GATX CORP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

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

COMMISSION FILE NUMBER 1-2328
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GATX CORPORATION
(Exact name of registrant as specified in its charter)

NEW YORK 36-1124040
(State of incorporation) (I.R.S. Employer Identification No.)

500 WEST MONROE STREET
CHICAGO, IL 60661-3676
(Address of principal executive offices, including zip code)

(312) 621-6200
(Registrant's telephone number, including area code)

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

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

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $1,467.7 million on June 30, 2002.

Indicate the number of shares outstanding of each registrant's classes of
common stock, as of the latest practicable date: 49,068,457 common shares were
outstanding as of March 7, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

GATX's definitive Proxy Statement to be filed on or about March 19,
2003 PART III
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INDEX TO GATX CORPORATION

2002 FORM 10-K

1

PART I

ITEM 1. BUSINESS

GATX Corporation (GATX or the Company) is headquartered in Chicago,
Illinois and provides its services through two operating segments: GATX Rail and
Financial Services. Through these businesses, GATX combines asset knowledge and
services, structuring expertise, partnering and risk capital to provide business
solutions to customers and partners worldwide. GATX specializes in railcar and
locomotive leasing, aircraft operating leasing, and information technology
leasing.

GATX invests in companies and joint ventures that complement its existing
business activities. GATX partners with financial institutions and operating
companies to improve scale in certain markets, broaden diversification within an
asset class, and enter new markets.

Beginning in 2000, GATX undertook certain initiatives to position itself as
a specialized finance and leasing company. To accomplish this goal, a decision
was made to exit the businesses of the former GATX Integrated Solutions Group
(ISG) segment. In 2002, GATX completed the sale of the ISG businesses. The ISG
segment was comprised of GATX Terminals Corporation (Terminals), GATX Logistics,
Inc. (Logistics) and minor business development efforts. As a result of these
actions, the financial data for the ISG segment is presented as discontinued
operations for all periods.

During 2002, GATX refined its strategic plan to focus resources on its core
air, rail, and technology leasing businesses. In December 2002, GATX announced
its intention to sell or otherwise run-off its venture finance business unit and
curtail investment in its specialty finance business unit.

At December 31, 2002, GATX had balance sheet assets of $6.4 billion,
comprised of operating assets such as railcars, commercial aircraft and
information technology equipment. In addition to the $6.4 billion of assets
recorded on the balance sheet, GATX utilizes approximately $1.4 billion of other
assets, such as railcars and aircraft, which were financed with operating leases
and therefore are not recorded on the balance sheet.

BUSINESS SEGMENTS

GATX RAIL

GATX Rail (Rail) is headquartered in Chicago, Illinois and is principally
engaged in leasing rail equipment, including tank cars, freight cars and
locomotives. Rail provides both full service leases and net leases. Under a net
lease, the lessee is responsible for maintenance, insurance and taxes. Under a
full service lease, Rail maintains and services the railcars, pays ad valorem
taxes, and provides other ancillary services. As of December 31, 2002, Rail's
worldwide fleet, excluding railcars managed for others or owned by affiliates,
totaled 127,000 railcars. Rail also has interests in 22,000 railcars worldwide
through its investments in affiliated companies.

Rail's North American fleet consisted of approximately 107,000 railcars,
comprised of 63,000 tank cars and 44,000 freight cars as of December 31, 2002.
This fleet has a depreciable life of 30 to 38 years and an average age of
approximately 16 years. The utilization rate of Rail's North American railcar
fleet was 91% at December 31, 2002. Rail also has interests in 6,000 railcars
and 800 locomotives through its investments in affiliated companies in North
America.

In North America, Rail typically leases new tank cars and specialty freight
cars for terms of approximately five years. Renewals, or extension of existing
leases, are generally for periods ranging from less than a year to ten years,
with an average lease term of four years. Rail purchases most of its new
railcars from a limited number of manufacturers, including Trinity Industries,
Inc., American Railcar Industries, Union Tank Car Company, and Bombardier, Inc.
In October 2002, Rail entered into a series of agreements to acquire 7,500 newly
manufactured railcars over the next five years. Rail has signed a supply
agreement with Trinity Industries, Inc. for 5,000 cars and with Union Tank Car
Company for 2,500 cars in connection with this program. Rail operates a network
of major service centers across North America supplemented by a

2

number of smaller service centers and a fleet of service trucks. Additionally,
Rail utilizes independent third-party repair facilities.

Rail's primary competitors in North America are Union Tank Car Company,
General Electric Railcar Services Corporation, and various financial companies.
At the end of 2002, there were 274,000 tank cars and 1.4 million freight cars
owned and leased in North America. At December 31, 2002, Rail's fleet was
approximately 23% of the tank cars in North America and 35% of the leased
market; and approximately 3% of the freight cars in North America and 7% of the
leased market. Principal competitive factors include price, service,
availability and customer relationships.

In addition to its North American fleet, Rail owns or has interests in
three European fleets. In March 2001, Rail purchased Dyrekcja Eksploatacji
Cystern Sp. z.o.o. (DEC), Poland's national tank car fleet and fuel distribution
company. DEC's assets include 10,000 tank cars and a railcar maintenance
network. DEC maintains three business offices and operates three service centers
in Poland.

In December 2002, Rail acquired the remaining interest in KVG Kesselwagen
Vermietgesellschaft mbH, and KVG Kesselwagen Vermietgesellschaft m.b.h.
(collectively KVG), a leading European railcar lessor. Prior to the December
acquisition, Rail held a 49.5% interest in KVG. With the acquisition of KVG,
Rail has added approximately 9,000 railcars to its wholly owned worldwide fleet.
KVG has business offices in Germany and Austria and operates a service center in
Germany. Rail also owns a 37.5% interest in AAE Cargo AG, a freight car lessor
headquartered in Switzerland, with approximately 16,000 cars.

Rail's customers utilize more than 80 railcar types to ship over 650
different commodities, principally chemicals, petroleum, and food products. For
2002, approximately 35% of railcar leasing revenue was attributable to shipments
of chemical products, 28% related to shipments of petroleum products, 14%
related to shipments of food, 9% was derived from leasing cars to railroads and
14% related to other revenue sources. Rail leases railcars to over 1,000
customers, including major chemical, oil, food, agricultural and railroad
companies. No single customer accounts for more than 3% of total railcar leasing
revenue.

See discussion in the GATX RAIL section of Management's Discussion and
Analysis and in the RISK FACTORS section of Part I of this document for
additional details regarding Rail's business and operating results.

FINANCIAL SERVICES

Financial Services provides financing for equipment and other capital
assets on a worldwide basis. These financings, which are held within Financial
Services' own portfolio and through partnerships with co-investors, are
structured as leases and loans, and frequently include interests in an asset's
residual value. Financial Services also generates fee-based income through
transaction structuring and portfolio management services. Fees are earned at
the time a transaction is completed, an asset is remarketed, and/or on an
ongoing basis in the case of portfolio management activities.

Headquartered in San Francisco, California, Financial Services consists of
four primary business units: Air, Technology, Venture Finance (Venture) and
Specialty Finance (Specialty). As noted above, the Company has announced its
intention to sell or otherwise run off Venture and curtail investment in
Specialty.

Air primarily leases newer, narrow-body aircraft widely used by commercial
airlines throughout the world. Air has ownership interests in 193 aircraft. Of
these, 45 aircraft are wholly owned and the remainder are owned in combination
with other investors. All of the 193 aircraft are in compliance with generally
applicable noise standards (Stage III) and have a weighted average age of
approximately five years. These aircraft have an estimated useful life of
approximately 25 years. For aircraft currently on lease, the average remaining
lease term is approximately four years. Air's customer base is diverse in
carrier type and geographic location. Air leases to over 60 airlines in 27
countries and no single customer exposure exceeds 10% of the net book value of
the total air portfolio. Air purchases its aircraft from two manufacturers,
Airbus Industrie (Airbus) and The Boeing Company (Boeing).

Technology provides lease financing and asset management services for
information technology (IT) equipment to customers in the publishing, data
processing and information services, retail, scientific, utilities,

3

manufacturing, finance, insurance, and other industries. The equipment leased to
customers includes personal computers, servers, mainframes, midrange and
communication equipment. Technology purchases equipment from a number of
manufacturers and is therefore not dependent on a single provider. IT equipment
is typically depreciated to an estimated residual value over the lease term,
which is approximately 3 to 5 years. The average size of an IT lease transaction
is approximately $400,000. Technology is not dependent on any single customer.

Venture provides loan and lease financing to early-stage, venture-capital
backed companies. The financing is typically secured by equipment and/or by a
lien on the customer's property, including intellectual property. Additionally,
the financings typically include warrants of non-public start-up companies.
Prior to 2002, Venture provided financing to telecommunication (telecom)
companies. Due to the poor performance of the telecom market, Venture exited the
telecom financing business in 2001; its telecom exposure is $9.2 million as of
December 31, 2002. Separately, Technology also leases various types of equipment
to established telecom service providers. Venture has a highly diversified
portfolio and provides financing to customers in a variety of industries,
including pharmaceutical and life sciences, software and network equipment, and
other business services. The average transaction size associated with Venture's
portfolio at December 31, 2002 is $1.8 million. Venture is not dependent on any
single customer. GATX announced in December 2002 its intention to sell or
otherwise run off Venture. If the Company is unable to sell Venture at an
appropriate price, the portfolio is expected to substantially run off over a
period of 24 months.

Specialty acts as an investor, arranger and manager of financing services
involving a variety of asset types and industries, and has an established
presence in the marine business. Specialty also manages $900 million of assets
for third-parties. The majority of these managed assets are in markets in which
the Company has a high level of expertise, such as air and rail. In addition,
Specialty, through American Steamship Company (ASC), operates a fleet of
self-unloading vessels on the Great Lakes. At the end of 2002, GATX announced
its intention to curtail investment in Specialty.

Financial Services primarily competes with captive leasing companies,
leasing subsidiaries of commercial banks, independent leasing companies, lease
brokers, investment bankers, financing arms of equipment manufacturers, and
Great Lakes captive and commercial fleets. No single customer accounts for more
than 3% of Financial Services' revenues. In addition to its San Francisco home
office, Financial Services has 6 domestic and 4 foreign offices.

See discussion in the FINANCIAL SERVICES section of Management's Discussion
and Analysis and in the RISK FACTORS section of Part I of this document for
additional details regarding Financial Services' businesses and operating
results.

DISCONTINUED OPERATIONS -- INTEGRATED SOLUTIONS GROUP

GATX completed the divestiture of the Integrated Solutions Group (ISG)
segment in 2002. The ISG segment provided logistics and supply chain services to
the chemical, petroleum, and dry goods industries.

GATX sold 81% of Logistics in May 2000 and the remaining 19% in December
2000. In the first quarter of 2001, GATX sold the majority of Terminals'
domestic operations. The sale included substantially all of Terminals' domestic
terminaling operations, the Central Florida Pipeline Company and Calnev Pipe
Line Company. Also in the first quarter of 2001, GATX sold substantially all of
Terminals' European operations. In the second and third quarters of 2001, GATX
sold Terminals' Asian operations and its interest in a U.S. distillate and
blending distribution affiliate. In the first quarter of 2002, GATX sold its
interest in a bulk-liquid storage facility located in Mexico.

TRADEMARKS, PATENTS AND RESEARCH ACTIVITIES

Patents, trademarks, licenses, and research and development activities are
not material to these businesses taken as a whole.

4

SEASONAL NATURE OF BUSINESS

Seasonality is not considered significant to the operations of GATX and its
subsidiaries taken as a whole.

CUSTOMER BASE

GATX as a whole is not dependent upon a single customer or concentration
among a few customers.

EMPLOYEES

As of December 31, 2002, GATX and its subsidiaries had approximately 2,800
employees, of whom 18% were hourly employees covered by union contracts.

ENVIRONMENTAL MATTERS

The transportation of various commodities or chemicals in GATX-owned
railcars, as well as certain GATX operations, may present potential
environmental risks. GATX is committed to protecting the environment as well as
complying with applicable environmental protection laws and regulations. GATX,
as well as its competitors, is subject to extensive regulation under federal,
state and local environmental laws which have the effect of increasing the costs
and liabilities associated with the conduct of its operations. In addition,
GATX's foreign operations are subject to environmental laws in effect within
each respective jurisdiction.

GATX's policy is to monitor and actively address environmental concerns in
a responsible manner. GATX has received notices from the U.S. Environmental
Protection Agency (EPA) that it is a potentially responsible party (PRP) for
study and cleanup costs at three sites in accordance with the requirements of
the Federal Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (Superfund). Under these Acts and comparable state laws, GATX may be
required to share in the cost to clean up various contaminated sites identified
by the EPA and other agencies. GATX has also received notice that it is a PRP at
one site to undertake a Natural Resource Damage Assessment. In all instances,
GATX is one of a number of financially responsible PRPs and has been identified
as potentially contributing only a small percentage of the contamination at each
of the sites. Due to various factors such as the required level of remediation
or restoration and participation in cleanup or restoration efforts by others,
GATX's total cleanup costs at these sites cannot be predicted with certainty;
however, GATX's best estimates for remediation and restoration of these sites
have been determined and are included in its environmental reserves.

Future costs of environmental compliance are indeterminable due to unknowns
such as the magnitude of possible contamination, the timing and extent of the
corrective actions that may be required, the determination of the Company's
liability in proportion to other responsible parties, and the extent to which
such costs are recoverable from third parties including insurers. Also, GATX may
incur additional costs relating to facilities and sites where past operations
followed practices and procedures that were considered acceptable at the time
but in the future may require investigation and/or remedial work to ensure
adequate protection to the environment under current or future standards. If
future laws and regulations contain more stringent requirements than presently
anticipated, expenditures may be higher than the estimates, forecasts, and
assessments of potential environmental costs provided below. However, these
costs are expected to be at least equal to the current level of expenditures. In
addition, GATX has provided indemnities for environmental issues to buyers of
previously divested companies for which GATX believes it has adequate reserves.

GATX's environmental reserve at December 31, 2002 was $33.2 million and
reflects GATX's best estimate of the cost to remediate known environmental
conditions. There were no additions to the reserve in 2002 and $1.7 million of
additions in 2001. Expenditures charged to the reserve amounted to $3.0 million
and $15.8 million in 2002 and 2001, respectively. In 2002, GATX made capital
expenditures of $.1 million for environmental and regulatory compliance compared
to $.2 million in 2001.

5

RISK FACTORS

GATX's businesses are subject to a number of risks which investors should
consider.

- Liquidity and Capital Resources. GATX is dependent in part upon the
issuance of unsecured and secured debt to fund its operations and
contractual commitments. A number of factors could cause GATX to incur
increased borrowing costs and to have greater difficulty accessing public
and private markets for both secured and unsecured debt. In addition,
based on GATX's current credit ratings, access to the commercial paper
market and uncommitted money market lines is inconsistent and can not be
relied upon. It is possible that in the long term, GATX's other sources
of funds, including available cash, bank facilities, cash flow from
operations and portfolio proceeds, may not provide adequate liquidity to
fund its operations and contractual commitments.

- Terrorism/International Conflict. The terrorist attacks on September 11,
2001 created many economic and political uncertainties and had a negative
impact on the global economy. The long-term effects of these attacks on
our future operating results and financial condition are unknown. The
national and international response to future terrorist attacks and the
possible war in Iraq could result in continued economic weakness and have
an adverse impact on GATX's business. The effects may include, among
other things, a permanent decrease in demand for air travel,
consolidation in the airline industry, increased customer bankruptcies,
inability of airlines to insure their aircraft, lower utilization of new
and existing aircraft, lower aircraft rental rates, impairment of air
portfolio assets and fewer available partners for joint ventures.
Depending on the severity, scope and duration of these effects, the
impact on our financial position, results of operations, and cash flows
could be material.

- Competition. GATX is subject to competition in its aircraft, rail and
technology leasing markets. In many cases, the competitors are larger
entities that have greater financial resources, higher credit ratings and
access to lower cost capital than GATX. These factors permit many
competitors to provide financing at lower rates than GATX.

- Lease versus Purchase Decision. GATX's core businesses are reliant upon
its customers continuing to lease rather than purchase assets. There are
a number of items that factor into the customer's decision to lease or
purchase assets, such as tax considerations, balance sheet
considerations, and operational flexibility. GATX has no control over
these external considerations and changes in these factors could
negatively impact demand for its leasing products.

- Effects of Inflation. Inflation in railcar rental rates as well as
inflation in residual values for air and rail equipment have historically
benefited GATX's financial results. Positive effects of inflation are
unpredictable as to timing and duration, depending on market conditions
and economic factors.

- Asset Obsolescence. GATX's core assets may be subject to functional or
economic obsolescence, especially in its technology leasing portfolio.
Although GATX believes it is adept at managing obsolescence risk, there
is no guarantee that changes in various market fundamentals will not
cause unexpected asset obsolescence in the future.

- Allowance for Possible Losses. GATX's allowance for possible losses may
be inadequate if unexpected adverse changes in the economy exceed the
expectation of management, or if discrete events adversely affect
specific customers, industries or markets. If the allowance for possible
losses is insufficient to cover losses related to reservable assets,
including gross receivables, finance leases, and loans, then GATX's
financial position or results of operations could be negatively impacted.

- Impaired Assets. An asset impairment charge may result from the
occurrence of unexpected adverse changes that impact GATX's estimates of
expected cash flows generated from our long-term assets. GATX regularly
reviews long-term assets for impairments, in particular when events or
changes in circumstances indicate the carrying value of an asset may not
be recoverable. An impairment loss is recognized when the carrying amount
of an asset is not recoverable and exceeds its fair value. GATX may be
required to recognize asset impairment charges in the future as a result
of the weak economic

6

environment, challenging market conditions in the air, rail or technology
markets or events related to particular customers.

