================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549-1004

                               -------------------
                                    Form 10-K
                               -------------------

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

                  For the fiscal year ended December 31, 1996

                                       OR

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

              For the transition period from        to 

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

                          Commission file number 1-1861

                          The CIT Group Holdings, Inc.
             (Exact name of registrant as specified in its charter)

                   Delaware                                    13-2994534
         (State or other jurisdiction                       (I.R.S. Employer
      of incorporation or organization)                    Identification No.)

1211 Avenue of the Americas, New York, New York                   10036
   (Address of principal executive offices)                    (Zip Code)

       Registrant's telephone number, including area code: (212) 536-1950
                               -------------------
           Securities registered pursuant to Section 12(b) of the Act:

                                                    Name of each exchange on
        Title of each class                               which registered
  -------------------------------                 -----------------------------
  8 3/4% Notes Due April 15, 1998 ..............     New York Stock Exchange
  5 7/8% Notes Due October 15, 2008 ............     New York Stock Exchange

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

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X  No ____.
     
     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X] 

     State the aggregate market value of the voting stock held by non-affiliates
     of the Registrant.

     None of the voting stock of the Registrant is held by non-affiliates of the
     Registrant.  80% of the  voting  stock  of the  Registrant  is owned by The
     Dai-Ichi  Kangyo Bank,  Limited and 20% by CBC Holding  (Delaware)  Inc., a
     wholly-owned subsidiary of The Chase Manhattan Corporation.

     Indicate  the  number of  shares  outstanding  of each of the  Registrant's
classes of common stock, as of the latest practicable date.

                   March 1, 1997--Common Stock--1,000 Shares

     List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g.,  Part I, Part II,  etc.) into which the document is
incorporated:  (1) any  annual  report  to  security  holders;  (2) any proxy or
information  statement;  and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. 

                                      None

================================================================================

<PAGE>

                               TABLE OF CONTENTS


 Form 10-K
  Item No.                       Name of Item                               Page
  --------                       ------------                               ----

                                     Part I

Item  1.  Business .........................................................  1
               General .....................................................  1
               Business and Services .......................................  1
               Industry Concentration ......................................  3
               Competition .................................................  3
               Regulation ..................................................  3
Item  2.  Properties ......................................................   4
Item  3.  Legal Proceedings ...............................................   4
Item  4.  Submission of Matters to a Vote of Security Holders .............   4

                                    Part II

Item  5.  Market for Registrant's Common Equity
               and Related Stockholder Matters ............................   5
Item  6.  Selected Financial Data .........................................   6
Item  7.  Management's Discussion and Analysis of
               Financial Condition and Results of Operations ..............  11
Item  8.  Financial Statements and Supplementary Data .....................  26
Item  9.  Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure ........................  49

                                   Part III

Item  10. Directors and Executive Officers of the Registrant ..............  50
Item  11. Executive Compensation ..........................................  52
               Long-Term Incentive Plan ...................................  53
               Defined Benefit Plans ......................................  53
               Employment Agreements ......................................  55
               Termination and Change-in-Control Arrangements .............  56
Item  12. Security Ownership of Certain Beneficial Owners and Management ..  57
Item  13. Certain Relationships and Related Transactions ..................  57

                                    Part IV

Item  14. Exhibits, Financial Statement Schedule and Reports on Form 8-K ..  58

<PAGE>

                                     PART I

Item 1.  Business

GENERAL

     The CIT Group Holdings,  Inc. (the "Corporation"),  a Delaware corporation,
is a successor to a company founded in St. Louis, Missouri on February 11, 1908.
It has its principal executive offices at 1211 Avenue of the Americas, New York,
New York 10036,  and its telephone  number is (212) 536-1950.  The  Corporation,
operating  directly or through its subsidiaries  primarily in the United States,
engages in  financial  services  activities  through a  nationwide  distribution
network.  The  Corporation  provides  financing  primarily on a secured basis to
commercial  borrowers,  ranging from  middle-market to larger companies,  and to
consumers. While these secured lending activities reduce the risk of losses from
extending credit,  the Corporation's  results of operations can also be affected
by other factors, including general economic conditions, competitive conditions,
the level and volatility of interest rates,  concentrations  of credit risk, and
government  regulation and  supervision.  The  Corporation  does not finance the
development or construction of commercial real estate. The Corporation has eight
strategic  business  units which offer  commercial and consumer  financing,  and
factoring products and services to clients.  The Corporation had 2,950 employees
at December 31, 1996, up from 2,750 employees at December 31, 1995.

     The Dai-Ichi Kangyo Bank,  Limited ("DKB") owns eighty percent (80%) of the
issued and outstanding shares of common stock of the Corporation.  DKB purchased
a  sixty  percent  (60%)  common  stock   interest  in  the   Corporation   from
Manufacturers  Hanover  Corporation  ("MHC") at  year-end  1989 and  acquired an
additional  twenty  percent (20%) common stock  interest in the  Corporation  on
December  15,  1995 from CBC  Holding  (Delaware)  Inc.  (formerly  known as MHC
Holdings (Delaware) Inc.) ("CBC Holding"), a wholly owned subsidiary of Chemical
Banking Corporation ("CBC"). The Chase Manhattan  Corporation ("Chase") acquired
CBC  Holding as part of the merger  between  Chase and CBC on March 31, 1996 and
continues to own the remaining twenty percent (20%) common stock interest in the
Corporation through CBC Holding. DKB has an option which expires on December 15,
2000 to purchase the remaining  twenty  percent (20%) common stock interest from
Chase.

     In accordance with a stockholders' agreement among DKB, Chase, as successor
to CBC, and the  Corporation,  dated as of December  29, 1989,  as amended by an
Amendment   to   Stockholders'   Agreement,   dated   December   15,  1995  (the
"Stockholders' Agreement"),  one nominee of the Board of Directors is designated
by Chase. The Stockholders' Agreement also contains restrictions with respect to
the transfer of the stock of the Corporation to third parties.

