schedule  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.

PricewaterhouseCoopers LLP

Stamford, Connecticut
January 21, 1999




<PAGE> 16
                         PITNEY BOWES CREDIT CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
                            (in thousands of dollars)

<TABLE>

<S>                                                                          <C>               <C>              <C> 

         Years Ended December 31                                                  1998              1997             1996
                                                                                  ----              ----             ----
         Revenue:
           Finance income......................................              $ 514,287         $ 524,913        $ 529,987
           Mortgage servicing revenue..........................                132,072            73,246           52,985
           Equipment sales.....................................                      -                 -           26,666
                                                                               -------           -------          -------

             Total revenue.....................................                646,359           598,159          609,638
                                                                               -------           -------          -------

         Expenses:
           Selling, general and administrative.................                136,999           121,043          111,217
           Depreciation and amortization.......................                 75,051            42,462           40,267
           Cost of equipment sales.............................                      -                 -           22,821
           Provision for credit losses.........................                 36,080            34,076           35,617
           Interest............................................                116,746           151,033          160,841
                                                                               -------           -------          -------
             Total expenses....................................                364,876           348,614          370,763
                                                                               -------           -------          -------
         Income from continuing operations
           before income taxes.................................                281,483           249,545          238,875
         Provision for income taxes............................                 82,460            71,737           76,445
                                                                               -------           -------          -------
         Income from continuing operations.....................                199,023           177,808          162,430
         Discontinued operations (net of taxes of $5,237 in 1998
           $10,546 in 1997 and $10,410 in 1996)................                  8,453            17,025           16,804
                                                                               -------           -------          -------

         Net income [1]........................................              $ 207,476        $ 194,833         $ 179,234
                                                                               =======           =======          =======




                   Consolidated Statement of Retained Earnings
                            (in thousands of dollars)


         Years Ended December 31                                                  1998              1997             1996
                                                                                  ----              ----             ----

         Retained earnings at beginning of year................            $ 1,007,136      $    890,303        $ 782,269
         Net income for the year...............................                207,476           194,833          179,234
         Dividends paid to Pitney Bowes Inc....................                (86,000)         (78,000)          (71,200)
                                                                              --------           -------          -------

         Retained earnings at end of year......................            $ 1,128,612       $ 1,007,136        $ 890,303
                                                                              ========           =======          =======

</TABLE>

         [1] For the years ended  December 31, 1998,  1997 and 1996, the Company
         had no other  comprehensive  income  items.  Consequently,  net  income
         represents the Company's total comprehensive income.


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



<PAGE> 17
                         PITNEY BOWES CREDIT CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                            (in thousands of dollars)

<TABLE>
<S>                                                                         <C>              <C>    
                                                                                       1998              1997
                                                                                      ----              ----
Assets: 
Cash.....................................................................    $       19,154  $       36,320
                                                                                  ---------        ---------
Investments:
  Finance assets.........................................................         2,721,805        3,475,538
  Investment in leveraged leases.........................................           764,145          667,779
  Investment in operating leases, net of accumulated depreciation........            33,261           32,112
  Allowance for credit losses............................................          (115,233)        (116,588)
                                                                                  ---------        ---------
    Net investments......................................................         3,403,978        4,058,841
                                                                                  ---------        ---------

  Mortgage servicing rights, net of accumulated amortization.............           364,071          220,912
  Assets held for sale...................................................           337,757          305,228
  Investment in partnership..............................................           165,950          158,327
  Loans and advances to affiliates.......................................           611,625          290,488
  Other assets...........................................................           391,135          258,224
                                                                                  ---------        ---------
     Total assets........................................................      $  5,293,670     $  5,328,340
                                                                                  =========        =========

Liabilities:
  Senior notes payable within one year...................................     $     991,853      $ 1,970,110
  Short-term notes payable to affiliates.................................          137,000                 -
  Accounts payable to affiliates.........................................           278,452          232,917
  Accounts payable and accrued liabilities...............................           182,236          199,905
  Deferred taxes.........................................................           486,906          510,060
  Senior notes payable after one year....................................         1,382,000        1,050,000
  Long-term notes payable to affiliates..................................           333,000                -
  Subordinated notes payable.............................................           285,886          270,487
                                                                                  ---------        ---------
      Total liabilities..................................................         4,077,333        4,233,479
                                                                                  ---------        ---------
Stockholder's Equity:
  Common stock...........................................................            46,000           46,000
  Capital surplus........................................................            41,725           41,725
  Retained earnings......................................................         1,128,612        1,007,136
                                                                                  ---------        ---------
     Total stockholder's equity..........................................         1,216,337        1,094,861
                                                                                  ---------        ---------
     Total liabilities and stockholder's equity..........................     $   5,293,670    $   5,328,340
                                                                                  =========        =========


</TABLE>



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


<PAGE> 18
                         PITNEY BOWES CREDIT CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands of dollars)

<TABLE>
<S>                                                                        <C>           <C>             <C> 
Years Ended December 31                                                         1998           1997            1996
                                                                                ----           ----            ----

Operating Activities
Net income...........................................................      $ 207,476     $ 194,833       $ 179,234
Adjustments to reconcile net income to net cash provided by
 operating activities:
  Provision for credit losses........................................         65,404         78,320         66,529
  Depreciation and amortization......................................         75,163         42,648         40,447
  Cost of equipment sales............................................              -              -         22,821
 Increase in deferred taxes..........................................         22,387         31,436         37,300
 Increase in other receivables.......................................        (14,643)       (37,782)        (8,315)
 Increase in foreclosure claims receivable...........................        (23,414)       (24,155)        (3,673)
 Increase in advances and deposits...................................        (17,942)       (23,351)        (6,168)
 Increase in loans held for sale.....................................        (89,577)       (12,336)       (17,964)
 Increase in accounts payable to affiliates..........................         45,535         64,359         41,551
 Increase in accounts payable and accrued liabilities................          7,518         23,248         21,054
 Other, net..........................................................        (10,155)        12,271           (784)
                                                                           ---------      ---------       --------
Net cash provided by operating activities                                    267,752        349,491        372,032
                                                                           ---------      ---------       --------
Investing Activities
  Proceeds from sale of subsidiary...................................        789,936              -               -
  Investment in net finance assets...................................     (1,399,498)    (1,420,409)    (1,494,606)
  Investment in leveraged leases.....................................        (77,441)       (46,390)       (22,446)
  Investment in operating leases.....................................         (6,366)       (16,023)       (20,348)
  Investment in assets held for sale.................................       (545,149)      (650,951)      (326,691)
  Cash receipts collected under lease contracts, net of finance
     income recognized...............................................      1,783,235      2,538,321      1,557,822
  Investment in mortgage service rights..............................       (206,464)      (110,014)       (50,407)
  Investment in affiliate notes......................................       (282,000)              -              -
  Loans and advances to affiliated companies, net....................        (26,101)      (281,777)        (2,001)
  Additions to equipment and leasehold improvements..................         (9,012)       (14,327)       (12,536)
                                                                           ---------      ---------       --------
Net cash provided by (used in) investing activities..................         21,140         (1,570)      (371,213)
                                                                           ---------      ---------       --------
Financing Activities
   Net change in short-term debt.....................................     (1,012,457)        89,029       (466,799)
   Short-term loans from affiliates..................................        137,000       (139,400)       (10,309)
   Proceeds from issuance of senior notes payable after one year.....        532,000              -        500,000
   Proceeds from issuance of subordinated debt.......................         15,399         41,333         58,297
   Settlement of long-term debt......................................       (225,000)      (245,500)             -
   Loans from affiliates ............................................        333,000              -              -
   Dividends paid to Pitney Bowes, Inc...............................        (86,000)       (78,000)       (71,200)
                                                                           ---------      ---------       --------
Net cash (used in) provided by financing activities..................       (306,058)      (332,538)         9,989
                                                                           ---------      ---------       --------
(Decrease) increase in cash..........................................        (17,166)        15,383         10,808
Cash at beginning of year............................................         36,320         20,937         10,129
                                                                           ---------      ---------       --------
Cash at end of year..................................................  $      19,154  $      36,320   $     20,937
                                                                           =========      =========       ========

