GATX CORP - 10-K Annual Report

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

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, 2004

OR

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

COMMISSION FILE NUMBER 1-2328
---------------------

(GATX CORPORATION LOGO)

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. [ ]

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 1,274.4 million on June 30, 2004.

Indicate the number of shares outstanding of each registrant's classes of
common stock, as of the latest practicable date: 49,654,494 common shares were
outstanding as of February 28, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

GATX's definitive Proxy Statement to be filed on or about March 21,
2005 PART III

GATX CORPORATION

2004 FORM 10-K

INDEX

1

PART I

ITEM 1. BUSINESS

GENERAL

GATX Corporation (GATX or the Company) is headquartered in Chicago,
Illinois and provides services primarily through three operating segments: GATX
Rail (Rail), GATX Air (Air), and GATX Specialty Finance (Specialty). GATX
specializes in railcar, locomotive, commercial aircraft, marine vessel and other
targeted equipment leasing. In addition, GATX owns and operates a fleet of
self-loading vessels on the Great Lakes through its wholly owned subsidiary
American Steamship Company (ASC).

GATX also 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.

At December 31, 2004, GATX had balance sheet assets of $5.6 billion,
comprised largely of railcars and commercial aircraft. In addition to the $5.6
billion of assets recorded on the balance sheet, GATX utilizes approximately
$1.2 billion of assets, primarily railcars, which were financed with operating
leases and therefore are not recorded on the balance sheet.

On June 30, 2004, GATX completed the sale of substantially all the assets
and related nonrecourse debt of GATX Technology Services (Technology) and its
Canadian affiliate. Subsequently, the remaining assets consisting primarily of
interests in two joint ventures were sold prior to year end. Financial data for
the Technology segment has been segregated as discontinued operations for all
periods presented.

See discussion in Note 24 to the consolidated financial statements for
additional details regarding financial information about geographic areas.

BUSINESS SEGMENTS

See discussion in the RISK FACTORS section of Part I and MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS section
of Part II, Item 7 of this document for additional details regarding each
segment's business and operating results.

GATX RAIL

Rail is headquartered in Chicago, Illinois and is principally engaged in
leasing rail equipment, including tank cars, freight cars and locomotives. Rail
has total assets of $3.9 billion including $1.2 billion of off-balance sheet
assets. Rail's customers ("lessees") are comprised primarily of railroads and
chemical, petroleum, agricultural and food processing companies. Rail primarily
provides full-service leases, under which it maintains the railcars, pays ad
valorem taxes, and provides other ancillary services. Rail also provides net
leases under which the lessee is responsible for maintenance, insurance and
taxes. As of December 31, 2004, GATX's owned worldwide fleet totaled
approximately 128,500 railcars. GATX also had an ownership interest in
approximately 26,700 railcars worldwide through investments in affiliated
companies. In addition, GATX manages approximately 12,700 railcars for third
party owners.

As of December 31, 2004, Rail's owned North American fleet consisted of
approximately 107,000 railcars, comprised of 61,000 tank cars and 46,000 freight
cars. The cars in this fleet have depreciable lives of 30 to 38 years and an
average age of approximately 16 years. In December 2004, Rail purchased the
remaining 50% interest in Locomotive Leasing Partners, LLC (LLP) which owned 486
locomotives as of the acquisition date. In aggregate, Rail owned 531 locomotives
at December 31, 2004. Rail also has interests in 5,900 railcars and 259
locomotives through its investments in affiliated companies in North America.

In North America, Rail typically leases new railcars for a term of
approximately five years. Renewals or extensions of existing leases are
generally for periods ranging from less than a year to ten years, and the
overall average remaining lease term is four years. Rail purchases new railcars
from a number of manufacturers, including Trinity Industries, Inc., American
Railcar Industries and Union Tank Car Company. In November

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2002, Rail entered into agreements with Trinity Industries, Inc. and Union Tank
Car Company for the purchase of 5,000 and 2,500 newly manufactured cars,
respectively, pursuant to which it may order railcars at any time through 2007.
To date, a total of 4,934 cars have been ordered under these committed purchase
programs.

Rail's primary competitors in North America are Union Tank Car Company,
General Electric Railcar Services Corporation, and various other lessors. At the
end of 2004, there were approximately 275,000 tank cars and 1.4 million freight
cars owned and leased in North America. At December 31, 2004, Rail's owned fleet
comprised approximately 22% of the tank cars in North America and approximately
3% of the freight cars in North America. Principal competitive factors include
price, service, availability and customer relationships.

Rail operates a network of major service centers across North America
supplemented by a number of mini-service centers and a fleet of service trucks
(mobile service units). Additionally, Rail utilizes independent third-party
repair facilities.

In addition to its North American fleet, Rail owns or has an interest in
38,100 railcars in Europe. At December 31, 2004, Rail, through its wholly owned
subsidiaries in Austria, Germany and Poland, directly owned approximately 18,100
railcars. Rail also owns a 37.5% interest in AAE Cargo AG (AAE), a freight car
lessor headquartered in Switzerland that operates approximately 20,000 cars. In
Europe, approximately 12.5% of the wholly owned fleet has an average lease term
of less than one month, while the rest of the fleet has an average lease term
ranging from one to five years. Major competitors in Europe include VTG Group
and Ermeva.

Worldwide, Rail provides more than 130 railcar types used to ship over 650
different commodities, principally chemicals, petroleum, and food products.
During 2004, approximately 33% of Rail's leasing revenue was attributable to
shipments of chemical products, 28% related to shipments of petroleum products,
11% related to shipments of food products, 11% related to leasing cars to
railroads and 17% related to other revenue sources. Rail leases railcars to over
850 customers and in 2004, no single customer accounted for more than 3% of
total railcar leasing revenue.

GATX AIR

Air is headquartered in San Francisco, California and is primarily engaged
in leasing narrowbody aircraft that are widely used by commercial airlines
throughout the world. Air has total assets of $2.1 billion which includes $29.1
million of off-balance sheet assets. Air typically enters into net leases under
which the lessee is responsible for maintenance, insurance and taxes. Air owns
directly or with other investors 163 aircraft, 50 of which are wholly owned with
the balance owned in combination with other investors in varying ownership
percentages. For example, Air holds a 50% interest in Pembroke Group, an
aircraft lessor and manager based in Ireland, which currently owns 28 aircraft.
Air also holds a 50% interest in a partnership with Rolls-Royce Plc that
primarily leases aircraft engines to airlines. New aircraft have an estimated
useful life of approximately 25 years. The weighted average age of Air's fleet
is approximately five years based on net book value. Aircraft on lease at
December 31, 2004 have an average remaining lease term of approximately three
years and lease terms typically range from three to seven years.

Air's customer base is diverse by carrier and geographic location. Air
leases to 61 airlines in 33 countries and in 2004, no single customer accounted
for more than 8% of Air's total revenue or represented more than 9% of Air's
total net book value. At December 31, 2004, Air had a significant concentration
of commercial aircraft in Turkey with approximately $286.8 million or 14% of
Air's total assets, and Brazil with approximately $206.9 million or 10% of Air's
total assets. Air has purchased new aircraft and also acquires aircraft in the
secondary market. Air primarily competes with GE Commercial Aviation Services,
International Lease Finance Corporation, and other leasing companies and
subsidiaries of commercial banks. Air carriers consider leasing alternatives
based on factors such as pricing and availability of aircraft types.

Air also manages 66 aircraft for third parties. Air's management role
includes marketing the aircraft, monitoring aircraft maintenance and condition,
and administering the portfolio, including billing and

3

collecting rents, accounting and tax compliance, reporting and regulatory
filings, purchasing insurance, and lessee credit evaluation.

GATX SPECIALTY FINANCE

Specialty is headquartered in San Francisco, California and is comprised of
the former specialty finance and venture finance business units, which are now
managed as one operating segment. Specialty has total assets of $489.9 million
including $12.5 million of off-balance sheet assets. The Specialty portfolio
consists primarily of leases and loans, frequently including interests in an
asset's residual value, and joint venture investments involving a variety of
underlying asset types, including marine.

Although Specialty had limited investment volume in 2004, it is pursuing
investments in marine assets as well as select industrial equipment
opportunities. Marine-related assets, including $10.0 million of off-balance
sheet assets, are $178.7 million at December 31, 2004, which is 37% of
Specialty's total assets.

Specialty also manages portfolios of assets for third parties with a net
book value of $728.8 million. The majority of these managed assets are in
markets in which GATX has a high level of expertise such as aircraft, power
generation, rail equipment, and marine equipment. Specialty generates fee-based
income through portfolio administration and remarketing services for third
parties.

Specialty sold its venture finance portfolios in the United Kingdom (U.K.)
and Canada in 2003, and continues to run-off the remaining venture finance
portfolio. GATX anticipates that the venture finance portfolio will be
substantially liquidated by the end of 2005. Venture finance-related assets are
$53.1 million at December 31, 2004 or 11% of Specialty's total assets.

The principal competitors of Specialty are captive leasing companies of
equipment manufacturers, leasing subsidiaries of commercial banks, independent
leasing companies, lease brokers and investment banks.

TRADEMARKS, PATENTS AND RESEARCH ACTIVITIES

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

SEASONAL NATURE OF BUSINESS

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

CUSTOMER BASE

Neither GATX as a whole nor any of its business segments is dependent upon
a single customer or concentration among a few customers.

EMPLOYEES

As of December 31, 2004, GATX and subsidiaries had approximately 2,680
employees, of whom 43% were covered by union contracts, primarily hourly rail
service center employees.

ENVIRONMENTAL MATTERS

GATX's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulations. These laws cover
discharges to waters, air emissions, toxic substances, and the generation,
handling, storage, transportation and disposal of waste and hazardous materials.
This regulation has the effect of increasing the cost and liabilities associated
with leasing rail cars. Environmental risks are also inherent in rail
operations, which frequently involve transporting chemicals and other hazardous
materials.

Some of GATX's real estate holdings, as well as previously owned
properties, are or have been used for industrial or transportation-related
purposes or leased to commercial or industrial companies whose activities may
have resulted in discharge of contaminants. As a result, GATX is now subject to
and will from time to

4

time continue to be subject to environmental cleanup and enforcement actions. In
particular, the federal Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), also known as the Superfund law, generally imposes joint
and several liability for cleanup and enforcement costs, without regard to fault
or the legality of the original conduct, on current and former owners and
operators of a site. Accordingly, GATX may be responsible under CERCLA and other
federal and state statutes for all or part of the costs to cleanup sites at
which certain substances may have been released by GATX, its current lessees,
former owners or lessees of properties, or other third parties. Environmental
remediation and other environmental costs are accrued when considered probable
and amounts can be reasonably estimated. As of December 31, 2004, environmental
costs were not material to GATX's results of operations, financial position or
liquidity. For further discussion, see Note 16 to the consolidated financial
statements.

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. These factors
include the global capital market environment and outlook, financial
performance and outlook, and credit ratings as determined primarily by
rating agencies such as Standard & Poor's (S&P) and Moody's Investor
Service (Moody's). In addition, based on GATX's current credit ratings,
access to the commercial paper market and uncommitted money market lines
is uncertain and cannot be relied upon. It is possible that 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. National and international political
developments, instability and uncertainties, including continuing
political unrest and threats of terrorist attacks, could result in global
economic weakness in general and in the United States in particular, and
could have an adverse impact on GATX's businesses. The effects may
include, among other things, legislation or regulatory action directed
toward improving the security of aircraft and railcars against acts of
terrorism which affects the construction or operation of aircraft and
railcars, a decrease in demand for air travel and rail services,
consolidation and/or additional bankruptcies in the rail and airline
industries, lower utilization of new and existing aircraft and rail
equipment, lower rail and aircraft rental rates and impairment of rail
and air portfolio assets or capital market disruption which may raise
GATX's financing costs or limit its access to capital. Depending upon the
severity, scope and duration of these effects, the impact on GATX's
financial position, results of operations and cash flows could be
material.

- Competition. GATX is subject to intense competition in its rail and
aircraft leasing businesses. In many cases, these competitors are larger
entities that have greater financial resources, higher credit ratings and
access to lower cost of capital than GATX. These factors may enable
competitors to offer leases and loans to customers at lower rates than
GATX is able to provide, thus impacting GATX's asset utilization or
GATX's ability to lease assets on a profitable basis.

- Lease versus Purchase Decision. GATX's core businesses rely 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, interest rates, 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, rail and other equipment has
historically benefited GATX's financial results. Effects of inflation are
unpredictable as to timing and duration, depending on market conditions
and economic factors.

5

- Asset Obsolescence. GATX's core assets may be subject to functional,
regulatory, or economic obsolescence. Although GATX believes it is adept
at managing obsolescence risk, there is no guarantee that changes in
various market fundamentals or the adoption of new regulatory
requirements 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
expectations 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-lived assets. GATX regularly
reviews long-lived assets for impairments, including 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. GATX may be required to recognize asset
impairment charges in the future as a result of a weak economic
environment, challenging market conditions in the air or rail markets or
events related to particular customers or asset types.

- Insurance. The ability to insure its rail and aircraft assets and their
associated risks 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.

- Potential for Claims and Lawsuits. The nature of assets which GATX owns
and leases exposes the Company to the potential for various claims and
litigation related to, among other things, personal injury and property
damage, environmental claims and other matters. Some of the commodities
transported by GATX's railcars, particularly those classified as
hazardous materials, can pose risks that GATX and its subsidiaries work
with its customers to minimize. The potential liabilities could have a
significant effect on GATX's consolidated financial condition or results
of operations.

- Commodity/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 or commodity prices could negatively impact these industries
resulting in a corresponding adverse effect on the demand for our
products and services. In addition, sustained high steel prices could
result in higher new railcar acquisition costs.

- 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. GATX's operations are also subject to the jurisdiction of
regulatory agencies of foreign countries. New regulatory rulings may
negatively impact GATX's financial results through higher maintenance
costs or reduced economic value of its assets.

- Risk Concentrations. GATX's revenues are generally derived from a wide
range of asset types, customers and geographic locations. However, from
time to time, GATX could have a large investment in a particular asset
type, a large revenue stream associated with a particular customer, or a
large number of customers located in a particular geographic region.
Decreased demand from a discrete event impacting a particular asset type,
discrete events with a specific customer, or adverse

6

regional economic conditions, particularly for those assets, customers or
regions in which GATX has a concentrated exposure, could have a negative
impact on GATX's results of operations.

- Foreign Currency. GATX's results are exposed to foreign exchange rate
fluctuations as the financial results of certain subsidiaries are
translated from the local currency into U.S. dollars upon consolidation.
As exchange rates vary, revenue and other operating results, when
translated, may differ materially from expectations. GATX is also subject
to gains and losses on foreign currency transactions, which could vary
based on fluctuations in exchange rates and the timing of the
transactions and their settlement. In addition, fluctuations in foreign
exchange rates can have an effect on the demand and relative price for
services provided by GATX domestically and internationally, and could
have a negative impact on GATX's results of operations.

- Asset Utilization and Lease Rates. GATX's profitability is largely
dependent on its ability to maintain assets on lease (utilization) at
satisfactory lease rates. A number of factors can adversely affect
utilization and lease rates, including, but not limited to: an economic
downturn causing reduced demand or oversupply in the markets in which the
company operates, changes in customer behavior, or any other change in
supply or demand caused by factors discussed in this Risk section.

- Retirement Benefits. GATX's pension and other post-retirement costs are
dependent on various assumptions used to calculate such amounts,
including discount rates, long-term return on plan assets, salary
increases, health care cost trend rates and other factors. Changes to any
of these assumptions could adversely affect GATX's results of operations.

- Income Taxes. GATX is subject to taxes in both the U.S. and various
foreign jurisdictions. As a result, GATX's effective tax rate could be
adversely affected by changes in the mix of earnings in the U.S. and
foreign countries with differing statutory tax rates, legislative changes
impacting statutory tax rates, including the impact on recorded deferred
tax assets and liabilities, changes in tax laws or by material audit
assessments. In addition, deferred tax balances reflect the benefit of
net operating loss carryforwards, the realization of which will be
dependent upon generating future taxable income.

- Internal Controls and Requirements of Section 404 of the Sarbanes-Oxley
Act. Section 404 of the Sarbanes-Oxley Act requires annual management
assessments of the effectiveness of internal control over financial
reporting and a report by the Company's independent auditors addressing
these assessments. If GATX fails to maintain the adequacy of internal
control over financial accounting, the Company may not be able to ensure
that GATX can conclude on an ongoing basis that it has effective internal
control over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act and related regulations. Although GATX's management
has concluded that adequate internal control procedures are in place, no
system of internal control can provide absolute assurance that the
financial statements are accurate and free of error. As a result, the
risk exists that GATX's internal control may not detect all errors or
omissions in the financial statements.

Circumstances and conditions may change. Accordingly, 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

7

after such material is electronically filed with, or furnished, to the SEC. Also
posted under Corporate Governance in the Investor Relations section of the GATX
website, and available in print upon request of any shareholder, are charters
for the Audit Committee, Compensation Committee and Governance Committee, the
Corporate Governance Guidelines, a Code of Ethics and a Code of Ethics for
Senior Officers. Within the time period required by the SEC and the New York
Stock Exchange, we will post on our website any amendment to the Code of Ethics
for Senior Officers and any waiver thereof. The information on GATX's website is
not incorporated by reference into this report.

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, 2004, locations of operations were as follows:

RAIL

HEADQUARTERS
Chicago, Illinois

BUSINESS OFFICES
San Francisco, California
Alpharetta, Georgia
Chicago, Illinois
Marlton, New Jersey
Raleigh, North Carolina
York, Pennsylvania
Houston, Texas
Calgary, Alberta
Cambridge, Ontario
Ennismore, Ontario
Montreal, Quebec
Vienna, Austria
Hamburg, Germany
Mexico City, Mexico
Nowa Wies Wielka, Poland
Warsaw, Poland

MAJOR SERVICE CENTERS
Colton, California
Waycross, Georgia
Hearne, Texas
Red Deer, Alberta
Sarnia, Ontario
Coteau-du-Lac, Quebec
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
Kansas City, Missouri
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
Sioux City, Iowa
Norco, Louisiana
Sulphur, Louisiana
Albany, New York
Masury, Ohio
Cooperhill, Tennessee
Galena Park, Texas
Olympia, Washington
Edmonton, Alberta
Red Deer, Alberta
Vancouver, British Columbia
Clarkson, Ontario
Sarnia, Ontario
Montreal, Quebec
Quebec City, Quebec
Moose Jaw, Saskatchewan
Tierra Blanca, Mexico

AFFILIATES
San Francisco, California
Kansas City, Missouri
Zug, Switzerland

AIR

HEADQUARTERS
San Francisco, California

BUSINESS OFFICES
Seattle, Washington
Toulouse, France
Tokyo, Japan
Singapore
London, United Kingdom

AFFILIATES
Dublin, Ireland
London, United Kingdom

SPECIALTY

HEADQUARTERS
San Francisco, California

CORPORATE HEADQUARTERS

Chicago, Illinois

AMERICAN STEAMSHIP COMPANY

Williamsville, New York

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 tank car
owned by the GATX Rail division of GATX Financial Corporation (GFC), a wholly
owned subsidiary of GATX, 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, but plaintiffs have not yet moved to have the class certified.
Settlement negotiations are ongoing.

In March 2001, East European Kolia-System Financial Consultant S.A. (Kolia)
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, 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 served on DEC in December 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. DEC has filed a response denying the allegations set forth
in the complaint. The parties each confirmed their respective positions in the
case at a hearing held in early March of 2002. At a hearing held on October 22,
2003, the court rendered a decision in favor of DEC, dismissing Kolia's action.
In December 2003, the plaintiff filed an appeal of the decision. In January of
2004, the Regional Court refused to exempt Kolia from its obligation to pay fees
in connection with the appeal. During 2004, Kolia filed various procedural
motions to reverse the decision of the Regional Court, all of which were
unsuccessful. Kolia then filed a complaint in the Regional Court against the
decision to dismiss the appeal which complaint was dismissed because Kolia had
failed to pay the fee associated with the complaint. On February 8, 2005, Kolia
filed a letter with the Regional Court demanding to have its appeal heard by the
Court of Appeals. The Regional Court responded by indicating that Polish law did
not provide for an appellate court examination under the circumstance cited in
the letter and asked Kolia whether its letter should be treated as a complaint
for restitution of the proceedings de novo, an extraordinary appeal, a remedy
available under very limited circumstances, with respect to the final judgment.
The judgment in favor of DEC appears to be final as the plaintiff has failed to
appeal. DEC is requesting that the court issue a written opinion stating that
the judgment is final.