BUSINESS AND SERVICES

Commercial Lending and Leasing

Business Credit

     The CIT  Group/Business  Credit offers  revolving and term loans secured by
accounts  receivable,  inventories  and fixed assets to medium and  larger-sized
companies.   Such  loans  are  used  by  clients   primarily  for  acquisitions,
refinancings,   debtor-in-possession   and   turnaround   financings.   The  CIT
Group/Business  Credit  sells  participation  interests  in such  loans to other
lenders and will  occasionally  purchase  participation  interests in such loans
originated  by other  lenders.  Business is  developed  through  direct  calling
efforts  and  through  other  sources  originated  by new  business  development
officers.  The CIT Group/Business Credit is headquartered in New York City, with
sales and customer service offices in New York,  Chicago,  Dallas,  Los Angeles,
Atlanta and Charlotte.

Capital Equipment Financing

     The CIT Group/Capital Equipment Financing specializes in customized secured
financing and leasing for  medium-sized  and large  corporations  in the form of
single investor leases, debt and equity portions of leveraged leases,  operating
leases,  direct  loans,  and sale and leaseback  arrangements  for major capital
equipment and other income producing assets. Such business is developed directly
with  large  companies  and  through  third  parties.  To  strategically  target

                                       1
<PAGE>


marketing efforts on the aerospace,  rail,  maritime and energy industries,  The
CIT  Group/Capital  Equipment  Financing,  on January 1, 1997,  transferred $1.5
billion of equipment  financing  and leasing  assets,  along with certain of its
operations  and  employees,  to The  CIT  Group/Industrial  Financing.  The  CIT
Group/Capital Equipment Financing is headquartered in New York City, with a full
service office in New York and additional sales coverage in certain key markets.

Credit Finance

     The CIT  Group/Credit  Finance offers revolving and term loans to small and
medium-sized  companies secured by accounts receivable,  inventories,  and fixed
assets.  Such loans are used by clients for working  capital,  in  refinancings,
acquisitions,  leveraged buyouts, reorganizations,  restructurings,  turnarounds
and Chapter 11 financing and confirmation  plans.  Business is developed through
direct  calling  efforts and through  other  sources  developed  by new business
development officers.  The CIT Group/Credit Finance is headquartered in New York
City,  with sales and  customer  service  offices in New York,  Chicago  and Los
Angeles and loan production offices in five other cities.

Industrial Financing

     The CIT  Group/Industrial  Financing offers secured equipment financing and
leasing  products,  including direct secured loans,  leases,  revolving lines of
credit,  sale and  leaseback  arrangements,  vendor  financing  and  specialized
wholesale and retail  financing for distributors  and  manufacturers,  portfolio
acquisition,  business  aircraft  financing,  third party  financing and medical
equipment  financing.  As described above, the $1.5 billion  portfolio  transfer
from The CIT  Group/Capital  Equipment  Financing  and  related  realignment  of
staffing will create a single, nationwide equipment financing franchise. The CIT
Group/Industrial  Financing is  headquartered  in Livingston,  New Jersey with a
network of offices in twenty-two cities,  including Tempe,  Arizona and Atlanta,
Georgia, which also serve as regional and customer service offices.

Commercial Services

     The CIT Group/Commercial Services, one of the largest factors in the United
States,  offers a full range of domestic  and  international  customized  credit
protection and lending  services.  These  services  include  factoring,  working
capital and term loans,  receivable  management  outsourcing,  bulk purchases of
accounts receivable,  import and export financing and letter of credit programs.
The CIT  Group/Commercial  Services is headquartered in New York City, with full
service offices in New York, Los Angeles, Dallas and Charlotte and sales offices
in Miami and Hong Kong.  Bookkeeping  and collection  functions are located in a
service center in Danville, Virginia.

Consumer Related  Lending

Consumer Finance

     The CIT  Group/Consumer  Finance  offers loans and lines of credit  secured
primarily by first or second  mortgages  on  residential  real  estate.  The CIT
Group/Consumer  Finance  originates  business through various channels including
direct marketing to consumers,  mortgage brokers and correspondent institutional
relationships.  This business is  headquartered  in Livingston,  New Jersey with
twenty-five offices servicing brokers and consumers in over forty states.  Three
regional  correspondent  offices  purchase loans from third parties.  A national
home  equity  center  engages in  nationwide  direct  marketing.  Servicing  and
collection  support is provided by The CIT  Group/Sales  Financing asset service
center located in Oklahoma City, Oklahoma and by The CIT Group/Consumer  Finance
quality control and document center located in Marlton, New Jersey.

Sales Financing

     The CIT Group/Sales Financing,  working through dealers,  manufacturers and
brokers provides retail secured financing on a nationwide basis for the purchase
of recreational  vehicles,  manufactured housing and recreational boats. The CIT
Group/Sales  Financing  also  purchases  portfolios  of these assets from banks,
savings and loans,  investment banks and others,  offers to manufacturers retail
and wholesale  "private label" financing  programs,  and provides  servicing for
portfolios owned by other financial institutions,  U.S. government agencies, and
securitization  trusts.  The  CIT  Group/Sales  Financing  is  headquartered  in


                                       2
<PAGE>

Livingston,  New Jersey with an asset service center in Oklahoma City, Oklahoma,
and covers the United  States  from six  regional  business  centers  located in
Atlanta, Boston, Kansas City, Sacramento, Oklahoma City and Seattle.

Other

Equity Investments and Venture Capital

     The CIT Group/Equity  Investments and its subsidiary The CIT  Group/Venture
Capital  originate  and  participate  in merger  and  acquisition  transactions,
purchasing   private  equity  and  equity-related   securities,   and  arranging
transaction  financing.  This unit also invests in emerging growth opportunities
in selected  industries,  including the life sciences,  information  technology,
communications  and  consumer  products.  Business is developed  through  direct
solicitation,  or through  referrals from  investment  banking firms,  financial
intermediaries, or the Corporation's other business units. The CIT Group/Venture
Capital is a federal  licensee under the Small Business  Investment Act of 1958.
The  CIT  Group/Equity   Investments  and  The  CIT  Group/Venture  Capital  are
headquartered in Livingston, New Jersey.

Multi-National Marketing

     Supplementing  the  Corporation's   marketing  efforts,  the  Corporation's
Multi-National  Marketing  Group  promotes  the  services  of the  Corporation's
various business units to the U.S.  subsidiaries of foreign corporations in need
of asset-based  financing.  Business is developed through referrals from DKB and
through direct calling efforts. The Multi-National Marketing Group is located in
New York City.

INDUSTRY CONCENTRATION

     See the  "Industry  Composition"  and  "Commercial  Airlines"  sections  of
"Financing and Leasing Assets Concentrations" in Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations.