- Insurance. The ability to insure its rail and aircraft assets is an
important aspect of GATX's ability to manage risk in these core
businesses. There is no guarantee that such insurance will be available
on a cost-effective basis consistently in the future.

- Environmental. GATX is subject to federal and state requirements for
protection of the environment, including those for discharge of hazardous
materials and remediation of contaminated sites. GATX routinely assesses
its environmental exposure, including obligations and commitments for
remediation of contaminated sites and assessments of ranges and
probabilities of recoveries from other responsible parties. Because of
the regulatory complexities and risk of unidentified contaminants on its
properties, the potential exists for remediation costs to be materially
different from the costs GATX has estimated.

- Legal Matters. From time to time, GATX has been, and in the future may
be, named a defendant in litigation involving personal injury, property
damage and damage to the environment arising out of incidents in which
its assets have been, and may be, involved.

- Energy Prices. Energy prices, including the price of natural gas and
oil, are significant cost drivers for many of our customers, particularly
in the chemical and airline industries. Sustained high energy prices
could negatively impact these industries resulting in a corresponding
adverse effect on the demand for our products and services.

- Regulation. GATX's air and rail operations are subject to the
jurisdiction of a number of federal agencies, including the Department of
Transportation. State agencies regulate some aspects of rail operations
with respect to health and safety matters not otherwise preempted by
federal law. New regulatory rulings from federal or state agencies may
impact GATX's financial results and economic value of its assets. In
addition, GATX's failure to comply with the requirements and regulations
of these agencies could negatively affect its financial results.

Additional risks and uncertainties not presently known, or that GATX
currently deems immaterial, may also adversely affect GATX's business
operations.

AVAILABLE INFORMATION

GATX files annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission (SEC). You may
read and copy any document GATX files at the SEC's public reference room at Room
1024, 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for information about the public reference room. The SEC
maintains a website that contains annual, quarterly and current reports, proxy
statements and other information that issuers (including GATX) file
electronically with the SEC. The SEC's website is www.sec.gov.

GATX makes available free of charge at its website, www.gatx.com, its most
recent annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and any amendments to those reports filed or furnished
pursuant to the Securities Exchange Act of 1934 as soon as reasonably
practicable after such material is electronically filed with, or furnished, to
the SEC. The information on GATX's website is not incorporated by reference into
this report.

7

ITEM 2. PROPERTIES

Information regarding the location and general character of certain
properties of GATX is included in ITEM 1, BUSINESS, of this document.

At December 31, 2002, locations of operations were as follows:

GATX RAIL

HEADQUARTERS
Chicago, Illinois

BUSINESS OFFICES
San Francisco, California
Alpharetta, Georgia
Chicago, Illinois
Marlton, New Jersey
Houston, Texas
Calgary, Alberta
Montreal, Quebec
Vienna, Austria
Sidney, Australia
Hamburg, Germany
Mexico City, Mexico
Krakow, Poland
Nowa Wilfs Wielka, Poland
Warsaw, Poland
Zurich, Switzerland

MAJOR SERVICE CENTERS
Colton, California
Waycross, Georgia
Hearne, Texas
Red Deer, Alberta
Sarnia, Ontario
Montreal, Quebec
Moose Jaw, Saskatchewan
Hanover, Germany
Tierra Blanca, Mexico
Gdansk, Poland
Ostroda, Poland
Slotwiny, Poland

MINI SERVICE CENTERS
Macon, Georgia
Terre Haute, Indiana
Geismar, Louisiana
Cincinnati, Ohio
Catoosa, Oklahoma
Freeport, Texas
Plantersville, Texas
Czechowice, Poland
Jedlicze, Poland
Plock, Poland

MOBILE SERVICE UNITS
Mobile, Alabama
Colton, California
Lake City, Florida
East Chicago, Indiana
Norco, Louisiana
Sulphur, Louisiana
Albany, New York
Masury, Ohio
Cooper Hill, Tennessee
Galena Park, Texas
Olympia, Washington
Edmonton, Alberta
Red Deer, Alberta
Sarnia, Ontario
Montreal, Quebec
Quebec City, Quebec
Moose Jaw, Saskatchewan
Vancouver, British Columbia
Tierra Blanca, Mexico

AFFILIATES
San Francisco, California
La Grange, Illinois
Kansas City, Missouri
Zug, Switzerland

FINANCIAL SERVICES

HEADQUARTERS
San Francisco, California

BUSINESS OFFICES
Lafayette, California
Farmington, Connecticut
Tampa, Florida
Williamsville, New York
Toledo, Ohio
Seattle, Washington
Sydney, Australia
Toulouse, France
Tokyo, Japan
London, United Kingdom

AFFILIATES
Dublin, Ireland
Bad Homburg, Germany
Elstree, United Kingdom
London, United Kingdom
Woking, United Kingdom

8

ITEM 3. LEGAL PROCEEDINGS

On May 25, 2001, a suit was filed in Civil District Court for the Parish of
Orleans, State of Louisiana, Schneider, et al. vs. CSX Transportation, Inc.,
Hercules, Inc., Rhodia, Inc., Oil Mop, L.L.C., The Public Belt Railroad
Commission for The City of New Orleans, GATX Corporation, GATX Capital
Corporation, The City of New Orleans, and The Alabama Great Southern Railroad
Company, Number 2001-8924. The suit asserts that on May 25, 2000, a GATX tank
car leaked the fumes of its cargo, Dimethyl Sulfide, in a residential area in
the western part of the city of New Orleans and that the tank car, while still
leaking, was subsequently taken by defendant New Orleans Public Belt Railroad to
another location in the city of New Orleans, where it was later repaired. The
plaintiffs are seeking compensation for alleged personal injuries and property
damages. The petition alleges that a class should be certified. The plaintiffs
have not actively prosecuted the case and have not yet moved to have the class
certified.

During the period from May, 2000 through April, 2001, twenty-two (22) law
suits were filed seeking damages in connection with a May 3, 2000 incident in
which a Burlington Northern Santa Fe Railway Company (Burlington Northern)
train, proceeding through the Louisiana town of New Iberia, derailed several of
its cars. One of the derailed cars was a tank car owned by the GATX Rail
division (Rail) of GATX Financial Corporation, with a cargo of xylene, which
overturned in the derailment and ruptured when it was struck by an adjacent car.
There was no fire or explosion. Some five hours later, after approximately 500
to 700 gallons of the xylene had escaped, the rupture in the tank car was
plugged. Additionally, hopper cars, not owned by Rail, were overturned and the
material they contained, Polyvinyl Chloride powder and pellets, spilled out. The
following cases have been filed in the United States District Court for the
Western District of Louisiana: David Theriot, et al v. The Burlington Northern
and Santa Fe Railway Co., et al (No. CV00-1097), David Theriot, et al v. The
Burlington Northern and Santa Fe Railway Co., et al (No. CV01-0861), Janice
Olivier, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No.
CV00-1561), Ethel Taylor, et al v. The Burlington Northern and Santa Fe Railway
Co., et al (No. CV00-1436), Arthur Gregoire, III, et al v. The Burlington
Northern and Santa Fe Railway Co., et al (No. CV00-1188), Peggy Jerac, et al v.
The Burlington Northern and Santa Fe Railway Co., et al (No. CV00-1155), Kenneth
Estilette, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No.
CV00-1170), Gloria Berry, et al v. The Burlington Northern and Santa Fe Railway
Co., et al (No. CV00-1141), Mary Viltz, et al v. The Burlington Northern and
Santa Fe Railway Co., et al (No. CV00-1140), The Burlington Northern and Santa
Fe Railway Co. v. General American Transportation Co., et al (No. CV01-0797),
Nelson J. Badeaux, et al v. The Burlington Northern and Santa Fe Railway Co., et
al (No. CV01-0794), Joseph Rochelle, et al v. The Burlington Northern and Santa
Fe Railway Co., et al (No. CV01-0877), Walter Thompson, et al v. The Burlington
Northern and Santa Fe Railway Co., et al (No. CV01-0878), John H. Bell, et al v.
The Burlington Northern and Santa Fe Railway Co., et al (No. CV01-0876). The
remainder of the cases are filed in the 16th Judicial District Court for the
Parish of Iberia, State of Louisiana as follows: Rebecca Hammons v. The
Burlington Northern and Santa Fe Railway Co., et al, (No. 95710), Phillip Walker
v. The Burlington Northern and Santa Fe Railway Co., et al (No. 95712), Serella
M. Adams, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No.
95711), Barry Bennett v. The Burlington Northern and Santa Fe Railway Co., et al
(No. 95718), Tiny Vallian, et al v. The Burlington Northern and Santa Fe Railway
Co., et al (No. 95861), Edward Martin v. The Burlington Northern and Santa Fe
Railway Co., et al (No. 95665), Janelle Allen, et al v. The Burlington Northern
and Santa Fe Railway Co., et al (No. 95723), Vernice Johnson, et al v. The
Burlington Northern and Santa Fe Railway Co., et al (No. 95617). The suits
collectively named approximately 112 plaintiffs and some asserted that a class
should be certified. Additionally, Burlington Northern filed suit against GATX
in the matter styled The Burlington Northern and Santa Fe Railway Company vs.
General American Transportation Company, et al., No 01-797 on the docket of the
United States District Court for the Western District of Louisiana, seeking: (i)
indemnity or contribution in the cases listed above; (ii) recovery of their
cleanup costs; and (iii) indemnity or contribution with respect to approximately
$1,000,000 in settlements paid to 4,961 claimants shortly after the accident.
The federal court and the parties pursued an aggressive settlement process that
included opening a claims office. Proofs of claim were filed by 2,723
individuals and businesses, few of which were amongst 4,961 Burlington Northern
had already settled with. That process culminated in a class action settlement
whereby the court certified a broadly defined class, including the

9

2,723 claimants who had filed proofs of claim and all individuals and businesses
within a substantial distance of the incident. An opt-out period was allowed,
resulting in 30 opt-outs, and a settlement in the amount of $5,000,000 was
approved by the court. The formal process of distributing the settlement funds
is presently under way. In return for a cash payment of $1,700,000, Burlington
Northern has entered into a settlement agreement with GATX providing (i) that
Burlington Northern indemnify and defend GATX against all claims of plaintiffs
that have opted out except for punitive damage claims; (ii) Burlington Northern
release its claim against GATX for its cleanup costs; and (iii) Burlington
Northern release its claim for indemnity or contribution with respect to its
approximately $1,000,000 in settlements with 4,961 claimants shortly after the
accident.

In March 2001, East European Kolia-System Financial Consultant S.A. filed a
complaint in the Regional Court (Commercial Division) in Warsaw, Poland against
Dyrekcja Eksploatacji Cystern Sp. z.o.o. (DEC), an indirect wholly owned
subsidiary of GATX Financial Corporation, alleging damages of approximately $52
million arising out of the unlawful taking over by DEC in August of 1998, of a
51% interest in Kolsped Spedytor Miedzynarodwy Sp. z.o.o. (Kolsped), and removal
of valuable property from Kolsped. The complaint was not served on DEC until
December of 2001. The plaintiff claims that DEC unlawfully obtained confirmation
of satisfaction of a condition precedent to its purchase of 51% interest in
Kolsped, following which it allegedly mismanaged Kolsped and put it into
bankruptcy. The plaintiff claims to have purchased the same 51% interest in
Kolsped in April of 1999, subsequent to DEC's alleged failure to satisfy the
condition precedent. GATX purchased DEC in March 2001 and believes this claim is
without merit, and is vigorously pursuing the defense thereof. The parties have
each confirmed their respective positions in the case at a hearing held in early
March of 2002, and a decision is expected to be rendered in this matter shortly.

GATX and its subsidiaries have been named as defendants in other
litigation, and have a number of unresolved pending claims, including
proceedings under governmental laws and regulations related to environmental
matters. Several of the Company's subsidiaries have also been named as
defendants or co-defendants in cases alleging injury relating to asbestos. In
these cases, the plaintiffs seek an unspecified amount of damages based on
common law, statutory or premises liability or, in the case of ASC, the Jones
Act, which makes limited remedies available to certain maritime employees. In
addition, demand has been made against the Company under a limited indemnity
given in connection with the sale of a subsidiary with respect to
asbestos-related claims filed against the former subsidiary. The amounts claimed
in some of these proceedings are substantial and the ultimate liability cannot
be determined at this time. However, it is the opinion of management that
amounts, if any, required to be paid by GATX and its subsidiaries in the
discharge of such liabilities are not likely to be material to GATX's
consolidated financial position or results of operations. Adverse court rulings
or changes in applicable law could affect claims made against GATX and its
subsidiaries, and increase the number, and change the nature, of such claims.

10

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

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to General Instruction G(3), the following information regarding
executive officers is included in Part I in lieu of inclusion in the definitive
GATX Proxy Statement:

Officers are elected annually by the Board of Directors.

- - Mr. Zech has served as Chairman, president and Chief Executive Officer of GATX
since 1996. Mr. Zech served as Chief Operating Officer of GATX from 1994 to
1996.

- - Mr. Kenney has served as Senior Vice President and Chief Financial Officer
since 2002, and Vice President and Chief Financial Officer of GATX since 2000.
Prior to that, Mr. Kenney served as Vice President, Finance from 1998 to 1999,
Vice President and Treasurer from 1997 to 1998, and Treasurer from 1995 to
1996.

- - Mr. Ciancio has served as Vice President, General Counsel and Secretary of
GATX since 2000. Mr. Ciancio was Assistant General Counsel of GATX from 1984
to 2000.

- - Ms. Duddy joined GATX in 1992 as Director of Compensation and in 1995 also
assumed responsibility for the employee benefits function. In 1997, Ms. Duddy
was elected Vice President, Compensation, Benefits and Corporate Human
Resources. In 1999, Ms. Duddy was elected Vice President, Human Recourses of
GATX.

- - In 2002, Mr. Muckian was elected Vice President, Controller and Chief
Accounting Officer. Prior to that, Mr. Muckian served as Controller and Chief
Accounting Officer from 2000 to 2001 and Director of Taxes for GATX from 1994
to 2000.

- - In 2002, Mr. Hasek was elected Vice President, Treasurer. Prior to that, Mr.
Hasek was Treasurer of GATX from 1999 to 2001, Director of Financial Analysis
and Budgeting from 1997 to 1999 and Manager of Corporate Finance from 1995 to
1997.

- - In 2002, Mr. Lyons was elected Vice President, Investor Relations of GATX. Mr.
Lyons joined GATX in 1996 and was Director of Investor Relations from 1998 to
2001 and prior to that was a Project Manager in Corporate Finance.

11

PART II

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

GATX common stock is listed on the New York and Chicago Stock Exchanges
under ticker symbol GMT. The approximate number of common stock holders of
record as of March 7, 2003 was 3,663. The following table shows the reported
high and low sales price of GATX common shares on the New York Stock Exchange,
which is the principal market for GATX shares, and the dividends declared per
share:

On February 1, 2002, the Company issued and sold to Salomon Smith Barney
Inc., J.P. Morgan Securities Inc., U.S. Bancorp Piper Jaffray Inc., Banc One
Capital Markets, Inc. and Credit Lyonnais Securities (USA) Inc. (the "Initial
Purchasers") $175 million aggregate principal amount of 7.5% convertible senior
notes due February 1, 2007. The Initial Purchasers purchased the notes from the
Company at a discount of 3.125% from the aggregate offering price of $175
million. The notes were issued and sold without registration under the
Securities Act in reliance on Section 4(2) of the Securities Act. The Initial
Purchasers subsequently resold the notes in the United States to "qualified
institutional buyers" in reliance on Rule 144A under the Securities Act. The
notes are convertible at the holder's option into shares of the Company's common
stock at an initial conversion price of $34.09 per share.

12

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

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

(a) 2002 includes a gain on sale of portion of segment of $9.2 million on a
pre-tax basis, or $6.2 million on an after-tax basis. The cumulative effect
of an accounting change represents a one-time, non-cash impairment charge
for goodwill in excess of fair market value at January 1, 2002, in
accordance with the adoption of SFAS 142.

(b) 2001 includes a gain on sale of a portion of a segment of $343.0 million on
a pre-tax basis, or $163.9 million on an after-tax basis, and also includes
a $13.1 million pre-tax benefit for litigation settlements.

(c) 2000 includes a provision for litigation of $160.5 million on a pre-tax
basis, or $97.6 million on an after-tax basis.

Note: Certain prior period amounts have been reclassified to conform to the 2002
presentation.

13

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

COMPANY OVERVIEW

Information regarding general information and characteristics of the
Company is included in ITEM 1, BUSINESS, of this document.

The following discussion and analysis should be read in conjunction with
the audited financial statements included herein. Certain statements within this
document may constitute forward-looking statements made pursuant to the safe
harbor provision of the Private Securities Litigation Reform Act of 1995. These
statements are identified by words such as "anticipate," "believe," "estimate,"
"expects," "intend," "predict," or "project" and similar expressions. This
information may involve risks and uncertainties that could cause actual results
to differ materially from the forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. Refer to the RISK FACTORS section of Part I of this document for a
discussion of these risks and uncertainties.