On December 29, 2003, a wrongful death action was filed in the District
Court of the State of Minnesota, County of Hennepin, Fourth Judicial District,
MeLea J. Grabinger, individually, as Personal Representative of the Estate of
John T. Grabinger, and as Representative/Trustee of the beneficiaries in the
wrongful death action, v. Canadian Pacific Railway Company, et al. The lawsuit
seeks damages for a derailment on January 18, 2002 of a Canadian Pacific Railway
train containing anhydrous ammonia cars near Minot, North Dakota. As a result of
the derailment, several tank cars fractured, releasing anhydrous ammonia which
formed a vapor cloud. One person died, as many as 100 people received medical
treatment, of whom fifteen were admitted to the hospital, and a number of others
were purportedly affected. The plaintiffs allege among other things that the
incident (i) caused the wrongful death of their husband/son, and (ii) caused
permanent physical injuries and emotional and physical pain. The complaint
alleges that the incident was proximately caused by the defendants who are
liable under a number of legal theories. On March 9, 2004, the National
Transportation Safety Board (NTSB) released a synopsis of its anticipated report
and issued its final report shortly thereafter. The report sets forth a number
of conclusions including that the failure of the track caused the derailment and
that the catastrophic fracture of tank cars increased the severity of the
accident. On

9

June 18, 2004, the plaintiff filed an amended complaint based on the NTSB
findings which added GFC and others as defendants. Specifically, the allegations
against GFC are that the steel shells of the tank cars were defective and that
GFC knew the cars were vulnerable and nonetheless failed to warn of the extreme
hazard and vulnerability. On July 12, 2004, GFC filed a motion to dismiss this
action on the basis that plaintiffs' claims are preempted by federal law and
that the plaintiffs have failed to state a claim with respect to certain causes
of action. On September 8, 2004, plaintiffs filed a third amended complaint (i)
dismissing counts that alleged liability of the tank car owners under the
theories of strict liability for an ultrahazardous activity, liability for
abnormally dangerous activity and liability for intentional infliction of
emotional distress (ii) clarifying claims that the tank cars were defective by
specifying that the cars were defective at the time of manufacture and (iii)
clarifying its claims against all defendants for damages for violation of North
Dakota environmental laws. GFC's motion to dismiss was deemed to apply to the
third amended complaint and the court heard argument on the motion and took the
matter under advisement on September 22, 2004. In December, the court dismissed
the motion without prejudice to refiling it as a motion for summary judgment
motion following completion of discovery. GFC intends to defend this suit
vigorously.

GFC has previously been named as a defendant and subsequently dismissed
without prejudice in nine other pending cases arising out of this derailment.
There are over 40 other cases arising out of this derailment pending in the
Fourth District Court of the State of Minnesota, Hennepin County. Thirty-one
additional cases were filed in the same court and then removed to federal court
by the Canadian Pacific Railway in July 2004. GFC has not been named in any of
these cases.

In October 2004, the liquidators of Flightlease Holdings (Guernsey) Limited
("FHG"), a member of the Swissair Group, commenced proceedings in the U.S.
Bankruptcy Court for the Northern District of California against (a) GATX Third
Aircraft Corporation ("Third Aircraft"), an indirect wholly owned subsidiary of
the Company, seeking recovery of approximately $1.9 million allegedly owed by
Third Aircraft, and (b) Third Aircraft and the Company seeking a court order
authorizing discovery in connection with a voluntary liquidation of FHG under
Guernsey law. The Guernsey liquidation is one of several liquidation or
insolvency proceedings, including proceedings in Switzerland, the Netherlands,
and the Cayman Islands, resulting from the bankruptcy of the Swissair Group in
2001. In September 1999, Third Aircraft and FHG formed an aircraft leasing joint
venture, which on the same day entered into a purchase agreement with Airbus
Industrie relating to the joint venture company's purchase of a substantial
number of Airbus aircraft. Prior to the Swissair Group's bankruptcy in October
2001, Third Aircraft and FHG had agreed to terminate the joint venture and
divide responsibility for the purchase of aircraft subject to the venture's
agreement with Airbus. By October 1, 2001 the joint venture company had ordered
a total of 41 aircraft from Airbus, and had made aggregate unutilized
pre-delivery payments to Airbus of approximately $228 million. Pursuant to
agreements by Third Aircraft and FHG to divide responsibility for the aircraft,
and to allocate the pre-delivery payments between them, Third Aircraft and
Airbus entered into a new purchase agreement and Airbus credited approximately
$78 million of the pre-delivery payments to Third Aircraft. By agreement of
Third Aircraft and FHG, the remaining portion of the pre-delivery payments
(approximately $150 million) was to be credited to FHG in a new contract with
Airbus. Following Swissair Group's bankruptcy, however, FHG and Airbus did not
enter into such a contract, and Airbus declared the joint venture in default and
retained the approximately $150 million in pre-delivery payments as damages. The
liquidators of FHG have stated that they believe that FHG may have suffered
damages, and may have potential claims arising out of these events against
various parties, including possibly Third Aircraft (including potential claims
for breach of fiduciary duty and for payment of the approximately $1.9 million
referred to above). The Company believes there is no valid basis for any
material claim by FHG or any of its affiliates against Third Aircraft or the
Company.

GATX and its subsidiaries have been named as defendants in a number of
other legal actions and claims, various governmental proceedings and private
civil suits arising in the ordinary course of business, including those related
to environmental matters, workers' compensation claims by GATX employees and
other personal injury claims. Some of the legal proceedings include claims for
punitive as well as compensatory damages. 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

10

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 number of these claims and the corresponding demands for
indemnity against the Company increased in the aggregate in 2004. It is possible
that the number of these claims could continue to grow and that the cost of
these claims could correspondingly increase in the future.

The amounts claimed in some of the above described 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.

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

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following information regarding GATX's executive officers is included
in Part I in lieu of inclusion in the definitive GATX Proxy Statement:

- - Mr. Zech has served as Chairman and Chief Executive Officer of GATX since
1996. Mr. Zech served as President of GATX from 1994 to 2004.

- - In 2004, Mr. Kenney was elected President of GATX. Prior to that, Mr. Kenney
served as Senior Vice President and Chief Financial Officer of GATX from 2002
to 2004, Vice President and Chief Financial Officer of GATX from 1999 to 2002,
Vice President, Finance from 1998 to 1999, Vice President and Treasurer from
1997 to 1998, and Treasurer from 1995 to 1996.

- - In 2004, Mr. Lyons was elected Chief Financial Officer of GATX. Prior to that,
Mr. Lyons served as Vice President, Investor Relations of GATX from 2002 to
2004, Director of Investor Relations of GATX from 1998 to 2002, and Project
Manager, Corporate Finance from 1996 to 1998.

- - In 2004, Mr. Ciancio was elected Senior Vice President, General Counsel and
Secretary of GATX. Prior to that, Mr. Ciancio served as Vice President,
General Counsel and Secretary of GATX from 2000 to 2004, and Assistant General
Counsel of GATX from 1984 to 2000.

- - In 2004, Ms. Duddy was elected Senior Vice President -- Human Resources of
GATX. Prior to that, Ms. Duddy served as Vice President -- Human Resources
from 1999 to 2004, Vice President, Compensa-

11

tion and Benefits and Corporate Human Resources from 1997 to 1999, Director of
Compensation and Benefits from 1995 to 1997, and Director of Compensation from
1992 to 1995.

- - Mr. Muckian has served as Vice President, Controller and Chief Accounting
Officer of GATX since 2002. Prior to that, Mr. Muckian served as Controller
and Chief Accounting Officer of GATX from 2000 to 2002, and Director of Taxes
of GATX from 1994 to 2000.

- - Mr. Hasek has served as Vice President and Treasurer of GATX since 2002. Prior
to that, Mr. Hasek served as Treasurer from 1999 to 2001, Director of
Financial Analysis and Budgeting from 1997 to 1999, and Manager of Corporate
Finance from 1995 to 1997.

- - In 2004, Ms. Noack was elected Vice President and Chief Risk Officer. Prior to
that, Ms. Noack served as Managing Director and Chief Risk Officer, Capital
Division of GATX Financial Corporation from 2003 to 2004, Managing Director
and Chief Credit Officer, Capital Division of GATX Financial Corporation from
2001 to 2003 and Vice President of GATX Capital Corporation, predecessor to
GATX Financial Corporation from 2000 to 2001.

- - In 2004, Ms. Scott was elected Vice President and Chief Information Officer.
Ms. Scott joined GATX in 1990 as Manager, Information Systems Audit and has
held the positions of Manager of Business Systems and Planning, Assistant
Director of Corporate Information Systems, Director of Business Development
and Information Services, Director of Information Services and Administration,
Vice President, Integrated Solutions Group, Vice President, Strategic
Initiatives GATX Rail.

- - In 2004, Mr. Earl was elected Executive Vice President. Prior to that Mr. Earl
served as Executive Vice President -- Commercial at GATX Rail from 2001 to
2004 and a variety of increasingly responsible positions in the GATX Capital
Rail Group from 1988 to 2001. Mr. Earl is the senior executive of the Rail
segment.

- - Mr. Coe has served as a GATX Vice President since 2004 and President of GATX
Air since 1997. Mr. Coe joined the Company in 1977 as a Financial Analyst and
has held a variety of positions both domestically and internationally.

- - Mr. Glenn has served as a GATX Vice President since 2004 and Executive Vice
President, GATX Specialty Finance since 2003. Prior to that, Mr. Glenn served
as Senior Vice President and Chief Financial Officer of GATX Capital Division
of GATX Financial Corporation from 2000 to 2003. Mr. Glenn joined GATX Capital
in 1980 as an Assistant Tax Manager and rose to Vice President and Principal
Accounting Officer, a position he held from 1991 to 1997. Prior to becoming
the Chief Financial Officer, from 1997 to 2000, he was Vice President and
Managing Director-Portfolio Management, for Diversified Finance. Mr. Glenn is
the senior executive of the Specialty Finance segment.

12

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

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 February 25, 2005 was 3,485. 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:

In January 2004, GATX's quarterly dividend was reduced to $.20 per common
share from previous quarterly dividends of $.32 per common share. GATX's Board
of Directors reduced the dividend based upon expectations of a gradual earnings
recovery as well as balancing GATX's expected investment level, projected
capital structure and other factors. The Board of Directors regularly evaluates
the appropriate dividend level.

13

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

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

(a) 2004 includes a gain on the sale of the Company's Staten Island property of
$68.1 million on a pre-tax basis, or $37.8 million on an after-tax basis,
insurance recoveries of $48.4 million on a pre-tax basis, or $31.5 million
on an after-tax basis and a loss on sale of segment of $12.0 million on a
pre-tax basis, or $7.2 million on an after-tax basis.
(b) Diluted earnings per share for the year ended December 31, 2003 has been
restated to reflect the impact of EITF 04-8. See Note 2 to the consolidated
financial statements for more information.
(c) 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 Statement of Financial Accounting Standards
No. 142.
(d) 2001 includes a gain on sale of segment of $343.0 million on a pre-tax
basis, or $163.9 million on an after-tax basis, and also includes a benefit
for litigation settlements of $13.1 million on a pre-tax basis, and $8.5
million on an after tax basis.
(e) 2000 includes a provision for litigation charge 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 2004
presentation.

14

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

COMPANY OVERVIEW

Information regarding general information and characteristics of the
Company including reporting segments 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,"
"expect," "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. In addition, certain factors, including Rick Factors identified in
Part I of this document may affect GATX's businesses. As a result, past
financial results may not be a reliable indicator of future performance.

This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contain certain non-GAAP financial measures. See
"Non-GAAP Financial Measures" for additional information including definitions
of terms and reconciliations to related GAAP amounts.

STATEMENT OF INCOME DISCUSSION

The following table presents income (loss) from continuing operations and
net income by segment for the years ended December 31, 2004, 2003 and 2002 (in
millions):

GATX provides services and products through three operating segments: Rail,
Air, and Specialty. Management evaluates the performance of each segment based
on several measures, including net income. These results are used to assess
performance and determine resource allocation among the segments.

GATX allocates corporate selling, general and administrative (SG&A)
expenses to the segments. Corporate SG&A expenses relate to administration and
support functions performed at the corporate office. Such expenses include
information technology, corporate SG&A, human resources, legal, financial
support and executive costs. Directly attributable expenses are generally
allocated to the segments and shared costs are retained in Other. Amounts
allocated to the segments are approximated based on management's best estimate
and judgment of direct support services.

Interest expense was allocated based upon a fixed leverage ratio for each
individual operating segment across all reporting periods, expressed as a ratio
of debt to equity. Rail's leverage ratio was set at 5:1, Air's leverage ratio
was set at 4:1 and Specialty's leverage ratio was set at 4:1. Interest expense
not allocated was assigned to Other in each period. Reflective of overall lower
leverage at GATX, management expects that leverage ratios to be utilized in 2005
will be modified to 4.5:1 at Rail and 3:1 at Air. Specialty will be unchanged at
4:1. Management believes this leverage and interest expense allocation
methodology applies an appropriate cost of capital for purposes of evaluating
each operating segment's risk-adjusted financial return.

15

Taxes are allocated to each segment based on the segment's contribution to
GATX's overall tax position.

GATX'S FINANCIAL PERFORMANCE MEASURES

The following table presents financial measures and ratios derived from the
financial statements that the Company uses as one element to analyze the
company's underlying financial performance from period to period. All amounts
and ratios are based on continuing operations ($'s in millions):

The 2004 return measures were positively affected by non-operating events
including the gain from the sale of the Staten Island property, insurance
recoveries and other non-recurring tax benefits. The SG&A efficiency ratio
represents SG&A before capitalized initial direct costs as a percentage of
average total owned and managed assets.

GATX RAIL

Improving market conditions in the North American rail industry favorably
impacted Rail's results in 2004, as Rail experienced increasing lease rates and
utilization levels. Demand for railcars was boosted by increased car loadings
and ton-miles, and most car types realized a more balanced supply/demand
profile. The improving market conditions, higher lease rates and high levels of
utilization are expected to continue during 2005.

The full impact of higher lease rates will be felt gradually, as only
20%-25% of Rail's North American fleet comes up for renewal each year. During
2004, approximately 25,000 cars were either renewed or assigned to new
customers. Reversing a trend evident in recent years, Rail experienced an
improving pricing environment as 2004 progressed. Rail is optimistic that the
positive pricing momentum will carry over into 2005. As a result, Rail
anticipates that, on average, the approximately 27,000 cars up for renewal in
2005 will be renewed or assigned at rates higher than the previous contract
rate.

Utilization of Rail's North American fleet improved during 2004 from 93% to
98% by year end. The increase resulted from the successful placement of new and
acquired railcars with customers, the movement of railcars from idle to active
status, and the scrapping of railcars.

In North America, Rail acquired approximately 6,200 railcars in 2004,
including approximately 3,000 new railcars and 3,200 used railcars purchased in
the secondary market. The new cars were primarily purchased under pre-existing
contracts with railcar manufacturers that provided Rail with a cost advantage
versus a spot purchase in the current market. Rail also increased its presence
in the locomotive leasing market by acquiring the remaining 50% ownership
interest of the Locomotive Leasing Partners, LLC (LLP) joint venture in the
fourth quarter.

Costs for maintaining the North American fleet continued to increase in
2004, primarily due to increased maintenance activity related to preparing cars
in storage for active service. The trend of increasing maintenance costs is
expected to continue due to increasing costs associated with regulatory
compliance and required maintenance as a result of the fact that a large number
of cars purchased in the mid- to late-1990's are approaching their 10-year
regulatory inspections. There is also the possibility that additional security
and safety regulations may be enacted, increasing future maintenance costs.

Rail's European operations experienced stable market conditions during
2004. Rail Europe was successful in placing new cars in existing markets, as
well as placing cars in new Eastern European markets, such as Romania and
Bulgaria. Rail acquired the remaining interest in a leading European tank car
lessor KVG Kesselwagen Vermietgesellschaft mbH, and KVG Kesselwagen
Vermietgesellschaft m.b.h. (collectively

16

KVG) in 2002. Generally, utilization remained high during 2004, but KVG began to
see some weakness in the chemical market. Rail purchased Dyrekcja Eksploatacji
Cystern Sp. z.o.o. (DEC) in 2001. During 2004, major steps were taken in DEC's
transition from a trip lease to a term rental business model, culminating with
signing its two largest customers to term rental agreements. Other transition
efforts included the closing of redundant repair centers. This transition is
expected to stabilize revenues, reduce operating costs and make additional cars
available for lease. The AAE Cargo AG (AAE) joint venture (37.5% owned)
continued to experience strong demand for the majority of its fleet,
particularly inter-modal cars, due to high seaport volumes, growth in the
containerization of freight traffic, and increased demand from private
operators. The strengthening of the Euro and the Zloty during 2004 positively
impacted Rail's European results.

The long-term outlook for the European market remains positive, as the
European Union (EU) is encouraging the use of railways in place of the congested
road system. Poland and nine other countries joined the EU in 2004, which is
expected to eventually lead to more seamless borders, upgraded infrastructure
and improved rail efficiency in those countries. Operationally, KVG and DEC
continue to integrate their tank car operations.

Components of Rail's income statement are summarized below (in millions):

17

FINANCIAL PERFORMANCE MEASURES FOR RAIL ($'S IN MILLIONS)

RAIL'S FLEET DATA

The following table summarizes fleet activity for GATX's wholly owned North
American rail cars for the years ended December 31:

COMPARISON OF YEAR ENDED DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31, 2003

SUMMARY

Net income of $60.4 million in 2004 increased $5.5 million from the prior
year. The increase in 2004 was driven primarily by higher lease income, higher
asset remarketing income for both Rail and its affiliates as the rail market
continues to improve and larger gains on scrapping of railcars as a result of
higher steel prices, partially offset by higher maintenance and ownership costs.

GROSS INCOME

Rail's 2004 gross income of $746.5 million was $52.7 million higher than
2003 due primarily to favorable North American market conditions and higher
scrapping gains resulting from higher scrap metal prices. North American renewal
and assignment activity was strong in 2004 and the active fleet increased by
approximately 5,900 railcars. Rail's secondary market acquisitions and new
railcar investments significantly contributed to the increase in active cars and
the corresponding increase in lease income. North American utilization improved
to 98% at December 31, 2004 representing approximately 104,200 railcars on lease
compared to 93% at December 31, 2003 with approximately 98,300 of railcars on
lease. In 2004, the average renewal rate on a basket of common railcar types
increased 2.7% versus the expiring rate, with this improvement largely
attributable to activity in the second half of the year. The impact of this
improvement on earnings will be reflected in Rail's financial results gradually
as rate changes move slowly through the fleet due to the term nature of the
business. We expect this improvement to continue in 2005. Also favorably
impacting Rail's gross income was the impact of foreign exchange rates and
higher gains associated with scrapping activity.

Rail's European rail operations have improved during the course of the
year. Utilization rates remain high and operations have been positively impacted
by success in new markets and the placement of new car deliveries.

18

Asset remarketing income in 2004 included residual sharing fees from a
managed portfolio, other residual sharing fees and a gain on the sale of
railcars. The largest component of remarketing income in 2004 was the gain on
the sale of 482 cars to Canadian National Railways. Asset remarketing income in
2003 included the gain on disposition of a leveraged lease commitment on
passenger rail equipment.

Other income of $58.3 million increased $13.8 million from 2003 due
primarily to higher scrapping gains as the price of steel increased
significantly from 2003.

Share of affiliates' 2004 earnings of $16.6 million were higher than the
prior year. The increase was the result of significant asset remarketing gains
at domestic and foreign affiliates.

OWNERSHIP COSTS

Ownership costs were $367.9 million in 2004 compared to $348.9 million in
2003. The increase was driven by significant investment volume in 2004. Through
new car and secondary market acquisitions, Rail purchased approximately 6,200
railcars and 1,000 railcars in North America and Europe, respectively.

OTHER COSTS AND EXPENSES

Maintenance expense of $186.8 million in 2004 increased $23.4 million from
2003. Maintenance costs increased sharply for a variety of reasons, including
costs associated with moving cars from one customer to another, moving cars from
idle to active service and continuing regulatory compliance. As railcars move
from idle to active service, repairs and improvements, such as replacement of
tank car linings and valves, are often required. Although fewer cars were
repaired, the cost per car increased due to the nature of the repairs.

During 2003, the American Association of Railroads (AAR) issued an early
warning letter that required all owners of railcars in the United States, Canada
and Mexico to inspect or replace certain bolsters manufactured from the
mid-1990s to 2001 by a now-bankrupt supplier. Rail owned approximately 3,500
railcars equipped with bolsters that were required to be inspected or replaced.
Approximately 2,200 of Rail's affected railcars are on full-service leases in
which case Rail is responsible for the costs of inspection or replacement. As of
December 31, 2004, bolsters on 2,100 cars have been replaced. The cost
attributable to the inspection and replacement of bolsters was $3.0 million in
2004, a decrease of $.9 million from the prior year period. Management expects
the remaining costs of bolster replacements to be approximately $.2 million and
to be completed by the end of the first quarter of 2005.

Other operating expenses were comparable between periods.

POTENTIAL RAILCAR REGULATORY MANDATES

As noted previously, Rail's operations as well as the entire railroad
industry face the increasing possibility that additional security or safety
regulations may be mandated, increasing future maintenance costs. Following are
two such matters that the Company is closely monitoring.

Certain recent railroad derailments, some of which involved GATX railcars,
focused attention on safety issues associated with the transportation of
hazardous materials. These incidents have led to calls for increased legislation
and regulation to address safety and security issues associated with the
transportation of hazardous materials. Suggested remedial measures vary, but
include rerouting hazardous material railcar movements and increasing the
inspection authority of the Federal Railroad Administration ("FRA"). Other
suggested remedial measures address the physical condition of tank cars,
including revising manufacturing specifications for high pressure cars which
carry hazardous materials. Specific focus has been directed at pressurized
railcars built prior to 1989 that utilized non-normalized steel. The National
Transportation Safety Board ("NTSB") issued a report in 2004 recommending that
the FRA conduct a comprehensive analysis to determine the impact resistance of
pressurized tank cars built prior to 1989, and use the results of that analysis
to rank cars according to risk and to implement measures to eliminate or
mitigate such risks. The NTSB has not recommended that pressure cars built prior
to 1989 be removed from service, nor has the FRA issued any orders curtailing
use of these cars. The Company owns approximately 6,500 pre-1989 built
pressurized tank cars in North America (6% of its North American fleet). While
the Company is actively working with trade
19

associations and others to participate in the legislative and regulatory process
affecting rail transportation of hazardous materials, the outcome of proposed
remedial measures, the probability of adoption of such measures, and the
resulting impact on GATX should such measures be adopted cannot be determined at
this time.