COMPETITION

The  business  in which the  Corporation  engages  is highly  competitive,  with
business developed primarily on the basis of customizing  transaction structure,
client service and relationships,  and payment terms. The Corporation is subject
to competition from many financial  institutions,  including finance  companies,
banks, leasing companies and investment banks.

     The interest rates charged by the  Corporation  for the various  classes of
financing  and leasing  assets  vary  depending  upon the credit  quality of the
borrower,  the amount and  maturity  of the loan,  the costs of  servicing,  the
income  tax  consequences  of the  transaction,  the  cost of  borrowing  to the
Corporation,  and, to a lesser degree,  state usury laws and other  governmental
regulations,  when applicable.  The Corporation's  finance receivables have both
variable  rates and fixed  rates of  interest.  Variable  rate loans  reprice in
accordance  with various agreed upon indices,  usually a published  reference or
prime interest rate.

REGULATION

     DKB is a bank  holding  company  within  the  meaning  of the Bank  Holding
Company  Act of 1956 (the  "Act"),  and is  registered  as such with the Federal
Reserve Board. As a result,  the Corporation is subject to certain provisions of
the Act.  In  general,  the Act limits the  activities  in which a bank  holding
company  and its  subsidiaries  may engage to those of banking  or  managing  or
controlling  banks  or  performing   services  for  their  subsidiaries  and  to
continuing  activities  which the Federal Reserve Board has determined to be "so
closely  related to banking or managing or  controlling  banks as to be a proper
incident  thereto." The  Corporation's  current  principal  business  activities
constitute permissible activities for a subsidiary of a bank holding company.

     The operations of the  Corporation  and its  subsidiaries  are subject,  in
certain instances, to supervision and regulation by governmental authorities and
may be  subject  to  various  laws and  judicial  and  administrative  decisions
imposing various  requirements and  restrictions,  including among other things,
regulating credit granting  activities,  establishing maximum interest rates and
finance  charges,   regulating   customers'   insurance   coverages,   requiring
disclosures  to  customers,   governing   secured   transactions,   and  setting


                                       3
<PAGE>

collection,  repossession,  and  claims  handling  procedures  and  other  trade
practices.  In most states the consumer  sales finance and loan business and the
consumer mortgage loan and line of credit businesses are subject to licensing or
regulation. In some states the industrial finance business is subject to similar
licensing  or  regulation.  The consumer  mortgage,  home equity line of credit,
sales  finance,   and  loan   businesses,   including  those  conducted  by  the
Corporation,  are also subject to a number of Federal  statutes,  including  the
Federal  Consumer Credit  Protection  Act, which  requires,  among other things,
disclosure of the finance charge in terms of an annual  percentage rate, as well
as the total dollar cost.

     In the judgment of management,  existing  statutes and regulations have not
had a materially adverse effect on the business conducted by the Corporation and
its subsidiaries.  However,  it is not possible to forecast the nature of future
legislation,  regulations,  judicial decisions, orders, or interpretations,  nor
their impact upon the future business, earnings or otherwise, of the Corporation
and its subsidiaries.

Item 2.  Properties.

     The  operations  of the  Corporation  and its  subsidiaries  are  generally
conducted in leased office space located in numerous cities and towns throughout
the United  States.  Such leased  office  space is suitable and adequate for the
needs of the Corporation.  The Corporation  utilizes, or plans to utilize in the
foreseeable future,  substantially all of its leased office space. For a summary
of the Corporation's past rental expense and future minimum rentals, see Item 8.
Financial Statements and Supplementary Data, "Note 13--Lease Commitments."

Item 3.  Legal Proceedings.

     Various claims and actions  against the  Corporation  and its  subsidiaries
arise  from time to time in the  normal  course of  business.  A number of these
actions,  some of which purport to be class actions,  are now pending.  While no
prediction  can be made as to the  ultimate  outcome of any  particular  action,
management  believes that meritorious  defenses are generally  available and the
aggregate  liability,  if any,  likely to result  therefrom  will not materially
affect the consolidated  financial position,  results of operations or liquidity
of the Corporation.

Item 4.  Submission of Matters to a Vote of Security Holders.

     No matters were  submitted to a vote of security  holders during the fourth
quarter of 1996.


                                       4
<PAGE>

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

     The outstanding common stock of the Corporation is owned 80% by DKB and 20%
by CBC Holding.  There is no public trading market for the Corporation's  common
stock.

     Commencing with the 1996 second quarter,  the Corporation  operates under a
policy  requiring the payment of dividends by the  Corporation  equal to and not
exceeding 30% of net operating  earnings on a quarterly basis.  Previously,  the
Corporation's  dividend  policy  required  payment  of  dividends  of 50% of net
operating  earnings on a quarterly basis. Such dividends are paid to DKB and CBC
Holding based upon their respective stock ownership in the Corporation.

     On December 24, 1996, with consent of the Corporation's  stockholders,  the
Corporation paid a special dividend in the aggregate amount of $165.0 million to
its stockholders.  Each stockholder  immediately contributed an aggregate amount
equal to the special dividend to the Corporation as additional paid-in-capital.

     The  Corporation  intends to  continue  to operate  under the 30%  dividend
policy as set forth  above.  Below are the  dividends  paid  during the past two
years:

  Dividends Paid                                           1996          1995
  -------------                                            ----          ----
                                                         Amounts in Millions
Regular Dividends
   First Quarter ..........................         $   37.9          $   26.2
   Second Quarter .........................             22.5              28.6
   Third Quarter ..........................             19.7              29.0
   Fourth Quarter .........................             18.8              20.3
                                                      ------            ------
         Sub-total ........................             98.9             104.1
   Special Dividend .......................            165.0               --
                                                      ------            ------
         Total ............................         $  263.9          $  104.1
                                                      ======            ======

     The  fourth  quarter  dividend  is  usually  paid on the  basis  of  actual
operating  earnings  for October  and  November  and an  estimate  of  operating
earnings for December.  However, the dividend for the fourth quarter of 1995 was
paid on the basis of actual operating earnings for October and November only, in
order  to make  payment  prior  to the  sale by CBC  Holding  to DKB of a twenty
percent (20%) common stock interest in the Corporation. During the first quarter
of 1996, the  Corporation  declared and paid a dividend of $8.9 million based on
actual earnings for December 1995.