In mid-March 2003, the United States appeared to be on the verge of war
with Iraq. The Company's business could be adversely impacted by such a war,
primarily because of the potential impact on the Company's airline leasing
business. Since a substantial portion of airline travel is discretionary, the
start of the war may result in travelers canceling or deferring their plans for
air travel, the consequences of which could further deteriorate the financial
condition of the Company's airline customers. During 2002 several airline
companies filed for bankruptcy. Should a war start and airline conditions
continue to deteriorate, additional airlines may file for bankruptcy. Because
airlines threatening to file for bankruptcy or operating under bankruptcy
protection have the flexibility to reduce their costs by voiding contracts and
renegotiating existing business obligations, current and future threatened or
actual airline bankruptcies could have an adverse impact on the Company's
revenue and financial results. Following the September 11, 2001 terrorists
attacks, aviation insurers dramatically increased airline insurance premiums and
reduced the maximum amount of insurance coverage for liability to persons other
than passengers for claims resulting from acts or war or terrorism (war risk
coverage). The Government has offered, and many carriers have accepted war risk
insurance to replace commercial insurance for a limited period of time. A war
could cause premiums to increase even further or cause certain types of airline
insurance to become unavailable or the Government may refuse to extend the time
period for which it will provide war risk insurance, which could increase the
risks involved in the Company's airline leasing business. Lastly, rising fuel
prices caused by market conditions, including the threat of war or an actual war
could cause financial distress for the Company's customers, especially to those
customers in the airline, chemical, and petroleum industries, which in turn
could have an adverse impact on the Company's revenues and financial results.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

GATX RAIL

Rail markets continue to be negatively impacted by the economic downturn,
which has adversely affected railcar demand, lease rate pricing and new car
investments. Railroad efficiency, shipper consolidations and aggressive
competition have also contributed to lower demand and lease rate pricing. Lease
rates for renewals in 2002 were lower compared to the prior lease rates,
continuing a recent trend. These factors negatively impacted Rail's 2002 results
and are expected to pressure 2003 results as well, as Rail has over 20,000
railcars scheduled for renewal in 2003. Further, natural gas prices have been
increasing; if this trend continues, many of Rail's customers could be
negatively impacted, putting further pressure on Rail's business. In response to
current rail market conditions, Rail continues to focus on controlling operating
and SG&A expenses. Certain long-term market indicators have begun to show
positive signs: customer inquiries are up, new car order backlogs have increased
at the railcar manufacturers, chemical shipments are increasing, and many older
cars have been taken out of the system and scrapped over the past three years.

14

In December 2002, Rail acquired the remaining interest in KVG Kesselwagen
Vermietgesellschaft mbH, and KVG Kesselwagen Vermietgesellschaft m.b.h.
(collectively KVG), a leading European railcar lessor. Prior to the December
acquisition, Rail held a 49.5% interest in KVG. KVG results are now included in
Rail's consolidated financial statements with the acquisition of the remaining
interest. With the acquisition of KVG, Rail added approximately 9,000 tank and
specialized railcars to its wholly owned worldwide fleet.

In March 2001, Rail purchased Dyrekcja Eksploatacji Cystern Sp. z.o.o.
(DEC), Poland's national tank car fleet and fuel distribution company, for $95.8
million. Therefore, comparisons between periods are affected by the inclusion of
DEC for the full year of 2002.

In May 2002, the Federal Railroad Administration (FRA) issued a
Railworthiness Directive (Bar Car Directive) which required Rail to inspect and
repair, if necessary, a certain class of its cars that were built or modified
with reinforcing bars prior to 1974. Approximately 4,200 of Rail's owned
railcars with a net book value of approximately $4.0 million were affected by
the Bar Car Directive. The unfavorable impact on Rail's operating results for
2002 was approximately $2.7 million after-tax, including lost revenue,
inspection, cleaning and replacement car costs, which were partially offset by
gains on the accelerated scrapping of affected cars that would otherwise have
been retired and scrapped over the next several years. As of year end 2002,
substantially all of the subject tank cars were removed from Rail's fleet.

Gross Income

Rail's 2002 gross income of $666.9 million was $9.5 million lower than
2001. Excluding DEC, lease income was down $25.5 million from 2001. Difficult
economic conditions, combined with aggressive competition, increased railroad
efficiency and railcar surpluses have resulted in continued softness in railcar
demand and pressure on lease rates. Rail's North American fleet, excluding
railcars managed for others or owned by affiliates, totaled 107,000 cars at year
end compared to 110,000 at the end of the prior year. Approximately 97,000
railcars were on lease throughout North America at the end of the year compared
to 100,000 cars at the end of the prior year. Rail's North American utilization
rate was 91% at December 31, 2002, flat with the prior year. The Bar Car
Directive favorably affected utilization as existing idle cars were deployed to
replace affected cars and subject cars taken out of service were scrapped.

Asset remarketing income of $4.9 million was $2.0 million higher than the
prior year mainly due to the sale of several residual sharing investments. Share
of affiliates' earnings of $13.1 million increased $5.7 million over the prior
year. Excluding nonrecurring adjustments in 2001, share of affiliates' earnings
in 2002 increased $3.7 million, largely due to improvement in KVG and AAE Cargo
results.

Ownership Costs

Ownership costs of $332.5 million were $4.8 million lower compared to the
prior year. Excluding the impact of DEC in both periods, ownership costs
decreased $4.3 million from the prior year period primarily due to lower
interest costs resulting from favorable interest rates, partially offset by
higher operating lease expense in 2002. The increase in operating lease expense
in 2002 is due to the full year impact of ownership costs related to a railcar
financing entered into in mid-2001.

Maintenance Expense

Maintenance expense of $145.6 million in 2002 increased $8.7 million from
2001. Excluding DEC in both years, maintenance expense increased $2.1 million in
2002. The variance is due to a higher number of cars repaired in 2002 and the
impact of the Bar Car Directive.

Other Operating Expenses

Rail's other operating expenses were $31.7 million in 2002 and $49.6
million in 2001. In 2001, other operating expenses included $24.5 million of
non-comparable items, of which $19.7 million related to the closing of its East
Chicago repair facility. Excluding the non-comparable items, other operating
expenses

15

increased $6.6 million primarily due to the write-off of international business
development costs and software implementation expenses.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses decreased $9.4 million
in 2002 from the prior year to $74.7 million. The decrease in SG&A expenses in
2002 is attributable to lower headcount due to the 2001 reduction in workforce
and lower discretionary spending.

Provision for Possible Losses

Rail's provision for possible losses of $1.4 million increased $.8 million
from the prior year.

Reduction in Work Force Charges

During 2002 and 2001, Rail recorded pre-tax charges of $2.0 million and
$5.3 million, respectively, related to reductions in workforce. The charge in
2002 was predominantly related to an ongoing plan to streamline the workforce
and operations of DEC. The charge in 2001 was part of GATX's initiative to
reduce SG&A expenses in response to poor North American economic conditions. The
reduction in workforce charge in 2002 and 2001 included involuntary employee
separation and benefit costs for 85 and 47 employees, respectively, as well as
occupancy and other costs.

Cumulative Effect of Accounting Change

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, Rail
completed a review of all recorded goodwill in 2002. Fair values were
established using discounted cash flows. Based on this review, Rail recorded a
one-time, non-cash impairment charge of $34.9 million related to DEC. The charge
is non-operational in nature and was recognized as a cumulative effect of
accounting change as of January 1, 2002 in the consolidated statements of
income. The impairment charge was due primarily to conservative expectations of
projected cash flows based on current market conditions and a lower long-term
growth rate projected for DEC.

Net Income

Rail's net income of $16.3 million was $27.8 million lower than the prior
year primarily due to the cumulative effect of accounting change, the impact of
unfavorable market conditions on lease income, and the impact of the Bar Car
Directive, partially offset by reduced SG&A expenses and the absence of 2001
closure costs related to its East Chicago repair facility.

FINANCIAL SERVICES

Financial Services continues to be negatively impacted by the weak economic
environment and challenging market conditions, which has resulted in
progressively lower lease rates and lower investment volume in its core markets,
particularly its technology business. During the fourth quarter 2002, GATX
announced its intent to sell or otherwise run off Venture and curtail investment
in Specialty in order to focus on Financial Services' core business units: Air
and Technology. Venture represents $254.1 million, or approximately 3.3% of
GATX's total assets (including both on and off balance sheet assets) at December
31, 2002. Specialty represents $1,000.5 million, or approximately 12.8% of
GATX's total assets (including both on and off balance sheet assets) at December
31, 2002.

The airline industry remains in a weakened condition further evidenced by
United Airlines' bankruptcy filing in the fourth quarter of 2002. Financial
Services recorded a net impairment charge of $6.2 million at a specialty joint
venture related to aircraft on lease to United Airlines. Financial Services also
recorded an impairment charge of $21.3 million at its air joint venture,
Pembroke Group Limited, an aircraft leasing and management company, related to
its investment in Fokker aircraft. GATX will continue to closely monitor its air
portfolio due to the greater potential for credit losses and asset impairments.

16

At December 31, 2002, the air portfolio consisted of assets with a net book
value of $2.0 billion. In total, the air portfolio accounted for 25.0% of GATX's
total assets (including both on and off balance sheet assets). For the year
ended December 31, 2002, 6.8% of GATX's gross income was derived from its air
portfolio investments.

Financial Services has interests in 193 aircraft. At December 31, 2002,
four aircraft were not on lease, two of which had signed letters of intent in
place. The four idle aircraft represent approximately 3% of the net book value
of Financial Services' total owned air portfolio. In 2003, Financial Services
also has eight scheduled lease expirations of owned aircraft for which it has
direct remarketing responsibility. Of these eight aircraft, one existing lease
was extended and two signed letters of intent with new lessees were in place as
of March 19, 2003. Also in 2003, there are six scheduled aircraft deliveries. Of
these six aircraft, there were three leases in place and three signed letters of
intent as of March 19, 2003.

Gross Income

Financial Services' 2002 gross income of $672.6 million includes $16.8
million attributable to gains on extinguishment of debt, as discussed below.
Excluding these gains, gross income decreased $186.7 million compared to the
prior year principally due to decreases in lease and interest income and lower
gains with respect to asset remarketing and the sale of securities. Lease income
of $407.4 million decreased $105.0 million from 2001. Lower operating lease
assets at Technology and the impact of lower average yields across the portfolio
contributed to the decrease. In 2001, Technology acquired a portfolio of leases
from El Camino Resources that contributed to higher lease income in 2001. The
decrease in lease income is partially offset by an increase in lease income at
Air resulting from higher operating lease assets in 2002. Marine operating
revenue of $79.7 million was comparable with 2001.

Asset remarketing income, which includes gains from the sale of assets from
Financial Services' own portfolio as well as residual sharing fees from the sale
of managed assets, was $49.8 million, $46.3 million lower than 2001. The
decrease in asset remarketing income was primarily due to decreased residual
sharing fees from managed portfolios, partially offset by an increase in
technology asset remarketing activity. The prior year included large gains at
Specialty. Gains on the sale of securities, which are primarily derived from
warrants received as part of financing and leasing transactions with non-public
start-up companies, were $3.9 million, a decrease of $34.8 million from the
prior year. Decreases in gains on the sale of securities are reflective of
limited initial public offering activity compared to 2001. Because the timing of
such sales is dependent on changing market conditions, gains on the sale of
securities and asset remarketing income do not occur evenly from period to
period. In addition, based on the current valuations of early stage companies,
it is unlikely that gains on the sale of securities will approach 2001 levels in
the future.

Interest income of $55.1 million in 2002 decreased $16.2 million due to
lower average loan balances at Venture and lower interest rates. Other income
was $10.4 million in 2002, $6.6 million higher than 2001. The increase was
primarily due to foreign currency translation gains which were largely offset in
fair value adjustments for derivatives.

Financial Services' share of affiliates' earnings increased $9.9 million to
$35.3 million in 2002 due primarily to the absence of losses within
telecommunication joint ventures compared to the prior year partially offset by
higher air impairment losses in the current year. Excluding air asset impairment
charges in 2001 and 2002 and telecom losses in 2001, share of affiliates'
earnings decreased $7.5 million in 2002 compared to the prior year due to lower
results in air joint ventures.

Ownership Costs

Ownership costs of $402.4 million decreased $92.2 million compared to the
prior year largely due to lower depreciation and amortization and interest
expense. Depreciation and amortization expense of $246.6 million decreased $44.8
million from 2001 reflecting lower average technology operating lease assets,
partially offset by higher average air operating lease assets. Interest expense
decreased $35.8 million in 2002 to $147.0 million due to lower average borrowing
rates. Operating lease expense decreased $11.6 million to $8.8 million in 2002
partly due to the reversal of a previously recorded sublease liability.

17

Selling, General and Administrative

SG&A expenses of $110.8 million decreased $29.7 million over the prior year
due to lower human resource and administrative expenses as a result of the
fourth quarter 2001 reduction in workforce and reduced legal expenses compared
to 2001.

Provision for Possible Losses

The provision for possible losses is derived from Financial Services'
estimate of losses based on a review of credit and market risks. The current
year provision at Financial Services of $35.2 million decreased $62.6 million
from 2001. The prior year provision reflected the deterioration of certain
steel, venture and telecom investments. Approximately $10.0 million of the
current provision and $2.3 million of the asset impairment loss were related to
one technology leasing investment and was largely offset by a gain on the
extinguishment of nonrecourse debt of $13.0 million associated with the same
investment. Financial Services frequently utilizes nonrecourse debt to finance
its technology portfolio. The allowance for possible losses decreased $17.9
million from December 31, 2001 to $68.6 million and was approximately 6.3% of
reservable assets, an increase from the prior year of 6.1%. Reservable assets
are defined as gross receivables, finance leases, and loans. Net charge-offs of
reservable assets totaled $53.2 million for the year ended December 31, 2002,
and were comprised primarily of venture and technology investments. Net
charge-offs of reservable assets totaled $100.4 million in 2001 and were
comprised primarily of venture, telecom, and specialty finance investments.

Asset Impairment Charges

Asset impairment charges of $40.5 million decreased $44.7 million from 2001
primarily due to the absence of telecom related impairment charges. The asset
impairment charges in the current year included $14.4 million for the write-off
of venture goodwill due to the announced exit from this business along with $3.7
million for two Gulfstream aircraft. The asset impairment charges in 2001
included $67.8 million of charges in the telecom portfolio and $7.8 million of
charges in the air portfolio.

Reduction in Work Force Charges

During 2002 and 2001, Financial Services recorded pre-tax charges of $14.9
million and $5.6 million, respectively, related to reductions in workforce. In
2002, this action was part of GATX's announced intent to sell or otherwise run
off Venture and to curtail investment in Specialty. In 2001, this action was
part of GATX's previously announced initiative to reduce SG&A expenses in
response to current economic conditions. The reduction in workforce charges
included involuntary employee separation and benefit costs for 85 and 88
employees in 2002 and 2001, respectively, as well as occupancy and other costs.

Net Income (Loss)

Net income for 2002 was $3.2 million. Although $22.1 million higher than
last year's net loss of $18.9 million, 2002 results reflect a decline in lease
income, asset remarketing income and gains on the sale of securities compared to
2001. The favorable increase over the prior year is primarily due to lower
ownership costs and SG&A expenses and the absence of losses related to telecom
investments.

CORPORATE AND OTHER

Corporate and other net expense was $25.8 million for the year 2002
compared to $17.7 million for the prior year, with the variance primarily due to
the additional interest expense resulting from the issuance of $175.0 million of
convertible notes in February 2002. The 2001 period included interest income on
the proceeds received from the sale of ISG and a $4.0 million tax charge related
to the Company's Corporate Owned Life Insurance (COLI) program. In 2001,
Corporate also recorded a pre-tax charge of $2.5 million related to a reduction
in workforce.

18

INCOME TAXES

The 2002 consolidated effective tax rate for continuing operations was 26%
compared to the 2001 rate of (34)%. The 2002 tax provision was favorably
impacted by the benefit of the extraterritorial income exclusion (an exemption
for income from the lease of equipment to foreign lessees). The 2001 tax
provision included a favorable deferred tax adjustment attributable to a
reduction in foreign tax rates offset by the COLI tax charge.

DISCONTINUED OPERATIONS

Discontinued operations encompasses the former ISG segment and comprises
Terminals, Logistics, and minor business development efforts.

A net after-tax gain of $163.9 million was recognized on the sales of ISG
assets in 2001. In the first quarter of 2002, GATX sold its interest in a
bulk-liquid storage facility located in Mexico and recognized a $6.2 million
after-tax gain.

Operating results for 2002 were zero, compared to $1.5 million in the prior
year. Comparisons between periods were affected by the timing of the sale of ISG
assets.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

GATX RAIL

Comparisons between periods are affected by the inclusion of DEC in the
2001 financial statements.

Gross Income

Rail's 2001 gross income of $676.4 million was essentially flat with 2000.
Excluding DEC's gross income of $25.6 million, Rail's gross income decreased
$25.2 million from the prior year.

Rental revenue was $602.9 million in 2001 excluding DEC, a decrease of $3.5
million from 2000, despite a slight increase in active railcars. Lease rates
were affected by excess capacity in the leasing market, which in turn negatively
impacted rental revenue. Excluding railcars managed for others or owned by
affiliates, Rail had approximately 100,000 railcars on lease throughout North
America at December 31, 2001, compared to 101,000 railcars in the previous year.
North American utilization was 91% at December 31, 2001 on a total fleet of
110,000 railcars, compared to 92% at the end of 2000. Rail added 4,000 cars in
2001, a sharp decrease from the 8,000 cars added in 2000, as a result of
limiting new railcar orders in response to the weakened rail market.

Asset remarketing income of $2.9 million in 2001 was $15.2 million lower
than the prior year. Share of affiliates' earnings of $7.4 million in 2001
decreased $13.2 million. The decrease in both asset remarketing income and share
of affiliates' earnings was partly attributable to the gain on sale of six-axle
locomotives in 2000. Rail and its affiliate Locomotive Leasing Partners, LLC
reconfigured the locomotive fleet from six-axle locomotive to four-axle
locomotives, which resulted in asset sales of wholly owned equipment and of
assets held within the joint venture. Additionally, share of affiliates'
earnings decreased $3.4 million in 2001 primarily due to nonrecurring accounting
adjustments.