Interest paid........................................................   $    162,270   $    196,968    $   197,256
                                                                           =========      =========       ========
Income taxes refunded, net...........................................  $     (63,420) $     (21,773)  $    (44,397)
                                                                           =========      =========       ========
</TABLE>
Supplemental noncash activities:
  During  1998,  the Company  acquired a lease  portfolio  consisting  of direct
financing and operating leases. In connection with this acquisition, the Company
assumed certain non-recourse debt in the amount of $59.2 million.

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


<PAGE> 19
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements

Note 1. - Summary of Significant Accounting Policies

Consolidation  The  consolidated  financial  statements  include the accounts of
Pitney Bowes Credit  Corporation and all of its  subsidiaries  (the "Company" or
"PBCC").  All  significant  intercompany  transactions  and  balances  have been
eliminated.  Use  of  estimates  The  preparation  of  financial  statements  in
conformity with generally accepted accounting  principles requires management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  Actual results could differ from those estimates.
Cash and cash  equivalents Cash equivalents  include  short-term,  highly liquid
investments  with  a  maturity  of  three  months  or  less  from  the  date  of
acquisition.  Basis  of  accounting  for  financing  transactions  At the time a
financing  transaction is consummated,  the Company records on its balance sheet
the total receivable, unearned income and the estimated residual value of leased
equipment.  Unearned income  represents the excess of the total  receivable plus
the estimated  residual  value over the cost of equipment 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.  Capital  services  transactions
are reviewed on an individual basis.  Income recognition is discontinued when it
is apparent an obligor will not be making payment in accordance with lease terms
and is resumed  when the Company has  sufficient  experience  on  resumption  of
payments to be satisfied  that such payments  will  continue in accordance  with
contract terms.  Income taxes The Company's  taxable results are included in the
consolidated  Federal and certain state income tax returns of Pitney Bowes.  For
tax purposes,  income from leases is recognized  under the operating  method and
represents the difference  between gross rentals billed and operating  expenses.
Under a tax sharing  agreement between the Company and Pitney Bowes, the Company
makes  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.  Mortgage  servicing  rights ("MSR") The Company  recognizes,  as separate
assets,  rights to service  mortgage loans,  whether those servicing  rights are
originated or purchased.  MSRs originated by others,  purchased  separately from
loans,  are recorded at cost. The Company  assesses  impairment of MSRs based on
the fair value of those  rights.  The Company  estimates  the fair value of MSRs
based on estimated  future net servicing  income,  using a valuation model which
considers  such factors as market  discount  rates,  consensus  loan  prepayment
predictions,  servicing  costs and  other  economic  factors.  For  purposes  of
impairment valuation,  the Company's policy stratifies MSRs based on predominant
risk characteristics of the underlying loans, including loan type,  amortization
type (fixed or adjustable)  and note rate. To the extent that the carrying value
of MSRs  exceeds  fair  value by  individual  stratum,  a  valuation  reserve is
established,  which is adjusted as the value of MSRs increases or decreases. The
cost of MSRs is amortized in  proportion to and over the period of estimated net
servicing income.  Reclassifications  Certain amounts from prior years have been
reclassified in order to conform to current year presentation.



<PAGE> 20
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements

Note 2. - Discontinued Operations

Discontinued   operations  On  October  30,  1998,  the  Company's  wholly-owned
subsidiary,  Colonial  Pacific  Leasing  Corporation  ("CPLC"),  transferred the
operations,   employees   and   substantially   all   assets   related   to  its
broker-oriented  small-ticket  lease  financing  business  to  General  Electric
Capital Corporation ("GECC"). The Company received approximately $790 million at
closing,  which  approximates  the book  value of net assets  sold or  otherwise
disposed of together with related  transaction  costs.  As part of the sale, the
Company  retained  certain  non-performing  accounts  of  CPLC.  (See  Note 6 to
CONSOLIDATED  FINANCIAL  STATEMENTS.) The transaction is subject to post-closing
adjustments  pursuant to the terms of the purchase  agreement with GECC executed
on October 12, 1998.  The Company does not expect the effect of any  adjustments
to be significant.
  Operating  results of CPLC have been  segregated and reported as  discontinued
operations in the consolidated  statements of income. Finance income of CPLC was
$128.8  million for the ten months ended October 31, 1998 and $180.5 million and
$163.0  million for the years ended  December  31, 1997 and 1996,  respectively.
Interest expense allocated to discontinued  operations was $33.9 million for the
ten months ended  October 31, 1998 and $46.2  million and $40.7  million for the
years ended December 31, 1997 and 1996, respectively.  Interest expense has been
allocated based on the level of CPLC's  intercompany  borrowing,  charged at the
Company's weighted average borrowing rate.


Note 3. - Finance Assets

The composition of the Company's finance assets is as follows:
<TABLE>
<S>                                                                       <C>             <C> 
           December 31                                                            1998           1997
                                                                                  ----           ----
           (in thousands of dollars)
            Gross finance receivables..................................    $ 3,050,572    $ 3,923,767
            Unguaranteed residual valuation............................        412,569        461,051
            Initial direct costs deferred..............................         46,224         85,497
            Unearned income............................................       (787,560)      (994,777)
                                                                             ---------      ---------
              Total finance assets.....................................    $ 2,721,805    $ 3,475,538
                                                                             =========      =========

</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  capital  services  programs  include  commercial jet aircraft
transactions   with   original   lease  terms  of  up  to  23  years  and  other
non-commercial jet aircraft  transactions with original lease terms ranging from
two to 12 years.  The balance due at December  31, 1998,  including  estimated
residual value realizable at the end of the lease term, is payable as follows:
<TABLE>

                                                  Gross Finance Assets
                                 -------------------------------------------------------
         <S>                     <C>                   <C>                    <C> 
                                                         Commercial
                                                             and
                                  Internal               industrial
                                  programs                programs                Total

         1999                    $1,125,925            $   134,753            $1,260,678
         2000                       662,580                121,363               783,943
         2001                       460,061                 90,612               550,673
         2002                       241,231                 98,914               340,145
         2003                        62,815                 68,107               130,922
         Thereafter                   7,912                388,868               396,780
                                   --------               --------              --------

         Total                   $2,560,524            $   902,617            $3,463,141
                                   ========               ========              ========

</TABLE>


  Net equipment  financed for Pitney Bowes products were $672.7 million,  $611.2
million and $571.6 million in 1998, 1997, and 1996, respectively.