     Stockholders' equity at December 31, 1996 was $2.1 billion.  Under the most
restrictive   provisions  of  agreements   relating  to  outstanding  debt,  the
Corporation  may not,  without the  consent of the holders of such debt,  permit
stockholders' equity to be less than $300.0 million.


                                       5
<PAGE>

Item 6. Selected Financial Data.

     The following table sets forth selected consolidated  financial information
regarding the Corporation's  results of operations.  This information  should be
read in  conjunction  with  Item 7.  Management's  Discussion  and  Analysis  of
Financial  Condition and Results of Operations and Item 8. Financial  Statements
and Supplementary Data.

<TABLE>
<CAPTION>

                                                               Years Ended December 31,
                                            ------------------------------------------------------------------
                                             1996           1995          1994            1993          1992
                                            -------        -------       -------        -------        -------
                                                                   Dollar Amounts in Millions
<S>                                        <C>            <C>           <C>            <C>            <C>     
Finance income ........................... $1,646.2       $1,529.2      $1,263.8       $1,111.9       $1,091.5
Interest expense .........................    848.3          831.5         614.0          508.0          552.0
                                            -------        -------       -------        -------        -------
 Net finance income ......................    797.9          697.7         649.8          603.9          539.5
Fees and other  income ...................    244.1          184.7         174.4          133.8          113.8
                                            -------        -------       -------        -------        -------
 Operating revenue .......................  1,042.0          882.4         824.2          737.7          653.3
                                            -------        -------       -------        -------        -------
Salaries and employee benefits                223.0          193.4         185.8          152.1          137.9
General operating expenses ...............    170.1          152.3         152.1          130.1          123.7
                                            -------        -------       -------        -------        -------
Salaries and general operating
   expenses ..............................    393.1          345.7         337.9          282.2          261.6
Provision for credit losses ..............    111.4           91.9          96.9          104.9          103.2
Depreciation on operating
   lease equipment .......................    121.7           79.7          64.4           39.8           16.7
                                            -------        -------       -------        -------        -------
Operating expenses .......................    626.2          517.3         499.2          426.9          381.5
                                            -------        -------       -------        -------        -------
Income before provision for income
   taxes and extraordinary item ..........    415.8          365.1         325.0          310.8          271.8
Provision for income taxes ...............    155.7          139.8         123.9          128.5          105.3
                                            -------        -------       -------        -------        -------
Income before extraordinary item .........    260.1          225.3         201.1          182.3          166.5
Extraordinary item - loss on early
   extinguishment of  debt, net of
   income tax benefit ....................      --            --            --             --             (4.2)
                                            -------        -------       -------        -------        -------
Net income ...............................   $260.1      $   225.3     $   201.1      $   182.3      $   162.3
                                            =======        =======       =======        =======        =======
Ratio of earnings to fixed charges .......     1.49           1.44          1.52           1.60           1.49
</TABLE>

                                       6
<PAGE>

Statistical Data

     The following  table  presents the components of net income as a percentage
of average financing and leasing assets ("AEA").

<TABLE>
<CAPTION>

                                                               Years Ended December 31,
                                          -------------------------------------------------------------------
                                            1996           1995           1994           1993          1992
                                          --------       --------       -------       --------       --------
                                                              Dollar Amounts in Millions
<S>                                            <C>            <C>           <C>            <C>            <C>  
Finance income (a) .....................       9.90%          9.90%         9.19%          8.93%          9.40%
Interest expense (a) ...................       5.08           5.36          4.42           4.00           4.67
                                          ---------       --------      --------       --------       --------
 Net finance income ....................       4.82           4.54          4.77           4.93           4.73
Fees and other income ..................       1.48           1.20          1.28           1.09           1.00
                                          ---------       --------      --------       --------       --------
 Operating revenue .....................       6.30           5.74          6.05           6.02           5.73
                                          ---------       --------      --------       --------       --------
Salaries and employee benefits .........       1.35           1.26          1.36           1.24           1.21
General operating expenses .............       1.03           0.99          1.12           1.06           1.09
                                          ---------      ---------     ---------      ---------      ---------
Salaries and general operating
expenses ...............................       2.38           2.25          2.48           2.30           2.30
Provision for credit losses ............       0.67           0.60          0.71           0.86           0.90
Depreciation on operating lease
   equipment ...........................       0.74           0.52          0.47           0.32           0.15
                                           --------       --------      --------       --------       --------
Operating expenses .....................       3.79           3.37          3.66           3.48           3.35
                                           --------       --------      --------       --------       --------
Income before provision for income
   taxes and extraordinary item ........       2.51           2.37          2.39           2.54           2.38
Provision for income taxes .............       0.94           0.91          0.91           1.05           0.92
                                           --------       --------      --------       --------       --------
Income before extraordinary item .......       1.57           1.46          1.48           1.49           1.46
Extraordinary item - loss on early
   extinguishment of debt, net of
   income tax benefit ..................        --            --            --              --           (0.04)
                                           --------       --------      --------       --------       --------
Net income .............................       1.57%          1.46%         1.48%          1.49%          1.42%
                                           ========       ========      ========       ========       ========
Average financing and leasing
   assets (b) ..........................  $16,543.1      $15,377.5     $13,630.3      $12,262.9      $11,401.7
Average finance receivables ............  $16,352.2      $15,397.8     $13,819.9      $12,266.1      $11,675.6

</TABLE>

----------
(a)  Excludes  interest  income and  interest  expense  relating  to  short-term
     interest-bearing deposits.

(b)  Average  financing and leasing  assets is calculated by adding  averages of
     finance  receivables,  operating lease equipment,  and certain  investments
     included in other assets in the Consolidated Balance Sheets and subtracting
     average credit balances of factoring clients.


                                       7
<PAGE>


     The following table sets forth selected consolidated  financial information
regarding the Corporation's  financial position. This information should be read
in conjunction  with Item 7.  Management's  Discussion and Analysis of Financial
Condition  and  Results  of  Operations  and Item 8.  Financial  Statements  and
Supplementary Data.