Ownership Costs

Ownership costs of $337.3 million in 2001 increased $17.1 million from
2000, and include approximately $10.4 million related to DEC. Excluding the
impact of DEC, the $6.7 million increase in ownership costs from the prior year
period is primarily due to the full year impact of new car additions in 2000.

19

Maintenance Expense

Maintenance expense was $136.9 million in 2001 compared to $127.8 million
in 2000, an increase of $9.1 million. Excluding DEC's 2001 repair costs of $12.1
million, maintenance expense was $3.0 million lower than 2000. The decrease was
primarily due to aggressive cost reduction efforts.

Other Operating Expenses

Rail's other operating expenses of $49.6 million in 2001 included $24.5
million of non-comparable items, of which $19.7 million related to the closing
of its East Chicago repair facility. Excluding the non-comparable items, other
operating expenses increased $11.4 million as costs in 2001 included higher
storage expense due to a larger idle fleet. In addition, there was an increase
to the general liability insurance reserve.

Selling, General and Administrative

SG&A expenses increased $4.7 million in 2001 from the prior year period to
$84.1 million. Excluding $6.2 million attributable to DEC, SG&A expenses
decreased $1.5 million in 2001. Increased international business development
costs of $4.9 million were offset by a reduction in personnel costs and lower
discretionary spending.

Provision for Possible Losses

Rail's provision for possible losses of $.6 million in 2001 decreased $1.1
million from the prior year.

Reduction in Work Force Charges

During 2001, Rail recorded a pre-tax charge of $5.3 million related to a
reduction in workforce. This action was part of GATX's previously announced
initiative to reduce SG&A expenses in response to current economic conditions.
The reduction in workforce charges included involuntary employee separation and
benefit costs for 47 employees, as well as occupancy and other costs.

Net Income

Rail's net income of $44.1 million in 2001 was $38.1 million lower than the
prior year primarily due to closure costs related to its East Chicago repair
facility, unfavorable market conditions and other nonrecurring charges.

FINANCIAL SERVICES

Gross Income

Financial Services' gross income of $842.5 million in 2001 increased $134.3
million over the prior year principally due to higher lease income generated
from a larger investment portfolio, and higher asset remarketing income. This
increase was partially offset by a decrease in share of affiliates' earnings.

Lease income of $512.4 million increased $131.3 million from 2000,
primarily from new leases within the technology portfolio. In the first quarter
of 2001, Financial Services acquired a portfolio of technology leases from El
Camino Resources that contributed significantly to the increase in lease income.
Marine operating revenue of $77.7 million decreased $10.5 million from the prior
year.

Asset remarketing income was $96.1 million, $51.2 million higher than 2000.
The increase in asset remarketing income was driven by larger gains within the
specialty and technology portfolios. Gains on the sale of securities, which are
primarily derived from warrants received as part of financing and leasing
transactions with start-up companies, were $38.7 million, a decrease of $13.6
million from the prior year.

Interest income increased $11.2 million to $71.3 million in 2001 primarily
due to an increase in average loan balances at Venture.

20

Financial Services' share of affiliates' earnings decreased $32.0 million
to $25.4 million in 2001 due primarily to losses incurred by telecommunication
joint ventures. 2001 earnings from telecom affiliates included $35.6 million for
provision for possible losses and asset impairment charges.

Ownership Costs

Ownership costs, including interest, depreciation and amortization and
operating lease expense, of $494.6 million increased $93.9 million in 2001 due
to higher depreciation and amortization and interest expense. Depreciation and
amortization expense of $291.4 million increased $79.2 million from 2000
reflecting the higher level of investment in operating lease assets,
specifically technology and air assets. Interest expense increased $22.0 million
in 2001 to $182.8 million reflecting higher average debt balances associated
with funding new investment activity. Operating lease expense was comparable
year over year.

Selling, General and Administrative

SG&A expenses of $140.5 million in 2001 increased $21.1 million over the
prior year due to higher human resource and administrative expenses associated
with an overall increase in business activity and increased legal expenses
associated with the Airlog litigation (see discussion of litigation charges
below). This increase was partially offset by a reduction in incentive
compensation.

Provision for Possible Losses

The provision for losses at Financial Services of $97.8 million in 2001
increased $81.8 million from 2000. This increase reflected the weakness in the
economy and the deterioration of certain venture, steel and telecom investments.
The allowance for possible losses decreased $2.6 million from December 31, 2000
to $86.5 million and was approximately 6.1% of reservable assets, down from 6.5%
at the prior year end. Net charge-offs of reservable assets totaled $100.4
million for the year ended December 31, 2001, and were comprised primarily of
venture, telecommunications, and specialty finance investments.

Asset Impairment Charges

Asset impairment charges of $85.2 million increased $80.2 million from
2000. Asset impairment in the telecom and air portfolios amounted to $67.8
million and $7.8 million respectively, for the year ended December 31, 2001.

Provision (Reversal) for Litigation Charges

GATX Financial Corporation, formerly known as GATX Capital Corporation
(GCC), was a party to litigation arising from the issuance by the Federal
Aviation Administration of Airworthiness Directive 96-01-03 in 1996, the effect
of which significantly reduced the amount of freight that ten 747 aircraft were
authorized to carry. GATX/Airlog, a California partnership in which a subsidiary
of GCC was a partner, through a series of contractors, modified these aircraft
from passenger to freighter configuration between 1988 and 1994. GCC reached
settlements covering five of the aircraft, and the remaining five were the
subject of this litigation.

On February 16, 2001, a jury found that GATX/Airlog breached certain
warranties under the applicable aircraft modification agreements, and
fraudulently failed to disclose information to the operators of the aircraft. In
2001, GCC reached settlement with each of the plaintiffs in this litigation.

GATX had recorded a pre-tax charge of $160.5 million in 2000 to accrue for
its obligation under the various settlement agreements. Upon settlement of these
matters, $13.1 million of the previously recorded provision was reversed in
2001.

Reduction in Work Force Charges

During 2001, Financial Services recorded a pre-tax charge of $5.6 million
related to a reduction in workforce. This action was part of GATX's previously
announced initiative to SG&A expenses in response to

21

current economic conditions. The reduction in workforce charge included
involuntary employee separation and benefit costs for 88 employees, as well as
occupancy and other costs.

Net Loss

Net loss for 2001 was $18.9 million, principally the result of increases to
the loss provision and asset impairment charges. Net loss for 2000 was $30.4
million and included an after-tax litigation charge of $97.6 million.

CORPORATE AND OTHER

Corporate and other net expense of $17.7 million in 2001 was $3.5 million
favorable to 2000. Decreases in SG&A expenses and net interest expense were
offset by a $4.0 million tax charge related to the Company's corporate-owned
life insurance program (COLI). The decrease in net interest expense reflects the
investment of the proceeds from the sale of the ISG businesses. Corporate also
recorded a pre-tax charge of $2.5 million related to a reduction in workforce in
2001.

INCOME TAXES

The 2001 consolidated effective tax rate for continuing operations was
(34)% compared to the 2000 rate of 42%. The 2001 tax provision was impacted by a
favorable deferred tax adjustment attributable to a reduction in foreign tax
rates offset by the COLI tax reserve.

DISCONTINUED OPERATIONS

At December 31, 2001, substantially all discontinued operations were sold.
A net after-tax gain of $163.9 million was recognized on the sales of ISG assets
in 2001.

Operating results for 2001 were $1.5 million, down $25.9 million from the
prior year. Comparisons between periods were affected by the timing of the sale
of ISG assets.

BALANCE SHEET DISCUSSION

ASSETS

Total assets increased to $6.4 billion in 2002 from $6.1 billion in 2001.
Operating lease investments, railcars and service facilities, and other assets
increased over the prior year due to increased aircraft investment and the
purchase of the remaining interest in KVG.

In addition to the $6.4 billion of assets recorded on the balance sheet,
GATX utilizes approximately $1.4 billion of other assets, such as railcars and
aircraft, which were financed with operating leases and therefore are not
recorded on the balance sheet. The $1.4 billion of off balance sheet assets
represents the present value of GATX's committed future operating lease payments
at a 10% discount rate.

22

The following table presents continuing assets (on and off balance sheet)
by segment and business lines (in millions):

RECEIVABLES

Receivables, including finance leases and loans, decreased $307.0 million
compared to the prior year primarily due to lower finance lease investments at
Technology and lower loan balances at Venture.

ALLOWANCE FOR POSSIBLE LOSSES

The purpose of the allowance is to provide an estimate of credit losses
inherent in the investment portfolio. GATX sets the allowance by assessing
overall risk and potential losses in the portfolio and by reviewing the
Company's historical loss experience. GATX charges off amounts that management
considers unrecoverable from obligors or through the disposition of collateral.
GATX assesses the recoverability of investments by considering factors such as a
customer's payment history and financial position, and the value of collateral
based on internal and external appraisal sources.

The following summarizes changes in the allowance for losses (in millions):

There were no material changes in estimation methods and assumptions for
the allowance that took place during 2002. The allowance for possible losses is
periodically reviewed for adequacy by considering changes in economic conditions
and credit quality indicators. GATX believes that the allowance is adequate to
cover losses inherent in the portfolio as of December 31, 2002. Because the
allowance is based on judgments and estimates, it is possible that those
judgments and estimates could change in the future, causing a corresponding
change in the recorded allowance.

The allowance for possible losses of $82.2 million decreased $12.0 million
from the prior year. Financial Services' allowance for possible losses decreased
$17.9 million and represented 6.3% of reservable assets, an increase from the
prior year of 6.1%. Rail's allowance for possible losses increased $5.8 million
in 2002. Consolidated net charge-offs totaled $53.0 million for the year, a
decrease of $51.4 million from 2001. The

23

2002 charge-offs were primarily in technology and venture investments while 2001
charge-offs were in largely telecom investments.

NON-PERFORMING INVESTMENTS

Leases and loans that are 90 days or more past due, or where reasonable
doubt exists as to timely collection of payments, are generally classified as
non-performing. Non-performing investments do not include operating lease assets
that are off lease or held for sale, or investments within joint ventures. Lease
or interest income accrued but not collected is reversed when a lease or loan is
classified as non-performing. Payments received on non-performing leases and
loans for which the ultimate collectibility of principal is uncertain are
applied as principal reductions. Otherwise, such collections are credited to
income when received.

Financial Services' non-performing investments at December 31, 2002 were
$94.9 million, $1.5 million lower than the prior year amount of $96.4 million.
Non-performing investments as a percentage of Financial Services investments
were 3.2% and 3.3% as of December 31, 2002 and 2001, respectively.

OPERATING LEASE ASSETS, FACILITIES AND OTHER

Net operating lease assets and facilities increased $600.1 million from
2001 mainly due to investments in aircraft and the KVG acquisition.

PROGRESS PAYMENTS

GATX classifies amounts deposited toward the construction of wholly owned
aircraft and other equipment, including capitalized interest, as progress
payments. Progress payments made for aircraft owned by joint ventures in which
GATX participates are classified as investments in affiliated companies. The
progress payments reported in 2002 and 2001 relate primarily to GATX's
commitment to purchase 10 Boeing 737-800 aircraft from 2002-2003, and 19 Airbus
A320 family aircraft from 2001-2004.

INVESTMENTS IN AFFILIATED COMPANIES

Investments in affiliated companies decreased $62.0 million in 2002, of
which $53.0 million was due to the reclassification of KVG from investments in
affiliated companies to a wholly owned subsidiary resulting from the acquisition
of the remaining interest in KVG. GATX invested $93.3 million and $246.5 million
in joint ventures in 2002 and 2001, respectively. Share of affiliates' earnings
were $48.4 million and $32.8 million in 2002 and 2001, respectively.
Distributions from affiliates were $148.8 million and $225.6 million in 2002 and
2001, respectively.

The following table shows GATX's investment in affiliated companies by
segment and business unit (in millions):

24

OTHER ASSETS

Other assets of $294.4 million at December 31, 2002 were $125.2 million
higher than the prior year primarily due to increases in prepaid pension, fair
value of derivatives and deferred financing costs.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses of $399.5 million increased $35.0
million compared to the prior year largely due to the acquisition of KVG.

DEBT

Total debt increased $163.0 million since the end of 2001, primarily due to
the consolidation of KVG. Nonrecourse debt decreased $114.8 million as
investments at Technology declined year over year.

GATX, including its principal subsidiary, GATX Financial Corporation (GFC),
issued $1.5 billion of debt in 2002. Significant borrowings included secured
financing supported by the European Credit Agencies (ECA) and the Export-Import
Bank of the United States (Ex-Im) for Airbus A320 and Boeing 737 aircraft
deliveries, other aircraft and railcar secured financings, senior unsecured term
notes, technology nonrecourse financing, and convertible debt.

The following table summarizes GATX's debt by major component, including
off balance sheet debt, as of December 31, 2002 (in millions):

DEFERRED INCOME TAXES

Deferred income taxes of $640.0 million increased $175.5 million from the
end of 2001 due to accelerated tax depreciation, including bonus depreciation
(30% accelerated depreciation on new equipment), 2002 pension plan contributions
and the consolidation of KVG balances.

TOTAL SHAREHOLDERS' EQUITY

Shareholders' equity decreased $80.2 million reflecting net income of $.3
million offset by common stock dividends of $62.5 million and changes in
accumulated other comprehensive loss of $26.4 million. The change in accumulated
other comprehensive loss was primarily driven by a higher minimum pension
liability and foreign currency translation loss.

25

CASH FLOW DISCUSSION

GATX generates a significant amount of cash from its operating activities
and proceeds from its investment portfolio, which is used to service debt, pay
dividends, and fund portfolio investments and capital additions. A continued
weak environment could decrease demand for GATX's services, which in turn could
impact the Company's ability to generate cash flow from operations and portfolio
proceeds.

NET CASH PROVIDED BY CONTINUING OPERATIONS

Net cash provided by continuing operations of $439.7 million increased
$77.4 million from 2001. Excluding the $141.0 million settlement of the Airlog
litigation in 2001, cash flow from continuing operations was $63.6 million lower
in 2002 due to pension contributions and timing of tax refunds generated by the
current year tax net operating loss. All cash received from asset dispositions
(excluding the proceeds from the sale of the ISG segment), including gain and
return of principal, is reported in investing activities as portfolio proceeds
or proceeds from other asset sales.

PORTFOLIO INVESTMENTS AND CAPITAL ADDITIONS

Portfolio investments and capital additions of $1.3 billion decreased
$519.5 million from 2001.

The following table presents portfolio investments and capital additions by
segment and business lines (in millions):

Air investments included $518.0 million of progress payments and final
delivery payments for aircraft in 2002. The number of aircraft in which GATX has
an ownership interest increased 12% from 173 in 2001 to 193 in 2002. Included in
Air's 2001 investments was the acquisition of an interest in the Pembroke Group
for $70.4 million. Investments at Technology and Venture were significantly
lower in 2002. In 2001, Technology acquired a portfolio of leases from El Camino
Resources for $129.8 million, net of the assumption of $255.6 million of
nonrecourse debt. In December 2002, Rail purchased the remaining 50.5% interest
of KVG, a portion of which was funded in 2003. Rail's 2001 capital additions
included the DEC acquisition for $95.8 million and the acquisition of
approximately 4,000 railcars and locomotives for $243.3 million. Future
portfolio investments and capital additions (excluding contractual commitments)
will be dependent on market conditions and opportunities to acquire desirable
assets.

PORTFOLIO PROCEEDS

Portfolio proceeds of $882.8 million decreased $143.4 million from 2001
primarily due to lower cash distributions from joint venture investments,
particularly in Air, disposals of leased equipment and sales of securities,
offset by higher loan principal and finance lease payments received. The timing
of assets coming off lease, opportunities to renew leases at attractive rates,
and the composition of the investment portfolio all contributed to the decrease
in portfolio proceeds.

26

PROCEEDS FROM OTHER ASSET SALES

Proceeds from other asset sales of $17.4 million in 2002 primarily relate
to railcar scrappings. Proceeds from the sale-leaseback of railcars were $189.2
million in 2001.

PROCEEDS FROM SALE OF A PORTION OF SEGMENT

Proceeds from the sale of a portion of a segment of $3.2 million in 2002,
and $903.1 million net of taxes paid in 2001, were related to the sale of
various ISG assets.

NET CASH USED IN FINANCING ACTIVITIES FOR CONTINUING OPERATIONS

Net cash used in financing activities of continuing operations was $42.5
million in 2002 compared to $503.0 million in 2001. Net proceeds from issuance
of long-term debt were $1.5 billion in 2002. Significant financings in 2002
included $321.7 million of U.S. Export-Import Bank aircraft financing, $241.0
million of aircraft financing from the European Credit Agencies, $250.0 million
of senior unsecured term notes, $240.3 of technology nonrecourse financing, and
the issuance of convertible debt of $175.0 million. Short-term debt decreased
$274.4 million from the prior year.

LIQUIDITY AND CAPITAL RESOURCES

GATX funds investments and meets debt, lease, and dividend obligations
through cash flow from operations, portfolio proceeds (including proceeds from
asset sales), commercial paper borrowings, uncommitted money market lines,
committed revolving credit facilities, the issuance of unsecured debt, and a
variety of secured borrowings. GATX utilizes both the domestic and international
bank and capital markets.