Additionally, the Association of American Railroads ("AAR") has issued a
proposal which would require all tank cars to be equipped with long travel
constant contact side bearings ("LT-CCSBs"). The application of LT-CCSBs is
intended to reduce empty tank car derailments by the reduction of train/track
operational issues. Management believes it is highly likely that the AAR will
adopt the LT-CCSB rule essentially as written. If it does so, this will affect
certain tank cars throughout the industry and the Company will be required to
retrofit approximately 50,000 of its tank cars over the next 7 to 10 years at a
cost of $700 to $800 per car. The Company generally has the contractual right to
increase lease rates to recover a portion of the costs of this retrofit, and is
currently formulating its plans on how it will exercise this contractual right.

TAXES

See "Consolidated Income Taxes" for a discussion of GATX's consolidated
income tax expense.

COMPARISON OF YEAR ENDED DECEMBER 31, 2003 TO YEAR ENDED DECEMBER 31, 2002

SUMMARY

Rail's net income of $54.9 million in 2003 increased $29.1 million from the
prior year. Income before the cumulative effect of accounting change decreased
$5.8 million. The decrease was primarily due to lower North American lease
income driven by lower average lease rates.

Challenging market conditions in the North American rail industry affected
Rail in 2003. The oversupply of certain car types in the railcar market, short
backlogs at railcar manufacturers, a weak economic environment and aggressive
competition from other lessors resulted in lease rates that were below peak
lease rates of the late 1990s. As a result, new market rates for expiring
leases, either with the same customer or contracting with a new customer, were
lower on average than the previous rate. In 2003, average lease rates on a
basket of common car types declined 5.2% versus the expiring rates. With
approximately 26,000 cars having expiring leases during 2003, lower rates
negatively impacted Rail's lease income.

In anticipation of an improving economy, Rail continued to purchase new
cars and actively pursue secondary market transactions. Investment in railcars
for North America increased in 2003 over the prior year, resulting in active
cars increasing by approximately 1,100 cars after two consecutive years of
decline. The acquisition at the end of the fourth quarter of a fleet of 1,200
covered hoppers on long-term lease drove the increase in active cars. In
addition, Rail took delivery of approximately 1,000 new cars in 2003, under pre-
existing purchase agreements with manufacturers. Utilization of the North
American fleet improved from 90% to 93% due to aggressive efforts to improve the
renewal success rate, to market specific car types and to scrap older,
uneconomic cars from the fleet.

Maintenance costs increased in 2003 from the 2002 level. An increase in the
number of car assignments and costs associated with an American Association of
Railroads (AAR) requirement to replace bolsters on certain cars (see discussion
below) adversely impacted 2003 maintenance costs.

In 2003, Rail's European operations generally experienced a more favorable
market environment than North America. Fleet utilization at both KVG and AAE,
Rail's European joint venture, was over 95%, as KVG's primary markets of
chemical, petroleum, mineral and liquid petroleum gas remained stable, and AAE
benefited from the high growth rates of shipping activity at European seaports.
Rail acquired the remaining interest in KVG in December 2002. DEC's performance
has been negatively affected by a weak Polish economy. However, KVG was
successful in placing DEC tank cars in service outside of Poland. This activity
between KVG and DEC marked the early stages of integrating their tank car
operations, a key European strategy for Rail.

20

GROSS INCOME

Rail's 2003 gross income of $693.8 million was $21.6 million higher than
2002. Excluding the impact from the timing of the KVG acquisition in both
periods, gross income was down $20.5 million from 2002. The decrease was
primarily driven by lower North American lease income resulting from lower
average lease rates and fewer railcars on lease for most of the year. Although
average renewal rates continued to be lower than Rail's prior contractual rate,
the percentage decline in renewal rates improved during 2003.

Excluding KVG's pre-tax earnings of $4.7 million in 2002, share of
affiliates' earnings in 2003 increased $4.1 million. The increase was the result
of a favorable maintenance expense at domestic affiliates combined with a larger
fleet and favorable foreign exchange rates at a foreign affiliate.

OWNERSHIP COSTS

Ownership costs were $348.9 million in 2003 compared to $332.5 million in
2002. The increase was primarily due to the acquisition and consolidation of
KVG.

OTHER COSTS AND EXPENSES

Maintenance expense of $163.4 million in 2003 increased $12.5 million from
2002. Excluding KVG, maintenance expense increased $2.8 million in 2003. The
variance was due primarily to the increase in car assignments discussed above.
Both 2003 and 2002 results included comparable levels of maintenance costs for
certain railroad mandated repairs.

In 2003, the AAR issued a series of early warning letters that required all
owners of railcars in the U.S., Canada and Mexico to inspect or replace certain
bolsters manufactured from the mid-1990s to 2001 by a now-bankrupt supplier.
Rail owned approximately 3,500 railcars equipped with bolsters that were
required to be inspected or replaced. Due dates for inspection or replacement of
the bolsters ranged from September 30, 2003 to December 31, 2004 depending on
car type and service. As of December 31, 2003, bolsters on approximately 1,300
cars had been replaced. 2003 maintenance expense included $3.9 million
attributable to the inspection and replacement of bolsters.

In the second quarter of 2002, the Federal Railroad Administration 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 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. As
of year end 2002, substantially all of the subject tank cars were removed from
Rail's fleet.

Selling, general and administrative (SG&A) expenses of $69.0 million
increased $9.8 million in 2003. Excluding KVG, SG&A expenses decreased $1.2
million due to cost savings initiatives. In 2003, Rail recorded a reversal of
provision for possible losses of $2.6 million resulting from improvement in
portfolio quality, recoveries of bad debts, and more favorable aging of Rail's
receivables.

TAXES

See "Consolidated Income Taxes" for a discussion of GATX's consolidated
income tax expense.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE

In accordance with Statement of Financial Accounting Standards (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 in 2002. 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

21

impairment charge was due primarily to lessened expectations of projected cash
flows based on market conditions at the time of the review and a lower long-term
growth rate projected for DEC.

GATX AIR

Worldwide revenue passenger miles increased in 2004 and lease rates are
recovering from the low levels of recent years, in particular for newer
aircraft. However, the recovery is fragile, and is threatened by the high cost
of jet fuel, as well as the possibility that additional airline failures and
terrorist acts will disrupt global travel. These challenging conditions persist,
particularly in North America, where the combination of high fuel prices and
pricing pressure from low-cost carriers have increased operating losses and
highlighted the vulnerabilities of many major U.S. carriers. Some European
airlines are also showing signs of weakness.

Air's owned portfolio, which consists principally of narrowbody aircraft,
had a weighted average age of five years based on the net book value at the end
of 2004. Air achieved almost full utilization in 2004. At December 31, 2004,
less than 1% of Air's portfolio was available for lease with over 98% on lease
with customers, and the remaining 1% was subject to signed letters of intent to
lease with customers. Air successfully placed 31 owned aircraft during 2004,
including 3 new and 28 existing aircraft.

Lessee defaults and the potential impairment of aircraft values will
continue to create potential uncertainties and volatility for Air's earnings.
For example, Boeing announced the cancellation of its B717 program in January,
2005 because of weak demand. Air holds a 50% interest in Pembroke Group (net
book value of $63.3 million), an aircraft lessor and manager based in Ireland,
which has Boeing 717 aircraft in its portfolio, six of which GATX has an
interest in, all of which were on lease at December 31, 2004. Additionally, Air
has one B757-200 aircraft on lease to ATA, a bankrupt U.S. carrier. The future
marketability of these aircraft and/or potential valuation issues is uncertain
at this time.

Air's wholly owned and partnered aircraft are leased to customers under net
operating leases. Air's other recurring source of revenue is fee income, which
results from remarketing and administering aircraft in its joint ventures, as
well as managing aircraft for third parties. Air's level of fee income can be
unpredictable, varying with the performance of the managed fleet and Air's
success in remarketing and selling aircraft. Air also has 50% investments in two
partnerships with Rolls-Royce Plc: Pembroke Group and Rolls-Royce & Partners
Finance Limited. Rolls-Royce & Partners Finance Limited, which leases aircraft
engines, was a major contributor to Air's financial performance in 2004.

During 2004, Air took delivery of and placed three new A320 aircraft with
non-U.S. airlines and also purchased four aircraft in the secondary market
subject to existing leases, with the intent of partnering these aircraft in
2005. Air has two additional aircraft purchase commitments in 2006, and expects
to retain the purchased aircraft as wholly owned aircraft.

22

Components of Air's income statement are summarized below (in millions):

FINANCIAL PERFORMANCE MEASURES FOR AIR ($'S IN MILLIONS)

23

AIR'S FLEET DATA

The following table summarizes information on GATX owned and managed
aircraft for the years ended December 31 ($'s in millions):

COMPARISON OF YEAR ENDED DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31, 2003

SUMMARY

Net income of $9.8 million in 2004 increased $7.7 million from the prior
year. The increase in 2004 was driven by gains from the sale of four aircraft
and the absence of the Air Canada loss which occurred in 2003. 2004 profit was
also driven by strong joint venture performance, particularly at Air's engine
leasing joint venture.

GROSS INCOME

Air's 2004 gross income of $144.9 million was $3.1 million higher than
2003. The increase was primarily driven by higher lease and asset remarketing
income partially offset by lower other income.

Lease income increased primarily due to the full year revenue recognition
on six new aircraft which were delivered at various times during 2003, three new
aircraft deliveries during 2004, and the purchase of four aircraft subject to
existing leases in 2004. Lease income in 2004 on the new aircraft purchases in
2004 and 2003 was approximately $12 million. The impact of higher variable rents
due to the increase in interest rates was $2.9 million. The increase was offset
by early lease terminations and lower lease rates on certain renewed lease
contracts. Asset remarketing income increased as the result of gains from the
sale of four aircraft in 2004. The decrease in other income was primarily
attributable to the recognition in 2003 of previously collected maintenance
deposits on aircraft held for pending sale (subsequently sold in 2004). These
maintenance deposits were entirely offset by related impairment charges taken on
the underlying aircraft in 2003. Share of affiliates' earnings decreased from
the prior year primarily because of asset impairments at the Pembroke affiliate
in 2004, more than offsetting continued strong performance at the Rolls-Royce
engine leasing joint venture.

OWNERSHIP COSTS

Ownership costs of $105.3 million in 2004 were $5.1 million higher than in
2003. The increase was primarily due to the $4.4 million increase in
depreciation resulting from higher operating lease balances due to full-year
depreciation on six new aircraft deliveries in 2003, three new deliveries in
2004, and four aircraft purchased in 2004. Interest expense was relatively
unchanged from the prior year.

OTHER COSTS AND EXPENSES

Total other costs and expenses of $25.3 million in 2004 were $13.3 million
lower than in 2003 primarily due to decreases in the provision for possible
losses and asset impairment charges, partially offset by higher SG&A expenses.
The provision for possible losses decreased $8.8 million from 2003 primarily due
to a net $9.6 million loss provision on disposal of an unsecured Air Canada note
in 2003. Asset impairment charges decreased by $9.8 million from 2003 primarily
due to impairment charges of $8.2 million in 2003 related to two commercial
aircraft held for pending sale (subsequently sold in 2004) that were offset by
the recognition into other income of previously collected maintenance deposits.
SG&A expenses increased by $3.4 million primarily due to higher employee costs
in 2004.

24

TAXES

See "Consolidated Income Taxes" for a discussion of GATX's consolidated
income tax expense.

COMPARISON OF YEAR ENDED DECEMBER 31, 2003 TO YEAR ENDED DECEMBER 31, 2002

SUMMARY

Net income of $2.1 million decreased $6.0 million compared to the prior
year. Improvement in share of affiliates' earnings was offset by an increase in
the provision for possible losses due to the Air Canada bankruptcy and increases
in SG&A expenses.

Challenging conditions in the aviation industry negatively affected Air in
2003. Although the industry appeared to be recovering from its severe downturn,
aircraft lessors experienced weak lease rates, credit defaults and asset
impairments during 2003. Specifically, aircraft over 15 years in age proved to
be more difficult to lease and presented the greatest uncertainty in value.
Rents on older aircraft declined in 2003, while rents on newer aircraft
stabilized.

Air's owned portfolio had a weighted average age of five years based on the
net book value at the end of 2003. With a relatively new fleet, Air achieved
almost full utilization in 2003. At December 31, 2003, less than 1% of Air's
portfolio was available for lease; over 96% had been on lease with customers,
and the remaining 3% were subject to signed letters of intent to lease with
customers. Air placed 19 owned aircraft during 2003, including six new and 13
existing aircraft.

GROSS INCOME

Air's 2003 gross income of $141.8 million was $38.0 million higher than
2002. The increase was primarily driven by higher lease income due to the
full-year revenue recognition on 16 new aircraft which were delivered at various
times during 2002, and an additional six new aircraft deliveries which were
received and put on lease in 2003. Other income also contributed $7.1 million to
the increase, primarily attributable to the recognition of previously collected
maintenance reserves. These maintenance reserves were entirely offset by related
impairment charges taken on by the underlying aircraft.

Share of affiliates' earnings of $31.6 million were $16.8 million higher
than the prior year. The increase from the prior year is primarily due to
impairment losses that were recognized in 2002 on a fleet of 28 Fokker 50 and
Fokker 100 aircraft owned by Air's 50% owned Pembroke affiliate.

OWNERSHIP COSTS

Ownership costs of $100.2 million in 2003 were $24.5 million higher than in
2002. The increase was primarily due to the $18.0 million increase in
depreciation resulting from higher balances for operating lease assets due to
full-year depreciation on 16 new aircraft deliveries in 2002 and six new
deliveries received and put on lease in 2003. Interest expense also contributed
$6.1 million to the increase as a result of higher debt balances due to the new
aircraft deliveries in 2002 and 2003, slightly offset by lower interest rates.

Excluding an accrual reversal in 2002, operating lease expense in 2003 was
lower by $4.3 million due to fewer leased-in aircraft compared to the prior
year. Operating lease expense of $3.5 million in 2002 was net of a credit of
$4.7 million for the reversal of a loss accrual recorded in prior years. GATX
was a lessee of an aircraft under an operating lease running through 2004. GATX
had subleased the aircraft to an unrelated third party with an initial lease
term expiring in 2001. Prior to 2001, as a result of financial difficulties of
the sublessee as well as concerns about subleasing the aircraft for the period
2001 to 2004, the Company recorded an accrual for the future costs expected to
be incurred on the operating lease in excess of the anticipated revenues. In
2002, the Company restructured terms of the lease, ultimately acquiring
ownership of the aircraft, and leasing it to a new customer. As a result, the
$4.7 million accrual was reversed as a credit to operating lease expense.

25

OTHER COSTS AND EXPENSES

Total other costs and expenses increased by $18.1 million in 2003 primarily
due to the increase in SG&A expenses, the provision for possible losses and
asset impairment charges. SG&A expenses increased by $4.8 million due to lower
capitalized expenses as a result of fewer aircraft deliveries in 2003 versus the
prior year. The provision for possible losses increased $7.9 million primarily
due to a net $9.6 million loss provision on the disposal of an unsecured Air
Canada note. Asset impairment charges of $10.2 million in 2003 include
impairment charges of $8.2 million related to two commercial aircraft that were
offset by the recognition into income of previously collected maintenance
reserves, included in other income.

TAXES

See "Consolidated Income Taxes" for a discussion of GATX's consolidated
income tax expense.

GATX SPECIALTY FINANCE

The Specialty portfolio consists primarily of leases and loans, frequently
including an interest in an asset's residual value, and joint venture
investments involving a variety of underlying asset types, including marine,
aircraft and other investments. Specialty generates fee-based income through
transaction structuring and portfolio management services.

Prospectively, Specialty will continue to pursue investments in marine
assets and will also seek selective investments in long-lived industrial
equipment in targeted mature industries. As a result, future earnings may be
more spread oriented, with asset remarketing gains and income resulting from the
improved credit profile anticipated to decline from the 2004 levels. Earnings
may also be unpredictable due to the uncertain timing of asset remarketing and
gains from the sale of securities.

26

Components of Specialty Finance's income statement are summarized below (in
millions):

FINANCIAL PERFORMANCE MEASURES FOR SPECIALTY FINANCE ($'S IN MILLIONS)

27

SPECIALTY'S PORTFOLIO DATA

The following table summarizes information on the owned and managed
Specialty Finance portfolio for the years ended December 31 ($'s in millions):

COMPARISON OF YEAR ENDED DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31, 2003

SUMMARY

Net income of $40.6 million increased $2.5 million from the prior year
primarily due to improved credit quality of the portfolio and lower SG&A
expenses. The continued strong performance of marine joint ventures and
remarketing gains also contributed to the 2004 results. Specialty's new marine
investments were $13.9 million and $26.6 million in 2004 and 2003, respectively.
As expected, overall asset levels continued to decline as asset run-off exceeded
new investment volume.

GROSS INCOME

Specialty's 2004 gross income of $108.7 million was $55.4 million lower
than 2003. The decrease was primarily the result of lower lease, interest and
asset remarketing income. The decreases of $13.1 million in lease income and
$23.7 million in interest income were the result of lower lease and loan
balances due to the run-off of portfolio assets. Asset remarketing income
decreased $10.3 million from 2003 and was comprised of both gains from the sale
of assets from Specialty's own portfolio as well as residual sharing fees from
the sale of managed assets. Because the timing of such sales is dependent on
changing market conditions, asset remarketing income does not occur evenly from
period to period. Share of affiliates' earnings were relatively unchanged from
2003 to 2004. However, 2004 income from marine joint ventures increased by $8.9
million in 2004. This increase was offset by 2003 income from other joint
venture investments that have been dissolved.

OWNERSHIP COSTS

Ownership costs of $34.5 million in 2004 were $23.7 million lower than 2003
consistent with the decrease in the portfolio. The $17.3 million decrease in
interest expense was due to lower debt balances as a result of a smaller
portfolio, and the $6.1 million decrease in depreciation was due to lower
operating lease assets.

OTHER COSTS AND EXPENSES

Other costs and expenses of $8.8 million in 2004 were $34.9 million lower
than 2003 primarily as a result of decreased asset impairment charges, and an
increase in the reversal of provision for possible losses, and lower SG&A
expenses consistent with the decline in total assets. The 2003 asset impairment
charges were primarily related to an investment in a corporate aircraft and
various equity investments. SG&A expenses decreased $8.6 million from 2003
reflecting lower personnel and other costs related to the exit from the venture
business. Specialty reversed $6.5 million more in provision for possible losses
in 2004 versus 2003 due to a better-than-expected performance within the
portfolio.

28

TAXES

See "Consolidated Income Taxes" for a discussion of GATX's consolidated
income tax expense.

COMPARISON OF YEAR ENDED DECEMBER 31, 2003 TO YEAR ENDED DECEMBER 31, 2002

SUMMARY

Net income of $38.1 million increased $33.2 million from 2002 primarily due
to lower asset impairments, provision reversals and lower SG&A expenses.

Specialty's portfolio declined during 2003 as a result of the decision in
late 2002 to curtail investment in the specialty finance portfolio and to sell
or otherwise run-off the venture finance portfolio. During 2003, the Canadian
and U.K. venture finance loan portfolios were sold, and the U.S. venture finance
loan portfolio, which had been retained along with associated warrants,
continued to run-off. Earnings were positively impacted by the timing of gains
on the sale of assets from the specialty finance portfolio and gains from the
sale of securities associated with the venture finance warrant portfolio. SG&A
expenses were lower as efficiencies were realized on the declining portfolio.
Investment volume was primarily related to prior funding commitments.

GROSS INCOME

Specialty's 2003 gross income of $164.1 million was $7.1 million lower than
2002. The decrease was primarily driven by lower lease and interest income,
consistent with a declining asset base, offset by an increase in asset
remarketing income. Asset remarketing income is comprised of both gains from the
sale of assets from Specialty's own portfolio as well as residual sharing fees
from the sale of managed assets. Gains from the sale of Specialty's owned assets
increased by $13.6 million and residual sharing fees from managed portfolios
decreased by $7.9 million. Because the timing of such sales is dependent on
changing market conditions, asset remarketing income does not occur evenly from
period to period. Share of affiliates' earnings of $22.7 million were $4.5
million higher than the prior year as a result of contributions from new marine
affiliate investments.

OWNERSHIP COSTS

Ownership costs of $58.2 million in 2003 were $14.7 million lower than in
2002, primarily due to a $4.3 million decrease in depreciation and a $10.4
million decrease in interest expense. The decrease in depreciation and interest
expense is consistent with the declining asset base.

OTHER COSTS AND EXPENSES

Total other costs and expenses decreased by $47.1 million in 2003 primarily
due to the decrease in the provision for possible losses and SG&A expenses. The
provision for possible losses decreased $22.7 million primarily due to the
improving credit quality of the portfolio and the decrease in the reservable
asset base. SG&A expenses decreased $10.1 million from 2002, reflecting lower
personnel costs as a result of the reduction in workforce in the fourth quarter
of 2002.

TAXES

See "Consolidated Income Taxes" for a discussion of GATX's consolidated
income tax expense.