<TABLE>
<CAPTION>

                                                                    At December 31,
                                         ---------------------------------------------------------------------
                                            1996           1995           1994          1993            1992
                                          ---------      ---------      ---------     ---------      ---------
                                                                Dollar Amounts in Millions
<S>                                       <C>            <C>           <C>            <C>            <C>      
Finance receivables ....................  $16,996.6      $15,795.5     $14,794.4      $12,624.1      $11,771.5
Reserve for credit losses ..............     (220.8)        (206.0)       (192.4)        (169.4)        (158.5)
Net finance receivables ................   16,775.8       15,589.5      14,602.0       12,454.7       11,613.0
Operating lease equipment, net .........    1,402.1        1,113.0         867.9          751.9          462.8
Total  assets ..........................   18,932.5       17,420.3      15,959.7       13,725.0       13,026.1
Capitalization:
   Commercial paper ....................    5,827.0        6,105.6       5,660.2        6,516.1        6,173.5
   Variable rate senior notes ..........    3,717.5        3,827.5       3,812.5        1,686.5        1,477.8
   Fixed rate senior notes .............    4,761.2        3,337.0       2,619.4        2,389.0        2,476.6
   Subordinated fixed rate notes .......      300.0          300.0         300.0          200.0          200.0
   Stockholders' equity ................    2,075.4        1,914.2       1,793.0        1,692.2        1,601.1
Dividends paid-regular .................       98.9          104.1         100.3           91.2           81.0
Dividends paid-special .................      165.0            --            --             --           150.0
Ratio of total debt to stockholders'
   equity ..............................     7.04-1         7.09-1        6.91-1         6.38-1         6.45-1

</TABLE>

                                       8
<PAGE>

Reserve for Credit Losses and Nonperforming Assets

     The following tables set forth information as of the dates shown concerning
the reserve  for credit  losses and the  carrying  value of  nonaccrual  finance
receivables  and assets  received in  satisfaction  of loans.  This  information
should be read in conjunction with the discussions of "Provision and Reserve for
Credit  Losses"  and "Past Due and  Nonaccrual  Finance  Receivables  and Assets
Received  in  Satisfaction  of Loans"  in Item 7.  Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations and Item 8. Financial
Statements and Supplementary Data.

<TABLE>
<CAPTION>

                                              1996          1995           1994          1993           1992
                                             ------         ------        ------         ------         ------
                                                               Dollar Amounts in Millions
<S>                                          <C>            <C>           <C>            <C>            <C>   
Balance, January 1 .....................     $206.0         $192.4        $169.4         $158.5         $155.1
                                             ------         ------        ------         ------         ------
Finance receivables charged-off ........     (122.2)         (96.9)        (95.4)        (105.6)        (110.2)
Recoveries on finance receivables
   previously charged-off ..............       20.7           19.7          11.2           11.2           11.9
                                             ------         ------        ------         ------         ------
      Net credit losses ................     (101.5)         (77.2)        (84.2)         (94.4)         (98.3)
                                             ------         ------        ------         ------         ------
Provision for credit losses ............      111.4           91.9          96.9          104.9          103.2
Portfolio acquisitions (dispositions),
   net .................................        4.9           (1.1)         10.3            0.4           (1.5)
                                             ------         ------        ------         ------         ------
   Net addition to reserve for credit 
      losses ...........................      116.3           90.8         107.2          105.3          101.7
                                             ------         ------        ------         ------         ------
Balance, December 31 ...................     $220.8         $206.0        $192.4         $169.4         $158.5
                                             ======         ======        ======         ======         ======
Reserve for credit losses as a percentage of:

   Finance receivables .................       1.30%          1.30%         1.30%          1.34%          1.35%
                                             ======         ======        ======         ======         ======
   Nonaccrual finance receivables ......      184.6%         147.7%        174.6%         121.0%          67.7%
                                             ======         ======        ======         ======         ======


                                                                       December 31,
                                            -------------------------------------------------------------------
                                              1996          1995           1994           1993           1992
                                             ------        ------         -------        ------         ------
                                                               Dollar Amounts in Millions

Nonaccrual finance receivables ............. $119.6         $139.5        $110.2         $139.9         $234.2
Nonaccrual finance receivables as a
   percentage of finance receivables .......   0.70%          0.88%         0.75%          1.11%          1.99%
Assets received in satisfaction of loans ... $ 47.9         $ 42.0        $ 86.5         $ 87.0         $ 93.8
Assets received in satisfaction of loans
 as a percentage of finance receivables ....   0.29%          0.27%         0.58%          0.69%          0.80%

Total nonperforming assets ................. $167.5         $181.5        $196.7         $226.9         $328.0
Total nonperforming assets as a
   percentage of finance receivables .......   0.99%          1.15%         1.33%          1.80%          2.79%
</TABLE>


                                       9
<PAGE>

Analysis of Past Due Finance Receivables and Net Credit Losses

     The following table sets forth information as of the dates shown concerning
finance  receivables  (net  of  unearned  finance  income),   past  due  finance
receivables and net credit losses incurred.

     Business units  comprising the commercial  caption include Business Credit,
Capital Equipment Financing,  Commercial Services, Credit Finance and Industrial
Financing.  Business units  comprising  the consumer  caption  include  Consumer
Finance (started de novo in December 1992) and Sales Financing. This information
should be read in  conjunction  with the  discussion of "Past Due and Nonaccrual
Finance  Receivables  and Assets  Received in  Satisfaction of Loans" in Item 7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations.