<PAGE> 21
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 3. - Finance Assets (continued)

  During 1997, PBCC and GATX  Corporation  ("GATX") formed PBG Capital  Partners
LLC ("PBG") for the purpose of financing and managing  certain  leasing  related
assets.  PBCC and GATX  each  contributed  assets  (primarily  direct  financing
leases) to PBG.  The  Company  and GATX each  maintain  a 50  percent  ownership
interest and jointly  manage PBG. PBCC accounts for its  investment in PBG under
the equity  method and recorded  income of  approximately  $8.0 million and $1.2
million in 1998 and 1997,  respectively.  During 1998,  PBCC  contributed  $65.3
million of assets to PBG and received cash distributions totaling $89.6 million.
Total assets sold and contributed (including assets sold to GATX) by PBCC during
1997 were $958.8 million.

  During 1998, 1997 and 1996, PBCC sold finance assets with limited  recourse of
approximately  $384 million,  $264 million and $409 million,  respectively.  The
uncollected  principal balance of receivables sold at December 31, 1998 and 1997
was $501.2 million and $391.0 million, respectively. The maximum risk of loss in
these transactions  arises from the possible  non-performance of lessees to meet
the terms of their contracts. The Company believes adequate provisions have been
made for sold receivables which may become uncollectible.

  As of December  31,  1998,  $326.8  million  (12.0  percent) of the  Company's
finance assets and $428.8 million (12.4 percent) of the Company's  gross finance
assets  were  related to aircraft  leased to  commercial  airlines.  The Company
considers  its  credit  risk for these  leases to be  minimal  due to the credit
worthiness  of the  underlying  lessees and the fact that all payments are being
made in accordance  with lease  agreements.  The Company  believes any potential
exposure in  commercial  aircraft  investment  is  mitigated by the value of the
collateral as the Company retains a security interest in the leased aircraft.


Note 4. - Net Investment in Leveraged Leases

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

<S>                                                                          <C>            <C> 
           December 31                                                            1998           1997
                                                                                  ----           ----
            (in thousands of dollars)
            Net rents receivable.......................................      $ 788,404      $ 627,655
            Unguaranteed residual valuation............................        599,741        599,741
            Unearned income............................................       (624,000)      (559,617)
                                                                             ---------      ---------
            Investment in leveraged leases.............................        764,145        667,779
            Deferred taxes arising from
             leveraged leases (1) .....................................       (450,900)      (308,746)
                                                                             ---------      ---------
            Net investment in leveraged leases.........................      $ 313,245      $ 359,033
                                                                             =========      =========
</TABLE>

 (1) Includes amounts reclassified to subordinated debt.

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

<TABLE>
<S>                                                            <C>            <C>           <C>   
           Year Ended December 31                                  1998          1997            1996
                                                                   ----          ----            ----
           (in thousands of dollars)
           Pretax leveraged lease income...............        $ 16,513       $  4,467       $  7,145
           Income tax benefit..........................          11,770         17,110          7,080
                                                                -------        -------        -------
            Net income from leveraged leases...........        $ 28,283       $ 21,577       $ 14,225
                                                                =======        =======        =======
</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> 22
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements



Note 4. - Net Investment in Leveraged Leases (continued)

Leveraged lease  investments  totaling $301.6 million (39.5 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 $297.5  million  (38.9  percent) and with
original  lease terms  ranging from 22 to 25 years;  one  transaction  involving
locomotives  with a total  investment  of $37.0  million (4.8  percent)  with an
original  lease term of 38 years and five  transactions  involving  rail and bus
facilities with a total investment of $128.0 million (16.8 percent) and original
lease terms of 37 to 44 years.


Note 5. - Investment in Operating Leases, Net

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

Minimum  future  rental  payments  to be received in each of the next five years
under non-cancelable  operating leases are $1.6 million in 1999, $0.7 million in
2000,  $0.5 million in 2001, $0.3 million in 2002, $0.1 million in 2003 and $0.3
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>


<S>                                                           <C>            <C>            <C> 
           December 31                                             1998           1997           1996
                                                                   ----           ----           ----
           (in thousands of dollars)
            Beginning balance..........................       $ 116,588      $  98,721      $ 101,355
            Additions charged to
              discontinued operations..................          29,324         44,244         30,912
            Additions charged to operations............          36,080         34,076         35,617
           Amounts written-off:
               Internal programs.......................        (28,945)        (27,182)       (22,879)
               Capital services........................           (490)             40           (101)
               External small-ticket...................        (37,324)        (33,311)       (46,183)
                                                                -------        -------        -------
                   Total write-offs....................        (66,759)        (60,453)       (69,163)
                                                                -------        -------        -------

            Ending balance.............................       $ 115,233      $ 116,588      $  98,721
                                                                =======        =======        =======
</TABLE>
                                             

The increase in the amount of additions charged to continuing operations in 1998
is the  result  of  higher  investment  levels  in the  Company's  new  business
initiatives  and the  impact  of  finance  asset  sales.  The  decrease  in 1997
additions was due to favorable  adjustments to the internal  financing  programs
provisions reflecting management's evaluation of expected losses.




<PAGE> 23
                         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 capital  services  financing  transactions,  the credit ratings  assigned by
Moody's and Standard & Poor's. In evaluating the adequacy of reserves, estimates
of expected losses, again by nature of the asset, are utilized. While historical
experience is the principal factor in determining loss percentages,  adjustments
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  programs,  the Company  discontinues  income
recognition  for  finance  receivables  past due over 120 days.  The Company has
utilized  this period  because  historically  internal  collection  efforts have
continued for this time period. In capital services programs, income recognition
is  discontinued  as soon as it is apparent  that the obligor will not be making
payments in  accordance  with lease terms,  such as in the event of  bankruptcy.
Otherwise, income recognition is discontinued when accounts are past due over 90
days.

Finance  receivables  are  written-off  to the allowance for credit losses after
collection  efforts are exhausted and the account is deemed  uncollectible.  For
internal financing transactions, this usually occurs near the point in time when
the  transaction  is  placed  in a  non-earning  status.  For  capital  services
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  capital  services
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 program non-earning accounts occurs
when  payments  are  reduced to 60 days or less past due.  On  capital  services
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>

<S>                                                           <C>            <C>            <C> 
           December 31                                             1998           1997           1996
                                                                   ----           ----           ----
            (in thousands of dollars)
            Non-performing (non-accrual) transactions
               Internal programs.......................       $  15,214      $  11,394      $  12,614
               Capital services programs...............           2,134          2,543          2,643
               External small-ticket...................          42,063         37,184         23,766
                                                                -------        -------        -------
                   Total...............................       $  59,411      $  51,121      $  39,023
                                                                =======        =======        =======
            Troubled (potential problem) transactions
               Capital services programs...............       $  12,906      $  13,446      $  13,810
                                                                =======        =======        ======= 
</TABLE>

The  increase in  non-performing  transactions  in 1998 and 1997 in the external
small-ticket  programs was due to an increase in bankruptcy levels among certain
lease  customers.  As part of the  sale of CPLC in  October  1998,  the  Company
retained certain non-performing accounts. These accounts have been placed with a
specialized  late stage  collection group in an effort to maximize the potential
for recovery. 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 capital services  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> 24
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements

Note 6. - Allowance for Credit Losses (continued)

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

<TABLE>

<S>                                                          <C>            <C>            <C> 
           December 31                                             1998           1997           1996
                                                                   ----           ----           ----
           (in thousands of dollars)
            Face value of receivables..................      $    2,500     $    2,500     $    2,500
            Cash collections applied to principal......         (1,481)         (1,352)        (1,252)
                                                                -------        -------        -------
            Carrying value.............................      $    1,019     $    1,148     $    1,248
                                                                =======        =======        =======

</TABLE>

Note 7. - Mortgage Servicing Rights

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

The Company  purchased  rights to service loans with aggregate  unpaid principal
balances of approximately  $12.4 billion in 1998, $8.1 billion in 1997, and $5.3
billion  in  1996.  The  costs  associated  with  acquiring  these  rights  were
capitalized and recorded as MSRs.