GATX OTHER

Other is comprised of corporate results, including SG&A and interest
expense not allocated to the segments, and the results of American Steamship
Company (ASC), a Great Lakes shipping company.

29

Components of the income statement are summarized below (in millions):

COMPARISON OF YEAR ENDED DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31, 2003

SUMMARY

Other net income in 2004 included a $37.8 million after-tax gain from the
sale of the Company's Staten Island property and an after-tax insurance recovery
of $31.5 million. In addition, 2004 tax expense reflects $14.5 million of tax
benefits realized during the year.

GROSS INCOME

Gross income of $231.3 million in 2004 increased $129.7 million from 2003
due to higher marine operating revenue and other income. The increase in marine
operating revenue of $26.8 million was driven by increased demand and more
favorable operating conditions on the Great Lakes. These factors also
contributed to higher marine operating expenses in 2004, and resulted in a net
$5.2 million increase in vessel operating contribution in 2004. Other income of
$119.3 million in 2004 includes a $68.1 million gain from the sale of a former
terminals facility in Staten Island and $48.4 million from the receipt of
insurance settlement proceeds associated with litigation GATX had initiated
against various insurers, related to coverage issues regarding the 2000-2001
Airlog litigation. Insurance settlement proceeds were $16.5 million in 2003.

OWNERSHIP COSTS

Ownership costs of $23.2 million in 2004 were $10.1 million lower than the
prior year, primarily due to a decrease in interest expense due to lower overall
leverage at GATX. Lower average debt balances and lower

30

average interest rates contributed to the favorable variance compared to 2003.
As noted previously, the debt not otherwise allocated to the operating segments
(based on set leverage ratios) is assigned to Other, along with the related
interest expense.

OTHER COSTS AND EXPENSES

SG&A expenses of $62.4 million were $3.2 million higher than the prior
year. The variance is largely due to higher consulting fees associated with the
implementation of Section 404 of the Sarbanes-Oxley Act, fees associated with a
bond exchange completed in 2004, and lower intercompany allocations due to the
mid-year sale of Technology.

The (reversal) provision for possible losses is derived from GATX's
estimate of possible losses inherent in its portfolio of reservable assets. In
addition to establishing loss estimates for known troubled investments, this
estimate involves consideration of historical loss experience, present economic
conditions, collateral values, and the state of the markets in which GATX
operates. GATX records a provision for possible losses in each operating
segments as well as in Other, targeting an overall allowance for possible losses
in accordance with established GATX policy. This overall allowance for possible
losses is measured and reported as a percentage of total reservable assets.
Reservable assets in accordance with generally accepted accounting principles
(GAAP) include loans, direct finance leases, leveraged leases and receivables.
Operating leases are not reservable assets in accordance with GAAP.

In 2004, GATX recorded a reversal of $12.3 million of provision for
possible losses in its operating segments and a reversal of $1.4 million of
provision for possible losses in Other. These reversals resulted in a
consolidated allowance for possible losses at December 31, 2004 of $22.1
million, or 4.9% of reservable assets. In 2003, GATX recorded a $2.7 million
provision for possible losses in its operating segments and a $2.0 million
provision for possible losses in Other. These provisions resulted in a
consolidated allowance for possible losses at December 31, 2003 of $45.6
million, or 8.1% of reservable assets. The decrease in the allowance for
possible losses as a percentage of reservable assets in 2004 was driven by the
general improvement in the quality of GATX's portfolio as well as the
better-than-expected performance and run-off of venture finance assets, which
were reserved at a relatively higher rate than the rest of the portfolio.

Asset impairment charges of $.2 million in 2004 decreased $5.8 million. The
2003 charge primarily related to ASC's only off-lakes barge which ceased
operations during the year. The barge was written down to an estimate of future
disposition proceeds.

TAXES

See "Consolidated Income Taxes" for a discussion of GATX's consolidated
income tax expense.

COMPARISON OF YEAR ENDED DECEMBER 31, 2003 TO YEAR ENDED DECEMBER 31, 2002

GROSS INCOME

Gross income of $101.6 million in 2003 increased $16.6 million from 2002
due to higher marine operating revenue and other income. The increase in marine
operating revenue of $5.3 million was driven by a larger average fleet in
operation in 2003, and was offset by higher marine operating expenses. Other
income includes $16.5 million in 2003 from the receipt of settlement proceeds
associated with the Airlog litigation GATX had initiated against various
insurers.

OWNERSHIP COSTS

Ownership costs of $33.3 million were $14.5 million lower compared to 2002,
primarily due to a decrease in interest expense. Lower average debt balances and
lower average interest rates contributed to the favorable variance compared to
2002.

31

OTHER COSTS AND EXPENSES

In 2003, GATX recorded a $2.7 million provision for possible losses in its
operating segments and a $2.0 million provision for possible losses in Other.
These provisions resulted in a consolidated allowance for possible losses at
December 31, 2003 of $45.6 million, or 8.1% of reservable assets. In 2002, GATX
recorded a $21.5 million provision for possible losses in its operating
segments, offset by a reversal of $13.7 million of provision for possible losses
in Other. These provisions resulted in a consolidated allowance for possible
losses at December 31, 2002 of $66.7 million, or 7.6% of reservable assets.

Asset impairment charges of $6.0 million in 2003 increased $4.9 million.
The 2003 charge primarily relates to ASC's sole off-lakes barge which ceased
operations during the year and was written down to an estimate of future
disposition proceeds.

During 2002, GATX recorded a pre-tax charge of $5.7 million related to
reductions in workforce. The charge was predominantly related to a reduction in
corporate overhead costs associated with management's intent to exit the venture
business and curtail investment in the specialty finance sector. The reduction
in workforce charge included involuntary employee separation and benefit costs
as well as occupancy and other costs.

TAXES

See "Consolidated Income Taxes" for a discussion of GATX's consolidated
income tax expense.

NET LOSS

The net loss at Other of $33.6 million in 2003 improved from 2002 by $16.1
million as a result of the insurance settlements, favorable interest expense,
and the reversal of tax audit reserves, partially offset by increased provision
for possible losses.

GATX CONSOLIDATED

CONSOLIDATED INCOME TAXES

GATX's consolidated income tax expense for continuing operations was $68.2
million in 2004, an increase of $52.0 million from the 2003 amount of $16.2
million. The 2004 consolidated effective tax rate was 30% compared to the 2003
rate of 21%. The 2004 tax provision was favorably impacted by the recognition of
income tax refunds of $14.5 million, deferred tax reductions of $2.4 million due
to lower rates enacted in foreign jurisdictions, and extraterritorial income
exclusion benefits (ETI) of $1.4 million. Excluding these items, GATX's
effective rate would have been approximately 38% in 2004. The 2003 tax provision
was favorably impacted by a $10.0 million reversal of tax audit reserves in
connection with the settlement of an Internal Revenue Service audit of
1995-1997, deferred tax reductions of $1.8 million due to lower rates enacted in
foreign jurisdictions, and ETI benefits of $1.7 million. Excluding these items,
GATX's effective rate in 2003 would have been approximately 38%.

See Note 14 for additional information about income taxes.

32

DISCONTINUED OPERATIONS

The following table summarizes the gross income, income before taxes and
the (loss) gain on sale of segment, net of tax, which has been reclassified to
discontinued operations for all periods presented (in millions):

On June 30, 2004, GATX completed the sale of substantially all the assets
and related nonrecourse debt of Technology and its Canadian affiliate to CIT
Group, Inc. for net proceeds of $234.1 million. Subsequently, the remaining
assets consisting primarily of interests in two joint ventures were sold by year
end. Financial data for the Technology segment has been segregated as
discontinued operations for all periods presented.

Technology's operating results for the twelve months ended December 31,
2004 were $18.3 million, net of tax, which was $3.1 million higher than the
prior year results of $15.2 million. Operating results were favorably impacted
by the suspension of depreciation on operating lease assets associated with
Technology's assets classified as held for sale during the second quarter of
2004. The effect of ceasing depreciation was approximately $14.3 million
after-tax. The after-tax loss on the sale of the Technology segment was $7.2
million as of December 31, 2004. The pre-tax loss of $12.0 million reflected a
write-off of $7.6 million of goodwill as well as sale-related expenses including
severance costs and losses on terminated leases. Technology's 2003 operating
results of $15.2 million, net of a $9.8 million tax provision, were $10.5
million higher than the prior year results. Technology's 2002 operating results
were $4.7 million, net of a $2.6 million tax provision.

In 2002, GATX completed the divestiture of the ISG segment. The ISG segment
was comprised of GATX Terminals Corporation (Terminals) and 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. 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. There was no operating activity at the ISG segment during
2002-2004.

See Note 21 for additional information about discontinued operations.

BALANCE SHEET DISCUSSION

ASSETS

Total assets of continuing operations increased to $5.6 billion in 2004
from $5.5 billion in 2003. Increases in operating lease assets were partially
offset by decreases in loans, progress payments, investments in affiliated
companies and recoverable income taxes.

In addition to the $5.6 billion of assets recorded on the balance sheet,
GATX utilizes approximately $1.2 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 $1.2 billion of off-balance sheet assets
represent the present value of GATX's committed future operating lease payments
using a 10% discount rate.

33

The following table presents assets of continuing operations (on and
off-balance sheet) by segment (in millions):

RECEIVABLES

Receivables of $452.1 million, including finance leases and loans,
decreased $112.2 million compared to the prior year primarily due to asset
run-off exceeding new investment at Specialty.

ALLOWANCE FOR POSSIBLE LOSSES

The purpose of the allowance is to provide an estimate of credit losses
inherent in the investment portfolio for which reserving is appropriate. In
addition to establishing loss estimates for known troubled investments, this
estimate involves consideration of historical loss experience, judgments about
the impact of present economic conditions, collateral values, and the state of
the markets in which GATX operates. This overall allowance for possible losses
is measured and reported as a percentage of total reservable assets. Reservable
assets in accordance with generally accepted accounting principles (GAAP)
include loans, direct finance leases, leveraged leases and receivables.

The following summarizes changes in GATX's consolidated allowance for
possible losses (in millions):

The following table presents the allowance for possible losses by segment
(in millions):

There were no material changes in estimation methods and assumptions for
the allowance that took place during 2004. The allowance for possible losses is
reviewed regularly 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 reservable portfolio as of December 31, 2004. The
allowance is based on judgments and estimates, which could change in the future,
causing a corresponding change in the recorded allowance.

34

The allowance for possible losses of $22.1 million decreased $23.5 million
from 2003 and represented 4.9% of reservable assets, compared to 8.1% in the
prior year. The allowance for possible losses as a percentage of reservable
assets in 2004 reflects the general improvement in the credit quality of GATX's
portfolio as well as the better-than-expected performance and run-off of venture
finance assets, which were reserved at a relatively higher rate than the rest of
the portfolio. Net charge-offs, which is calculated as charge-offs less
recoveries (excluding other), totaled $11.2 million for the year, an improvement
of $11.8 million from 2003. The 2004 charge-offs were primarily related to Rail
of $3.2 million and Specialty of $4.6 million, as well as a fully reserved
corporate charge-off of $5.0 million.

NON-PERFORMING INVESTMENTS

Finance leases and loans that are 90 days or more past due, or where
reasonable doubt exists as to timely collection of payments related thereto, are
generally classified as non-performing. Non-performing assets also include the
full net book value of operating lease assets deemed non-performing which are
subject to the impairment rules of SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets as they are not considered reservable assets.
The allowance for possible losses, discussed above, relates only to rent and
other receivables, finance leases and loans. Non-performing investments do not
include operating lease assets that are off lease or held for sale, investments
within joint ventures or off-balance sheet assets. Finance 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 finance leases and loans
for which the ultimate collectability of principal is uncertain are applied as
principal reductions. Otherwise, such collections are credited to income when
received.

The following summarizes non-performing assets by segment (in millions):

Non-performing investments at December 31, 2004 were $57.2 million; $18.9
million lower than the prior year amount of $76.1 million. The decrease in
non-performing leases and loans was driven by improvement in the Air and
Specialty portfolios. The Rail increase was primarily due to operating lease
assets with a net book value of $15.1 million on lease to a bankrupt customer,
for which restructured lease terms are currently being negotiated.

OPERATING LEASE ASSETS, FACILITIES AND OTHER

Net operating lease assets and facilities increased $558.3 million from
2003 primarily due to Rail and Air investments. During 2004, Rail and Air net
operating lease assets and facilities increased $379.1 million and $179.4
million, respectively. In 2004, Rail acquired 6,200 railcars and 1,000 railcars
in North America and Europe, respectively which includes new car purchases and
secondary market acquisitions. Air made final delivery payments on three new
aircraft and acquired four used aircraft during 2004.

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.

Progress payments were $20.0 million at year end compared to $53.6 million
in the prior year. The decrease is due to the reclassification of progress
payments to operating lease assets for three aircraft delivered in 2004.

35

INVESTMENTS IN AFFILIATED COMPANIES

Investments in affiliated companies decreased $129.0 million in 2004 due to
affiliate cash distributions exceeding affiliate income and the acquisition and
consolidation of a joint venture. GATX invested $7.8 million in joint ventures
in 2004, compared to $99.6 million in 2003. Share of affiliates' earnings were
$65.2 million and $66.8 million in 2004 and 2003, respectively. Distributions
from affiliates increased $.4 million to $146.2 million in 2004 from $145.8
million in 2003. In December 2004, GATX Rail acquired the remaining 50% interest
in Locomotive Leasing Partners, LLC (LLP), resulting in 100% ownership of the
fleet of 486 locomotives. As a result, LLP's operations are consolidated with
GATX and it is no longer reported as an investment in affiliated companies.

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

See Note 7 for additional information about investments in affiliated
companies.

RECOVERABLE INCOME TAXES

Recoverable income taxes decreased by $53.8 million from the prior year due
to receipt of applicable income tax refunds.

GOODWILL

Goodwill was $93.9 million, an increase of $6.7 million from the prior
year. The increase was due to foreign currency exchange effects. The Company's
changes in carrying value of goodwill are further discussed in Note 8 to the
Company's consolidated financial statements.

OTHER INVESTMENTS

Other investments were $79.0 million, a decrease of $22.6 million from the
prior year. At the end of 2004, investments of $9.0 million and $24.0 million
were classified as available-for-sale and held-to-maturity, respectively. Refer
to Note 9 of the Company's consolidated financial statements for further
information regarding the Company's investments in securities.

OTHER ASSETS

Other assets are primarily comprised of the fair value of derivatives,
prepaid pension and other prepaid items and miscellaneous receivables. The
decrease of $7.3 million from the prior year includes a decrease in the fair
value of derivatives of $30.1 million offset with an increase in prepaid pension
of $8.2 million and other prepaid items and receivables.

LIABILITIES

Total liabilities of continuing operations decreased to $4.5 billion in
2004 from $4.8 billion in 2003. In addition to the $4.5 billion of liabilities
recorded on the balance sheet, GATX has approximately $1.2 billion of
off-balance sheet debt related to assets that are financed with operating
leases. The $1.2 billion of off-balance sheet debt represents the present value
of GATX's committed future operating lease payments at a 10% discount rate.

36

DEBT

Total debt decreased $361.4 million from 2003 primarily due to debt
repayments of unsecured notes and bank loans, as well as decreased capital lease
obligations. Debt repayments were partially offset by increases in commercial
paper and bank credit facilities as well as secured financing supported by the
European Export Credit Agencies (ECAs) for aircraft deliveries. 2004 repayments
of debt totaled $500.5 million. GATX, through its principal subsidiary GATX
Financial Corporation (GFC), issued $141.8 million in debt in 2004.

The following table summarizes the debt of GATX and its subsidiaries by
major component, including off-balance sheet debt, as of December 31, 2004 (in
millions):

DEFERRED INCOME TAXES

Deferred income taxes increased $49.3 million to $721.0 million in 2004
compared to $671.7 million in 2003. The increase was due to accelerated tax
depreciation (including bonus depreciation on new equipment) which more than
offset taxable income from operations and the taxable income on the sale of
Technology and the Staten Island property.

SHAREHOLDERS' EQUITY

Shareholders' equity increased $192.0 million from 2003 including net
income of $169.6 million; issuance of common stock of $5.8 million and changes
in accumulated other comprehensive income of $56.0 million, offset by dividends
paid of $39.4 million. The change in accumulated other comprehensive income was
driven by foreign currency translation gains of $55.5 million due to the
weakening of the U.S. dollar against the Canadian dollar, Euro and Zloty.

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.

NET CASH PROVIDED BY CONTINUING OPERATIONS

Net cash provided by continuing operations of $301.5 million increased
$34.1 million compared to 2003. Cash flow benefited from higher insurance
proceeds related to the Airlog matter, partially offset by lower income tax
refunds. Comparison between periods is also affected by other changes in working
capital. All cash received from asset dispositions (excluding the proceeds from
the sale of the Technology segment, which is

37

reported as discontinued operations), including gain and return of principal, is
included in investing activities as portfolio proceeds or other asset sales.

PORTFOLIO INVESTMENTS AND CAPITAL ADDITIONS

Portfolio investments and capital additions of $760.0 million increased
$131.4 million from 2003.

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

Rail invested $489.9 million in 2004, an increase of $240.3 million from
the prior year. The increase was primarily attributable to new railcar
purchases, fleet acquisition activity and the purchase of the remaining 50%
interest in Locomotive Leasing Partners, LLC. Portfolio investments and capital
additions at Air of $225.2 million were comparable to the prior year.
Investments at Specialty were significantly lower in 2004 as a result of
curtailment in specialty investments. Future portfolio investments and capital
additions (excluding contractual commitments) will depend on market conditions
and opportunities to acquire desirable assets.

PORTFOLIO PROCEEDS

Portfolio proceeds of $355.5 million decreased $185.1 million from 2003.
The decrease was primarily due to a decrease in loan payments received, lower
proceeds from disposal of lease equipment and cash distributions from joint
venture investments partially offset by an increase in finance lease payments
received and proceeds from sales of securities.

PROCEEDS FROM OTHER ASSET SALES

Proceeds from other asset sales of $130.3 million in 2004 primarily relate
to $98.8 million proceeds received from the sale of Staten Island property in
addition to proceeds from railcar scrappings.

NET CASH USED IN FINANCING ACTIVITIES FOR CONTINUING OPERATIONS

Net cash used in financing activities of continuing operations was $375.9
million in 2004 compared to $260.3 million in 2003. Net proceeds from issuance
of long-term debt were $127.8 million in 2004. Significant financings in 2004
included $107.8 million of aircraft financing guaranteed by the European Export
Credit Agencies. Repayments of debt included an $80.0 million prepayment of a
portion of a term loan which was originally due in 2006.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

GATX funds investments and meets its obligations through cash flow from
operations, portfolio proceeds (including proceeds from asset sales), commercial
paper issuance, 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. GATX
believes its current liquidity remains strong due to its cash position,
available and committed credit lines and more cost effective access to the
capital markets relative to recent years.

38

CREDIT FACILITIES

On May 18 2004, GATX's wholly owned subsidiary GATX Financial Corporation
(GFC), entered into a credit agreement for $545.0 million comprised of a $445.0
three-year senior unsecured revolving credit facility maturing in May 2007, and
a $100.0 million five-year senior unsecured term loan, with a delayed draw
feature effective for one year, maturing in May 2009. The new agreement replaces
the three separate revolving credit facilities previously in place at GFC. At
December 31, 2004, availability under the credit facility was $362.9 million
with $27.1 million of letters of credit issued and backed by the facility, $30.0
million drawn on the facility and $25.0 million of commercial paper issued. All
$100.0 million of the unsecured term loan was available.

RESTRICTIVE COVENANTS

The revolving credit facility and unsecured term loan contain various
restrictive covenants, including requirements to maintain a defined net worth
and a fixed charge coverage ratio. In addition, both contain certain negative
pledge provisions, including an asset coverage test, and a limitation on liens
condition for borrowings on the facility and the term loan.

As defined in the credit facility and term loan, the net worth of GFC at
December 31, 2004 was $1.8 billion, which was in excess of the minimum net worth
requirement of $1.1 billion. Additionally, the ratio of earnings to fixed
charges as defined in the credit facility and term loan was 2.6x for the period
ended December 31, 2004, in excess of the minimum covenant ratio of 1.3x. At
December 31, 2004, GFC was in compliance with the covenants and conditions of
the credit facility.

The indentures for GFC's public debt also contain restrictive covenants,
including limitations on loans, advances or investments in related parties
(including GATX) and dividends it may distribute to GATX. Some of the indentures
also contain limitation on lien provisions that limit the amount of secured
indebtedness that GFC may incur, subject to several exceptions, including those
permitting an unlimited amount of purchase money indebtedness and nonrecourse
indebtedness. In addition to the other specified exceptions, GFC would be able
to incur liens securing a maximum of $717.1 million of additional indebtedness
as of December 31, 2004 based on the most restrictive limitation on liens
provision. At December 31, 2004, GFC was in compliance with the covenants and
conditions of the indentures.

The covenants in the credit facilities and indentures effectively limit the
ability of GFC to transfer funds to GATX in the form of loans, advances or
dividends. At December 31, 2004, the maximum amount that GFC could transfer to
GATX without violating its financial covenants was $843.1 million, implying that
$545.9 million of subsidiary net assets were restricted. 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.

In addition to the credit facility and indentures, GFC and its subsidiaries
are subject to financial covenants related to certain bank financings. Some bank
financings include coverage and net worth financial covenants as well as
negative pledges. One financing contains a leverage covenant, while another
financing contains leverage and cash flow covenants that are specific to a
subsidiary.