<TABLE>
<CAPTION>

                                                             Balance Past Due                           % to
                                                              60 Days or More                          Average
                                          Finance        ------------------------         Net          Finance
                                        Receivables       Amount          Percent    Credit Losses   Receivables
                                        -----------      --------         -------     -----------    -----------
                                                        Dollar Amounts in Millions
<S>                                       <C>               <C>             <C>         <C>               <C>  
December 31, 1996
Commercial ..........................     $13,757.6         $219.8          1.60%       $  80.4           0.59%
Consumer ............................       3,239.0           72.5          2.24%          21.1           0.75%
                                           --------         ------          ----         ------           ----
                                          $16,996.6         $292.3          1.72%       $ 101.5           0.62%
                                           ========         ======          ====         ======           ====
December 31, 1995
Commercial ..........................     $13,451.5         $228.7          1.70%       $  67.1           0.51%
Consumer ............................       2,344.0           35.2          1.50%          10.1           0.44%
                                           --------         ------          ----         ------           ----
                                          $15,795.5         $263.9          1.67%       $  77.2           0.50%
                                           ========         ======          ====         ======           ====
December 31, 1994
Commercial ..........................     $12,821.2         $166.8          1.30%       $  74.8           0.62%
Consumer ............................       1,973.2           10.1          0.51%           9.4           0.55%
                                           --------         ------          ----         ------           ----
                                          $14,794.4         $176.9          1.20%       $  84.2           0.61%
                                           ========         ======          ====         ======           ====
December 31, 1993
Commercial ..........................     $11,185.2         $199.8          1.79%       $  82.9           0.77%
Consumer ............................       1,438.9           16.3          1.13%          11.5           0.77%
                                           --------         ------          ----         ------           ----
                                          $12,624.1         $216.1          1.71%       $  94.4           0.77%
                                           ========         ======          ====         ======           ====
December 31, 1992
Commercial ..........................     $10,359.7         $318.0          3.07%       $  85.7           0.83%
Consumer ............................       1,411.8           17.8          1.26%          12.6           0.91%
                                           --------         ------          ----         ------           ----
                                          $11,771.5         $335.8          2.85%       $  98.3           0.84%
                                           ========         ======          ====         ======           ====
</TABLE>

                                       10
<PAGE>                         

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

1996 vs. 1995

Highlights

     For the year ended December 31, 1996, net income totaled $260.1 million, an
increase of 15.5 percent from the $225.3 million for 1995, and  represented  the
ninth consecutive  increase in annual earnings and the sixth consecutive year of
record  earnings.  The 1996 results  reflect  stronger  revenues from  increased
finance income, higher fees and other income, partially offset by an increase in
operating expenses.

     Financing  and  leasing  assets,  which  include  finance  receivables  and
operating lease  equipment,  totaled a record $18.4 billion,  an increase of 8.8
percent over 1995.  This increase is the result of growth in the operating lease
portfolio  as well  as  strong  new  business  originations  across  all  units,
particularly  in the areas of  consumer  and small to  medium  ticket  equipment
financing,  offset by termination activity and, to a lesser extent, by paydowns.
Additionally,   the   Corporation   continued   its   securitization   activity,
securitizing  $774.9 million of  recreational  vehicle and  recreational  marine
finance   receivables  during  1996,   compared  to  recreational   vehicle  and
manufactured housing finance receivables of $723.2 million in 1995.

Net Finance Income

     A comparison of the  components of 1996 and 1995 net finance  income is set
forth below.
<TABLE>
<CAPTION>

                                           Years Ended December 31,         Increase
                                           ------------------------    -----------------
                                              1996          1995        Amount   Percent
                                           ----------    ----------    --------- -------
                                                        Dollar Amounts in Millions
<S>                                        <C>           <C>           <C>         <C> 
Finance income .........................   $  1,646.2    $  1,529.2    $  117.0    7.7%
Interest expense .......................        848.3         831.5        16.8    2.0
                                           ----------    ----------    --------   ----
Net finance income .....................   $    797.9    $    697.7    $  100.2   14.4%
                                           ==========    ==========    ========   ====
Average financing & leasing assets (AEA)   $ 16,543.1    $ 15,377.5    $1,165.6    7.6%
                                           ==========    ==========    ========   ====
Net finance income as a % of AEA .......         4.82%         4.54%
                                           ==========    ==========
</TABLE>

     Finance income totaled  $1,646.2 million in 1996, up $117.0 million or 7.7%
over 1995.  As a percentage of AEA,  finance  income was 9.90% for both periods.
Interest  expense  totaled $848.3 million in 1996, up $16.8 million or 2.0% over
1995.  As a percentage of AEA,  1996  interest  expense  decreased to 5.08% from
5.36% in 1995.

     Net finance income  increased  $100.2 million or 14.4% in 1996,  surpassing
the growth in AEA as a result of both  lower  borrowing  costs and higher  yield
related fees on account terminations.

Fees and Other Income

     Fees and other income  improved $59.4 million to $244.1 million during 1996
due to  higher  gains  from  equipment  sales  and  venture  capital  investment
transactions, increased servicing fees associated with the Corporation's managed
third party portfolio and higher factoring commissions.

                                       11
<PAGE>

Provision and Reserve for Credit Losses

     Net credit losses were $101.5  million in 1996 compared to $77.2 million in
1995,  primarily  reflecting  provisions  related  to certain  nonaccrual  loans
secured by  oceangoing  carriers and cruise line vessels as well as seasoning of
the consumer  portfolio.  As a percentage of average  finance  receivables,  net
credit  losses  were  0.62% in 1996  compared  to  0.50%  in  1995.  Information
concerning  the  provision  and reserve for credit  losses is  summarized in the
following table.

                                               Years ended December 31,
                                              -------------------------
                                                 1996          1995
                                                -------       -------
                                              Dollar Amounts in Millions

Net credit losses ........................      $ 101.5       $  77.2
                                                =======       =======
Provision for credit losses ..............      $ 111.4       $  91.9
                                                =======       =======
Net credit losses as a percentage of                       
  average finance receivables ............         0.62%         0.50%
                                                =======       =======
Reserve for credit losses ................      $ 220.8       $ 206.0
                                                =======       =======
Reserve for credit losses as a                             
  percentage of finance receivables ......         1.30%         1.30%
                                                =======       =======
                                                  
     The reserve for credit losses is  periodically  reviewed for adequacy based
on the nature and  characteristics  of the  obligors,  economic  conditions  and
trends, charge-off experience,  delinquencies and value of underlying collateral
and  guarantees  (including  recourse  to  dealers  and  manufacturers).  It  is
management's  judgment that the reserve for credit losses is adequate to provide
for potential credit losses.  Finance  receivables are reviewed  periodically to
determine the probability of loss.  Charge-offs are taken after considering such
factors  as the  obligor's  financial  condition  and the  value  of  underlying
collateral and guarantees.  Because the reserve for credit losses is intended to
provide  for future  events,  which by their  nature are  uncertain,  changes in
economic  conditions  or other  discrete  events  adversely  affecting  specific
obligors  or  industries  may  necessitate  additions  to the reserve for credit
losses.

Salaries and General Operating Expenses

     Salaries and general  operating  expenses  increased  $47.4 million or 13.7
percent to $393.1  million in 1996 from  $345.7  million in 1995.  Salaries  and
employee  benefits rose $29.6 million (15.3%) while general  operating  expenses
rose $17.8 million  (11.7%).  Personnel  increased to 2,950 at December 31, 1996
from 2,750 at December 31, 1995.