GFC has revolving credit facilities totaling $778.3 million. GFC's credit
facilities include three agreements for $350.0 million, $283.3 million, and
$145.0 million expiring in 2003, 2004, and 2005, respectively. The $145.0
million facility which closed in July 2002 is intended to be utilized to meet
short-term funding requirements. The $350.0 million and $283.3 million
facilities were established as back-up lines. The revolving credit facilities
contain various restrictive covenants, including an asset coverage test,
requirements to maintain a defined minimum net worth and a certain fixed charges
coverage ratio. At December 31, 2002, GFC was in compliance with the covenants
and conditions of the credit facilities. As defined in the credit facilities,
the net worth of GFC at December 31, 2002 was $1.5 billion, which was in excess
of the most restrictive minimum net worth requirement of $1.1 billion.
Additionally, the ratio of earnings to fixed charges as defined by the credit
facilities was 1.6x for the December 31, 2002 period, in excess of the most
restrictive agreement amount of 1.3x. At December 31, 2002, all credit
facilities were unused and available.

Secured financings are comprised of the sale-leaseback of railcars, loans
secured by railcars and aircraft, technology nonrecourse financing, and a
commercial paper (CP) conduit securitization facility. The railcar
sale-leasebacks qualify as operating leases and the assets or liabilities
associated with this equipment are not recorded on the balance sheet. In
December, 2002, GFC closed the $100 million CP conduit securitization facility
which can be renewed annually. At December 31, 2002, no amounts had been funded
through this facility.

GFC has a $1.0 billion shelf registration for debt securities, of which
$850.0 million has been issued.

The availability of these funding options may be adversely impacted by
certain factors including the global capital market environment and outlook as
well as GFC's financial performance and outlook. Access to capital markets at
competitive interest rates is partly dependent on GFC's credit rating as
determined primarily by rating agencies such as Standard & Poor's (S&P) and
Moody's Investor Service (Moody's). As of March 19, 2003, GFC's credit ratings
on its long-term unsecured debt were BBB and Baa3 at S&P and Moody's,
respectively. GFC's credit ratings on its commercial paper were A-3 and Prime-3
at S&P and Moody's, respectively. On February 3, 2003, S&P placed GFC's
long-term unsecured debt on credit watch with negative implications. GFC's
existing credit rating situation has increased the cost of borrowing from prior
years. Also, GFC's access to the commercial paper market has been seriously
constrained and GFC has experienced greater difficulty accessing the long-term
unsecured capital market on a cost efficient basis.

27

In 2002, GFC arranged financing supported by the European Credit Agencies
to fund GFC's 2001-2004 Airbus A320 aircraft deliveries. Additionally, GFC
received approval from the Export-Import Bank of the United States to provide
credit support to finance GFC's 2002-2003 Boeing 737 aircraft deliveries. GFC
expects that it will be able to meet its contractual obligations for 2003 and
2004 through a combination of its current cash position, projected cash flow
from operations and portfolio proceeds, and its existing financing commitments
without the utilization of any back-up credit facilities.

At December 31, 2002, GATX's contractual commitments, including debt
maturities, lease payments, and unconditional purchase obligations were (in
millions):

GATX has total unconditional purchase obligations of $1,005.3 million,
consisting primarily of committed aircraft deliveries and railcar orders. Other
unconditional purchase obligations include $76.7 million of specialty finance
obligations primarily related to business jet aircraft and marine equipment
purchases, and $47.4 million related to new technology and venture investments.
Additionally, under the terms of the DEC acquisition agreement, GATX is
obligated to invest $65.9 million in DEC over the next three years.

At December 31, 2002, GATX's unconditional purchase obligations by segment
and business unit were (in millions):

In connection with certain investments or transactions, GATX has entered
into various commercial commitments, such as guarantees and standby letters of
credit, which could potentially require performance in the event of demands by
third parties. Similar to GATX's balance sheet investments, these guarantees
expose GATX to credit and market risk; accordingly GATX evaluates commitment and
other contingent obligations using the same techniques used to evaluate funded
transactions.

Lease and loan payment guarantees generally involve guaranteeing repayment
of the financing utilized to acquire assets being leased by an affiliate to
customers, and are in lieu of making direct equity investments in the affiliate.
GATX is not aware of any event of default which would require it to satisfy
these guarantees, and expects the affiliates to generate sufficient cash flow to
satisfy their lease and loan obligations.

28

Asset residual value guarantees represent GATX's commitment to third
parties that an asset or group of assets will be worth a specified amount at the
end of a lease term. Over 50% of the asset residual value guarantees are related
to rail equipment. Based on known and expected market conditions, management
does not believe that the asset residual value guarantees will result in any
negative financial impact to GATX.

GATX and its subsidiaries are also parties to letters of credit and bonds.
No material claims have been made against these obligations. At December 31,
2002, GATX does not expect any material losses to result from these off-balance
sheet instruments because performance is not anticipated to be required.

GATX's commercial commitments at December 31, 2002 were (in millions):

At December 31, 2002, $516.8 million of subsidiary net assets were
restricted, limiting the ability of GATX Financial Corporation, its principal
subsidiary, to transfer assets to GATX in the form of loans, advances or
dividends. Restricted assets are defined as the subsidiary's equity, less
intercompany receivables from the parent company, less the amount that could be
transferred to the parent company. The net asset restrictions of GFC result from
covenants under its revolving credit agreements and indentures. Such
restrictions are not expected to have an adverse impact on the ability of GATX
to meet its cash obligations.

In 2002, GATX contributed $42.2 million to its qualified pension plans. The
Company may make additional contributions to the plans in 2003, but is not
required to do so. However, if investment returns underperform expectations,
additional contributions may be necessary and could be material in amount.

CRITICAL ACCOUNTING POLICIES

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to use judgment in
making estimates and assumptions that affect reported amounts of assets,
liabilities, revenues and expenses and related disclosures. The Company
regularly evaluates its estimates and judgments based on historical experience
and other relevant factors and circumstances.

The Company considers the following as critical accounting policies:

Operating lease assets and facilities -- Operating lease assets and
facilities are stated principally at cost. Assets acquired under capital leases
are included in operating lease assets and the related obligations are recorded
as liabilities. Provisions for depreciation include the amortization of the cost
of capital leases. Operating lease assets and facilities are depreciated using
the straight-line method to an estimated residual value. Railcars, locomotives,
aircraft, marine vessels, buildings and leasehold improvements are depreciated
over the estimated useful lives of the assets. Technology equipment is
depreciated to an estimated residual value over the term of the lease contract.
The Company periodically reviews the appropriateness of depreciable lives and
residual values based on physical and economic factors, as well as existing
market conditions.

Impairment of long-lived assets -- A review for impairment of long-lived
assets, such as operating lease assets and facilities, is performed whenever
events or changes in circumstances indicate that the carrying amount of
long-lived assets may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset to
estimated future net cash flows expected to be generated by the asset. Estimated
future cash flows are based on a number of assumptions including lease rates,
lease

29

term, operating costs, life of the asset and disposition proceeds. If such
assets are considered to be impaired, the impairment loss to be recognized is
measured by the amount by which the carrying amount of the assets exceeds fair
value. Assets to be disposed of are reported at the lower of the carrying amount
or fair value less selling costs.

Allowance for possible losses -- The purpose of the allowance is to provide
an estimate of credit losses with respect to reservable assets inherent in the
investment portfolio. Reservable assets include gross receivables, loans and
finance leases. GATX sets the allowance by assessing overall risk and total
potential losses in the portfolio and by reviewing historical loss experience.
GATX charges off amounts that management considers unrecoverable from obligors
or the disposition of collateral. GATX assesses the recoverability of
investments by considering factors such as a customer's payment history and
financial position. The allowance for possible losses is periodically reviewed
for adequacy considering changes in economic conditions, collateral values,
credit quality indicators and customer-specific circumstances. GATX believes
that the allowance is adequate to cover losses inherent in the portfolio as of
December 31, 2002. Because the allowance is based on judgments and estimates, it
is possible that those judgments and estimates could change in the future,
causing a corresponding change in the recorded allowance.

Investments in affiliated companies -- Investments in affiliated companies
represent investments in domestic and foreign companies and joint ventures that
are in businesses similar to those of GATX, such as commercial aircraft leasing,
rail equipment leasing, technology equipment leasing and other business
activities, including ventures that provide asset residual value guarantees in
both domestic and foreign markets. Investments in 20 to 50 percent-owned
companies and joint ventures are accounted for under the equity method and are
shown as investments in affiliated companies. Certain investments in joint
ventures that exceed 50% ownership are not consolidated and are also accounted
for using the equity method as GATX does not have effective or voting control of
these legal entities. The investments in affiliated companies are initially
recorded at cost and are subsequently adjusted for GATX's share of the
affiliate's undistributed earnings. Distributions, which reflect both dividends
and the return of principal, reduce the carrying amount of the investment.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 1 to the consolidated financial statements for a summary of new
accounting pronouncements that may impact GATX's business.

30

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

GATX is exposed to certain market risks, including changes in interest
rates and currency exchange rates. To manage these risks, GATX, pursuant to
established and authorized policies, enters into certain derivative
transactions, principally interest rate swaps, Treasury derivatives and currency
swaps. These instruments and other derivatives are entered into for hedging
purposes only. GATX does not hold or issue derivative financial instruments for
speculative purposes.

GATX's interest expense is affected by changes in interest rates as a
result of its use of variable rate debt instruments. Based on GATX's variable
rate debt instruments at December 31, 2002, if market rates were to increase
hypothetically by 10% of GATX's weighted average floating rate, after-tax
interest expense would increase by approximately $2.4 million in 2003.

Changes in certain currency exchange rates would also affect GATX's
reported earnings. Based on 2002 reported earnings from continuing operations, a
uniform and hypothetical 10% strengthening in the U.S. dollar versus applicable
foreign currencies would decrease after-tax income from continuing operations in
2003 by approximately $1.3 million.

The interpretation and analysis of the results from the hypothetical
changes to interest rates and currency exchange rates should not be considered
in isolation; such changes would typically have corresponding offsetting
effects. For example, offsetting effects are present to the extent that floating
rate debt is associated with floating rate assets.

31

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF GATX MANAGEMENT

To Our Shareholders

The management of GATX Corporation is responsible for the preparation,
integrity and objectivity of the accompanying consolidated financial statements
and the related financial information included in the Annual Report on Form 10-K
to shareholders. The financial statements have been prepared in conformity with
generally accepted accounting principles and necessarily include certain amounts
which are based on estimates and informed judgments of management.

The financial statements have been audited by the Company's independent
auditors, whose report thereon appears on page 33. Their role is to form an
independent opinion as to the fairness with which such statements present the
financial position of the Company and the results of its operations.

GATX maintains a system of internal accounting controls which is designed
to provide reasonable assurance as to the reliability of its financial records
and the protection of its shareholders' assets. The concept of reasonable
assurance is based on the recognition that the cost of a system of internal
control should not exceed the related benefits. Management believes the
Company's system provides this appropriate balance in all material respects.

GATX's system of internal controls is further augmented by an audit
committee composed of independent directors, which meets several times during
the year with management, the independent auditors and the internal auditors; an
internal audit program that includes prompt, responsive action by management;
and the annual audit of the Company's financial statements by independent
auditors.

RONALD H. ZECH BRIAN A. KENNEY WILLIAM M. MUCKIAN
Chairman, President and Senior Vice President and Vice President, Controller
Chief Executive Officer Chief Financial Officer and
Chief Accounting Officer

32

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of GATX Corporation

We have audited the accompanying consolidated balance sheets of GATX
Corporation and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of income, changes in shareholders' equity,
comprehensive income, and cash flows for each of the three years in the period
ended December 31, 2002. Our audits also included the financial statement
schedules listed in the index at Item 15(a). These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GATX
Corporation and subsidiaries as of December 31, 2002 and 2001, and the results
of their operations and cash flows for each of the three years in the period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects, the
information set forth therein.

As discussed in Note 1 to the financial statements, in 2002 the Company
changed its method of accounting for goodwill and other intangible assets, and
in 2001 the Company changed its method of accounting for derivatives.

ERNST & YOUNG LLP

Chicago, Illinois
January 27, 2003

33

CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes are an integral part of these consolidated financial
statements.

35

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial
statements.

36

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial
statements.

37

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

The accompanying notes are an integral part of these consolidated financial
statements.

38

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

The accompanying notes are an integral part of these consolidated financial
statements.

39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

Consolidation -- The consolidated financial statements include the accounts
of GATX and its majority-owned subsidiaries. Investments in 20 to 50
percent-owned companies and joint ventures are accounted for under the equity
method and are shown as investments in affiliated companies, with pre-tax
operating results shown as share of affiliates' earnings. Certain investments in
joint ventures that exceed 50% ownership are not consolidated and are also
accounted for using the equity method as GATX does not have effective or voting
control of these legal entities. The consolidated financial statements reflect
the ISG segment as discontinued operations for all periods presented.

Cash Equivalents -- GATX considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.

Restricted Cash -- Restricted cash is comprised of cash and cash
equivalents which are restricted as to withdrawal and usage. GATX's restricted
cash primarily includes an amount designated to fund the construction of
railcars for a customer, and additional amounts maintained as required by
contract for three bankruptcy remote, special-purpose corporations that are
wholly owned by GFC.

Operating Lease Assets and Facilities -- Operating lease assets and
facilities are stated principally at cost. Assets acquired under capital leases
are included in operating lease assets and the related obligations are recorded
as liabilities. Provisions for depreciation include the amortization of capital
leases. Operating lease assets and facilities listed below are depreciated over
their respective estimated useful life to an estimated residual value using the
straight-line method. Technology equipment, machinery and related equipment are
depreciated over the term of the lease contract to an estimated residual value.
The estimated useful lives of depreciable new assets are as follows:

Railcars.................................................... 30 - 40 years
Locomotives................................................. 28 years
Aircraft.................................................... 25 years
Buildings and leasehold improvements........................ 5 - 50 years
Marine vessels.............................................. 15 - 50 years

Operating lease assets and facilities by segment and business unit are as
follows (in millions):

Progress Payments for Aircraft and Other Equipment -- GATX classifies
amounts paid toward the construction of wholly owned aircraft and other
equipment, including capitalized interest, as progress payments.

40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Investments in Affiliated Companies -- GATX has investments in 20 to 50
percent-owned companies and joint ventures and other investments in which GATX
does not have effective or voting control. These investments are accounted for
using the equity method. The investments in affiliated companies are initially
recorded at cost, including goodwill at acquisition date, and are subsequently
adjusted for GATX's share of affiliates' undistributed earnings. Distributions,
which reflect both dividends and the return of principal, reduce the carrying
amount of the investment.

Goodwill -- Effective January 1, 2002, GATX adopted Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, which
changed the accounting for goodwill. Under these new rules, goodwill is no
longer amortized, but rather subject to an annual impairment test in accordance
with the SFAS 142. In accordance with SFAS 142, GATX completed a review of all
recorded goodwill. Fair values were established using discounted cash flows.
Prior to January 1, 2002, the Company amortized goodwill over an estimated
useful life of 10 to 40 years using the straight-line method. See Note 17 for
further information.

Long-Lived Assets -- Effective January 1, 2002, GATX adopted SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement
supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of. Although the new rules maintain many of
the fundamental recognition and measurement provisions of SFAS No. 121, they
modify the criteria required to classify an asset as held-for-sale. SFAS No. 144
also supersedes certain provisions of APB Opinion 30 with regard to reporting
the effects of a disposal of a segment of a business and will require expected
future operating losses from discontinued operations to be separately reported
in discontinued operations during the period in which the losses are incurred
(rather than as of the measurement date as presently required by APB 30). The
adoption of this statement did not have a material impact on the Company's
consolidated financial position or results of operations.

A review for impairment of long-lived assets, such as operating lease
assets and facilities, is performed whenever events or changes in circumstances
indicate that the carrying amount of long-lived assets may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell. In 2002,
asset impairment charges of $40.5 million include a $14.4 million goodwill
impairment charge at Venture, as discussed in Note 17, along with additional
impairment charges at Venture of $2.7 million. Additional impairment charges
include $14.0 million at Technology, $2.8 million at Air, and $6.6 million at
Specialty, including a $3.7 million charge related to the impair of two
Gulfstream aircraft.

Allowance for Possible Losses -- The purpose of the allowance is to provide
for credit losses inherent in the investment portfolio. Reservable assets
related to the allowance are gross receivables, finance leases and loans.
Operating lease assets are subject to the impairment tests and are not
reservable under current accounting standards. GATX sets the allowance by
assessing overall risk and total potential losses in the portfolio and by
reviewing GATX's historical loss experience. GATX charges off amounts that
management considers unrecoverable from obligors or the disposition of
collateral. GATX assesses the recoverability of investments by considering
factors such as a customer's payment history and financial position, and the
value of collateral based on internal and external appraisal sources. The
allowance for possible losses is periodically reviewed for adequacy considering
changes in economic conditions, collateral values and credit quality indicators.
GATX believes that the allowance is adequate to cover losses inherent in the
portfolio as of December 31, 2002. Because the allowance is based on judgments
and estimates, it is possible that those judgments and estimates could change in
the future, causing a corresponding change in the recorded allowance.

41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income Taxes -- United States income taxes have not been provided on the
undistributed earnings of foreign subsidiaries and affiliates that GATX intends
to permanently reinvest in these foreign operations. The cumulative amount of
such earnings was $192.6 million at December 31, 2002.

Other Liabilities -- Other liabilities include the accrual for
post-retirement benefits other than pensions; environmental, general liability,
litigation and workers' compensation reserves; and other deferred credits.

Derivatives -- Effective January 1, 2001, GATX adopted SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS
No. 137, Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133, and SFAS
No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities -- an amendment of FASB Statement No. 133.