GFC does not anticipate any covenant violation in the credit facility, bank
financings, or indenture, nor does GFC anticipate that any of these covenants
will restrict its operations or its ability to procure additional financing.

DEBT FINANCING

Secured financings are comprised of the sale-leaseback of railcars, loans
secured by railcars and aircraft, and a commercial paper 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 2004, the commercial paper conduit securitization facility
was renewed as a $50.0 million facility.

39

In June 2004, GFC completed a debt exchange transaction for portions of
three series of notes due in 2006 ("Old Notes") for a new series of 6.273% Notes
due in 2011 ("New Notes"). The Old Notes are comprised of the 6 3/4% Notes due
March 1, 2006, the 7 3/4% Notes due December 1, 2006, and the 6 7/8% Notes due
December 15, 2006. A total of $165.3 million of Old Notes were tendered in the
transaction. As part of the exchange, a premium to par value of $13.5 million
was paid to noteholders that participated in the transaction. The premium
included an amount reflecting the current market value of the notes above par at
the date of exchange plus an inducement fee for entering into the exchange.

During 2004, all of GATX's debt issuance was at GFC. GFC issued a total of
$141.8 million and repaid $500.5 million of long-term debt. Significant
financings in 2004 included $107.8 million of aircraft financing guaranteed by
the European Export Credit Agencies. As of December 31, 2004, $166.5 million of
senior unsecured notes had been issued against the shelf registration of $1.0
billion. GFC also has debt in the form of commercial paper and bank revolver
drawings. These sources of cash are typically used to fund daily operations, and
accumulate until they are paid down using cash flow or proceeds of long-term
debt issuance.

CREDIT RATINGS

The availability of GATX's funding options may be adversely affected 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 rates is dependent on GFC's credit rating as determined by rating
agencies such as Standard & Poor's (S&P) and Moody's Investor Service (Moody's).
On December 21, 2004, S&P affirmed the credit rating on GFC's long-term
unsecured debt at BBB-, and revised the rating outlook to positive from stable.
On May 10, 2004, Moody's affirmed the credit rating on GFC's long-term unsecured
debt at Baa3, and revised the rating outlook to stable from negative. GFC's
existing commercial paper credit ratings of A-3 (S&P) and P-3 (Moody's)
restricts GFC's access to the commercial paper market. However, subsequent to
December 31, 2004, GFC has had over $100 million of commercial paper outstanding
at times.

One of the factors that the rating agencies monitor in reviewing GFC's
credit rating is its use of secured debt. In particular, S&P monitors the ratio
of GFC's secured assets as a percentage of total assets. Over the last four
years, this ratio has increased substantially as GFC has financed 27 new
aircraft deliveries with secured debt supported by the European Export Credit
Agencies and the U.S. Export-Import Bank. GATX currently believes that its
secured asset ratio can be maintained at levels acceptable to the rating
agencies. However, if GFC became unable to access unsecured financing in the
future, it may have to rely on secured financing and could suffer a credit
rating downgrade if the resulting increase in its secured asset ratio became
unacceptable to one or both rating agencies.

2005 LIQUIDITY POSITION

GFC expects that it will be able to meet its contractual obligations for
2005 through a combination of projected cash flow from operations, portfolio
proceeds, committed unsecured term loan, and its revolving credit facilities.

40

CONTRACTUAL COMMITMENTS

At December 31, 2004, GATX's contractual commitments, including debt
maturities, lease payments, and unconditional purchase obligations were (in
millions):

The carrying value of recourse and nonrecourse debt (debt) is adjusted for
fair value hedges. As of December 31, 2004, debt of $2,956.2 million excludes a
fair value adjustment of $24.4 million. The adjustment for qualifying fair value
hedges is excluded from the above table as such amount does not represent a
contractual commitment with a fixed amount or maturity date. Other represents
GATX's obligation under the terms of the DEC acquisition agreement to cause DEC
to make qualified investments of $23.9 million by December 31, 2005. To the
extent there are no satisfactory investment opportunities during 2005, DEC may
invest in long-term securities for purposes of future investment.

UNCONDITIONAL PURCHASE OBLIGATIONS

At December 31, 2004, GATX's unconditional purchase obligations of $522.3
million consisted primarily of commitments to purchase railcars and scheduled
aircraft acquisitions. GATX had commitments of $327.8 million related to the
committed railcar purchase program entered into in 2002. GATX also had
commitments of $74.1 million for orders on two new aircraft to be delivered in
2006. Additional unconditional purchase obligations include $115.1 million of
other rail related commitments.

At December 31, 2004, GATX's unconditional purchase obligations by segment
were (in millions):

GUARANTEES

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

41

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. Approximately 55% of the Company's asset residual value
guarantees are related to rail equipment. Based on known facts and current
market conditions, management does not believe that the asset residual value
guarantees will result in any negative financial impact to GATX. GATX believes
these asset residual value guarantees will likely generate future income in the
form of fees and residual sharing proceeds.

GATX and its subsidiaries are also parties to standing letters of credit
and bonds primarily related to workers' compensation and general liability
insurance coverages. No material claims have been made against these
obligations. At December 31, 2004, 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, 2004 were (in millions):

PENSION CONTRIBUTIONS

In 2004, GATX contributed $13.7 million to its funded and unfunded pension
plans. In 2005, the Company expects to make payments of approximately $2.8
million with respect to its pension plans. Additional contributions will be
dependent on a number of factors including plan asset investment returns and
actuarial experience. Subject to the impact of these factors, the Company may
make additional material plan contributions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles (GAAP) 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. Actual results may differ from
these estimates under different assumptions or conditions.

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. Certain 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. 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

42

expected to be generated by the asset. Estimated future cash flows are
based on a number of assumptions including lease rates, lease 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. In
addition, the Company periodically reviews the residual values used in
the accounting for finance leases. When conditions indicate the residual
value has declined, the Company recognizes the accounting impact in that
period.

- 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's estimate of the amount of
provision (reversal) for losses incurred in each period requires
consideration of historical loss experience, judgments about the impact
of present economic conditions, collateral values, and the state of the
markets in which GATX participates, in addition to specific losses for
known troubled accounts. GATX charges off amounts that management
considers unrecoverable from obligors or the disposition of collateral.
GATX assesses the recoverability of investments by considering several
factors, including customer payment history and financial position. The
allowance for possible losses is regularly 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, 2004. 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, 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 when GATX
does not have effective or voting control of these legal entities and is
not the primary beneficiary of the venture's activities. 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.

- Pension and Post-retirement Benefits Assumptions -- GATX's pension and
post-retirement benefit obligations and related costs are calculated
using actuarial assumptions. Two critical assumptions, the discount rate
and the expected return on plan assets, are important elements of plan
expense and liability measurement. GATX evaluates these critical
assumptions annually. Other assumptions involve demographic factors such
as retirement, mortality, turnover and rate of compensation increases.

The discount rate is used to calculate the present value of expected
future pension and post-retirement cash flows as of the measurement date.
The guideline for establishing this rate is high-quality, long-term bond
rates. A lower discount rate increases the present value of benefit
obligations and increases pension expense. The expected long-term rate of
return on plan assets is based on current and expected asset allocations,
as well as historical and expected returns on various categories of plan
assets. A lower-than-expected rate of return on pension plan assets will
increase pension expense. See Note 15 to the consolidated financial
statements for additional information regarding these assumptions.

- Income Taxes -- GATX evaluates the need for a deferred tax asset
valuation allowance by assessing the likelihood of whether deferred tax
assets, including net operating loss carryforward benefits, will be
realized in the future. The assessment of whether a valuation allowance
is required involves judgment

43

including the forecast of future taxable income and the evaluation of tax
planning initiatives, if applicable.

Taxes have not been provided on undistributed earnings of foreign
subsidiaries as the Company has historically maintained that undistributed
earnings of its foreign subsidiaries and affiliates were intended to be
permanently reinvested in those foreign operations. If in the future,
these earnings are repatriated to the U.S., or if the Company expects such
earnings will be remitted in the foreseeable future, provision for
additional taxes would be required.

The American Jobs Creation Act of 2004 introduced a special one-time
dividends received deduction on the repatriation of certain foreign
earnings to a U.S. taxpayer (repatriation provision) provided certain
criteria are met. The repatriation provision is available to GATX for the
year ended December 31, 2005. GATX is currently evaluating the effect of
the repatriation provision on its plan for reinvestment or repatriation of
foreign earnings. The range of reasonably possible amounts of unremitted
earnings considered for repatriation, and the income tax effects of such
repatriation cannot be estimated with certainty at this time. It is
anticipated that the evaluation of the effect of the repatriation
provision will be completed during the third quarter of 2005.

GATX's operations are subject to taxes in the U.S., various states and
foreign countries and as result, may be subject to audit in all of these
jurisdictions. Tax audits may involve complex issues and disagreements
with taxing authorities could require several years to resolve. Accruals
for tax contingencies require management to make estimates and assessments
with respect to the ultimate outcome of tax audit issues.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 2 to the consolidated financial statements for a summary of new
accounting pronouncements that may impact GATX's business.

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures disclosed in this report are meant to provide
additional information and insight to historical operating results and financial
position of the business. Management uses these performance measures to assist
in analyzing the Company's underlying financial performance from period to
period, evaluate the financial performance of its operating segments, and
establish criteria for compensation decisions. The Company presented return on
assets, including off-balance sheet assets, because it believes that
incorporating off-balance sheet assets, primarily rail cars financed with
operating leases, results in a more accurate measure of the return GATX receives
on assets in which it has an ownership-like interest. The SG&A efficiency ratio
as presented, which includes SG&A expenses before the capitalization of initial
direct costs, is a more accurate measurement of actual SG&A incurred for the
year as it relates to underlying owned and managed assets. Utilizing the total
owned and managed asset base is more reflective of the support services and
administrative activities performed for both GATX and its customers. These
measures are not in accordance with, or a substitute for, GAAP and may be
different from or inconsistent with non-GAAP financial measures used by other
companies.

GLOSSARY OF KEY TERMS

- Initial Direct Costs -- SG&A expenses incurred by GATX to originate new
loans and leases. Identified initial direct costs are deferred and
amortized over the term of the lease or loan.

- Managed Assets -- Assets that GATX manages, but that are not included in
assets on balance sheet or off-balance sheet assets. An asset is
considered managed if GATX performs the same activities relative to the
asset as performed for similar owned assets. The managed assets include
the assets wholly-owned by third-parties and assets owned by joint
ventures in which GATX is both an investor and manager. In these cases,
managed assets are shown net of GATX's investment in the joint venture,
to the extent the investment is already included in on balance sheet or
off-balance sheet assets.

44

- Non-GAAP Financial Measures -- Numerical measure of a company's
historical performance, financial position or liquidity that is different
from that presented in the financial statements as calculated in
accordance with generally accepted accounting principles.

- Off-Balance Sheet Assets -- Assets, primarily railcars, which are
financed with operating leases and therefore not recorded on the balance
sheet. GATX estimates the off-balance sheet asset amount by calculating
the present value of committed future operating lease payments using a
10% discount rate.

- On Balance Sheet Assets -- Total assets as reported on the balance sheet
excluding assets of discontinued operations.

- Return on Assets -- Income from continuing operations before cumulative
effect of accounting change divided by average total on and off-balance
sheet assets.

- Return on Equity -- Income from continuing operations before cumulative
effect of accounting change divided by average total shareholders'
equity.

- SG&A -- Selling, general and administrative expenses.

- SG&A Efficiency Ratio -- SG&A before capitalized initial direct costs
divided by average total owned and managed assets.

- Total Owned and Managed Assets -- The sum of on and off-balance sheet
assets and managed assets.

Selected non-GAAP disclosures are presented and reconciled in the table
below (in millions):

ASSETS

SG&A BEFORE CAPITALIZED INITIAL DIRECT COSTS(3)

SG&A BEFORE CAPITALIZED INITIAL DIRECT COSTS

Rail....................................................... $ 70.7 $ 69.0 $ 59.2
Air........................................................ 24.6 21.0 21.0
Specialty.................................................. 8.9 17.7 29.0
Other...................................................... 62.4 59.2 61.1
------ ------ ------
Consolidated............................................. $166.6 $166.9 $170.3
====== ====== ======

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

(1) Total on and off-balance sheet assets are used in the calculation of return
on assets which is income from continuing operations before cumulative
effect of accounting change divided by average total on and off-balance
sheet assets.

(2) Total owned and managed assets are used in the calculation of the SG&A
efficiency ratio which is SG&A before capitalized initial direct costs
divided by average total owned and managed assets.

(3) SG&A before capitalized initial direct costs is used in the calculation of
the SG&A efficiency ratio which is SG&A before capitalized initial direct
costs divided by average total owned and managed assets.

46

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, GATX is exposed to interest rate, foreign
currency exchange rate, and equity price risks that could impact results of
operations. To manage these risks, GATX, pursuant to authorized policies, may
enter into certain derivative transactions, principally interest rate swaps,
Treasury note derivatives and currency swaps. These instruments and other
derivatives are entered into for hedging purposes only to manage existing
underlying exposures. GATX does not hold or issue derivative financial
instruments for speculative purposes.

Interest Rate Exposure -- 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, 2004 and giving affect
to related derivatives, if market rates were to increase hypothetically by 100
basis points, after-tax interest expense would increase by approximately $11.9
million in 2005.

Functional Currency/Reporting Currency Exchange Rate Exposure -- GATX
conducts operations in foreign countries, principally Europe and Canada. As a
result, changes in the value of the U.S. dollar as compared to foreign
currencies would affect GATX's reported earnings. Based on 2004 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 2005 by approximately
$3.1 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.

Equity Price Exposure -- GATX also has equity price risk inherent in stock
and warrants of companies in which it has investments. At December 31, 2004, the
fair value of the stock and warrants was $4.7 million and $3.1 million,
respectively. The hypothetical change in value from a 10% sensitivity test would
not be material to GATX operations.

47

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of GATX Corporation

We have audited the accompanying consolidated balance sheets of GATX
Corporation and subsidiaries as of December 31, 2004 and 2003, and the related
consolidated statements of income, changes in shareholders' equity, cash flows,
and comprehensive income for each of the three years in the period ended
December 31, 2004. Our audits also include 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 the standards of the Public
Company Accounting Oversight Board (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 at December 31, 2004 and 2003, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2004, in conformity with U.S. generally accepted
accounting principles. 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
herein.

As discussed in Note 2 to the financial statements, in 2004 the Company
changed its method of accounting for the effects of contingently convertible
instruments on diluted earnings per share, and in 2002 changed its method for
accounting for goodwill.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of GATX
Corporation's internal control over financial reporting as of December 31, 2004,
based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 4, 2005 expressed an unqualified opinion thereon.

ERNST & YOUNG LLP

Chicago, Illinois
March 4, 2005

48

CONSOLIDATED STATEMENTS OF INCOME

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

(a) Diluted earnings per share for the year ended December 31, 2003 has been
restated to reflect the impact of EITF 04-8. See Note 2 to the consolidated
financial statements for more information.

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

50

CONSOLIDATED BALANCE SHEETS

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

* Less than $.1 million.

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

51

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial
statements.
52

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

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

* Less than $.1 million.

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

53

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS

GATX Corporation (GATX or the Company) is headquartered in Chicago,
Illinois and provides services primarily through three operating segments: GATX
Rail (Rail), GATX Air (Air), and GATX Specialty Finance (Specialty). GATX
specializes in railcar and locomotive leasing, aircraft operating leasing, and
financing other large-ticket equipment. In addition, GATX owns and operates a
fleet of self-loading vessels on the Great Lakes through its wholly owned
subsidiary American Steamship Company (ASC).

GATX also 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.

On June 30, 2004, GATX completed the sale of substantially all the assets
and related nonrecourse debt of GATX Technology Services (Technology) and its
Canadian affiliate. Subsequently, the remaining assets consisting primarily of
interests in two joint ventures were sold prior to year end. Financial data for
the Technology segment has been segregated as discontinued operations for all
periods presented.

See Note 25 for a full description of GATX's operating segments.

NOTE 2. 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 when GATX does not have effective or
voting control of these legal entities and is not the primary beneficiary of the
venture's activities. The consolidated financial statements reflect the
Integrated Solutions Group (ISG) and Technology segments 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 of $60.0 million as of December 31, 2004
is comprised of cash and cash equivalents which are restricted as to withdrawal
and usage. GATX's restricted cash primarily relates to amounts maintained as
required by contract for three bankruptcy remote, special-purpose corporations
that are wholly owned by GATX's principal subsidiary, GATX Financial Corporation
(GFC).

Loans -- GATX records loans at the principal amount outstanding plus
accrued interest. A loan is placed on non-accrual status and interest income
ceases to be recognized when collection of contractual loan payments is
doubtful. Payments received for loans that have been placed on non-accrual
status are recognized as return of principal. GATX resumes interest recognition
on loans on non-accrual status after recovery of outstanding principal or an
assessment by the Company that future payments are reasonably assured, if
earlier.

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
lease assets. Operating lease assets and facilities listed below are depreciated
over their respective estimated useful life to an

55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

estimated residual value using the straight-line method. The estimated useful
lives of depreciable new assets are as follows:

Railcars.................................................... 30 - 38 years
Locomotives................................................. 27 - 28 years
Aircraft.................................................... 25 years
Buildings................................................... 40 - 50 years
Leasehold improvements...................................... 5 - 40 years
Marine vessels.............................................. 40 - 50 years

Progress Payments for Aircraft and Other Equipment -- GATX classifies
amounts deposited toward the construction of wholly owned aircraft and other
equipment, including capitalized interest, as progress payments. Once GATX takes
possession of the completed asset, amounts recorded as progress payments are
reclassified to operating lease assets. Progress payments made for aircraft
owned by joint ventures in which GATX participates are classified as investments
in affiliated companies.

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. 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
and is not the primary beneficiary of the venture's activities.

Inventory -- GATX has inventory that consists of railcar and locomotive
repair components, vessel spare parts and fuel related to its marine operations.
All inventory balances are stated at lower of cost or market. Railcar repair
components are valued using the average cost method. Vessel spare parts
inventory and vessel fuel inventory are valued using the first-in, first-out
method. Inventory is included in other assets on the balance sheet and was $25.8
million and $25.6 million at December 31, 2004 and 2003, respectively.

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 rules, goodwill is no longer
amortized, but rather subject to an annual impairment test in accordance with
SFAS 142. GATX completed its annual review of all recorded goodwill. Fair values
were estimated using discounted cash flows.

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
future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment 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 2004, asset impairment charges of $3.4 million
include $.4 million of impairment charges at Air related to a commercial
aircraft. Additional impairment charges include $1.6 million at Specialty,
primarily related to the impairment of equity investments, $1.2 million at Rail
due to container cars classified as held-for-sale, and other impairment charges
of $.2 million that relate to marine operating assets. Asset impairment charges
recognized by GATX joint ventures accounted for using the equity method of
accounting result in a lower earnings from affiliates on GATX's income
statement.

Maintenance and Repair Costs -- Maintenance and repair costs are expensed
as incurred. Costs incurred by GATX in connection with planned major maintenance
activities such as rubber linings and conversions

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

that improve or extend the useful life of an asset are capitalized and
depreciated over their estimated useful life.

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's estimate of the amount of provision (reversal) for losses
incurred in each period requires consideration of historical loss experience,
judgments about the impact of present economic conditions, collateral values,
and the state of the markets in which GATX participates, in addition to specific
losses for known troubled accounts. GATX charges off amounts that management
considers unrecoverable from obligors or the disposition of collateral. GATX
assesses the recoverability of investments by considering several factors,
including customer 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, 2004. 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.

Income Taxes -- United States (U.S.) 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 $246.4 million at December 31, 2004. The American
Jobs Creation Act of 2004 introduced a special one-time dividends received
deduction on the repatriation of certain foreign earnings to a U.S. taxpayer
(repatriation provision) provided certain criteria are met. The repatriation
provision is available to GATX for the year ended December 31, 2005. GATX has
historically maintained that undistributed earnings of its foreign subsidiaries
and affiliates were intended to be permanently reinvested in those foreign
operations. GATX is currently evaluating the effect of the repatriation
provision on its plan for reinvestment or repatriation of foreign earnings. The
range of reasonably possible amounts of unremitted earnings considered for
repatriation, and the income tax effects of such repatriation cannot be
estimated with certainty at this time. It is anticipated that the evaluation of
the effect of the repatriation provision will be completed during the third
quarter of 2005.

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.

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 other liabilities in the statement of
financial position.

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 the 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, 2004, 2003 and 2002 no amounts 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, 2004, 2003 and 2002, a loss of $2.6 million, a loss
of $3.8 million and loss of $.8 million, respectively, were recognized in
earnings for derivatives not qualifying as hedges.

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The 2004 carrying value of the ineffective derivatives (which equals the
fair value) was $.2 million recorded in other assets and $4.2 million recorded
in other liabilities. In 2003, the balances were $.5 million which was recorded
in other assets and $1.9 million which was recorded in other liabilities.

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.

Fair Value Hedges
For qualifying 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 qualifying derivatives designated as cash flow hedges, the effective
portion of the derivative's gain or loss is recorded as part of other
comprehensive income (loss) 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 income (loss) and
recognized in income when the original hedged transaction affects earnings.

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 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 required.