     Management  monitors  productivity  via the  relationship  of salaries  and
general operating expenses to both AEA and average serviced assets ("ASA").  ASA
is  comprised  of  earning  assets,   off-balance  sheet   securitized   finance
receivables  and other  receivables  serviced for third parties.  Changes in the
relationship of salaries and employee benefits and general operating expenses to
AEA and ASA are set forth below:

<TABLE>
<CAPTION>

                                                Years Ended December 31,
                                               Dollar Amounts in Millions
                                  ----------------------------------------------------
                                             1996                       1995
                                  Amount    % AEA   % ASA     Amount   % AEA    % ASA
                                  ------    ----     ----     ------    ----     ----
<S>                               <C>       <C>      <C>      <C>       <C>      <C>  
Salaries and employee benefits    $223.0    1.35%    1.22%    $193.4    1.26%    1.19%
General operating expenses ...     170.1    1.03     0.93      152.3    0.99     0.94
                                  ------    ----     ----     ------    ----     ----
    Total ....................    $393.1    2.38%    2.15%    $345.7    2.25%    2.13%
                                  ======    ====     ====     ======    ====     ====

</TABLE>

     The increase in expenses  from 1995 to 1996 is primarily  due to strong new
business  originations and 12.6% growth in average  serviced assets,  as well as
the Corporation's continued investment in its consumer related infrastructure.

     The  Corporation  manages  expenditures  using  a  comprehensive  budgetary
process.  Expenses are  monitored  closely by business unit  management  and are
reviewed monthly with senior  management of the  Corporation.  To ensure overall

                                       12
<PAGE>

project cost control, an approval and review procedure is in place for all major
capital  expenditures,  such as  purchases  of computer  equipment,  including a
post-implementation analysis.

Depreciation on Operating Lease Equipment

     Depreciation on operating  lease equipment for 1996 was $121.7 million,  up
from $79.7 million for 1995 due to growth in the operating lease portfolio.

Income Taxes

     The provision  for Federal and state and local income taxes totaled  $155.7
million in 1996 compared with $139.8 million in 1995.  The effective  income tax
rate for 1996  declined to 37.4%  compared to 38.3% in 1995 as a result of state
and local tax planning strategies.

Financing and Leasing Assets

     Financing  and  leasing  assets  (comprised  of  finance   receivables  and
operating lease  equipment) rose $1.5 billion (8.8%) to $18.4 billion in 1996 as
presented by business unit in the following table.
<TABLE>
<CAPTION>

                                                    December 31          Increase (Decrease)
                                                ---------------------    -------------------
                                                  1996         1995       Amount     Percent
                                                --------     --------    ---------   -------
                                                            Dollar Amounts in Millions
<S>                                           <C>          <C>          <C>          <C>    
Finance Receivables
  Business Credit ........................    $  1,235.6   $  1,471.0   $  (235.4)   (16.0)%
  Capital Equipment Financing ............       4,302.7      4,548.7      (246.0)    (5.4)
  Commercial Services ....................       1,804.7      1,743.3        61.4      3.5
  Credit Finance .........................         797.8        758.7        39.1      5.2
  Industrial Financing ...................       5,616.8      4,929.9       686.9     13.9
  Consumer Finance .......................       2,005.5      1,039.0       966.5     93.0
  Sales Financing ........................       1,233.5      1,304.9       (71.4)    (5.5)
                                               ---------    ---------    --------     ----
      Total Finance Receivables ..........      16,996.6     15,795.5     1,201.1      7.6
                                               ---------    ---------    --------     ----
                                                                      
Operating Lease Equipment, net                                        
  Capital Equipment Financing ............         975.5        750.0       225.5     30.1
  Industrial Financing ...................         426.6        363.0        63.6     17.5
                                               ---------    ---------    --------     ----
      Total Operating Lease Equipment, net       1,402.1      1,113.0       289.1     26.0
                                               ---------    ---------    --------     ----
      Total Financing and Leasing Assets .    $ 18,398.7   $ 16,908.5   $ 1,490.2      8.8%
                                               =========    =========    ========     ====
</TABLE>
                                                                    
      The changes in the preceding table are discussed below.

     o Business  Credit--Receivables  declined to $1.2  billion at December  31,
1996. Record new business originations were offset by high customer terminations
and paydowns as customers'  access to  alternative  financing  sources  (capital
markets and banks) increased.

     o Capital  Equipment  Financing--Growth  in new business  originations  was
offset  by  liquidations  and  a  net  transfer  of  $57.5  million  of  finance
receivables to assets  received in  satisfaction  of loans.  Growth in operating
lease  equipment  occurred   primarily  in  commercial   aircraft  and  railroad
equipment.

     o Commercial  Services--Finance  receivables increased 3.5% to $1.8 billion
at December 31, 1996 as a result of increased factoring volume.

     o Credit  Finance--Strong  new business  originations  partially  offset by
liquidations due to a highly competitive  marketplace  resulted in the 5.2% rise
in finance receivables to $797.8 million at December 31, 1996.

     o Industrial  Financing--Another  record year of new business  originations
resulted in finance  receivable growth of 13.9%.  Operating lease equipment grew
$63.6 million with  increases in various  collateral  types  including  business
aircraft and manufacturing equipment.

                                       13
<PAGE>

     o Consumer Finance--Record new business originations, including real estate
secured finance receivable  portfolio  purchases of $468.7 million,  led to this
unit's 93.0% increase in finance receivables.

     o Sales  Financing--New  business  originations were offset by recreational
vehicle and recreational  marine finance  receivable  securitizations  of $774.9
million  (of which  $112.0  million  was  classified  as assets held for sale at
December 31, 1995) and the  classification  of an additional  $116.3  million of
recreational  vehicle and recreational marine finance receivables to assets held
for sale at December 31, 1996.

Financing and Leasing Assets Composition

     Financing and leasing assets are composed of loans and direct financing and
leveraged leases with commercial and consumer  customers located  principally in
the United States and operating lease  equipment,  largely  commercial  aircraft
(44.5% of the operating lease portfolio),  placed with lessees both domestically
and internationally.