The adoption of SFAS No. 133, as amended, in the first quarter of 2001,
resulted in $1.1 million being recognized as expense in the consolidated
statement of income and $4.7 million of unrealized gain in other comprehensive
(loss) income. SFAS No. 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts. The statement requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. GATX records the fair
value of all derivatives as either other assets or long-term recourse debt in
the balance sheet. At December 31, 2002, GATX had not discontinued any hedges
because it was probable that the original forecasted transaction would not
occur.

Instruments that meet established accounting criteria are formally
designated as qualifying hedges at the inception of the contract. These criteria
demonstrate that the derivative is expected to be highly effective at offsetting
changes in fair value of underlying exposure both at inception of the hedging
relationship and on an ongoing basis. The change in fair value of the
ineffective portion of all hedges is immediately recognized in earnings. For the
years ended December 31, 2002 and 2001, losses of $2.3 million and $.9 million,
respectively, were recognized in earnings for hedge ineffectiveness. Derivatives
that are not designated as qualifying hedges are adjusted to fair value through
earnings immediately. For the years ended December 31, 2002 and 2001, income of
$.2 million and $.4 million, respectively, were recognized in earnings for
derivatives not qualifying as hedges.

GATX uses interest rate and currency swap agreements, Treasury derivatives,
and forward sale agreements, as hedges to manage its exposure to interest rate
and currency exchange rate risk on existing and anticipated transactions. GATX
also enters into foreign exchange forward contracts to hedge foreign currency
exposure of a net investment in a foreign operation.

Fair Value Hedges
For derivatives designated as fair value hedges, changes in both the
derivative and the hedged item attributable to the risk being hedged are
recognized in earnings.

Cash Flow Hedges
For derivatives designated as cash flow hedges, the effective portion of
the derivative's gain or loss is recorded as part of other comprehensive (loss)
income in shareholders' equity and subsequently recognized in the income
statement when the hedged forecasted transaction affects earnings. Gains and
losses resulting from the early termination of derivatives designated as cash
flow hedges are included in other comprehensive (loss) income and recognized in
income when the original hedged transaction affects earnings.

Hedge of Net Investment in Foreign Operations
Changes in fair value of derivatives designated as a hedge of a net
investment in foreign operations are included in other comprehensive (loss)
income as part of the cumulative translation adjustment.

Environmental Liabilities -- Expenditures that relate to current or future
operations are expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and

42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

which do not contribute to current or future revenue generation, are charged to
environmental reserves. Reserves are recorded in accordance with accounting
guidelines to cover work at identified sites when GATX's liability for
environmental cleanup is both probable and a reasonable estimate of associated
costs can be made; adjustments to initial estimates are recorded as necessary.

Revenue Recognition -- Gross income includes rents on operating leases,
accretion of income on finance leases and interest on loans. Operating lease
income is recognized on a straight-line basis over the term of the underlying
lease. Finance lease income is recognized on the basis of the interest method,
which produces a constant yield over the term of the lease. Other income
includes fees, gains on the sale of portfolio investments and equity securities
and share of affiliates' earnings.

Lease and Loan Origination Costs -- Initial direct costs of leases are
deferred and amortized over the lease term, either as an adjustment to the yield
for direct finance and leveraged leases (collectively, finance leases), or on a
straight-line basis for operating leases. Loan origination fees and related
direct loan origination costs for a given loan are offset, and the net amount is
deferred and amortized over the term of the loan as an adjustment to interest
income.

Residual Values -- GATX has investments in the residual values of its
leasing portfolio. The residual values represent the estimate of the values of
the assets at the end of the lease contracts. GATX initially records these based
on appraisals and estimates. Realization of the residual values is dependent on
GATX's future ability to market the assets under existing market conditions.
GATX reviews residual values periodically to determine that recorded amounts are
appropriate. For finance leases, GATX reviews the estimated residual values of
leased equipment at least annually, and any other-than-temporary declines in
value are immediately charged to income. For operating leases, GATX reviews the
estimated salvage values of leased equipment at least annually, and changes in
values are recorded as adjustments to depreciation expense over the remaining
useful life of the asset. In addition to a periodic review, if events or changes
in circumstances trigger a review of operating lease assets for impairment, any
such impairment is immediately charged to income as an impairment loss.

Investments in Equity Securities -- GATX's venture portfolio includes stock
warrants received from investee companies and common stock resulting from
exercising the warrants. Under the provisions of SFAS No. 133, as amended, the
warrants are accounted for as derivatives, with prospective changes in fair
value recorded in current earnings. All other investments are classified as
available-for-sale in accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. The securities are carried at fair
value. Unrealized gains and losses arising from marking the portfolio to fair
value are included on a net-of-tax basis as a separate component of accumulated
other comprehensive (loss) income. The unrealized gains on these securities were
$1.4 million and $3.5 million at the end of 2002 and 2001, respectively.

Foreign Currency Translation -- The assets and liabilities of GATX's
operations located outside the United States are translated at exchange rates in
effect at year end, and income statements are translated at the average exchange
rates for the year. Adjustments resulting from the translation of foreign
currency financial statements are deferred and recorded as a separate component
of accumulated other comprehensive (loss) income in the shareholders' equity
section of the balance sheet. The cumulative foreign currency translation
adjustment was $(67.2) million and $(65.6) million at the end of 2002 and 2001,
respectively.

Incentive Compensation Plans -- The Company grants stock options to
employees under stock-based compensation plans. In December 2002, the FASB
issued SFAS No. 148, Accounting for Stock-Based Compensation -- Transition and
Disclosure -- an amendment of SFAS No. 123. This statement provides alternative
methods of transition for voluntary change to the fair value based method of
accounting for stock-based employee compensation. This statement also amends the
disclosure requirements of SFAS No. 123 and APB Opinion No. 28, Interim
Financial Reporting, to require prominent disclosure in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect on reported results. As permitted under SFAS No.
148, the company accounts for all stock-based employee compensation plans under
the recognition and measurement provisions of APB Opinion No. 25, Accounting

43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for Stock Issued to Employees. Under these guidelines, no compensation expense
is recognized because the exercise price of GATX's employee stock options equals
the market value of the underlying stock on the date of grant.

Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, Accounting for Stock-Based Compensation, and has been
determined as if GATX had accounted for its employee stock options under the
fair value method. The Black-Scholes model, one of the most frequently
referenced models to value options, was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including expected stock price volatility. Because
GATX's employee stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion the
existing models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.

The following table illustrates the effect on net income and earnings per
share if the company had applied the fair value provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation
(in millions except for per share data):

The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions:

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles necessarily 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 as well as revenues and expenses during the reporting
period. Actual amounts when ultimately realized could differ from those
estimates.

Reclassification -- Certain amounts in the 2001 and 2000 financial
statements have been reclassified to conform to the 2002 presentation.

New Accounting Pronouncements -- In June 2001, the Financial Accounting
Standards Board issued SFAS No. 141, Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets, effective

44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for fiscal years beginning after December 15, 2001. Under the new rules,
goodwill and intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment testing in accordance with
the statements. Other intangible assets will continue to be amortized over their
useful lives. GATX applied the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. During 2002, GATX
performed the required impairment tests of goodwill and indefinite lived
intangible assets as of January 1, 2002, and has determined the impact to be
$34.9 million. See further information in Note 17.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections, effective for fiscal years beginning after May 15, 2002, with early
application encouraged. The provisions of this statement update, clarify and
simplify certain existing accounting pronouncements. For the year ended December
31, 2002, GATX applied the provisions of SFAS No. 145. Specifically, SFAS No.
145 rescinds SFAS No. 4, which previously required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effects. In accordance with the
statement, GATX's gain on extinguishment of debt of $18.0 million recognized in
the year ended December 31, 2002, is not considered an extraordinary item, and
was therefore included in results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness to Others. FIN 45 clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee, including its
ongoing obligation to stand ready to perform over the term of the guarantee in
the event that the specified triggering events or conditions occur. The
objective of the initial measurement of the liability is the fair value of the
guarantee at its inception. The initial recognition and initial measurement
provisions of FIN 45 are effective for GATX on a prospective basis as to
guarantees issued after December 31, 2002. See Note 14 for additional
information related to GATX's guarantee arrangements.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, which addresses consolidation by a
business of variable interest entities (VIE) in which it is the primary
beneficiary. FIN 46 applies immediately to VIE's created or acquired after
January 31, 2003. For other VIE's, FIN 46 applies in the first fiscal quarter or
interim period beginning after June 15, 2003. GATX is currently assessing the
impact FIN 46 will have on its financial statements.

NOTE 2. ACCOUNTING FOR LEASES

The following information pertains to GATX as a lessor:

Finance Leases -- GATX's finance leases are comprised of direct financing
leases and leveraged leases. Investment in direct finance leases consists of
lease receivables, plus the estimated residual value of the equipment at the
lease termination dates, less unearned income. Lease receivables represent the
total rent to be received over the term of the lease reduced by rent already
collected. Initial unearned income is the amount by which the original sum of
the lease receivable and the estimated residual value exceeds the original cost
of the leased equipment. Unearned income is amortized to lease income over the
lease term in a manner that produces a constant rate of return on the net
investment in the lease.

Finance leases that are financed principally with nonrecourse borrowings at
lease inception and that meet certain criteria are accounted for as leveraged
leases. Leveraged lease receivables are stated net of the related nonrecourse
debt. Initial unearned income represents the excess of anticipated cash flows
(including estimated residual values, net of the related debt service) over the
original investment in the lease.

45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the investment in finance leases were (in millions):

Operating Leases -- The majority of railcar assets and certain other
equipment leases included in operating lease assets are accounted for as
operating leases. Rental income from operating leases is generally reported on a
straight-line basis over the term of the lease.

Rental income on certain leases is based on equipment usage. Usage rents
for the years ended December 31, 2002, 2001 and 2000 were $7.1 million, $3.3
million, and $2.6 million, respectively.

Minimum Future Receipts -- Minimum future lease receipts from finance
leases and minimum future rental receipts from noncancelable operating leases by
year at December 31, 2002 were (in millions):

The following information pertains to GATX as a lessee:

Capital Leases -- Assets classified as operating lease assets and finance
leases that have been financed under capital leases were (in millions):

Operating Leases -- GATX has financed railcars, aircraft, and other assets
through sale-leasebacks that are accounted for as operating leases. A subsidiary
of GATX has provided a guarantee for a portion of the residual value related to
two operating leases. Operating lease expense for the years ended December 31,
2002, 2001, and 2000 was $179.5 million, $184.2 million, and $168.8 million,
respectively.

46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future Minimum Rental Payments -- Future minimum rental payments due under
noncancelable leases at December 31, 2002 were (in millions):

The above capital lease amounts and certain operating leases do not include
the costs of licenses, taxes, insurance, and maintenance that GATX is required
to pay. Interest expense on the above capital leases was $14.1 million in 2002,
$15.0 million in 2001, and $14.4 million in 2000.

The amounts shown as nonrecourse operating leases primarily reflect rental
payments of three bankruptcy remote, special-purpose corporations that are
wholly owned by GATX. These rentals are consolidated for accounting purposes,
but do not represent legal obligations of GATX.

NOTE 3. LOANS

Loans are recorded at the principal amount outstanding plus accrued
interest. The loan portfolio is reviewed regularly, and a loan is classified as
impaired and written down when it is probable that GATX will be unable to
collect all amounts due under the loan agreement. Since most loans are
collateralized, impairment is generally measured as the amount by which the
recorded investment in the loan exceeds the fair value of the collateral, and
any adjustment is considered in determining the provision for possible losses.
Generally, interest income is not recognized on impaired loans until the
outstanding principal is recovered.

The types of loans in GATX's portfolio are as follows (in millions):

Impaired loans had identified allowance for possible losses of $22.0
million and $17.5 million at December 31, 2002 and 2001, respectively. The
average balance of impaired loans was $48.6 million and $53.0 million in 2002
and 2001, respectively.

47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 2002, loan principal due by year was as follows (in
millions):

NOTE 4. ALLOWANCE FOR POSSIBLE LOSSES

The purpose of the allowance is to provide for credit losses with respect
to reservable assets inherent in the investment portfolio. Reservable assets
include gross receivables, loans and finance leases. GATX sets the allowance by
assessing overall risk and probable losses in the portfolio and by reviewing
historical loss experience. GATX charges off amounts that management considers
unrecoverable from obligors or through the disposition of collateral. GATX
assesses the recoverability of investments by considering factors such as a
customer's payment history and financial position.

The following summarizes changes in the allowance for possible losses (in
millions):

The charges to allowance in 2002 were primarily due to write-offs related
to technology and venture investments. 2001 charges to the allowance primarily
related to write-offs of venture, including telecom, and steel investments.

There were no material changes in estimation methods or assumptions for the
allowances during 2002. GATX believes that the allowance is adequate to cover
losses inherent in the portfolio as of December 31, 2002. Because the allowance
is based on judgments and estimates, it is possible that those judgments and
estimates could change in the future, causing a corresponding change in the
recorded allowance.

NOTE 5. INVESTMENTS IN AFFILIATED COMPANIES

Investments in affiliated companies represent investments in domestic and
foreign companies and joint ventures that are in businesses similar to those of
GATX, such as commercial aircraft leasing, rail equipment leasing, technology
equipment leasing and other business activities, including ventures that provide
asset residual value guarantees in both domestic and foreign markets.

The investments in affiliated companies are initially recorded at cost,
including goodwill at acquisition date, and are subsequently adjusted for GATX's
share of affiliates' undistributed earnings. These investments include net loans
to affiliated companies of $301.2 million and $246.1 million at December 31,
2002 and 2001, respectively. Share of affiliates' earnings includes GATX's share
of interest income on these loans, which offsets the proportional share of the
affiliated companies' interest expense on the loans. Share of affiliates'

48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

earnings in 2001 and 2000 was also adjusted for the amortization of goodwill.
Distributions, which reflect both dividends and the return of principal, reduce
the carrying amount of the investment. Distributions received from such
affiliates were $148.8 million, $225.6 million, and $119.7 million in 2002, 2001
and 2000, respectively.

At December 31, 2002, GATX had one investment in excess of 10% of the total
investment in affiliated companies: a 13.5% investment in an air affiliate. At
December 31, 2001, the air affiliate represented 12.3% of the total investment
in affiliated companies, and a specialty finance investment was 10.6%. The
following table shows GATX's investments in affiliated companies by segment and
business unit (in millions):

Affiliated companies conduct their businesses throughout the world and
there is no geographical concentration of risk.

The following table shows GATX's pre-tax share of affiliates' earnings by
segment and business unit (in millions):

For purposes of preparing the following information, GATX made certain
adjustments to the information provided by the joint ventures. Pre-tax income
was adjusted to reverse interest expense recognized by the joint ventures on
loans from GATX. In addition, GATX recorded its loans to the joint ventures as
equity contributions, therefore, loan balances were reclassified from
liabilities to equity.

49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

For all affiliated companies held at the end of the year, operating
results, as if GATX held 100 percent interest, were (in millions):

For 2001, pre-tax income as if GATX held a 100 percent interest was less
than GATX's pre-tax share of affiliates' earnings due to telecom losses at
Venture of $131.9 million. GATX's share of these losses was $35.6 million.

For all affiliated companies held at the end of the year, summarized
balance sheet data, as if GATX held 100 percent interest, were (in millions):

At December 31, 2002, GATX's wholly owned subsidiary, GATX Financial
Corporation, had provided $89.2 million in debt guarantees and $242.3 million in
residual value guarantees related to affiliated companies.

NOTE 6. FOREIGN OPERATIONS

GATX has a number of investments in subsidiaries and affiliated companies
that are located in or derive revenues from foreign countries. Foreign entities
contribute significantly to share of affiliates' earnings. The foreign
identifiable assets represent investments in affiliated companies as well as
fully consolidated railcar operations in Canada, Mexico and Europe, and foreign
lease, loan and other investments.

50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Foreign cash flows generated are used to meet local operating needs and for
reinvestment. For foreign functional currency entities, the translation of the
financial statements into U.S. dollars results in an unrealized foreign currency
translation adjustment, a component of accumulated other comprehensive (loss)
income.

NOTE 7. SHORT-TERM DEBT AND LINES OF CREDIT

Short-term debt (in millions) and weighted average interest rates as of
year end were:

GFC's other short-term borrowings include foreign denominated loans.

GFC has commitments under credit agreements with a group of financial
institutions for revolving credit loans totaling $778.3 million. GFC's revolving
credit agreements are for $350.0 million, $283.3 million and $145.0 million
expiring in 2003, 2004 and 2005, respectively. At December 31, 2002, all credit
facilities were unused and available. In December 2002, GFC also closed a
commercial paper (CP) conduit securitization facility for $100.0 million, which
can be renewed annually. At December 31, 2002, no amounts had been funded
through this facility. At December 31, 2002, GFC's contractual borrowing rates
associated with the CP conduit securitization facility and the $145.0 million
credit agreement were A1/P1 CP + .60%, and LIBOR + 1.75%, respectively.

The annual commitment fees for the revolving credit agreements are based on
a percentage of the commitment and totaled approximately $1.2 million, $.7
million, and $.8 million for 2002, 2001, and 2000, respectively. GFC's revolving
credit agreements contain various restrictive covenants and requirements to
maintain a defined minimum net worth and certain financial ratios. GFC met all
credit agreement requirements at December 31, 2002.

NOTE 8. LONG-TERM DEBT

Long-term debt (in millions) and the range of interest rates as of year end
were:

51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Maturities of GATX's long-term debt as of December 31, 2002, for the next
five years were (in millions):

At December 31, 2002, certain technology assets, aircraft, railcars, and
other equipment with a net carrying value of $1,829.4 million were pledged as
collateral for $1,538.5 million of notes and obligations.