Revenue Recognition -- Gross income includes rents on operating leases,
accretion of income on finance leases, interest on loans, marine operating
revenue, fees, asset remarketing gains (losses), gains (losses) on the sale of
the portfolio investments and equity securities and share of affiliates'
earnings. Operating lease income is recognized on a straight-line basis over the
term of the underlying leases. Finance lease income is recognized on the basis
of the interest method, which produces a constant yield over the term of the
lease. Marine operating revenue is recognized as shipping services are performed
and revenue is allocated among reporting periods based on the relative transit
time in each reporting period for shipments in process at any month end. Asset
remarketing income includes gains from the sale of assets from GATX's portfolio
as well as residual sharing fees from the sale of managed assets. Asset
remarketing income is recognized upon completion of the sale of assets. Fee
income, including management fees received from joint ventures, is recognized as
services are performed, which may be over the period of a management contract or
as contractual obligations are met.

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 lease investments, 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 lease assets,
GATX reviews the estimated salvage values of leased equipment at least annually,
and declines in estimated residual values are recorded as

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

adjustments to depreciation expense over the remaining useful life of the asset
to the extent the net book value is not otherwise impaired. 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 as an impairment loss on the statement of income.

Investments in Equity Securities -- GATX's 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. Other equity securities 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 and unrealized gains and losses arising from re-measuring securities to
fair value are included on a net-of-tax basis as a separate component of
accumulated other comprehensive income (loss).

Foreign Currency Translation -- The assets and liabilities of GATX's
operations having non-U.S functional currencies are translated at exchange rates
in effect at year end, and income statements and the statements of cash flows
are translated at weighted average exchange rates for the year. In accordance
with SFAS No. 52, Foreign Currency Translation, gains and losses resulting from
the translation of foreign currency financial statements are deferred and
recorded as a separate component of accumulated other comprehensive income or
loss in the shareholders' equity section of the balance sheet.

Incentive Compensation Plans -- The Company grants stock options to
employees under stock-based compensation plans. In December 2002, SFAS No. 148,
Accounting for Stock-Based Compensation -- Transition and Disclosure -- an
amendment of SFAS No. 123 was issued. 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
establishes new disclosure requirements 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 for Stock Issued to Employees. Under those rules, 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. See information relating to new accounting pronouncements for additional
information.

Pro forma information regarding net income and earnings per share is
required to be disclosed as if GATX had accounted for its employee stock options
using the fair value method under SFAS No. 123, Accounting for Stock-Based
Compensation. 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.

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. The Company regularly evaluates estimates and judgments based on
historical experience and other relevant facts and circumstances. Actual amounts
when ultimately realized could differ from those estimates.

Variable Interest Entities -- In January 2003, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 46 (FIN 46), Consolidation
of Variable Interest Entities, which addresses consolidation by business
enterprises of variable interest entities (VIEs) in which it is the primary
beneficiary. FIN 46 applied immediately to VIEs created or acquired after
January 31, 2003. No VIEs were created or obtained by GATX during 2004 or 2003.
For other VIEs, FIN 46 initially applied in the first fiscal quarter or interim
period beginning after June 15, 2003. In October 2003, the FASB deferred the
effective date of FIN 46 to interim periods ending after December 15, 2003 in
order to address a number of interpretation and implementation issues. In
December 2003, the FASB reissued FIN 46 (Revised Interpretations) with certain
modifications and clarifications. Application of this guidance was effective for
interests in certain VIEs commonly referred to as special-purpose entities
(SPEs) as of December 31, 2003. Application for all other types of VIEs is
required for periods ending after March 15, 2004, unless previously applied.
GATX did not have an interest in any SPEs subject to the December 31, 2003
implementation date. The Company completed an assessment of the impact of FIN 46
for all other types of entities. Based on this review to date, certain
investments are considered VIEs pursuant to the guidance provided in FIN 46.
However, GATX is not a primary beneficiary with respect to any of the VIEs. As a
result, GATX does not consolidate these entities. GATX's maximum exposure to
loss with respect to these VIEs is approximately $272.4 million of which $242.1
million was the aggregate carrying value of these investments recorded on the
balance sheet at December 31, 2004.

60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Reclassification -- Certain amounts in the 2003 and 2002 financial
statements have been reclassified to conform to the 2004 presentation.

New Accounting Pronouncements -- In April 2004, FASB issued FASB Staff
Position (FSP) 129-1, Disclosure of Information about Capital Structure Relating
to Contingently Convertible Securities. This standard requires the disclosure of
the rights and privileges of various convertible securities including the
conversion price, rates, dates and significant terms of contracts to issue
additional shares. The purpose is to enable users of financial statements to
understand the contingency and the potential impact of conversion and possible
dilution of earnings per share. The requirements of FSP 129-1 have been
incorporated into Note 23 to the financial statements.

In September 2004, the Emerging Issues Task Force (EITF) of the FASB
reached consensus on issue EITF 04-8, Accounting Issues Related to Certain
Features of Contingently Convertible Debt and the Effect on Diluted Earnings per
Share which provided that contingently convertible securities, and other
securities that have embedded contingent features should be included in the
computation of diluted earnings per share as if the securities were converted
and the underlying shares of common stock were issued and outstanding during the
applicable accounting period. EITF 04-8 is effective for reporting periods
ending after December 15, 2004 with retroactive application to prior years if
applicable. The impact of the contingently convertible securities is reflected
in GATX's computation of diluted earnings per share. 2003 diluted earnings per
share has been restated to reflect the impact of EITF 04-8. See Note 23 to the
financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based
Payments, which is a revision of SFAS No. 123, Accounting for Stock-Based
Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows.
Generally, Statement 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement, establishes fair value as the measurement objective and requires
entities to apply a fair value-based measurement method in accounting for
share-based payment transactions. The statement applies to all awards granted,
modified, repurchased or cancelled after July 1, 2005, and unvested portions of
previously issued and outstanding awards. GATX is currently evaluating the
impact of adopting this statement.

In December 2004, FASB issued FASB Staff Position (FSP) 109-2, Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision within
the American Jobs Creation Act of 2004 which introduced a special one-time
dividends received deduction on the repatriation of certain foreign earnings to
a U.S. taxpayer (repatriation provision) provided certain criteria are met. The
repatriation provision is available to GATX for the year ended December 31,
2005. GATX has historically maintained that undistributed earnings of its
foreign subsidiaries and affiliates were intended to be permanently reinvested
in those foreign operations. GATX is currently evaluating the effect of the
repatriation provision on its plan for reinvestment or repatriation of foreign
earnings. The range of reasonably possible amounts of unremitted earnings
considered for repatriation, and the income tax effects of such repatriation
cannot be estimated with certainty at this time. It is anticipated that the
evaluation of the effect of the repatriation provision will be completed during
the third quarter of 2005.

Accounting for Certain Leveraged Leases -- Prior to 2004, GATX entered into
two structured leasing investments that are accounted for in the consolidated
financial statements as leveraged leases in accordance with guidance provided in
SFAS No. 13, Accounting for Leases. This accounting guidance requires total
income over the term of a lease to be recognized into income on a proportionate
basis in those years in which the net investment in a lease is positive. The net
investment is based on net cash flows from the lease, including the effect of
related income taxes. During 2004, the Internal Revenue Service (IRS) challenged
the timing of certain tax deductions claimed with respect to these transactions.
GATX believes that its tax position related to these transactions was proper,
based upon applicable statutes, regulations and case law in effect at the time
the transactions were entered into. GATX and the IRS are conducting settlement

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

discussions with respect to these transactions. However, resolution of this
matter has not concluded and may ultimately be litigated. See Note 14 for more
information on the tax impact.

Under existing accounting guidance in SFAS No. 13, any changes in estimates
or assumptions not affecting estimated total net income from a leveraged lease,
including the timing of income tax cash flows, do not change the timing of
leveraged lease income recognition. However, the FASB is currently reviewing
this guidance. If the FASB modifies this guidance in such a way as to require a
recalculation of the timing of leveraged lease income recognition to reflect a
settlement of this tax matter, this change in accounting could result in a
one-time, non-cash charge to earnings. An equivalent amount of any such
adjustment would then be recognized in income over the remaining term of the
applicable leases; over the full term of these leases, cumulative accounting
income would not change. The impact to GATX's financial results will be
dependent on the details of the FASB's new guidance and the timing and terms of
any IRS settlement.

NOTE 3. ACQUISITIONS

The Company completed acquisitions of $65.0 million in 2004 and $56.8
million in 2002 for cash and other consideration. The results of operations of
these acquisitions have been included in the consolidated statements of income
since their respective dates of acquisition. Neither of these acquisitions were
material to the Company's consolidated financial statements.

In December 2004, Rail acquired the remaining 50% interest in Locomotive
Leasing Partners, LLC (LLP). Rail has held a 50% interest in LLP since its
inception in 1995, and at the date of acquisition, this transaction resulted in
100% ownership of the fleet of 486 locomotives by Rail. The $65.0 million
purchase price was funded in 2004.

In December 2002, Rail acquired the remaining 50.5% interest in KVG
Kesselwagen Vermietgesellschaft mbH and KVG Kesselwagen Vermietgesellschaft
m.b.h. (collectively KVG), a leading European railcar lessor for $56.8 million
and assumed $56.0 million of debt. $22.5 million of the purchase price was
funded in 2003. Prior to the transaction, which resulted in 100% ownership, Rail
held a 49.5% interest in KVG. At date of acquisition, KVG added approximately
9,000 tank cars and specialized railcars to Rail's wholly owned worldwide fleet.

NOTE 4. 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. The Company recognized net income from
leveraged leases (net of taxes) of $6.1 million, $10.7 million and $14.6 million
in 2004, 2003 and 2002, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

Operating Leases -- The majority of railcar assets, air 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, 2004, 2003 and 2002 were $31.7 million, $33.4
million, and $28.9 million, respectively.

Minimum Future Receipts -- Minimum future lease receipts from finance
leases, net of debt payments for leveraged leases, and minimum future rental
receipts from noncancelable operating leases by year end December 31, 2004 were
(in millions):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following information pertains to GATX as a lessee:

Capital Leases -- Assets that have been leased to customers under operating
lease assets and finance leases or otherwise utilized in operations and were
financed under capital leases were (in millions):

Depreciation of capital lease assets is classified as depreciation in the
statements of income. Interest expense on the above capital leases was $8.4
million in 2004, $12.0 million in 2003, and $14.1 million in 2002.

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,
2004, 2003, and 2002 was $173.6 million, $176.0 million, and $179.5 million,
respectively. Certain operating leases provide options for GATX to renew the
leases or purchase the assets at the end of the lease term. The specific terms
of the renewal and purchase options vary.

Future Minimum Rental Payments -- Future minimum rental payments due under
noncancelable leases at December 31, 2004 were (in millions):

The payments for these leases and certain operating leases do not include
the costs of licenses, taxes, insurance, and maintenance that GATX is required
to pay.

The amounts shown for 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5. 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 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 expected payments plus 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. In 2004, GATX recognized $3.1 million in
interest income from loans classified as impaired.

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

The Company has recorded an allowance for possible losses of $5.7 million
and $14.7 million on impaired loans at December 31, 2004 and 2003, respectively.
The average balance of impaired loans was $21.4 million, $38.9 million and $45.9
million during 2004, 2003 and 2002, respectively.

At December 31, 2004, scheduled loan principal due by year was as follows
(in millions):

NOTE 6. 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's
estimate of the amount of loss incurred in each period requires consideration of
historical loss experience, judgments about the impact of present economic
conditions, collateral values, and the state of the markets in which GATX
participates, in addition to specific losses for known troubled accounts. 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

The reversal of provision for losses in 2004 was primarily due to favorable
credit experience during the run-off of the venture portfolio and improvements
in overall portfolio quality. The charges to the allowance in 2004 were
primarily due to charge-offs related to Rail and Specialty investments, as well
as a fully reserved corporate charge-off of $5.0 million. The charges to the
allowance in 2003 were primarily due to write-offs related to Air and Specialty
investments. 2002 charges to the allowance primarily related to write-offs at
Specialty, including telecom and steel investments. Other activity in 2003
included a $7.3 million reduction in the allowance related to the sale of
Specialty's U.K. and Canadian venture-related loan portfolios completed in
December 2003.

There were no material changes in estimation methods or assumptions for the
allowances during 2004. GATX believes that the allowance is adequate to cover
losses inherent in the reservable portfolio as of December 31, 2004. 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 7. INVESTMENTS IN AFFILIATED COMPANIES

Investments in affiliated companies represent investments in, and loans to
and from, domestic and foreign companies and joint ventures that are in
businesses similar to those of GATX, such as commercial aircraft leasing, rail
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 the acquisition date, and are subsequently adjusted for
GATX's share of affiliates' undistributed earnings (losses). These investments
include net loans to affiliated companies of $279.1 million and $293.7 million
at December 31, 2004 and 2003, 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.
Distributions reflect both dividends and the return of principal and reduce the
carrying amount of the investment. Distributions received from such affiliates
were $146.2 million, $145.8 million, and $148.3 million in 2004, 2003 and 2002,
respectively.

The following table shows GATX's investments in affiliated companies by
segment (in millions):

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table shows GATX's pre-tax share of affiliates' earnings by
segment (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, those loan balances were reclassified from
liabilities to equity.

Operating results for all affiliated companies held at the end of the year,
assuming GATX held a 100% interest, would be (in millions):

Summarized balance sheet data for all affiliated companies held at the end
of the year, assuming GATX held a 100% interest, would be (in millions):

At December 31, 2004 and 2003, GFC provided $12.4 million and $17.3
million, respectively, in debt guarantees and $122.0 million and $125.0 million,
respectively, in residual value guarantees related to affiliated companies.

NOTE 8. GOODWILL

Goodwill was $93.9 million and $87.2 million as of December 31, 2004 and
2003, respectively. In accordance with SFAS 142, a review for impairment of
long-lived assets is performed at least annually and whenever events or changes
in circumstances indicate that the carrying amount of long-lived assets may not
be recoverable.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following reflects the changes in the carrying value of goodwill
related to continuing operations for the period of December 31, 2001 to December
31, 2004 (in millions):

Rail -- In 2002, GATX acquired the remaining interest in KVG. As a result
of this transaction, GATX recorded $8.2 million of goodwill. Additionally, the
net book value of the goodwill that related to GATX's previous investments in
KVG was $29.2 million. GATX reclassified the $29.2 million goodwill balance
related to the previous investments on the Company's balance sheet from
investment in affiliated companies to goodwill as of December 31, 2002.

In 2002, the purchase accounting adjustment of $10.5 million was related to
the finalization of the allocation of the 2001 purchase price of DEC among the
amounts assigned to assets and liabilities. GATX relied on the conclusions of an
independent appraisal for purposes of assigning value to DEC's tangible and
intangible assets (excluding goodwill). In addition, GATX finalized its plans to
integrate and restructure certain functions of DEC's operations, and in
accordance with EITF 95-3 recognized the associated costs of the plan as a
liability assumed in a purchase business combination and included the amount in
the allocation of acquisition cost.

In accordance with SFAS 142, the Company completed its review of the
goodwill recorded from the DEC acquisition by the third quarter of 2002. Based
on that review, the Company determined that all of the goodwill related to DEC
was in excess of its fair market value. As a result, the Company recorded a
one-time, non-cash impairment charge of $34.9 million in 2002. Such charge is
non-operational in nature and recognized as a cumulative effect of accounting
change in the 2002 consolidated statement of income. The impairment charge was
due primarily to lessened expectations of projected cash flows based on the then
current market conditions and a lower, long-term growth rate projected for DEC.

In 2003, the purchase accounting adjustment of $16.4 million was
attributable to the finalization of the allocation of the 2002 purchase price of
KVG among the amounts assigned to assets and liabilities. GATX relied on the
conclusions of an independent appraisal for purposes of assigning value to KVG's
tangible and intangible assets (excluding goodwill). The adjustment reflects a
lower allocation of purchase price to fixed assets as remaining lives were lower
than preliminary estimates.

The carrying amount of goodwill at Rail increased $6.7 million and $15.9 in
2004 and 2003, respectively, as a result of foreign currency translation
adjustments.

Specialty -- GATX recorded a $14.4 million impairment charge in 2002 for
the write-down of goodwill associated with the Company's plan to exit the former
venture finance business.

68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. INVESTMENT SECURITIES

Equity securities, generally related to common stock received upon the
exercise of warrants received in connection with financing of non-public,
venture-backed companies, are classified as available-for-sale, carried at fair
value and are included in other investments in the consolidated balance sheet.
Unrealized gains representing the difference between carrying amount and
estimated current fair value, are recorded in the accumulated other
comprehensive income (loss) component of shareholders' equity, net of related
tax effects, and totaled $1.6 million and $1.7 million as of December 31, 2004
and 2003, respectively. The Company did not have any unrealized losses on
available-for-sale securities as of December 31, 2004 and 2003.

Debt securities which management has the intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost. The
Company had $24.0 million of investments classified as held-to-maturity as of
December 31, 2004 and none at December 31, 2003. All other debt securities are
classified as available-for-sale and carried at fair value with net unrealized
gains and losses included in shareholders' equity on an after-tax basis.
Interest on debt securities, including amortization of premiums and accretion of
discounts, are included in interest income.

Debt and equity securities are written down to fair value when declines in
fair value below the security's amortized cost basis is determined to be other
than temporary.

Information regarding the Company's available-for-sale securities is
provided in the table below (in millions):

Information regarding the Company's held-to-maturity securities is provided
in the table below (in millions):

Debt securities at December 31, 2004 mature as follows (in millions):

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Proceeds and realized gains from sales of available-for-sale securities,
generally related to common stock received upon the exercise of warrants
received in connection with financing of non-public, venture backed companies,
totaled $31.1 million in 2004, $7.3 million in 2003 and $3.9 million in 2002.

Upon the adoption of SFAS No. 133, as amended, warrants are accounted for
as derivatives, with prospective changes in fair value recorded in current
earnings. Accordingly, upon the conversion of warrants and subsequent sale of
stock, any amounts previously recorded in fair value adjustments for derivatives
related to the warrants are reclassified to gain on sale of securities in the
income statement. Refer to Note 13 to the Company's financial statements for
further information regarding the Company's warrants.

During the years ended December 31, 2004, 2003 and 2002, $.5 million, $4.4
million, and $2.4 million, net of tax, respectively, were reclassified from
accumulated other comprehensive income (loss) for gains realized and included in
net income. The Company used specific identification as the basis to determine
the amount reclassified from accumulated other comprehensive income (loss) to
earnings.

NOTE 10. OTHER ASSETS

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

NOTE 11. COMMERCIAL PAPER AND BANK CREDIT FACILITIES

Commercial paper and bank credit facilities (in millions) and weighted
average interest rates as of year end were:

In 2004, GATX's wholly owned subsidiary GATX Financial Corporation (GFC),
entered into a credit agreement with a group of financial institutions for
$545.0 million comprised of a $445.0 million three-year senior unsecured
revolving credit facility maturing in May 2007, and a $100.0 million five-year
senior unsecured term loan, with a delayed draw feature effective for one year
(through May 2005) maturing in May 2009. The new agreement replaced three
separate revolving credit facilities previously in place at GFC. At December 31,
2004, availability under the revolving credit facility was $362.9 million with
$27.1 million of letters of credit issued and backed by the facility, $30.0
million drawn on the facility and $25.0 million of commercial paper issued. The
full amount of the $100.0 million unsecured term loan was available. Annual
commitment fees for the revolving credit agreements are based on a percentage of
the commitment and totaled approximately $1.2 million, $1.4 million and $1.3
million for 2004, 2003 and 2002, respectively.

The revolving credit facility and unsecured term loan contain various
restrictive covenants, including requirements to maintain a defined net worth
and a fixed charge coverage ratio. In addition, both contain

70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

certain negative pledge provisions, including an asset coverage test, and a
limitation on liens condition for borrowings on the facility and the term loan.

As defined in the credit facility and term loan, the net worth of GFC at
December 31, 2004 was $1.8 billion, which was in excess of the minimum net worth
requirement of $1.1 billion. Additionally, the ratio of earnings to fixed
charges as defined in the credit facility and term loan was 2.6x for the period
ended December 31, 2004, in excess of the minimal covenant ratio of 1.3x. At
December 31, 2004, GFC was in compliance with the covenants and conditions of
the credit facility.

The indentures for GFC's public debt also contain restrictive covenants,
including limitations on loans, advances or investments in related parties
(including GATX) and dividends it may distribute to GATX. Some of the indentures
also contain limitation on lien provisions that limit the amount of secured
indebtedness that GFC may incur, subject to several exceptions, including those
permitting an unlimited amount of purchase money indebtedness and nonrecourse
indebtedness. In addition to the other specified exceptions, GFC would be able
to incur liens securing a maximum of $717.1 million of additional indebtedness
as of December 31, 2004 based on the most restrictive limitation on liens
provision. At December 31, 2004, GFC was in compliance with the covenants and
conditions of the indentures.

The covenants in the credit facilities and indentures effectively limit the
ability of GFC to transfer funds to GATX in the form of loans, advances or
dividends. At December 31, 2004, the maximum amount that GFC could transfer to
GATX without violating its financial covenants was $843.1 million, implying that
$545.9 million of subsidiary net assets were restricted. 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.

In addition to the credit facility and indentures, GFC and its subsidiaries
are subject to financial covenants related to certain bank financings. Some bank
financings include coverage and net worth financial covenants as well as
negative pledges. One financing contains a leverage covenant, while another
financing contains leverage and cash flow covenants that are specific to a
subsidiary.

GFC does not anticipate any covenant violation in the credit facility, bank
financings, or indenture, nor does GFC anticipate that any of these covenants
will restrict its operations or its ability to procure additional financing.