The following summarizes the Company's capitalized MSR activity:
<TABLE>

<S>                                                           <C>            <C>            <C> 
           December 31                                             1998           1997           1996
                                                                   ----           ----           ----
           (in thousands of dollars)
           Balance at beginning of year................       $ 220,912      $ 138,146      $ 108,851
           MSR acquisitions............................         206,464        110,014         50,407
           Deferred hedge loss.........................           1,709              -              -
           MSR amortization............................        (54,787)        (27,248)       (21,112)
           Impairment reserve..........................        (10,227)              -              -
                                                                -------        -------        -------
            Balance at end of year.....................       $ 364,071      $ 220,912      $ 138,146
                                                                =======        =======        =======
</TABLE>

The fair value of MSRs was approximately $372.9 million at December 31, 1998 and
$247.5 million at December 31, 1997.

Note 8. - Assets Held for Sale

The Company funded transactions  totaling $545.1 million in 1998, $650.9 million
in 1997,  and  $326.7  million  in  1996,  relating  to  assets  held for  sale.
Transactions  totaling  $380.3 million in 1998 and $445.5 million in 1997,  were
sold for a net gain  before  taxes of $7.4  million in 1998 and $6.3  million in
1997,  which is recorded as part of finance  income.  Thirty-eight  transactions
relating to assets held for sale remain in inventory  with a net carrying  value
of $337.8  million at December 31, 1998  compared with  twenty-one  transactions
with a net carrying value of $305.2 million at December 31, 1997.


<PAGE> 25


                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements

<TABLE>

Note 8. - Other Assets

<S>                                                                          <C>           <C> 
           December 31                                                            1998           1997
                                                                                  ----           ----
           (in thousands of dollars)
           Loans held for sale.........................................      $ 131,504     $   41,927
           Other receivables...........................................         74,834         60,191
           Foreclosure claims receivable, net..........................         57,471         34,057
           Equipment and leasehold improvements, net of accumulated
             depreciation and amortization: 1998-$22,259; 1997-$21,975.         15,393         30,612
           Billed meter rental receivables ............................         33,514         29,582
           Mortgage escrow advances....................................         33,019         25,634
           Other advances and deposits.................................         29,698         19,141
           MSR hedge...................................................          3,950              -
           Deferred partnership fees...................................          3,330          5,290
           Deferred debt placement fees................................          3,594          3,308
           Goodwill, net of accumulated amortization:
             1998-$2,518; 1997-$2,132..................................          2,131          2,518
           Interest discount on commercial paper.......................             51          2,672
           Prepaid expenses and other assets...........................          2,646          3,292
                                                                              --------       --------
            Total other assets.........................................      $ 391,135      $ 258,224
                                                                              ========       ========
</TABLE>

Loans held for sale consist of purchased and  originated  mortgage loans secured
by first real estate mortgages and are stated at the lower of aggregated cost or
market. Market value is determined by outstanding committments from investors or
by current  investor  yield  requirements.  In general,  the Company enters into
forward  delivery  contracts for the sale of loans.  Write-downs of loans to the
lower of cost or market  are  included  in net income of the period in which the
adjustment occurs. Any discount resulting from the purchase of mortgage loans is
not included in net income until the loans are sold.  There were no  write-downs
of loans held for sale for the years ended December 31, 1998 or 1997.

Other  receivables  increased  over the prior year  mainly due to higher  billed
receivables at the Company's Mortgage  Servicing  subsidiary and proceeds due on
syndication transactions.

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  $8.4 million at December 31, 1998 and $5.5
million at December 31, 1997.

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.

The MSR hedge  represents  the net  carrying  value of the  interest  rate floor
contract the Company has entered into during 1998.

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.


<PAGE> 26
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 8. - Other Assets (continued)

Deferred debt  placement  fees incurred in  connection  with placing  senior and
subordinated notes are amortized over the related terms of the notes.


Note 9. - Accounts Payable and Accrued Liabilities

<TABLE>
<S>                                                                          <C>            <C> 
           December 31                                                            1998           1997
                                                                                  ----           ----
            (in thousands of dollars)
           Advances and deposits from customers........................      $  48,448      $  51,616
           Accounts payable............................................         45,787         48,572
           Accrued interest payable....................................         27,393         23,081
           Sales and use, property and sundry taxes....................         15,282         14,663
           Portfolio purchase price payable............................          4,448         12,800
           Accrued salary and benefits payable.........................          5,664          8,662
           Minority interest in partnership............................          8,751          8,130
           Other liabilities...........................................         26,463         32,381
                                                                              --------       --------
            Total accounts payable and accrued liabilities.............       $182,236       $199,905
                                                                              ========       ========
</TABLE>

Note 10. - Notes Payable

Short-term  notes  payable  totaled  $1.0  billion at December 31, 1998 and $2.0
billion at December 31, 1997. 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>
<S>                                                                       <C>            <C> 
         December 31                                                              1998           1997
                                                                                  ----           ----
         (in thousands of dollars)
         Senior Notes Payable:
           Commercial paper at the weighted average
             interest rate of 4.90% (5.66% in 1997)....................   $    173,700   $ 1,361,110
           Notes payable against bank lines of credit and others at a
             weighted average interest rate of 1.16% (1.68% in 1997)...        618,153        384,000
           Current installment of long-term debt due within one year at
             an interest rate of 6.54% (5.84% to 6.31% in 1997)........        200,000        225,000
                                                                             ---------      ---------
            Total senior notes payable due within one year.............        991,853      1,970,110
            Senior notes payable due after one year at interest rates of
              5.65% to 9.25% (6.06% to 9.25% in 1997)..................      1,382,000      1,050,000
                                                                             ---------      ---------
            Total senior notes payable.................................      2,373,853      3,020,110
                                                                             ---------      ---------
         Notes Payable to Affiliates:
            Due within one year at interest rates of 5.38% and 5.55%...        137,000              -
            Due after one year at an interest rate of 5.38%............        333,000              -
                                                                             ---------      ---------
            Total notes payable to affiliates..........................        470,000              -
                                                                             ---------      ---------
         Subordinated Notes Payable:
           Non-interest bearing notes due Pitney Bowes Inc.............        285,886        270,487
                                                                             ---------      ---------


            Total notes payable........................................   $  3,129,739   $  3,290,597
                                                                             =========      =========

</TABLE>

<PAGE> 27
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements

Note 10. - Notes Payable (continued)

At December  31,  1998,  the Company  had unused  lines of credit and  revolving
credit facilities  totaling $1,200 million largely  supporting  commercial paper
borrowings.  The Company recorded commitment fees of $0.7 million,  $0.6 million
and $1.3 million in 1998, 1997 and 1996, respectively,  to maintain its lines of
credit.  The reduction in commitment fees from 1996 is a result of reductions in
commitment fee rates in January 1997.