In February 2002, GATX completed a private offering of $175.0 million of
five-year, 7.5% senior unsecured convertible notes. The notes are convertible
into GATX Corporation common stock at a price of $34.09 per share.

Interest expense on long-term debt, net of capitalized interest, was $219.4
million in 2002, $252.2 million in 2001 and $253.5 million in 2000. Interest
expense capitalized as part of the cost of construction of major assets was
$15.8 million in 2002, $14.4 million in 2001 and $10.6 million in 2000. Interest
allocated to discontinued operations in 2002, 2001 and 2000 was zero, $5.0
million and $51.2 million, respectively.

NOTE 9. FAIR VALUE OF FINANCIAL INSTRUMENTS

GATX Corporation and its subsidiaries may enter into authorized derivative
transactions for the purposes of reducing earnings volatility, hedging specific
economic exposures, including adverse movements in foreign currency exchange
rates, and changing interest rate characteristics of debt securities. These
instruments are entered into for hedging purposes only. GATX does not hold or
issue derivative financial instruments for purposes other than hedging, except
for warrants, which are not designated as accounting hedges under SFAS No. 133,
as amended.

FAIR VALUE HEDGES

GATX uses interest rate swaps to convert fixed rate debt to floating rate
debt and to manage the fixed to floating rate mix of the debt portfolio. The
fair value of interest rate swap agreements is determined based on the
differences between the contractual rate of interest and the rates currently
quoted for agreements of similar terms and maturities. As of December 31, 2002,
maturities for interest rate swaps designated as fair value hedges range from
2003-2009.

CASH FLOW HEDGES

GATX's interest expense is affected by changes in interest rates as a
result of its use of variable rate debt instruments, including commercial paper
and other floating rate debt. GATX uses interest rate swaps and forward starting
interest rate swaps to convert floating rate debt to fixed rate debt and to
manage the floating to fixed rate ratio of the debt portfolio. The fair value of
interest rate swap agreements is determined based on the differences between the
contractual rate of interest and the rates currently quoted for agreements of
similar terms and maturities. As of December 31, 2002, maturities for interest
rate swaps qualifying as cash flow hedges range from 2003-2011.

GATX enters into currency swaps, currency and interest rate forwards, and
Treasury derivatives as hedges to manage its exposure to interest rate and
currency exchange rate risk on existing and anticipated transactions. The fair
values of currency swaps, currency and interest forwards, and Treasury
derivatives are based on interest rate swap rates, LIBOR futures, currency
rates, and current forward foreign exchange rates. As of December 31, 2002,
maturities for previously mentioned hedges range from 2003-2013. As of

52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 2002, GATX expects to reclassify $.6 million of net losses on
derivative instruments from accumulated other comprehensive (loss) income to
earnings within the next twelve months due to hedging various transactions.

HEDGE OF NET INVESTMENT IN FOREIGN OPERATIONS

As of December 31, 2001, GATX held a foreign exchange forward contract to
hedge foreign currency exposure of an investment with operations located in
Germany. The fair value of the foreign exchange forward is determined by the
current forward foreign exchange rate. As of December 31, 2001, the net gain
that related to the foreign exchange forward contract was $8.9 million. The
foreign exchange forward contract matured prior to December 31, 2002. There are
no hedges of net investment in foreign operations as of December 31, 2002.

OTHER DERIVATIVES

GATX obtains warrants from non-public, venture backed companies in
connection with its financing activities. Upon adoption of SFAS No. 133, as
amended, these warrants are accounted for as derivatives. Upon receipt, fair
value is generally not ascertainable due to the early stage nature of the
investee companies. Accordingly, assigned values are nominal. Prior to an
initial public offering (IPO) of these companies, the fair value of pre-IPO
warrants is deemed to be zero. Accordingly, no amounts were recognized in
earnings for changes in fair value of pre-IPO warrants. The fair value of
warrants subsequent to the IPO is based on currently quoted prices of the
underlying stock.

OTHER FINANCIAL INSTRUMENTS

The fair value of other financial instruments represents the amount at
which the instrument could be exchanged in a current transaction between willing
parties. The following methods and assumptions were used to estimate the fair
value of other financial instruments:

The carrying amount of cash and cash equivalents, restricted cash, rent
receivables, accounts payable, and short-term debt approximates fair value
because of the short maturity of those instruments. Also, the carrying amount of
variable rate loans approximates fair value.

The fair value of fixed rate loans was estimated using discounted cash flow
analyses, at interest rates currently offered for loans with similar terms to
borrowers of similar credit quality.

The fair value of variable and fixed rate long-term debt was estimated by
performing a discounted cash flow calculation using the term and market interest
rate for each note based on GATX's current incremental borrowing rates for
similar borrowing arrangements. Portions of variable rate long-term debt have
effectively been converted to fixed rate debt by utilizing interest rate swaps
(GATX pays fixed rate interest, receives floating rate interest). Portions of
fixed rate long-term debt have effectively been converted to floating rate debt
by utilizing interest rate swaps (GATX pays floating rate interest, receives
fixed rate interest). In such instances, the increase (decrease) in the fair
value of the variable or fixed rate long-term debt would be offset in part by
the increase (decrease) in the fair value of the interest rate swap.

53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the carrying amounts and fair values of
GATX's financial instruments (in millions):

In the event that a counterparty fails to meet the terms of the interest
rate swap agreement or a foreign exchange contract, GATX's exposure is limited
to the market value of the swap if in GATX's favor. GATX manages the credit risk
of counterparties by dealing only with institutions that the Company considers
financially sound and by avoiding concentrations of risk with a single
counterparty. GATX considers the risk of non-performance to be remote.

NOTE 10. PENSION AND OTHER POST-RETIREMENT BENEFITS

GATX maintains noncontributory defined benefit pension plans covering its
employees and the employees of certain of its subsidiaries. Benefits payable
under the pension plans are based on years of service and/or final average
salary. The funding policy for the pension plans is based on an actuarially
determined cost method allowable under Internal Revenue Service regulations.

In addition to the pension plans, GATX's other post-retirement plans
provide health care, life insurance and other benefits for certain retired
employees who meet established criteria. Most domestic employees are eligible
for health care and life insurance benefits if they retire from GATX with
immediate benefits under the GATX pension plan. The plans are either
contributory or noncontributory, depending on various factors.

54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables set forth pension obligations and plan assets and
other post-retirement obligations (in millions):

55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of pension and other post-retirement benefit costs are as
follows (in millions):

Special termination benefit expense of $.2 million was incurred in 2002 for
certain extra benefits paid to terminated or retired employees. Special
termination benefit expense of $12.6 million was incurred in 2001 for certain
extra benefits paid to terminated or retired employees of which $8.9 million
related to discontinued operations. Offsetting this expense in 2001 was a $15.1
million curtailment credit resulting from the elimination of future service cost
for covered employee groups; $14.5 million of the curtailment credit related to
discontinued operations.

There are no pension costs related to discontinued operations for the year
ended December 31, 2002. Pension costs include a credit of $.1 million and
expense of $1.2 million related to discontinued operations for the years ended
December 31, 2001 and 2000, respectively.

GATX amortizes the prior service cost using a straight-line method over the
average remaining service period of employees expected to receive benefits under
the plan.

Assumptions as of December 31:

The health care cost trend rate has a significant effect on the other
post-retirement benefit cost and obligation. Due to increasing health care and
drug costs, the assumed health care cost trend rate for 2002 was increased to
12.0% for participants over the age of 65 and 10.0% for participants under the
age of 65. Beginning in 2003 the assumed health care cost trend rates are
projected to decline. The assumed health care cost trend rate anticipated for
2003 will be 11.0% for participants over the age of 65 and 9.0% for participants
under the age of 65. Over a six-year period the trend rates will decline
gradually to 6.0% and remain at that level thereafter. A 1% increase in the
trend rate would increase the cost by $.3 million and the obligation by $4.2
million. A 1% decrease in the trend rate would decrease the cost by $.3 million
and the obligation by $3.9 million.

In addition to contributions to its defined benefit plans, GATX maintains
two 401(k) retirement plans that are available to substantially all salaried and
certain other employee groups. GATX may contribute to the

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

plans as specified by their respective terms, and as determined by the Board of
Directors. Contributions to such plans for continuing operations were $1.9
million, $2.0 million, and $1.8 million for 2002, 2001, and 2000, respectively.
Contributions related to discontinued operations were zero, $.2 million, and $.9
million for 2002, 2001, and 2000, respectively.

NOTE 11. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

Significant components of GATX's deferred tax liabilities and assets were
(in millions):

At December 31, 2001, GATX had fully utilized all of its alternative
minimum tax credit.

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GATX and its United States subsidiaries file a consolidated federal income
tax return. Amounts shown as Current-Federal for 2000 represents taxes payable
as determined by the Alternative Minimum Tax. Income taxes for continuing
operations consisted of (in millions):

Taxes (recovered) paid include amounts allocable to discontinued operations
of ($8.9) million, $285.9 million, and $3.9 million in 2002, 2001 and 2000
respectively.

The reasons for the difference between GATX's effective income tax rate and
the federal statutory income tax rate were (in millions):

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12. SHAREHOLDERS' EQUITY

In accordance with GATX's amended certificate of incorporation, 120 million
shares of common stock are authorized, at a par value of $.625 per share. As of
December 31, 2002, 57,016,920 shares were issued and 49,048,293 shares were
outstanding.

GATX's certificate of incorporation also authorizes 5 million shares of
preferred stock at a par value of $1.00 per share. At December 31, 2002, 21,911
shares of preferred stock were outstanding. Shares of preferred stock issued and
outstanding consist of Series A and B $2.50 cumulative convertible preferred
stock, which entitled holders to a cumulative annual cash dividend of $2.50 per
share. Each share of such preferred stock may be called for redemption by GATX
at $63 per share, has a liquidating value of $60 per share, and may be converted
into five shares of common stock. Holders of both series of $2.50 convertible
preferred stock and common stock are entitled to one vote for each share held.
Except in certain instances all such classes vote together as a single class.

In February 2002, GATX completed a private offering of $175.0 million of
five-year, 7.5% senior unsecured convertible notes. The notes are convertible
into GATX Corporation common stock at a price of $34.09 per share.

A total of 13,402,810 shares of common stock were reserved at December 31,
2002, for the following:

To ensure the fair value to all shareholders in the event of an unsolicited
takeover offer for the Company, GATX adopted a Shareholders' Rights Plan in
August 1998. Shareholders received a distribution of one right for each share of
the Company's common stock held. Initially the rights are represented by GATX's
common stock certificates and are not exercisable. The rights will be
exercisable only if a person acquires or announces a tender offer that would
result in beneficial ownership of 20 percent or more of the Company's common
stock. If a person acquires beneficial ownership of 20 percent or more of the
Company's common stock, all holders of rights other than the acquiring person
will be entitled to purchase the Company's common stock at half price. The
rights are scheduled to expire on August 14, 2008.

NOTE 13. INCENTIVE COMPENSATION PLANS

The GATX Corporation 1995 Long Term Incentive Compensation Plan (the 1995
Plan) contains provisions for the granting of nonqualified stock options,
incentive stock options, stock appreciation rights (SARs), cash and common stock
individual performance units (IPUs), restricted stock rights, restricted common
stock, performance awards and exchange stock options. An aggregate of 5,000,000
shares of common stock may be issued under the 1995 Plan. As of December 31,
2002, 822,827 shares were available for issuance under the 1995 Plan.

Nonqualified stock options and incentive stock options may be granted for
the purchase of common stock for periods not longer than ten years from the date
of grant. The exercise price will not be less than the higher of market value at
date of grant or par value of the common stock. Except for options issued under
the Exchange Stock Option Program (see below), options vest and become
exercisable commencing on a date no earlier than one year from the date of
grant.

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

IPUs may be granted to key employees and, if predetermined performance
goals are met, will be redeemed in cash and common stock, as applicable, with
the redemption value determined in part by the fair market value of the common
stock as of the date of redemption and in part by the extent to which pre-
established performance goals have been achieved. No IPUs were granted during
2002 and 68,663 IPUs in total were outstanding at the end of the year. In 2002,
1,836 shares of common stock and $.1 million in cash were paid to the
participants in redemption of previously issued IPUs.

In 2002, the Company adopted the Executive Incentive Plan (EIP) for key
employees which replaced the former IPU Plan. Under the EIP, participants were
awarded a one-time grant comprised of restricted stock and cash components
covering plan years 2002 and 2003. At the end of the restricted periods and
contingent on employment, both awards will be redeemed in cash, with the value
of the phantom restricted stock award based on the fair market value of the
common stock as of the date of redemption. In 2002, 54,500 phantom restricted
shares and $1.7 million in cash were granted. In 2002, $1.0 million in cash was
paid to participants.

Restricted stock rights may be granted to key employees entitling them to
receive a specified number of shares of restricted common stock. The recipients
of restricted common stock are entitled to all dividends and voting rights, but
the shares are not transferable prior to the expiration of a "restriction
period" as determined at the discretion of the Compensation Committee of the
Board of Directors. Performance Awards are granted to employees who have been
granted restricted stock rights or restricted common stock, but these Awards may
not exceed the market value of the restricted common stock when restrictions
lapse. The Performance Awards provide cash payments if certain criteria and
earnings goals are met over a predetermined period. During 2002, no grants of
restricted stock were made.

The Exchange Stock Option Program became part of the 1995 Plan in 1999 and
allows key employees to make an irrevocable election to exchange up to 25% of
their pensionable incentive payments for stock options, with a minimum amount of
$5,000 in any calendar year. The purchase price of the options is based on a
percentage of the Black-Scholes value of stock options of GATX common stock as
specified by the Compensation Committee. Exchange Stock Options are granted in
January and are exercisable immediately following grant thereof. All Exchange
Stock Options will terminate on the tenth anniversary of the date of grant. The
exercise price of the options is the fair market value of the common stock on
the grant date. No options were granted for the 2001 plan year. A total of
14,972 options were granted for the 2002 plan year.

Under the GATX Employee Stock Purchase Plan, which became effective July 1,
1999, GATX is authorized to issue up to 247,167 shares of common stock to
eligible employees during the calendar year. Such employees may have up to
$10,000 of earnings withheld to purchase GATX common stock. The purchase price
of the stock on the date of exercise is 85% of the lesser of its market price at
the beginning or end of the plan year. In accordance with the plan, GATX sold
61,340 shares to employees in 2002.

60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock options are outstanding under the GATX Corporation 1985 Long Term
Incentive Compensation Plan (the 1985 Plan), as amended, but no additional
options, stock or awards may be issued thereunder. Data with respect to both the
1985 Plan and the 1995 Plan, including the range of exercise prices per share
for 2002 and 2001, are set forth below:

NUMBER OF SHARES UNDER STOCK OPTION PLANS

Accounting for Stock Options -- GATX has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, in
accounting for its employee stock options. Under these guidelines, no
compensation expense is recognized because the exercise price of GATX's employee
stock options equals the market price of the underlying stock on the measurement
date. See further disclosure information in Note 1.

NOTE 14. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK

GATX's revenues are derived from a wide range of industries and companies.
Approximately 18% of total revenues are generated from the transportation of
products for the chemical industry; for similar services, 14% of revenues are
derived from the petroleum industry. In addition, approximately 26% of GATX's
assets, including off balance sheet assets, consist of commercial aircraft
operated by various domestic and international airlines.

Under its lease agreements, GATX retains legal ownership of the asset
except where such assets have been financed by sale-leasebacks. With most loan
financings, the loan is collateralized by the equipment. GATX performs credit
evaluations prior to approval of a lease or loan contract. Subsequently, the

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

creditworthiness of the customer and the value of the collateral are monitored
on an ongoing basis. GATX maintains an allowance for possible losses and other
reserves to provide for potential losses that could arise should customers
become unable to discharge their obligations to GATX.

At December 31, 2002, GATX's unconditional purchase obligations of $1,005.3
million consisted primarily of railcar commitments and scheduled aircraft
acquisitions. During the fourth quarter 2002, GATX entered into a series of
agreements to acquire 7,500 railcars for $453.7 million. GATX had commitments of
$383.1 million for orders and options for interest in 11 new aircraft to be
delivered between 2003 and 2004. Additional unconditional purchase obligations
include $124.1 million of technology, specialty finance and venture finance
commitments and $44.4 million of other rail related commitments. Additionally,
under the terms of the DEC acquisition agreement, GATX is obligated to invest
$65.9 million in DEC over the next three years.

GATX has various commercial commitments, such as guarantees and standby
letters of credit, which could potentially require performance in the event of
demands by third parties. Similar to GATX's on balance sheet investments, these
guarantees expose GATX to credit and market risk; accordingly, GATX evaluates
commitment and other contingent obligations using the same techniques used to
evaluate funded transactions.

GATX and its subsidiaries are also parties to letters of credit and bonds
totaling $28.7 million at December 31, 2002. In GATX's past experience,
virtually no claims have been made against these financial instruments. At
December 31, 2002, management does not expect any material losses to result from
these off-balance sheet instruments because performance is not expected to be
required, and, therefore, is of the opinion that the fair value of these
instruments is zero.

Lease and loan payment guarantees generally involve guaranteeing repayment
of the financing utilized to acquire assets being leased by an affiliate to
customers, and are in lieu of making direct equity investments in the affiliate.
GATX is not aware of any event of default which would require it to satisfy
these guarantees, and expects the affiliates to generate sufficient cash flow to
satisfy their lease and loan obligations.