NOTE 12. DEBT OBLIGATIONS

Debt obligations (in millions) and the range of interest rates as of year
end were:

71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Maturities of GATX's debt as of December 31, 2004, for the next five years
were (in millions):

At December 31, 2004, certain aircraft, railcars, and other equipment with
a net carrying value of $1,264.1 million were pledged as collateral for $1,016.5
million of notes and obligations.

Nonrecourse debt of $10.9 million and $15.0 million was borrowed by SPEs
which were wholly owned and consolidated by GATX in 2004 and 2003, respectively.
The creditors of the SPEs have no recourse to the general credit of GATX.

In June 2004, GFC completed a debt exchange transaction for portions of
three series of notes due in 2006 ("Old Notes") for a new series of 6.273% Notes
due in 2011 ("New Notes"). The Old Notes are comprised of the 6 3/4% Notes due
March 1, 2006, the 7 3/4% Notes due December 1, 2006, and the 6 7/8% Notes due
December 15, 2006. A total of $165.3 million of Old Notes were tendered in the
transaction. As part of the exchange, a premium to par value of $13.5 million
was paid to noteholders that participated in the transaction. The premium
included an amount reflecting the current market value of the notes above par at
the date of exchange plus an inducement fee for entering into the exchange.

In August 2003, GATX completed a private offering of $125.0 million
long-term, 5.0% senior unsecured convertible notes. The notes are convertible
into GATX Corporation common stock at a conversion price of $23.93 per share.
The conversion price is subject to adjustment based on various factors,
including changes in the dividend on GATX's common stock and the trading price
of the notes. Holders of the notes have the right to require all or a portion of
the notes to be purchased at a price equal to 100% of the principal amount of
the notes plus accrued and unpaid interest in August 2008, August 2013, and
August 2018. Any required purchases in August 2008 will be payable in cash,
whereas any purchases in August 2013 or August 2018 may be paid in cash or
shares of common stock, at GATX's option.

Interest expense capitalized as part of the cost of construction of major
assets was $1.9 million, $4.2 million and $15.8 million in 2004, 2003 and 2002,
respectively.

NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS

GATX may enter into derivative transactions in accordance with its policy
for the purposes of reducing earnings volatility and hedging specific financial
exposures, including movements in foreign currency exchange rates and changing
interest rates on debt securities. These instruments are entered into for
hedging purposes only to manage underlying exposures. 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, 2004, maturities for interest rate swaps designated as fair value hedges
range from 2005-2009.

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

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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, 2004, maturities for
interest rate swaps qualifying as cash flow hedges range from 2005-2012.

GATX enters into currency swaps, currency and interest rate forwards, and
Treasury note 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 rate forwards, and Treasury note
derivatives are based on interest rate swap rates, LIBOR futures, currency
rates, and current forward foreign exchange rates. As of December 31, 2004,
maturities for these hedges range from 2005-2013.

As of December 31, 2004, GATX expects to reclassify $1.0 million of net
losses on derivative instruments from accumulated other comprehensive income
(loss) to earnings within the next twelve months related to various hedging
transactions.

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 were 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 commercial paper and bank credit facilities
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 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 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 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 debt would be offset in part by the increase (decrease) in the fair value
of the interest rate swap.

73

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 14. 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. U.S. 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 $246.4 million at
December 31, 2004.

The American Jobs Creation Act of 2004 introduced a special one-time
dividends received deduction on the repatriation of certain foreign earnings to
a U.S. taxpayer (repatriation provision) provided certain criteria are met. The
repatriation provision is available to GATX for the year ended December 31,
2005. GATX has historically maintained that undistributed earnings of its
foreign subsidiaries and affiliates were intended to be permanently reinvested
in those foreign operations. GATX is currently evaluating the effect of the
repatriation provision on its plan for reinvestment or repatriation of foreign
earnings. The range of reasonably possible amounts of unremitted earnings
considered for repatriation, and the income tax effects of such repatriation
cannot be estimated with certainty at this time. It is anticipated that the
evaluation of the effect of the repatriation provision will be completed during
the third quarter of 2005.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

At December 31, 2004, GATX had a U.S. federal net operating loss
carryforward of approximately $131.3 million, of which $104.4 million expires
after 2023 and $26.9 million expires after 2024. The alternative minimum tax
credit of $29.3 million has an unlimited carryforward period. A valuation
allowance for recorded deferred tax assets has not been provided as management
expects such benefits to be fully realized.

The domestic and foreign components of income before income tax from
continuing operations consisted of (in millions):

75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GATX and its U.S. subsidiaries file a consolidated federal income tax
return. Income taxes for continuing operations consisted of (in millions):

The tax amount recovered in 2003 is net of $21.4 million paid to the
Internal Revenue Service (IRS) to settle all disputed tax issues related to the
audits for the years 1992 to 1997.

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

The extraterritorial income exclusion (ETI) is an exemption from U.S.
federal income tax for the lease of U.S. manufactured equipment to foreign
lessees. The benefit recorded in 2002 included both the 2001 and 2002 amounts.
ETI was repealed for years after 2004 with a reduced benefit allowable in 2005
and 2006 under transition rules.

76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax rate decrease on deferred taxes recorded in 2004 and 2003 is the
result of changes in foreign income tax rates enacted in those years.

State income taxes are provided on domestic pre-tax income or loss. The
effect of state income tax on the overall income tax rate is impacted by the
amount of domestic income subject to state taxes relative to total income from
all sources.

During 2004, the IRS agreed to certain refunds claimed for 1999 and 2000
that related to the disposition of businesses in those years and to additional
Foreign Sales Corporation and ETI benefits. The refunds resulted in a benefit of
$14.5 million in 2004.

The recovery of tax audit reserve in 2003 was the reversal of prior year
tax audit accruals as a result of the favorable resolution and settlement with
the IRS of issues in the 1995 to 1997 audit. The tax audit accrual provided in
2002 was primarily attributable to audit adjustments made by the IRS related to
the disallowance of interest deductions associated with the Company's Corporate
Owned Life Insurance (COLI) program. During 2002, GATX reached agreement with
the IRS to settle the COLI issue. The settlement amount was substantially
equivalent to the tax audit accrual provided in prior years.

The effective income tax rate is impacted by foreign taxes on the earnings
of foreign subsidiaries and affiliates which are imposed at rates that are
higher or lower than the U.S. federal statutory rate. Foreign taxes are also
withheld on certain payments received by the Company from foreign sources. The
net amount of foreign tax that exceeds or is less than the U.S. statutory rate
of tax on foreign earnings is shown above. The foreign income tax rate effects
exclude the impact on deferred taxes of enacted changes in foreign rates, which
are identified separately.

The Company's U.S. income tax returns have been audited through 1997 and
all issues for that period have been settled with the IRS. An audit by the IRS
of the Company's U.S. tax returns for the period 1998 through 2002 is currently
in process. During 2004, the IRS challenged certain deductions claimed by the
Company with respect to two structured leasing investments. GATX believes that
its tax position related to these transactions was proper based upon applicable
statutes, regulations and case law in effect at the time the transactions were
entered into. GATX and the IRS are conducting settlement discussions with
respect to these transactions. However, resolution of this matter has not
concluded and may ultimately be litigated. Excluding the leasing investments
matter, the Company expects the IRS to complete its 1998-2002 audit in 2005.
Certain of the Company's subsidiaries are under audits for various periods in
various state and foreign jurisdictions. The Company believes its reserves
established for potential assessments, including interest and penalties with
respect to the leasing transactions, and other open tax issues are reasonable.
Once established, reserves are adjusted only when circumstances, including final
resolution of an issue, require.

NOTE 15. PENSION AND OTHER POST-RETIREMENT BENEFITS

GATX maintains both funded and unfunded noncontributory defined benefit
pension plans covering its domestic employees and the employees of certain of
its subsidiaries. GATX also has a funded noncontributory defined benefit pension
plan related to a closed subsidiary in the United Kingdom (U.K.). The U.K.
pension plan no longer has any active members and is closed to new entrants.
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
actuarially determined cost methods allowable under IRS regulations and
statutory regulations in the U.K.

In addition to the pension plans, GATX's has other post-retirement plans
providing health care, life insurance and other benefits for certain retired
domestic 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.

GATX uses a December 31, 2004 measurement date for all of its plans.

77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables set forth pension obligations and plan assets and
other post-retirement obligations as of December 31 (in millions):

The aggregate accumulated benefit obligation for the defined benefit
pension plans was $366.4 million and $353.8 million at December 31, 2004 and
2003, respectively.

78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information for pension plans with a projected benefit obligation in excess
of plan assets is as follows (in millions):

Information for pension plans with an accumulated benefit obligation in
excess of plan assets is as follows (in millions):

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

The previous tables include amounts allocated each year to discontinued
operations, all of which were immaterial. Amounts shown for curtailment loss
(gain) and special termination expense in 2004 relate to the sale of Technology.
2002 amounts are related to the former ISG segment.

GATX amortizes the unrecognized prior service cost and the unrecognized net
obligation using a straight-line method over the average remaining service
period of employees expected to receive benefits under the plan. The excess of
recognized net gains or losses (excluding asset gains and losses not yet
reflected in the market-related value of assets) above the greater of 10% of the
projected benefit obligation or 10% of the market-related value of the assets
are amortized by dividing this excess, if any, by the average remaining service
period of active employees.

79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GATX used the following assumptions to measure the benefit obligations,
compute the expected long-term return on assets and to measure the periodic cost
for GATX's defined benefit pension plans and other post-retirement benefit plans
for the years ended December 31, 2004 and 2003:

GATX determines a long-term rate of return assumption on plan assets for
its funded pension plans based on current and expected asset allocations, as
well as historical and expected returns on various categories of plan assets.
GATX reviews historical markets as well as peer group data to determine its
expected long-term rate of return for each of the plans. GATX routinely reviews
its historical returns along with current market conditions to ensure its
long-term rate of return assumption on plan assets is reasonable and
appropriate.

The health care cost trend rate has a significant effect on the other
post-retirement benefit cost and obligation. The assumed health care cost trend
rate for 2004 was 8.50% for participants over the age of 65 and 10.00% for
participants under the age of 65. The assumed health care cost trend rate
anticipated for 2005 will be 9.00% for participants over the age of 65 and 8.00%
for participants under the age of 65. Over a five-year period, the trend rates
will decline gradually to 6.00% and remain at that level thereafter.

80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A one-percentage-point change in the trend rate would have the following
effects (in millions):

GATX's investment policies require that asset allocations of domestic and
foreign funded pension plans be maintained at certain targets. GATX's
weighted-average asset allocations of its domestic funded pension plans at
December 31, 2004 and 2003, and current target asset allocation for 2005, by
asset category, are as follows:

GATX's weighted-average asset allocations of its foreign funded pension
plan at December 31, 2004 and 2003, and current target asset allocation for
2005, by asset category, are as follows:

The primary objective of the domestic funded pension plans is to fully fund
benefit payments to plan participants. A secondary objective is to minimize
GATX's pension expense and plan contributions. To reach these goals, GATX's
philosophy is a diversified approach using a mix of equities, debt and real
estate investments to maximize the long-term return of plan assets. Its equity
investments are diversified across U.S. and non-U.S. stocks as well as growth,
value, and small to large capitalizations. Its debt securities are also
diversified across U.S. investments and include the following: governments,
agencies, investment grade and high-yield corporates, mortgage-backed
securities, and other collateralized investments. GATX's real estate investments
include various property types throughout the U.S.

On a timely basis, but not less than twice a year, GATX will formally
review actual results to ensure adherence to investment guidelines and the
Company's stated investment approach. This review also evaluates reasonableness
of investment decisions and risk positions. The performance of investments is
compared to indices and peers to determine if performance has been acceptable.

GATX expects to contribute approximately $2.8 million to its pension plans
(domestic and foreign) and approximately $8.1 million to its other
post-retirement benefit plans in 2005. Additional contributions to the domestic
funded pension plans will be dependent on several factors including investment
returns on plan assets and actuarial experience.

81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid (in millions):

In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) was enacted. The Act introduces a
prescription drug benefit under Medicare (Medicare Part D) that provides several
options for Medicare eligible participants and employers, including a federal
subsidy payable to companies that elect to provide a retiree prescription drug
benefit which is at least actuarially equivalent to Medicare Part D. During the
third quarter of 2004, GATX concluded its evaluation of the provisions of the
Medicare Act and elected to maintain its drug program entitling it to the
subsidy available under the Medicare Act. The impact of the Act was accounted
for in accordance with FASB Staff Position No. 106-2, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003" and was recognized during 2004 resulting in a
reduction in the accumulated post-retirement benefit obligation of $8.4 million
and a decrease to net other post-retirement benefit expense of $.5 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 plans as specified by
their respective terms, and as determined by the Board of Directors.
Contributions to such plans were $1.6 million, $1.7 million, and $1.9 million
for 2004, 2003, and 2002, respectively. Contributions to discontinued operations
were immaterial in each year.

NOTE 16. CONCENTRATIONS, OFF-BALANCE SHEET ITEMS AND OTHER CONTINGENCIES

CONCENTRATIONS

Concentration of Revenues -- GATX's revenues are derived from a wide range
of industries and companies. Approximately 20% of total revenues are generated
from customers in the chemical industry; for similar services, 16% of revenues
are derived from the petroleum industry and 12% of revenues are derived from the
commercial jet aircraft industry. GATX's foreign identifiable revenues include
earnings in affiliated companies as well as fully consolidated railcar
operations in Canada, Mexico, Poland, Austria and Germany. The Company did not
derive revenues in excess of 10% of consolidated revenues from any one foreign
country for the years ended December 31, 2004 and 2003. In 2002, Canada
contributed 12% to total GATX's revenues and share of affiliates' earnings from
continuing operations.

Concentration of Credit Risk -- Under its lease agreements with lessees,
GATX retains legal ownership of the asset except where such assets have been
financed by sale-leasebacks. For most loan financings to customers, the loan is
collateralized by the equipment. GATX performs credit evaluations prior to
approval of a lease or loan contract. Subsequently, the creditworthiness of the
customer and the value of the collateral are monitored on an ongoing basis. GATX
maintains an allowance for possible losses to provide for potential losses that
could arise should customers become unable to discharge their obligations to
GATX. The Company did not derive revenues in excess of 10% of consolidated
revenues from any one customer for any of the three years ended December 31,
2004, 2003 and 2002.

82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OFF-BALANCE SHEET ITEMS

Unconditional Purchase Obligations -- At December 31, 2004, GATX's
unconditional purchase obligations of $522.3 million consisted primarily of
railcar commitments and scheduled aircraft acquisitions over the period of 2005
through 2008. GATX had commitments of $327.8 million related to the committed
railcar purchase program, entered into in 2002. GATX also had commitments of
$74.1 million for orders and options for interests in two new aircraft to be
delivered in 2006. Unconditional purchase obligations also include $115.1
million of other rail related commitments. GATX has an obligation under the
terms of the DEC acquisition agreement to cause DEC to make qualified
investments of $23.9 million by December 31, 2005. To the extent there are no
satisfactory investment opportunities during 2005, DEC may invest in long-term
securities for purposes of future investment.

Commercial Commitments -- 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, market and equipment
risk; accordingly, GATX evaluates its commitments and other contingent
obligations using techniques similar to those used to evaluate funded
transactions.

The following table shows GATX's commercial commitments for continuing
operations (in millions):

At December 31, 2004, the maximum potential amount of lease, loan or
residual value guarantees under which GATX or its subsidiaries could be required
to perform was $507.0 million. The related carrying value of the guarantees on
the balance sheet, including deferred revenue primarily associated with residual
value guarantees entered into prior to the effective date of FASB Interpretation
No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness to Others, was a
liability of $3.1 million. The expirations of these guarantees range from 2005
to 2017. Any liability resulting from GATX's performance pursuant to the
residual value guarantees will be reduced by the value realized from the
underlying asset or group of assets. Historically, gains associated with the
residual value guarantees have exceeded any losses incurred and are recorded in
asset remarketing income in the consolidated statements of income. Based on
known facts and current market conditions, management does not believe that the
asset residual value guarantees will result in any significant adverse financial
impact to the Company. Accordingly, the Company has not recorded any accrual for
contingent losses with respect to the residual value guarantees as of December
31, 2004. GATX believes these asset residual value guarantees will likely
generate future income in the form of fees and residual sharing proceeds.

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 to the extent such proceeds are in excess of the amount guaranteed
(which is recorded when realized).

83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

GATX and its subsidiaries are also parties to outstanding letters of credit
and bonds primarily related to workers' compensation and general liability
insurance coverages. In GATX's past experience, virtually no claims have been
made against these financial instruments. At December 31, 2004, 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.

OTHER CONTINGENCIES

Environmental -- The Company's operations are subject to extensive federal,
state and local environmental regulations. GATX's operating procedures include
practices to protect the environment from the risks inherent in railcar leasing,
which frequently involve transporting chemicals and other hazardous materials.
Additionally, some of GATX's land holdings, including previously owned
properties, are and have been used for industrial or transportation-related
purposes or leased to commercial or industrial companies whose activities may
have resulted in discharges onto the property. As a result, GATX is subject to
environmental cleanup and enforcement actions. In particular, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA), also known as the Superfund law, as well as similar state laws
generally impose joint and several liability for cleanup and enforcement costs
on current and former owners and operators of a site without regard to fault or
the legality of the original conduct. GATX has been notified that it is a
potentially responsible party (PRP) for study and cleanup costs at six (6)
Superfund sites for which investigation and remediation payments are or will be
made or are yet to be determined (the Superfund sites) and, in many instances,
is one of several PRPs. In addition, GATX may be considered a PRP under certain
other laws. Accordingly, under CERCLA and other federal and state statutes, GATX
may be held jointly and severally liable for all environmental costs associated
with a particular site. If there are other PRPs, GATX generally participates in
the cleanup of these sites through cost-sharing agreements with terms that vary
from site to site. Costs are typically allocated based on relative volumetric
contribution of material, the amount of time the site was owned or operated,
and/or the portion of the total site owned or operated by each PRP.

At the time a potential environmental issue is identified, initial reserves
for environmental liability are established when such liability is probable and
a reasonable estimate of associated costs can be made. Environmental costs are
based on the estimated costs associated with the type and level of investigation
and/or remediation activities that our internal environmental staff (and where
appropriate, independent consultants) have determined to be necessary to comply
with applicable laws and regulations and include initial site surveys and
environmental studies of potentially contaminated sites as well as costs for
remediation and restoration of sites determined to be contaminated. In addition,
GATX has provided indemnities for potential environmental liabilities to buyers
of divested companies. In these instances, reserves are based on the scope and
duration of the respective indemnities together with the extent of known
contamination. Estimates are periodically reviewed and adjusted as required to
reflect additional information about facility or site characteristics or changes
in regulatory requirements. GATX conducts an ongoing environmental contingency
analysis, which considers a combination of factors including independent
consulting reports, site visits, legal reviews, analysis of the likelihood of
participation in and the ability of other PRPs to pay for cleanup, and
historical trend analyses. GATX does not believe that a liability exists for
known environmental risks beyond what has been provided for in the environmental
reserve.

GATX is involved in a number of administrative and judicial proceedings and
other mandatory cleanup efforts at approximately eleven (11) sites, including
the Superfund sites, at which it is participating in the study or cleanup, or
both, of alleged environmental contamination. The Company recognized
environmental expense of $13.3 million in 2004 which consisted of a $15.5
million for the Staten Island property sold, offset

84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

by a Rail reserve reduction as a result of favorable resolution of certain
environmental matters. GATX did not recognize an environmental expense in 2003
or 2002. GATX paid $1.4 million, $3.4 million and $3.0 million during 2004, 2003
and 2002, respectively, for mandatory and unasserted claims cleanup efforts,
including amounts expended under federal and state voluntary cleanup programs.
GATX has recorded liabilities for remediation and restoration of all known sites
of $37.7 million at December 31, 2004, compared with $27.2 million at December
31, 2003. These amounts are included in other liabilities on GATX's balance
sheet. GATX's environmental liabilities are not discounted. GATX anticipates
that the majority of the accrued costs at December 31, 2004, will be paid over
the next five years and no individual site is considered to be material.

The Company did not materially change its methodology for identifying and
calculating environmental liabilities in the three years presented. There are
currently no known trends, demands, commitments, events or uncertainties that
are reasonably likely to occur and materially affect the methodology or
assumptions described above.

Recorded liabilities include GATX's best estimates of all costs for
remediation and restoration of affected sites, without reduction for anticipated
recoveries from third parties, and include both asserted and unasserted claims.
However, GATX's total cleanup costs at these sites cannot be predicted with
certainty due to various factors such as the extent of corrective actions that
may be required; evolving environmental laws and regulations; advances in
environmental technology, the extent of other parties' participation in cleanup
efforts; developments in ongoing environmental analyses related to sites
determined to be contaminated, and developments in environmental surveys and
studies of potentially contaminated sites. As a result, future charges to income
for environmental liabilities could have a significant effect on results of
operations in a particular quarter or fiscal year as individual site studies and
remediation and restoration efforts proceed or as new sites arise. However,
management believes it is unlikely any identified matters, either individually
or in the aggregate, will have a material adverse effect on GATX's results of
operations, financial position or liquidity.