Total notes payable at December 31, 1998 mature as follows: approximately $1,129
million in 1999,  $87 million in 2000,  $519  million in 2001,  $137  million in
2002, $437 million in 2003 and $821 million thereafter.

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

In January 1998,  the Company  issued $250 million of  medium-term  notes due in
January 2003.

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

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

In  1998  and  1997,  the  Company  issued  $15.4  million  and  $41.3  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 1997 and 1996  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.



<PAGE> 28


                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 11. - Business Segment Information

The  Internal  Financing  Division of PBCC  provides  marketing  support to PBI.
Equipment  leased or financed for Internal  Division  programs  include mailing,
paper handling and shipping  equipment,  scales,  copiers,  and facsimile units.
PBCC's  Capital  Services  Division  operates in the  commercial  and industrial
market  by  offering  financial  services  to its  customers  for  products  not
manufactured  or  sold  by PBI  or  its  subsidiaries.  The  Company's  Mortgage
Servicing  Division is  responsible  for the  management of Atlantic  Mortgage &
Investment  Corporation ("AMIC"), a wholly-owned  subsidiary of PBCC, located in
Jacksonville,   Florida,   which  specializes  in  servicing  residential  first
mortgages  for a fee.  The  accounting  policies of the segments are the same as
those described in the summary of significant  accounting policies.  (See Note 1
to  CONSOLIDATED  FINANCIAL  STATEMENTS.)  Operating  profit of each  segment is
determined by deducting from revenue the costs and expenses  directly related to
the segment as well as an allocation of certain  corporate  expenses.  Operating
profit  excludes  income taxes and net interest  attributable to corporate debt.
Identifiable  assets are those used by the segment  directly in  operations  and
exclude cash and cash equivalents,  short-term investments and general corporate
assets.  Long-lived assets exclude finance receivables,  investment in leveraged
leases and MSRs.  Segmental  revenue and income before taxes for the years ended
1998, 1997 and 1996 are presented  below.  All revenue is produced in the United
States.
<TABLE>

                                                                             Revenue
                                                              ---------------------------------------
<S>                                                           <C>            <C>            <C> 
    Year Ended December 31                                         1998           1997           1996
                                                                   ----           ----           ----
    (in thousands of dollars)
      Internal financing...............................       $ 358,273      $ 331,824      $ 308,084
      Capital services.................................         156,014        193,089        248,569
      Mortgage servicing...............................         132,072         73,246         52,985
                                                                -------        -------        -------
           Total revenue...............................       $ 646,359      $ 598,159      $ 609,638
                                                                =======        =======        =======



                                                                         Income before Taxes
                                                              ---------------------------------------
    Year Ended December 31                                         1998           1997           1996
                                                                   ----           ----           ----
    (in thousands of dollars)
      Internal financing...............................       $ 212,030      $ 194,171      $ 174,176
      Capital services.................................          77,313         66,638         73,294
      Mortgage servicing...............................          40,273         27,102         16,028
                                                                -------        -------        -------
      Total for reportable segments....................         329,616        287,911        263,498
      Unallocated amounts:
        Corporate interest expense, net................        (28,040)        (20,796)       (15,201)
        Corporate expenses.............................        (20,093)        (17,570)        (9,422)
                                                                -------        -------        -------
      Income before income taxes.......................       $ 281,483      $ 249,545     $  238,875
                                                                =======        =======        =======

Additional segment information is as follows:
                          Depreciation and Amortization
                                                               --------------------------------------
    Year Ended December 31                                         1998           1997           1996
                                                                   ----           ----           ----
    (in thousands of dollars)
      Internal financing...............................        $     16      $       -      $       -
      Capital services.................................          13,186         14,231         19,155
      Mortgage servicing...............................          61,849         28,231         21,112
                                                                -------        -------        -------
           Total.......................................        $ 75,051      $  42,462      $  40,267
                                                                =======        =======        =======
</TABLE>


<PAGE> 29
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 11. - Business Segment Information (continued)


<TABLE>
                                                                        Net Interest Expense
                                                              ---------------------------------------
<S>                                                           <C>            <C>            <C> 
    Year Ended December 31                                         1998           1997           1996
                                                                   ----           ----           ----
    (in thousands of dollars)
      Internal financing...............................       $  52,174      $  47,844      $  43,213
      Capital services.................................          44,197         85,994        105,446
      Mortgage servicing...............................         (7,665)         (3,601)        (3,019)
                                                                -------        -------        -------
      Total for reportable segments....................          88,706        130,237        145,640
      Corporate interest expense, net..................          28,040         20,796         15,201
                                                                -------        -------        -------
      Consolidated interest expense, net...............       $ 116,746      $ 151,033      $ 160,841
                                                                =======        =======        =======
</TABLE>


<TABLE>
                                                                                  December 31,
                                                                       ------------------------------
<S>                                                                    <C>                   <C> 
    Net additions to long-lived assets:                                     1998                 1997
                                                                            ----                 ----
    (in thousands of dollars)
      Internal financing....................................           $ 245,665             $ 57,492
      Capital services......................................             372,725              183,031
      Mortgage servicing....................................              20,736                4,086
                                                                         -------              -------
      Total  for reportable segments........................             639,126              244,609
      General corporate assets..............................             106,746              284,251
                                                                         -------              -------
     Consolidated additions to
      long-lived assets.....................................           $ 745,872            $ 528,860
                                                                         =======              =======


                                                                                  December 31,
                                                                           --------------------------
    Identifiable assets:                                                    1998                 1997
                                                                            ----                 ----
    (in thousands of dollars)
      Internal financing....................................         $ 2,087,845          $ 1,797,783
      Capital services......................................           2,437,177            3,015,278
      Mortgage servicing....................................             598,771              345,317
                                                                        --------             --------
    Total for reportable segments...........................           5,123,793            5,158,378
    Cash....................................................              19,154              36,320
    General corporate assets................................             150,723              133,642
                                                                        --------             --------
    Consolidated assets.....................................         $ 5,293,670          $ 5,328,340
                                                                        ========             ========
</TABLE>

<PAGE> 30
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 12. - Derivative Instruments

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

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

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

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

     Pay fixed      Commercial paper                          $325,000             7.70%             4.73%

</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, 1998 was used to calculate
the weighted average interest rate.