Asset residual value guarantees represent GATX's commitment to third
parties that an asset or group of assets will be worth a specified amount at the
end of a lease term. Revenue is earned for providing these asset value
guarantees in the form of an initial fee (which is amortized into income over
the guaranteed period) and by sharing in any proceeds received upon disposition
of the assets in excess of the amount guaranteed (which is recorded when
realized). At December 31, 2002, the maximum potential amount of residual value,
lease or loan guarantees under which GATX or its subsidiaries could be required
to perform was $767.0 million. The related carrying value of the guarantees on
the balance sheet was zero. The expirations of these guarantees range from 2003
to 2020. GATX's liability resulting from the performance pursuant to the
residual value guarantees may be reduced by the value realized from the
underlying asset or group of assets. Based on known and expected market
conditions, management does not believe that the asset residual value guarantees
will result in any adverse financial impact to GATX.

GATX and its subsidiaries are engaged in various matters of litigation and
have a number of unresolved claims pending, including proceedings under
governmental laws and regulations related to environmental matters. While the
amounts claimed are substantial, and the ultimate liability with respect to such
litigation and claims cannot be determined at this time, it is the opinion of
management that amounts, if any, required to be paid by GATX and its
subsidiaries in the discharge of such liabilities, are not likely to be material
to GATX's consolidated financial position or results of operations.

NOTE 15. DISCONTINUED OPERATIONS

In 2002, GATX completed the divestiture of the ISG segment. The ISG segment
was comprised of GATX Terminals Corporation (Terminals), GATX Logistics, Inc.
(Logistics), and minor business development efforts. Financial data for the ISG
segment has been segregated as discontinued operations for all periods
presented.

62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GATX sold 81% of Logistics in May 2000 and the remaining 19% in December
2000. In the first quarter of 2001, GATX sold the majority of Terminals'
domestic operations. The sale included substantially all of Terminals' domestic
terminaling operations, the Central Florida Pipeline Company and Calnev Pipe
Line Company. Also in the first quarter of 2001, GATX sold substantially all of
Terminals' European operations. In the second and third quarters of 2001, GATX
sold Terminals' Asian operations and its U.S. interest in a distillate and
blending distribution affiliate.

In the first quarter of 2002, GATX sold its interest in a bulk-liquid
storage facility located in Mexico and recognized a $6.2 million gain, net of
taxes of $3.0 million. In the first quarter of 2001, GATX sold the majority of
Terminals' operations and recognized a gain of $163.9 million, net of taxes of
$179.1 million. The 2000 gain on sale of portion of segment reflects the sale of
GATX Logistics, Inc. and was $8.4 million, including a tax benefit of $5.2
million.

In 2001 and 2000, corporate allocations to discontinued operations were for
services provided. Operating results include interest expense on debt that was
assumed by the buyer and an allocation of the interest expense on GATX's general
credit facilities based on actual historical financing requirements.

Operating results of the discontinued ISG operation are presented below (in
millions):

Assets and liabilities of the discontinued operations as of December 31,
2001 are summarized below (in millions):

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16. FINANCIAL DATA OF BUSINESS SEGMENTS

The financial data presented below conforms to SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information, and depict the
profitability, financial position and cash flow of each of GATX's continuing
business segments. Segment profitability is presented to reflect operating
results inclusive of allocated support expenses from the parent company and
estimated applicable interest costs. Discontinued operations and the cumulative
effect of accounting change are not included in the financial data presented
below.

GATX provides its services and products through two operating segments:
GATX Rail and Financial Services. Through these businesses, GATX combines asset
knowledge and services, structuring expertise, partnering and risk capital to
serve customers and partners worldwide. GATX specializes in railcar and
locomotive leasing, aircraft operating leasing, information technology leasing
and venture finance.

The Financial Services segment consists of the following four business
units:

- Air, which is a leading aircraft lessor, focused on leasing newer
narrow-body aircraft widely used by commercial airlines throughout the
world

- Technology, which provides lease financing and asset management services
related to information technology equipment

- Venture Finance, which provides loan and lease financing to early-stage
companies, and

- Specialty Finance, which acts as an investor, arranger and manager of
financing services involving a variety of asset types and industries,
with an established presence in the marine business.

In December, 2002, GATX announced its intention to sell or otherwise run
off Venture and curtail investment in Specialty.

64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 17. GOODWILL

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets, which changed the accounting for goodwill. Under these
new rules, goodwill is no longer amortized, but rather subject to an annual
impairment test in accordance with SFAS 142. In accordance with SFAS 142, the
company completed a review of all recorded goodwill. Fair values were
established using discounted cash flows. Based on this review, the Company
determined that all of the goodwill related to its Polish railcar reporting
unit, Dyrekcja Eksploatacji Cystern Sp. z.o.o. (DEC) was in excess of its fair
market value at January 1, 2002. As a result, the Company recorded a one-time,
non-cash impairment charge of $34.9 million. Such a charge is non-operational in
nature and recognized as a cumulative effect of accounting change as of January
1, 2002 in the consolidated statements of income. The impairment charge was due
primarily to conservative expectations of projected cash flows based on current
market conditions and a lower long-term growth rate projected for DEC.
Subsequent to the adoption of SFAS 142, GATX also recorded a $14.4 million
impairment charge for the write-down of goodwill associated with the company's
plan to exit the venture finance business.

Goodwill, net of accumulated amortization, was $62.5 million and $63.3
million as of December 31, 2002 and 2001, respectively. Amortization expense
totaled $4.6 million and $6.3 million for the years ended December 2001 and
2000, respectively. There was no amortization expense recorded in 2002.

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Following is the pro forma effect of the adoption of SFAS 142 (in millions,
except per share data):

Following reflects the changes in the carrying value of goodwill for the
year ended December 31, 2002 (in millions):

GATX Rail recorded $8.2 million of goodwill related to the KVG acquisition
in 2002. GATX Rail also recorded a purchase accounting adjustment of $10.5
million related to DEC prior to the $34.9 million goodwill impairment charge.
Additionally, $29.2 million of goodwill related to the previous investment in
KVG was reclassified from investment in affiliated companies to goodwill by GATX
Rail as of December 31, 2002.

67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 18. OTHER ASSETS

The following table summarizes the components of other assets reported on
the consolidated balance sheets (in millions):

NOTE 19. PORTFOLIO PROCEEDS

The following table summarizes the components of portfolio proceeds
reported on the consolidated statement of cash flows (in millions):

NOTE 20. REDUCTION IN WORKFORCE

During 2002, GATX recorded a pre-tax charge of $16.9 million related to its
2002 reduction in workforce. This action was part of GATX's fourth quarter
announcement of its intent to exit the venture business and curtail investment
in the specialty finance sector as well as a headcount reduction at DEC, GATX's
Polish railcar subsidiary, related to an integration plan implemented to
streamline the workforce and operations. This charge included involuntary
employee separation and benefit costs for 170 employees company-wide, as well as
legal fees, occupancy and other costs. The employee groups terminated included
professional and administrative staff. As of December 31, 2002, 34 of the
terminations were completed. The amount of termination benefits paid in 2002
totaled $.3 million. Remaining cash payments of $16.6 million will be funded
from ongoing operations and are not expected to have a material impact on GATX's
liquidity.

During 2001, GATX recorded a pre-tax charge of $13.4 million related to its
2001 reduction in workforce. This action was part of GATX's previously announced
initiative to reduce selling, general and administrative costs in response to
current economic conditions and the divestiture of ISG operations. This charge
included involuntary employee separation and benefit costs for 147 employees
company-wide, as well as legal fees, occupancy and other costs. The employee
groups terminated included professional and administrative staff, including
corporate personnel. As of December 31, 2002, all of the employee terminations
were completed. The amount of termination benefits paid in 2002 and 2001 totaled
$4.1 million and

68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$2.4 million, respectively. Occupancy and other costs paid in 2002 and 2001
totaled $2.0 million and $.8 million, respectively. In 2002, $.2 million of the
charge was reversed to reflect actual expenses. Remaining cash payments for
occupancy and other costs of $3.9 million will be funded through ongoing
operations and are not expected to have a material impact on GATX's liquidity
position.

NOTE 21. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during each year. Shares
issued during the year and shares reacquired during the year, if applicable, are
weighted for the portion of the year that they were outstanding. Diluted
earnings per share is computed in a manner consistent with that of basic
earnings per share except that the weighted average shares outstanding are
increased to include additional shares from the assumed conversion of preferred
stock, convertible debt, and the assumed exercise of stock options, if dilutive.
The number of additional shares is calculated by assuming that outstanding
options were exercised and that the proceeds from such exercises were used to
acquire shares of common stock at the average market price during the reporting
period.

The following table sets forth the computation of basic and diluted net
income per common share (in millions, except per share amounts):

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

(a) The Company had approximately 2.5 million, 1.3 million, and 3.5 million
stock options outstanding at December 31, 2002, 2001, and 2000,
respectively, which have been excluded from the computation of diluted
earnings per share because of anti-dilutive effects.

(b) Conversion of convertible securities (issued February 2002) was excluded
from the calculations of diluted earnings because of antidilutive effects.

70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATED QUARTERLY FINANCIAL DATA
(UNAUDITED)

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

(a) In the first quarter of 2002 and 2001, gain on sale of portion of segment
was $9.2 million and $343.0 million on a pre-tax basis, $6.2 million and
$163.9 million on an after-tax basis, respectively.

(b) In the third quarter, GATX completed its transition goodwill impairment
test in accordance with SFAS No. 142, and recorded a $34.9 million
impairment charge. The charge was recognized as a cumulative effect of
accounting change as of January 1, 2002. Amounts shown have been restated
from GATX's first quarter Form 10-Q.

(c) Operating expenses include maintenance expense, marine operating expenses,
and other operating expenses.

(d) Quarterly earnings per share results may not be additive, as per share
amounts are computed independently for each quarter and the full year is
based on the respective weighted average common shares and common stock
equivalents outstanding.

Note: Certain amounts have been reclassified to conform to the current
presentation.

71

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

Information required by this item regarding directors is contained in
sections entitled "Nominees For Directors" and "Additional Information
Concerning Nominees" in the GATX Proxy Statement dated March 19, 2003, which
sections are incorporated herein by reference.

Information regarding executive officers is included in Part I of this
Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item regarding compensation of directors and
executive officers of GATX is contained in sections entitled "Compensation of
Directors" and "Compensation of Executive Officers" in the GATX Proxy Statement
dated March 19, 2003, which sections are incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information required by this item regarding the Company's Common Stock is
contained in sections entitled "Nominees For Directors," "Security Ownership of
Management" and "Beneficial Ownership of Common Stock" in the GATX Proxy
Statement dated March 19, 2003, which sections are incorporated herein by
reference.

EQUITY COMPENSATION PLAN INFORMATION (AS OF DECEMBER 31, 2002):

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

(1) This number represents shares available under the 1995 Plan and include
shares that may be issued as Restricted Stock or the Common Stock portion of
the redemption of Individual Performance Units. Shares reserved for issuance
pursuant to awards previously granted and outstanding under the 1985 Plan
and the 1995 Plan and would again become available for issuance under the
1995 Plan if those awards lapse.

(2) The plan consists of a grant of Phantom Restricted Stock to one individual
on January 25, 2001. The terms of the grant conform to the terms of
Restricted Stock grants under the 1995 Plan except that the restrictions
lapse in equal annual installments over a three year period commencing one
year following the grant date rather than at the end of the third year. When
restrictions lapse, shares are issued from treasury shares and not from
authorized but unissued shares from the 1995 Plan. Shareholder approval of
the plan was not required by applicable provisions of law or the rules of
the New York Stock Exchange.

72

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, GATX management, with
the participation of the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), conducted an evaluation of the effectiveness of disclosure
controls and procedures in accordance with Exchange Act Rule 13a-14. Based on
that evaluation, the CEO and CFO have concluded that the disclosure controls and
procedures are effective in ensuring that all material information required to
be filed in this annual report has been made known to them in a timely fashion.
There have been no significant changes in internal controls, or in factors that
could significantly affect internal controls, subsequent to the date the CEO and
CFO completed their evaluation.

73

PART IV

ITEM 15. FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K AND EXHIBITS.

(a) 1. Financial Statements

2. Financial Statement Schedules:

Schedule I Condensed Financial Information of Registrant.... 78
Schedule II Valuation and Qualifying Accounts............... 82

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and,
therefore, have been omitted.

3. Exhibits. See the Exhibit Index included herewith and incorporated by
reference hereto.

(b) Report on Form 8-K.

Form 8-K filed on December 17, 2002 reporting that GATX Corporation
intends to sell GATX Ventures, its business unit that specializes in
providing secured financing to early stage companies. In addition, GATX
will further curtail new investment in its specialty finance unit.

Form 8-K filed on December 19, 2002 reporting that GATX Corporation has
acquired the remaining interest in the companies comprising KVG
Kesselwagen, a leading European railcar lessor. GATX Rail has held a
minority interest in KVG since 1997 and this transaction will result in
100% ownership by GATX Rail.

Form 8-K filed on January 30, 2003 reporting GATX Corporation's 2002 year
end and fourth quarter results.

74

SIGNATURES

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

GATX CORPORATION
(Registrant)

/s/ RONALD H. ZECH
--------------------------------------
Ronald H. Zech
Chairman, President and
Chief Executive Officer
March 19, 2003

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

/s/ RONALD H. ZECH Chairman, President and
------------------------------------------------------ Chief Executive Officer
Ronald H. Zech
March 19, 2003

/s/ BRIAN A. KENNEY Senior Vice President and
------------------------------------------------------ Chief Financial Officer
Brian A. Kenney
March 19, 2003

/s/ WILLIAM M. MUCKIAN Vice President, Controller
------------------------------------------------------ and Chief Accounting Officer
William M. Muckian
March 19, 2003

Rod F. Dammeyer Director
James M. Denny Director
Richard Fairbanks Director
William C. Foote Director
Deborah M. Fretz Director
Miles L. Marsh Director
Michael E. Murphy Director
John W. Rogers, Jr. Director

By /s/ RONALD J. CIANCIO
------------------------------------------------
Ronald J. Ciancio
(Attorney in Fact)
March 19, 2003

75

CERTIFICATIONS

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Ronald H. Zech, certify that:

1. I have reviewed this annual report on Form 10-K of GATX Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within these entities,
particularly during the period in which this annual report is being
prepared;

(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):

(a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and

(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ RONALD H. ZECH
--------------------------------------
Ronald H. Zech
Chairman, President and Chief
Executive Officer

March 19, 2003

76

CERTIFICATIONS

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Brian A. Kenney, certify that:

1. I have reviewed this annual report on Form 10-K of GATX Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within these entities,
particularly during the period in which this annual report is being
prepared;

(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):

(a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and

(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ BRIAN A. KENNEY
--------------------------------------
Brian A. Kenney
Senior Vice President and Chief
Financial Officer

March 19, 2003

77

SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT

GATX CORPORATION
(PARENT COMPANY)

STATEMENTS OF INCOME

- ---------------
NOTE: Certain amounts in the 2001 and 2000 financial statements have been
reclassified to conform to the 2002 presentation.

78

SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT

GATX CORPORATION
(PARENT COMPANY)

BALANCE SHEETS

79

SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONT'D)

GATX CORPORATION
(PARENT COMPANY)

STATEMENTS OF CASH FLOWS

80

SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONT'D)

GATX CORPORATION
(PARENT COMPANY)

STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

81

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

GATX CORPORATION AND SUBSIDIARIES

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

(a) Deducted from asset accounts.

(b) Represents the recovery of amounts previously written off and
reclassifications from other accounts.

(c) Represents principally reductions in asset values charged off and
uncollectible amounts.

82

EXHIBIT INDEX

85

EXHIBIT 12

GATX CORPORATION AND SUBSIDIARIES

COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS

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

(A) The ratio of earnings to fixed charges represents the number of times
"fixed charges" are covered by "earnings." "Fixed charges" consist of
interest on outstanding debt and amortization of debt discount and expense,
adjusted for capitalized interest and one-third (the proportion deemed
representative of the interest factor) of operating lease expense.
"Earnings" consist of consolidated net income before income taxes and fixed
charges, less share of affiliates' earnings, net of distributions received.

(B) For the year ended December 31, 2001, fixed charges and preferred stock
dividends exceeded earnings by $31.4 million.

86

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

The following is a list of subsidiaries included in GATX's consolidated
financial statements (excluding a number of subsidiaries which, considered in
the aggregate, would not constitute a significant subsidiary), and the state of
incorporation of each:

GATX Financial Corporation (Delaware) -- includes 85 domestic subsidiaries, 46
foreign subsidiaries and interests in 36 foreign domestic affiliates and 62
foreign affiliates.

GATX Rail Holdings I, Inc. (Delaware)

87

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the following: (i)
Registration Statement No. 2-92404 on Form S-8, filed July 26, 1984; (ii)
Registration Statement No. 2-96593 on Form S-8, filed March 22, 1985; (iii)
Registration Statement No. 33-38790 on Form S-8 filed February 1, 1991; (iv)
Registration Statement No. 33-41007 on Form S-8 filed June 7, 1991; (v)
Registration Statement No. 33-61183 on Form S-8 filed July 20, 1995; (vi)
Registration Statement No. 33-06315 on Form S-8 filed June 19, 1996; (vii)
Registration Statement No. 333-78037 on Form S-8 filed May 7, 1999; (viii)
Registration Statement No. 333-81173 on Form S-8 filed June 21, 1999, and (ix)
Registration Statement No. 333-91865 on Form S-8 filed December 1, 1999, of GATX
Corporation, of our report dated January 27, 2003 with respect to the
consolidated financial statements and schedules of GATX Corporation included in
the Annual Report on Form 10-K for the year ended December 31, 2002.

ERNST & YOUNG LLP

March 19, 2003
Chicago, Illinois

88