Legal -- GATX and its subsidiaries have been named as defendants in a
number of other legal actions and claims, various governmental proceedings and
private civil suits arising in the ordinary course of business, including those
related to environmental matters, workers' compensation claims by GATX employees
and other personal injury claims. Some of the legal proceedings include claims
for punitive as well as compensatory damages. 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 for indemnity with
respect to asbestos-related claims filed against a former subsidiary has been
made against the Company under a limited indemnity given in connection with the
sale of such subsidiary. The number of these claims and the corresponding
demands for indemnity against the Company increased in the aggregate in 2004. It
is possible that the number of these claims could continue to grow and that the
cost of these claims could correspondingly increase in the future.

The amounts claimed in some of the above-described 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.

NOTE 17. 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, 2004, 57,477,201 shares were issued and 49,530,370 shares were
outstanding.

85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In August 2003, GATX completed a private offering of $125.0 million of
20-year, 5.0% senior unsecured convertible notes. The notes were convertible
into GATX Corporation common stock at an initial price of $23.69 per share. The
conversion price is subject to adjustment based on various factors, including
the dividend level on GATX's common stock and the trading price of the notes. As
a result of the reduction in GATX's dividend in 2004, the conversion price was
modified to $23.93 per share. Shares of common stock have been reserved for the
offering based on the maximum number of shares that could be issued pursuant to
the dividend adjustment provisions.

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 22,166,295 shares of common stock were reserved at December 31,
2004, for the following:

GATX's certificate of incorporation also authorizes five million shares of
preferred stock at a par value of $1.00 per share. At December 31, 2004 and
2003, 21,468 shares and 21,824 shares, respectively, 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 is convertible
at the option of the holder at any time into five shares of common stock. Each
share of such preferred stock may be called for redemption by GATX at any time
at $63 per share. In the event of GATX's liquidation, dissolution or winding up,
the holders of such preferred stock will be entitled to receive $60 per share
plus accrued and unpaid dividends to the date of payment. At December 31, 2004
and 2003, the aggregated liquidated preference of both series of preferred stock
was $1.3 million.

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.

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.

86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 18. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The change in components for accumulated other comprehensive income (loss)
are as follows (in millions):

NOTE 19. SUPPLEMENTAL CASH FLOW INFORMATION

The following tables summarize the components of portfolio proceeds and
discontinued operations reported on the consolidated statement of cash flows (in
millions):

PORTFOLIO PROCEEDS

87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DISCONTINUED OPERATIONS

Cash paid for interest and recovered for income taxes were as follows (in
millions):

Significant items resulting from investing or financing activities of the
Company that did not impact cash flows were (in millions):

In 2004, GATX completed the sale of GATX Technology (Technology) and $291.5
million of nonrecourse debt was assumed by the acquirer.

In 2003, GATX disposed of a leveraged lease commitment on passenger rail
equipment. $184.9 million of assets were sold, including $108.4 million of
restricted cash and $48.0 million of progress payments. In addition, $183.4
million of liabilities, primarily nonrecourse debt, were assumed by the
acquirer.

In 2002, the Company acquired KVG and assumed $56.0 million of debt.

NOTE 20. INCENTIVE COMPENSATION PLANS

The GATX Corporation 2004 Equity Incentive Compensation Plan as amended
(the 2004 Plan), provides for the granting of nonqualified stock options, stock
appreciation rights (SARs), and full value awards. An aggregate of 3,000,000
shares of common stock was authorized under the 2004 Plan as well as 493,349
shares available for additional awards under the 1995 Long-Term Incentive
Compensation Plan as amended (the 1995 Plan) as of April 26, 2004. As of
December 31, 2004, 3,215,501 shares were available for issuance under the 2004
Plan.

88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Nonqualified stock options may be granted for the purchase of common stock
for periods not longer than seven years from the date of grant, ten years for
options granted prior to 2004. The exercise price will not be less than the
higher of market value at date of grant or par value of the common stock.
Options vest and become exercisable commencing on a date no earlier than one
year from the date of grant and vesting is generally over a three-year period.
Dividend equivalents accrue on all stock options granted under the 2004 Plan and
are paid when the options vest. Dividend equivalents continue to be paid until
the options are exercised or cancelled.

SARs may be granted in tandem with a nonqualified stock option and entitle
the holder to receive the difference between the exercise price and the fair
market value at the time of exercise, either in shares of common stock, cash or
a combination thereof at GATX's discretion. Exercise of SARs result in the
cancellation of the underlying options. During 2004, no SARs were issued and
none were outstanding.

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 (Compensation Committee). In 2004, 515 shares of restricted
stock were released and converted to GATX common shares. During 2004, two awards
of restricted stock totaling 23,085 shares were granted and were outstanding as
of December 31, 2004. Compensation expense is recognized for these awards over
the vesting period.

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
February 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. In 2004, 2003 and 2002, 1,144, 14,972 and zero options,
respectively, were granted. As of December 31, 2004, 162,243 options remain
outstanding.

Performance-based restricted stock units (RSUs) may be granted to key
employees to focus attention on the achievement of GATX strategic objectives.
The units are converted to restricted common stock based on the achievement of
predetermined performance goals at the end of a specified performance period as
assessed by the Compensation Committee. Full vesting of the restricted shares
may then be subject to an additional service period, ending no later than the
third anniversary of the grant, absent the occurrence of certain events such as
retirement, death or disability. Recipients are credited with dividend
equivalents on the number of RSUs that are converted to restricted shares. They
are also entitled to vote shares of restricted common stock, but they are not
entitled to vote RSUs. In 2004, a total of 120,280 performance-based restricted
stock units were granted and 118,192 were outstanding at the end of the year.
Compensation expense is recognized for these awards over the vesting period.

Under the GATX Employee Stock Purchase Plan (ESPP), 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. GATX employees purchased 32,687 shares
and 47,591 shares in 2004 and 2003, respectively.

GATX has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, in accounting for its employee stock
options, including the options issued under the Exchange Stock Option Program.
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 2.

89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock options are outstanding under the 2004 Plan and the 1995 Plan. Data
with respect to stock options, including the Employee Stock Option Program
issued both from the 2004 Plan and the 1995 Plan, including the range of
exercise prices per share for 2004, 2003 and 2002, are set forth below:

NUMBER OF SHARES UNDER STOCK OPTION PLANS

NOTE 21. DISCONTINUED OPERATIONS

Consistent with GATX's strategy of focusing on the company's core
businesses, railcar and aircraft leasing, GATX sold its Technology business
during 2004. On June 30, 2004, GATX completed the sale of substantially all the
assets and related nonrecourse debt of Technology and its Canadian affiliate to
CIT Group Inc. for net proceeds of $234.1 million. Subsequently, the remaining
assets consisting primarily of interests in two joint ventures were sold by year
end. Financial data for the Technology segment has been segregated as
discontinued operations for all periods presented.

Technology's income from operations for the twelve months ended December
31, 2004 was $18.3 million, net of taxes of $11.8 million. Operating results
were favorably impacted by the suspension of depreciation on operating lease
assets associated with Technology's assets classified as held-for-sale during
the second quarter of 2004. The effect of ceasing depreciation was approximately
$14.3 million after-tax. The 2004 loss on the sale of the Technology segment was
$7.2 million. net of taxes of $4.8 million. The $7.2 million loss reflected a
write-off of $7.6 million of goodwill as well as sale-related expenses including
severance costs and losses on terminated leases. Technology's 2003 and 2002
operating results were $15.2 million and $4.7 million, net of

90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

taxes of $9.8 million and $2.6 million, respectively. Technology's operating
results included interest expense of $12.9 million, $24.5 million, and $40.7
million in 2004, 2003, and 2002 respectively. Debt balances and interest expense
were allocated to Technology based upon a fixed leverage ratio, expressed as a
ratio of debt to equity. Technology's leverage ratio was set at 1:1 (excluding
nonrecourse debt) for all reporting periods.

In 2002, GATX completed the divestiture of the former ISG segment. The ISG
segment was comprised of GATX Terminals Corporation (Terminals) and 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. 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. There was no operating activity at the ISG
segment during 2002-2004.

The following table summarizes the gross income, income before taxes and
the (loss) gain on sale of segment, net of tax, which has been reclassified to
discontinued operations for all periods presented (in millions):

NOTE 22. 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 announced intention
to exit the venture finance business and curtail investment at specialty
finance. The charge also included costs incurred as part of headcount reductions
related to an integration plan implemented to rationalize the workforce and
operations at DEC. The total charge included involuntary employee separation and
benefit costs of $14.7 million for 170 employees company-wide, as well as
occupancy costs of $2.2 million. The employee groups terminated included
professional and administrative staff. As of December 31, 2004, all of the
employee terminations were completed.

The following is the reserve activity for the year ended December 31, 2004
(in millions):

Reserve balance at 12/31/03................................. $ 2.6
Benefits paid............................................... (1.3)
Occupancy costs paid........................................ (.4)
Other adjustments........................................... .3
-----
Reserve balance at 12/31/04................................. $ 1.2
=====

During 2001, GATX recorded a pre-tax charge of $13.4 million related to its
2001 reduction in workforce. This reduction was part of GATX's 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 costs of $6.8 million for 147 employees
company-wide, as well as legal fees of $.5 million, occupancy costs of $5.1
million and other costs of $1.0 million. The employee groups terminated included
professional and administrative staff, including corporate personnel. As of
December 31, 2002, all of the employee terminations were completed.

91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is the reserve activity for the year ended December 31, 2004
(in millions):

Reserve balance at 12/31/03................................. $2.9
Occupancy costs paid........................................ (.8)
Other adjustments........................................... (.3)
----
Reserve balance at 12/31/04................................. $1.8
====

Management expects the Company's reserve balance at December 31, 2004
related to the reductions in workforce to be adequate. Remaining cash payments
of $3.0 million will be funded from ongoing operations and are not expected to
have a material impact on GATX's liquidity.

NOTE 23. 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.

GATX has issued two convertible securities, one in 2002 for $175.0 million
and the other in 2003 for $125.0 million. Shares underlying $175.0 million of
convertible securities issued in 2002 and the related interest expense
adjustment were excluded from the calculation of diluted earnings per share for
2002 and 2003 because of antidilutive effects. These securities are convertible
into common stock at a price of $34.09 per share, which would result in
5,133,471 common shares issued upon conversion.

Shares underlying $125.0 million of convertible securities issued in 2003
and the related interest expense were included in the calculation of diluted
earnings per share for 2004 and 2003 in accordance with the guidance provided in
EITF 04-08 more fully described in Note 2. Prior to the effective date of EITF
04-08 in September 2004, these shares and related interest expense were excluded
from the calculation of diluted earnings per share. As a result, diluted
earnings per share previously reported for 2003 and the first three quarters of
2004 have been restated. The impact to net income per diluted share was $.22 and
$.04 in 2004 and 2003, respectively. These securities are convertible into
common stock with a current conversion price of $23.93 per share, which would
result in 5,223,460 common shares issued upon conversion. The conversion price
is subject to adjustment based on various factors, including changes in the
dividend on GATX's common stock. The conversion into common stock is subject to
a number of contingencies including the market price of GATX's common stock and
the trading price of the notes.

92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

93

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

(a) The Company had approximately 2.1 million, 3.8 million, and 2.5 million
stock options outstanding at December 31, 2004, 2003, and 2002,
respectively, which have been excluded from the computation of diluted
earnings per share because of anti-dilutive effects.

(b) Conversion of convertible securities that were issued in February 2002 were
excluded from the calculations of diluted earnings in 2002 and 2003 because
of anti-dilutive effects.

(c) Diluted earnings per share for the year ended December 31, 2003 has been
restated to reflect the impact of EITF 04-8. See Note 2 for more
information.

NOTE 24. FOREIGN OPERATIONS

GATX has a number of investments in subsidiaries and affiliated companies
that are located in or derive revenues from various foreign countries. GATX's
foreign identifiable assets include investments in affiliated companies as well
as fully consolidated railcar operations in Canada, Mexico, Poland, Austria and
Germany, and foreign leases, loans and other investments. Foreign entities
contribute significantly to GATX's share of affiliates' earnings. Revenues and
identifiable assets are determined to be foreign or U.S.-based depending upon
the location of the customer; classification of affiliates' earnings as foreign
or domestic is made based upon the office location of the affiliate. The Company
did not derive revenues in excess of 10% of consolidated revenues from any one
foreign country for the years ended December 31, 2004 and 2003. In 2002, Canada
contributed 12% to total GATX's revenues and share of affiliates' earnings from
continuing operations. In addition, no foreign country represented more than 10%
of GATX's identifiable assets for continuing operations in 2004, 2003 or 2002.

94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The table below is a summary GATX's continuing operations including
subsidiaries and affiliated companies (in millions):

Foreign cash flows generated are used to meet local operating needs and for
reinvestment. For non-U.S. 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 income
(loss).

NOTE 25. 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 depicts the
profitability, financial position and capital expenditures 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 services primarily through three operating segments: Rail,
Air and Specialty. Other is comprised of corporate results (including selling,
general and administrative (SG&A) expense and interest expense not allocated to
segments), and the results of American Steamship Company (ASC), a Great Lakes
shipping company.

Rail is principally engaged in leasing rail equipment, including tank cars,
freight cars and locomotives. Rail primarily provides full-service leases under
which Rail maintains and services the railcars, pays ad valorem taxes, and
provides other ancillary services. Rail also provides net leases, under which
the lessee is responsible for maintenance, insurance and taxes.

Air is principally engaged in leasing narrowbody aircraft to commercial
airlines and others throughout the world. Air typically provides net leases
under which the lessee is responsible for maintenance, insurance and taxes.

Specialty is comprised of the former specialty finance and venture finance
business units, which are now managed as one operating segment. Specialty's
portfolio consists primarily of leases and loans, frequently including interests
in an asset's residual value, and joint venture investments involving a variety
of underlying asset types, including marine, aircraft and other diversified
investments.

95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Other is comprised of corporate results, including selling, general and
administrative expense (SG&A) and interest expense not allocated to segments,
and the results of ASC, a Great Lakes shipping company.

Management, evaluates the performance of each segment based on several
measures, including net income. These results are used to assess performance and
determine resource allocation among the segments.

GATX allocates corporate SG&A expenses to the segments. Corporate SG&A
expenses relate to administration and support functions performed at the
corporate office. Such expenses include information technology, corporate SG&A,
human resources, legal, financial support and executive costs. Directly
attributable expenses are generally allocated to the segments and shared costs
are retained in Other. Amounts allocated to the segments are approximated based
on management's best estimate and judgment of direct support services.

Debt balance and interest expense were allocated based upon a fixed
leverage ratio for each individual operating segment across all reporting
periods, expressed as a ratio of debt to equity. Rail's leverage ratio was set
at 5:1, Air's leverage ratio was set at 4:1 and Specialty's leverage ratio was
set at 4:1. Any GATX debt and related interest expense that remained after this
allocation methodology was assigned to Other in each period. Management believes
this leverage and interest expense allocation methodology gives an accurate
indication of each operating segment's risk-adjusted financial return.

The following tables present certain segment data for the years ended
December 31, 2004, 2003 and 2002 (in millions):

96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATED QUARTERLY FINANCIAL DATA
(UNAUDITED)

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

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

(B) 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.

(C) Financial data for the Technology segment has been segregated as
discontinued operations for all periods presented. As a result, amounts
have been restated from Form 10-Q filed with the SEC for the quarterly
period ended March 31, 2004.

(D) Amounts shown as diluted earnings per share in the first, second and third
quarters of 2004 and the third and fourth quarters of 2003 have been
restated from amounts previously reported to reflect the impact of EITF
04-8. See Note 2 to the consolidated financial statements.

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

98

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

MANAGEMENT'S REPORT REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND
PROCEDURES

The Company's management, with the participation of its principal executive
and principal financial officers, have conducted an evaluation of the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934 (the "Exchange Act")). Based on such
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
have concluded that as of the end of the period covered by this annual report,
the Company's disclosure controls and procedures were effective.

MANAGEMENT'S REPORT REGARDING THE EFFECTIVENESS OF INTERNAL CONTROL AND
PROCEDURES

The Company's management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) of the Exchange Act for the Company. The Company's internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. The Company's internal control over financial reporting
includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over a financial
reporting may not prevent or detect misstatements. In addition, projections of
any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate as a result of changes in conditions, or that the
degree of compliance with the applicable policies and procedures may
deteriorate.

The Company's management, with the participation of its principal executive
and principal financial officers, has conducted an evaluation of the Company's
internal control over financial reporting as of the end of the period covered by
this annual report based on the framework in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Such evaluation included reviewing the documentation of the
Company's internal controls, evaluating the design effectiveness of the internal
controls and testing their operating effectiveness.

Based on such evaluation, the Company's management has concluded that as of
the end of the period covered by this annual report, the Company's internal
control over financial reporting was effective.

Ernst & Young LLP, the independent registered public accounting firm that
audited the financial statements included in this annual report has issued an
attestation report on the management's assessment of the Company's internal
control over financial reporting. That report appears below.

99

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER
FINANCIAL REPORTING

The Board of Directors and Shareholders of GATX Corporation

We have audited management's assessment, included in the accompanying
Management's Report Regarding the Effectiveness of Internal Control and
Procedures, that GATX Corporation maintained effective internal control over
financial reporting as of December 31, 2004, based on criteria established in
Internal Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). GATX Corporation's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the company's
internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that GATX Corporation maintained
effective internal control over financial reporting as of December 31, 2004, is
fairly stated, in all material respects, based on the COSO criteria. Also, in
our opinion, GATX Corporation maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2004, based on the
COSO criteria.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheets as of December 31, 2004 and 2003, and the related consolidated statements
of income, changes in shareholders' equity, cash flows, and comprehensive income
for each of the three years in the period ended December 31, 2004 and the
financial statement schedules listed in the index at Item 15(a) of GATX
Corporation and our report dated March 4, 2005 expressed an unqualified opinion
thereon.

ERNST & YOUNG LLP

Chicago, Illinois
March 4, 2005
100

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No change in the Company's internal control over financial reporting (as
such term is defined above) that occurred during the fiscal quarter ended
December 31, 2004 has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this item regarding directors, the Company's Code
of Ethics and the Audit Committee Financial Expert is contained in sections
entitled "Nominees For Directors," "Additional Information Concerning Nominees,"
"Board of Directors" and "Audit Committee Report" in the GATX Proxy Statement
dated March 21, 2005, 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 21, 2005, which sections are incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

EQUITY COMPENSATION PLAN INFORMATION (AS OF DECEMBER 31, 2004):

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

(1) This number includes stock options granted under plans as follows: the 2004
Equity Incentive Plan ("2004 Plan") (533,844); the 1995 Long-Term Incentive
Compensation Plan ("1995 Plan") (3,316,067); the Employee Stock Purchase
Plan ("ESPP") (32,687); the Directors' Deferred Stock Plan (71,797); the
Directors' Deferred Fee Plan (20,212). Stock options awarded to employees
for the purchase of shares of Common Stock were granted at the fair market
value of the shares on the date of grant, generally have a 7-year exercise
period (10 years if granted prior to 2004) and become exercisable one-half
on the anniversary of grant, one-quarter on the second anniversary and
one-quarter on the third anniversary. Awards of restricted stock granted
under the 1995 Plan were established by the Compensation Committee at the
time of issuance. This number includes units of phantom stock which are not
included in the weighted average price calculation in column (b).

(2) There were 3,215,501 shares available for grant under the 2004 Plan and
3,371,701 shares available under the ESPP. At the time the ESPP was
approved, the plan provided for awards of up to 247,167 shares per year for
a period of 15 years. The plan has been terminated effective January 1, 2005
and participants shall have 14 months in which to close their accounts.
Participant shares still held by the plan are listed in (a) above under
shareholder approved plans.

101

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information required by this item regarding fees paid to Ernst & Young is
contained in sections entitled "Audit Fees," "Audit Related Fees," "Tax Fees,"
and "All Other Fees" in the GATX Proxy Statement dated March 21, 2005, which
sections are incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) 1. Financial Statements

2. Financial Statement Schedules:

Schedule I Condensed Financial Information of Registrant.... 96

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.

102

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 and
Chief Executive Officer
March 14, 2005

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

/s/ RONALD H. ZECH Chairman and
------------------------------------------------------ Chief Executive Officer
Ronald H. Zech (Principal Executive
March 14, 2005 Officer)

/s/ BRIAN A. KENNEY President and Director
------------------------------------------------------
Brian A. Kenney
March 14, 2005

/s/ ROBERT C. LYONS Vice President
------------------------------------------------------ and Chief Financial Officer
Robert C. Lyons (Principal Financial
March 14, 2005 Officer)

/s/ WILLIAM M. MUCKIAN Vice President, Controller
------------------------------------------------------ and Chief Accounting Officer
William M. Muckian (Principal Accounting
March 14, 2005 Officer)

Rod F. Dammeyer Director
James M. Denny Director
Richard Fairbanks Director
Deborah M. Fretz Director
Miles L. Marsh Director
Mark G. McGrath Director
Michael E. Murphy Director
Casey J. Sylla Director

By /s/ RONALD J. CIANCIO
------------------------------------------------
Ronald J. Ciancio
(Attorney in Fact)
March 14, 2005

103

SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT

GATX CORPORATION
(PARENT COMPANY)

STATEMENTS OF INCOME

104

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

GATX CORPORATION
(PARENT COMPANY)

BALANCE SHEETS

105

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

GATX CORPORATION
(PARENT COMPANY)

STATEMENTS OF CASH FLOWS

106

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

GATX CORPORATION
(PARENT COMPANY)

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

107

EXHIBIT INDEX

108

109

110

111