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



                                                                           Pay
            (in thousands of dollars)                                     Fixed

            1999.......................................                 $      -
            2000.......................................                        -
            2001.......................................                        -
            2002.......................................                  100,000
            2003.......................................                        -
            Thereafter.................................                  225,000
                                                                         -------
            Notional Amount............................                 $325,000
                                                                         =======



<PAGE> 31
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 12. - Derivative Instruments (continued)

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

<S>                                                           <C>            <C>            <C>
                                                                            Annual Maturity
                                                               --------------------------------------
                                                                          Pay
                                                               ------------------------
            (in thousands of dollars)                             Fixed       Variable          Total

           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
            New contracts..............................         125,000              -        125,000
            Expired contracts..........................               -        (23,524)      ( 23,524)
                                                               --------       --------       --------

           Balance December 31, 1998...................       $ 325,000 $            -      $ 325,000
                                                               ========       ========       ========
</TABLE>









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>
<S>                                                                      <C>              <C>               <C> 
                                                                            1998             1997              1996
                                                                            ----             ----              ----

Impact of interest rate swaps on interest expense (000's)..............  $ 4,500          $ 6,268           $ 7,346
Weighted average borrowing rate excluding interest rate swaps..........    5.53%            5.89%             5.81%
Weighted average borrowing rate including interest rate swaps..........    5.69%            6.09%             6.03%
</TABLE>


A second source of the Company's  interest-rate  risk is the  sensitivity of its
MSRs to prepayments.  The mortgage borrower has the option to repay the mortgage
loan at any time. When mortgage interest rates decline, borrowers have a greater
incentive to prepay mortgage loans through a refinancing; when mortgage interest
rates rise,  this  incentive is reduced or  eliminated.  To mitigate the risk of
declining long-term interest rates,  higher-than-expected  mortgage prepayments,
and the potential  impairment of the MSRs, the Company uses interest-rate  swaps
and  interest  rate floors tied to yields on 10-year  "constant  maturity"  swap
rates.  Decreases in the value of such contracts  aggregating  $2.1 million,  of
which,  $1.7 million has been recorded as  adjustments  to the carrying value of
MSRs at December 31, 1998.

The aggregate  amount of the MSRs hedge  categorized  by contract  type, and the
related interest rate to be paid and received assuming current market conditions
is reflected below:


<TABLE>
<S>                                                        <C>                <C>                  <C>
                                                               Total
                                                             Notional
                                                              Amount                  Interest Rates
     Contract Type                                            (000's)         Fixed/Floor          Variable

     Interest rate swap:                                                                            3-Month
       Company as variable rate payor                      $   275,000            5.400%             LIBOR

                                                                                                    10-Year
     Interest rate floor                                   $ 1,275,000            5.186%               CMS

</TABLE>



<PAGE> 32


                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 12. - Derivative Instruments (continued)

Interest  rate swap  agreements  involve the exchange of fixed rate and variable
rate interest  payments based on a notional  principal amount and maturity date.
In a  purchased  interest-rate  floor  agreement,  cash  interest  payments  are
received  only if current  interest  rates fall below a  predetermined  interest
rate.

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

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

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

There were no deferred  gains or losses  relating to  terminated  interest  rate
swaps or foreign  currency  contracts  at December  31, 1998 and 1997.  The fair
value of interest rate swaps and foreign currency contracts is presented in Note
14 to CONSOLIDATED FINANCIAL STATEMENTS.


Note 13. - Stockholder's Equity

The following is a reconciliation of stockholder's equity:

<TABLE>
<S>                                          <C>             <C>           <C>            <C>
                                                                                              Total
                                                  Common        Capital        Retained     Stockholder's
         (in thousands of dollars)                Stock        Surplus        Earnings        Equity

         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
         Net income - 1998..............              -               -        207,476        207,476
         Dividends paid to PBI..........              -               -        (86,000)       (86,000)
                                               --------        --------       --------       --------

         Balance December 31, 1998......     $   46,000       $  41,725     $1,128,612     $1,216,337
                                               ========        ========       ========       ========
</TABLE>


At December 31, 1998, 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,  1998 and  1997.  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> 33


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

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

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

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, 1998 and 1997 was
$151 million and $213  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.

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

<TABLE>
<S>                                           <C>           <C>             <C>            <C>
         December 31                                     1998                         1997
                                              -------------------------     -------------------------
         (in thousands of dollars)              Carrying        Fair          Carrying         Fair
                                                Value (1)       Value         Value (1)        Value

         Investment securities               $      683     $       683     $   15,822     $   15,715
         Loans receivable (2)                   453,558         469,159        357,227        358,941
         Senior notes payable after one year (1,325,454)    (1,414,697)     (1,068,662)    (1,143,402)
         Interest rate swaps                     (2,051)       (29,730)           (935)       (24,524)
         MSR hedge                                2,864           2,864              -              -
         Transfers of receivables
           with recourse                        (42,805)       (42,805)         (7,765)        (7,765)
         Financial guarantee contracts           (1,532)        (3,411)         (1,656)        (3,265)
         Residual and conditional
           commitment guarantee contracts          (545)           (48)         (4,750)        (4,253)

(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.
</TABLE>


<PAGE> 34
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 15. - Taxes on Income from Continuing Operation

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

<TABLE>
<S>                                                           <C>            <C>            <C> 
           Year Ended December 31                                  1998           1997           1996
                                                                   ----           ----           ----
           (in thousands of dollars)
            Income from continuing operations
              before income taxes......................       $ 281,483      $ 249,545      $ 238,875
                                                               ========       ========       ========
           Provision for income taxes:
             Federal:
               Current.................................       $   4,565      $ (21,879)     $  (3,479)
               Deferred................................          67,656         94,380         64,566
                                                                -------        -------        -------
                   Total federal.......................          72,221         72,501         61,087
                                                                -------        -------        -------
             State and local:
               Current.................................           3,380         11,209         (6,553)
               Deferred................................           6,859        (11,973)        21,911
                                                                -------        -------        -------
                   Total state and local...............          10,239           (764)        15,358
                                                                -------        -------        -------

            Total......................................       $  82,460      $  71,737      $  76,445
                                                                =======        =======        =======

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

           Year Ended December 31                                  1998           1997           1996
                                                                   ----           ----           ----
           (in thousands of dollars)
            Federal....................................      $   76,773    $    81,668     $   70,136
            State and local............................          10,924            615         16,719
                                                                -------        -------        -------
                   Total...............................      $   87,697    $    82,283     $   86,855
                                                                =======        =======        =======

Deferred tax liabilities and (assets):

           December 31                                             1998           1997           1996
                                                                   ----           ----           ----
           (in thousands of dollars)
           Deferred tax liabilities:
             Lease revenue and related depreciation....       $ 511,172      $ 531,195      $ 553,206
           Deferred tax assets:
             Alternative minimum tax
                credit carryforwards...................        (24,266)        (21,135)       (74,582)
                                                               --------       --------       --------
            Total......................................       $ 486,906      $ 510,060      $ 478,624
                                                               ========       ========       ========
</TABLE>


<PAGE> 35
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 15. - Taxes on Income from Continuing Operation (continued)


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

<TABLE>
<S>                                                               <C>            <C>            <C> 
           Year Ended December 31                                  1998           1997           1996
                                                                   ----           ----           ----
           (Percent of pretax income)
           U.S. Federal statutory rate.................            35.0%           35.0%          35.0%

            State and local income taxes ..............             2.2           (0.2)           4.1
            Partnership tax benefits...................           (0.7)           (0.9)          (1.0)
            Tax-exempt foreign trade income............           (1.7)           (2.1)          (2.4)
            Tax-exempt finance income .................           (1.1)           (0.7)          (0.6)
            Residual portfolio and
              equipment acquisition....................           (0.5)           (0.5)          (0.6)
            Other, net ................................           (3.9)           (1.8)          (2.5)
                                                               --------       --------       --------
            Effective income tax rate .................           29.3%           28.8%          32.0%
                                                               ========       ========       ========
</TABLE>

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

Note 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 1998 were 7.00 percent for the discount rate,
4.25 percent for the expected rate of increase in future compensation levels and
9.30 percent for the  expected  long-term  rate of return on plan  assets.  Plan
assumptions  for 1997 were 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 $0.5 million in 1998, $0.4 million in 1997 and $1.6 million in 1996.

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:  $3.2 million in 1999, $2.3 million in 2000, $2.1 million in 2001, $2.0
million in 2002,  $1.9  million  in 2003 and $16.1  million  thereafter.  Rental
expense under operating  leases was $2.8 million,  $4.3 million and $4.1 million
in 1998, 1997 and 1996, respectively.

At December 31, 1998,  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 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.


<PAGE> 36


                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


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

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

In 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:

o    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
o 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 o as
of December 31, 1997, use of mechanical meters that interface with mail machines
or processors ("systems meters") would be suspended and would have to be
     removed from service
o 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 less than
10% of PBI's  installed U.S.  meter base as of December 31, 1998,  compared with
25% as of December 31, 1997.

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:

o the Indicium  specification- the technical  specifications for the Indicium to
be printed
o a Postal Security Device  specification-  the technical  specification for the
device that would contain the accounting and security features of the system

o a Host specification

o 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 March 1997, the USPS published
for public comment the vendor infrastructure specification.

On August 26, 1998, the USPS  published for public  comment a  consolidated  and
revised  set  of  IBIP  specifications   entitled   "Performance   Criteria  for
Information  Based Indicia and Security  Architecture  for IBI Postage  Metering
Systems"  (the  IBI  Performance   Criteria).   The  IBI  Performance   Criteria
consolidated the aforementioned IBIP specifications and Incorporated many of the
comments previously  submitted by the Company. PBI submitted comments to the IBI
Performance Criteria on November 30, 1998.

As of December 31, 1998, PBI is in the process of finalizing the  development of
a PC project,  which  satisfies  the proposed  IBI  Performance  Criteria.  This
product is  currently  undergoing  beta  testing and is expected to be ready for
market upon final approval from the USPS.


<PAGE> 37
                         PITNEY BOWES CREDIT CORPORATION
                   Notes to Consolidated Financial Statements


Note 19. - Quarterly Financial Information (Unaudited)

Summarized  quarterly  financial data for 1998 and 1997 follows (in thousands of
dollars):
<TABLE>

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

<S>                                          <C>             <C>            <C>            <C>
         1998                                  March 31         June 30       Sept. 30        Dec. 31
         ----                                  --------         -------       --------        -------

         Total revenue                       $  142,841      $  156,034     $  169,342     $  178,142
                                               --------        --------       --------       --------
         Expenses:
         Selling, general and administrative     30,008          33,348         32,215         41,428
         Depreciation and amortization           12,216          14,190         27,059         21,586
         Provision for credit losses              8,849           8,933          8,307          9,991
         Interest                                29,870          29,833         28,542         28,501
         Provision for income taxes              17,802          20,271         22,027         22,360
                                               --------        --------       --------       --------
         Total expenses                          98,745         106,575        118,150        123,866
                                               --------        --------       --------       --------
         Income from continuing operations       44,096          49,459         51,192         54,276
         Discontinued operations                  2,753           2,633          2,367            700
                                               --------        --------       --------       --------
         Net income                          $   46,849      $   52,092     $   53,559     $   54,976
                                               ========        ========       ========       ========






         1997

         Total revenue                        $ 148,201       $ 146,007      $ 151,341      $ 152,610
                                               --------        --------       --------       --------
         Expenses:
         Selling, general and administrative     27,462          28,070         34,121         31,390
         Depreciation and amortization           10,457           9,786         13,340          8,879
         Provision for credit losses              9,155           9,753          5,237          9,931
         Interest                                39,445          39,684         39,081         32,823
         Provision for income taxes              19,320          17,301         15,696         19,420
                                               --------        --------       --------       --------
         Total expenses                         105,839         104,594        107,475        102,443
                                               --------        --------       --------       --------
         Income from continuing operations       42,362          41,413         43,866         50,167
         Discontinued operations                  2,876           3,373          3,623          7,153
                                               --------        --------       --------       --------
         Net income                          $   45,238      $   44,786     $   47,489     $   57,320
                                               ========        ========       ========       ========

</TABLE>







<PAGE> 38
                         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> 39


                         PITNEY BOWES CREDIT CORPORATION

                                     Part IV
<TABLE>
<S>                                                                                                <C>

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

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

1.       Consolidated financial statements
         Included in Part II of this report
           Report of independent accountants.................................................           15
           Consolidated statements of income and of retained earnings for each of
           the three years in the period ended December 31, 1998.............................           16
           Consolidated balance sheet at December 31, 1998 and 1997..........................           17
           Consolidated statement of cash flows for each of the three years in
           the period ended December 31, 1998................................................           18
           Notes to consolidated financial statements........................................        19-37
2.       Financial statement schedules
         Valuation and qualifying accounts and reserves (Schedule II)........................           42
</TABLE>

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

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

<S>     <C>                <C>                                                      <C>
         REG S-K                                                                     STATE OR INCORPORATION
         EXHIBITS                            DESCRIPTION                                   BY REFERENCE
         --------          ------------------------------------------               ----------------------
             (3)           1.  Certificate of Incorporation, as amended             Incorporated by reference to 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> 40
                         PITNEY BOWES CREDIT CORPORATION
<TABLE>

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

<S>      <C>               <C>                                                      <C>
         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 from continuing         Exhibit (i)
                           operations to fixed charges

             (21)          Subsidiaries of the registrant                           Exhibit (ii)

             (23)          Consent of Independent Accountants                       Exhibit (iii)

             (27)          Financial Data Schedule                                  Exhibit (iv)
</TABLE>

(b)      Reports on Form 8-K

On February 4, 1998,  the Company filed a current Report on Form 8-K pursuant to
Item 5 thereof, reporting the issuance of the Company's 5.65% Notes.

On October 19, 1998,  the Company filed a current Report on Form 8-K pursuant to
Item 5 thereof,  reporting  the  proposed  sale of the  operations  of  Colonial
Pacific Leasing Corporation ("CPLC").
     
On November 16, 1998, the Company filed a current Report on Form 8-K pursuant to
Items 2 and 7 thereof,  reporting the sale of the  operations of CPLC on October
30, 1998.

On November 19, 1998, the Company filed a current Report on Form 8-K pursuant to
Item 7 thereof,  reporting the content of the Stock  Purchase  Agreement for the
operations of CPLC.


<PAGE> 41



                                   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 31, 1999

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.
<TABLE>
<S>     <C>                                                                     <C>
         By       /s/  MATTHEW S. KISSNER                                       Dated:  March 31, 1999
                  ----------------------
                  Matthew S. Kissner
                  President and Chief Executive Officer

         By       /s/  NANCY E. COOPER                                          Dated:  March 31, 1999
                  ----------------------
                  Nancy E. Cooper
                  Vice President, Finance and
                  Chief Financial Officer
                  (Principal Financial and Accounting Officer)

         By       /s/  MARC C. BRESLAWSKY                                       Dated:  March 31, 1999
                  ----------------------
                  Marc C. Breslawsky
                  Director

         By       /s/  MICHAEL J.  CRITELLI                                     Dated:  March 31, 1999
                  ----------------------
                  Michael J. Critelli
                  Director

         By       /s/  SARA E. MOSS                                             Dated:  March 31, 1999
                  ----------------------
                  Sara E. Moss
                  Director

         By       /s/  MURRAY L. REICHENSTEIN                                   Dated:  March 31, 1999
                  -------------------------
                  Murray L. Reichenstein
                  Director

         By       /s/  HARRY W. NEINSTEDT                                       Dated:  March 31, 1999
                  ----------------------
                  Harry W. Neinstedt
                  Director

         By       /s/  DOUGLAS A. RIGGS                                         Dated:  March 31, 1999
                  ----------------------
                  Douglas A. Riggs
                  Director

         By       /s/  JOHN N.D. MOODY                                          Dated:  March 31, 1999
                  ----------------------
                  John N.D. Moody
                  Director

         By       /s/  ARLEN F. HENOCK                                          Dated:  March 31, 1999
                  ----------------------
                  Arlen F. Henock
                  Director

</TABLE>
<PAGE> 42
                         PITNEY BOWES CREDIT CORPORATION
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                  FOR THE YEARS ENDED DECEMBER 31, 1996 TO 1998

<TABLE>

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

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

   1997               $  98,721         $  34,076        $  44,244         $  60,453        $ 116,588

   1996               $ 101,355         $  35,617        $  30,912         $  69,163        $  98,721

</TABLE>
<TABLE>


                                  Valuation Allowance for Mortgage Servicing Rights Impairment
                          ----------------------------------------------------------------------------
<S>                         <C>                   <C>                 <C>                  <C>  
                                                  Additions
                            Balance at            charged to          Deductions -
                             beginning            costs and           impairment           Balance at
                              of year             expenses            recoveries           end of year

   1998                     $        -            $  12,102           $    1,875           $   10,227

</TABLE>

<PAGE> 43
                         PITNEY BOWES CREDIT CORPORATION

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

                            (in thousands of dollars)


<TABLE>

                                                           Years Ended December 31,
                                       --------------------------------------------------------------
<S>                                    <C>          <C>          <C>          <C>          <C> 
                                             1998         1997         1996         1995         1994
                                             ----         ----         ----         ----         ----


Income from continuing operations
  before income taxes...............   $  281,483    $ 249,545    $ 238,875    $ 209,872    $ 199,747
                                          -------      -------     --------     --------      -------

Fixed charges:
  Interest on debt..................      116,746      151,033      160,841      172,417      128,181
  One-third of rent expense.........          934        1,428        1,379        1,438        1,338
                                          -------      -------     --------     --------      -------
Total fixed charges.................      117,680      152,461      162,220      173,855      129,519
                                          -------      -------     --------     --------      -------

Earnings from continuing
  operations before fixed charges...   $  399,163   $  402,006    $ 401,095    $ 383,727    $ 329,266
                                          =======      =======     ========     ========      =======

Ratio of earnings from continuing
  operations to fixed charges (1)...        3.39X        2.64X        2.47X        2.21X        2.54X
                                          =======      =======     ========     ========      =======

</TABLE>





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


<PAGE> 44


                         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, 1998:
<TABLE>
                                                                                             Country or State
Company Name                                                                                 of Incorporation
<S>                                                                                          <C>

Atlantic Mortgage & Investment Corporation   ("AMIC")                                        Florida
     RE Properties Management Corporation   (Subsidiary of AMIC)                             Delaware
Waterview Resolution Trust Corporation                                                       Massachusetts
FSL Holdings Inc.                                                                            Connecticut
    FSL Risk Managers Inc. (Subsidiary of FSL Holdings Inc.)                                 New York
    FSL Valuation Services Inc. (Subsidiary of FSL Holdings Inc.)                            Connecticut
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 Connections Inc.                                                       Delaware
Pitney Structured Funding I Inc.                                                             Delaware
Harlow Aircraft Inc.                                                                         Delaware
     PREFCO XII Holdings Inc.               (Subsidiary of Harlow Aircraft Inc.)             Delaware
Pitney Bowes Real Estate Financing Corporation ("PREFCO")                                    Delaware
     PB/PREFCO Real Estate Holdings Inc.    (Subsidiary of PREFCO)                           Delaware
     PREFCO I LP Inc                        (Subsidiary of PREFCO)                           Delaware
     PREFCO II Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO III LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO IV Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO IV LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO V LP Inc.                       (Subsidiary of PREFCO)                           Delaware
     PREFCO VI Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO VI LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO VII Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO VII LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO VIII LP Inc.                    (Subsidiary of PREFCO)                           Delaware
     PREFCO IX LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO XI Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO XI LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO XII LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO XIII Inc.                       (Subsidiary of PREFCO)                           Delaware
     PREFCO XIII LP Inc.                    (Subsidiary of PREFCO)                           Delaware
     PREFCO XIV LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO XV Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO XV LP Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO XVI Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO - Dayton Community
       Urban Redevelopment Corporation      (Subsidiary of PREFCO XVI Inc.)                  Ohio
     PREFCO XVI LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO XVII Inc.                       (Subsidiary of PREFCO)                           Delaware
     PREFCO XVII LP Inc.                    (Subsidiary of PREFCO)                           Delaware

</TABLE>


<PAGE> 45


                         PITNEY BOWES CREDIT CORPORATION

                                  Exhibit (ii)
                   Subsidiaries of the Registrant (continued)

<TABLE>
                                                                                             Country or State
Company Name                                                                                 of Incorporation
<S>                                         <C>                                              <C>    

     PREFCO XVIII Inc.                      (Subsidiary of PREFCO)                           Delaware
     PREFCO XVIII LP Inc.                   (Subsidiary of PREFCO)                           Delaware
     PREFCO XIX Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO XIX LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO XX Inc.                         (Subsidiary of PREFCO)                           Delaware
     PREFCO XXI Inc.                        (Subsidiary of PREFCO)                           Delaware
     PREFCO XXI LP Inc.                     (Subsidiary of PREFCO)                           Delaware
     PREFCO XXII Inc.                       (Subsidiary of PREFCO)                           Delaware
     PREFCO XXII LP Inc.                    (Subsidiary of PREFCO)                           Delaware


</TABLE>



<PAGE> 45


                                  Exhibit (iii)
                       Consent of Independent Accountants




We  hereby  consent  to  the   incorporation  by  reference  in  the  Prospectus
constituting part of the Registration  Statement on Form S-3 (No.  333-59181) of
Pitney Bowes Credit  Corporation  of our report dated January 21, 1999 appearing
on page 15 of this Form 10-K.






PricewaterhouseCoopers LLP

Stamford, Connecticut
March 31, 1999