Transaction Type

     Financing  and  leasing  assets  by  transaction  type are set forth in the
following table.
<TABLE>
<CAPTION>

                                      1996       Percent              1995       Percent
                                    --------     --------           -------      -------
                                                   Dollar Amounts in Millions
<S>                               <C>                 <C>         <C>              <C>  
Commercial ...................    $ 13,757.6          74.8%       $ 13,451.5       79.5%
Consumer .....................       3,239.0          17.6           2,344.0       13.9
Operating lease equipment, net       1,402.1           7.6           1,113.0        6.6
                                  ----------         -----        ----------      -----
                                  $ 18,398.7         100.0%       $ 16,908.5      100.0%
                                  ==========         =====        ==========      ===== 
</TABLE>

     Business units  comprising the commercial  caption include Business Credit,
Capital Equipment Financing,  Commercial Services, Credit Finance and Industrial
Financing.  Business units  comprising  the consumer  caption  include  Consumer
Finance and Sales Financing.

Geographic Composition

     The  following  table  presents  financing  and leasing  assets by customer
location.
<TABLE>
<CAPTION>

                                               At December 31, 1996   At December 31, 1995
                                              ---------------------   --------------------
                                               Amount     Percent      Amount     Percent
                                              --------   ---------    -------     --------
                                                        Dollar Amounts in Millions
<S>                                          <C>             <C>     <C>            <C>  
United States
   West .................................    $ 4,539.7     24.7%     $ 3,959.9      23.4%
   Northeast ............................      4,250.9     23.1        4,094.2      24.2
   Midwest ..............................      3,703.1     20.1        3,209.1      19.0
   Southeast ............................      2,780.6     15.1        2,631.7      15.6
   Southwest ............................      2,015.3     11.0        1,929.8      11.4
Foreign (principally commercial aircraft)      1,109.1      6.0        1,083.8       6.4
                                             ---------    -----      ---------     ----- 
     Total ..............................    $18,398.7    100.0%     $16,908.5     100.0%
                                             =========    =====      =========     ===== 
</TABLE>                                                                        

                                       14
<PAGE>

Industry Composition

     The following table presents financing and leasing assets by major industry
class.
<TABLE>
<CAPTION>

                                                          At December 31, 1996             At December 31, 1995
                                                        -----------------------          -----------------------
                                                          Amount       Percent             Amount       Percent
                                                        ----------    ---------          -----------   --------
                                                                        Dollar Amounts in Millions
<S>                                                      <C>             <C>              <C>            <C>  
Manufacturing(a) (none greater than 3.9%) ............   $ 4,425.7       24.1%            $ 4,328.6      25.6%
Home mortgage ........................................     2,005.5       10.9               1,039.0       6.1
Commercial airlines(b) ...............................     1,910.0       10.4               1,911.6      11.3
Construction (c) .....................................     1,683.1        9.1               1,463.9       8.7
Retail ...............................................     1,651.1        9.0               1,519.3       9.0
Transportation(d) ....................................     1,184.5        6.4               1,043.1       6.1
Manufactured housing(e) ..............................       837.4        4.6                 618.6       3.7
Other (none greater than 3.4%)(f) ....................     4,701.4       25.5               4,984.4      29.5
                                                          --------       ----              --------     ----
   Total .............................................   $18,398.7      100.0%            $16,908.5     100.0%
                                                          ========       ====              ========     ====
</TABLE>

----------
(a)  Includes  manufacturers of industrial machinery,  steel and metal products,
     textiles and apparel, printing and paper products and other industries.

(b)  Refer to the Commercial  Airlines  section of "Financing and Leasing Assets
     Concentrations" for a discussion of the commercial airlines portfolio.

(c)  Primarily  relates to equipment.  Does not include real estate  development
     and acquisition.

(d)  Transportation  includes rail, bus,  over-the-road  trucking,  and business
     aircraft industries.

(e)  Excludes  securitized  finance  receivables  of $412.2  million  and $470.8
     million at December 31, 1996 and 1995, respectively.

(f)  Excludes  securitized  recreational  vehicle finance  receivables of $746.8
     million and $445.7 million at December 31, 1996 and 1995, respectively, and
     recreational  marine finance  receivables of $278.4 million at December 31,
     1996.


Financing and Leasing Assets Concentrations

Commercial Airlines

     Commercial airline finance  receivables of $1.3 billion and operating lease
equipment of $624.0 million  totaled $1.9 billion (10.4% of total  financing and
leasing assets) at December 31, 1996 compared with $1.9 billion (11.3%) in 1995.
The  portfolio  is  secured  by  commercial   aircraft  and  related  equipment.
Management  continues  to limit the growth in this  portfolio  relative to total
financing and leasing assets. The following table presents information about the
commercial airline industry portfolio.

                                                          At December 31,
                                                  ---------------------------
                                                    1996                1995
                                                  --------            -------
                                                   Dollar Amounts in Millions
      Finance receivables
         Amount outstanding(a) ...............    $1,286.0           $1,412.2
         Number of obligors ..................          54                 51
      Operating lease equipment
         Net carrying value ..................    $  624.0           $  499.4
         Number of obligors ..................          32                 24
         Total ...............................    $1,910.0           $1,911.6
      Number of obligors(b) ..................          72                 68
      Number of aircraft(c) ..................         239                256

----------
(a)  Includes  accrued rents on operating leases which are classified as finance
     receivables in the Consolidated Balance Sheets.

(b)  Certain   obligors  have  both  finance   receivable  and  operating  lease
     transactions.

(c)  Regulations  established by the Federal Aviation Administration (the "FAA")
     limit  the  maximum  permitted  noise an  aircraft  may  make.  A Stage III
     aircraft meets a more restrictive  noise level  requirement than a Stage II
     aircraft.  The FAA has  issued  rules  which  phase out the use of Stage II
     aircraft  in the United  States  through the year 2000.  The  International
     Civil Aviation  Organization has issued similar requirements for Europe. At
     year-end  1996,  the portfolio  consisted of Stage III aircraft of $1,733.2
     million (90.7%) and Stage II aircraft of $149.1 million (7.8%) versus Stage
     III  aircraft of $1,664.3  million  (87.1%) and Stage II aircraft of $207.7
     million (10.9%) at year-end 1995.

     Kiwi International  Airlines ("Kiwi") filed for protection under Chapter 11
of the  Bankruptcy  Code on  September  30,  1996  and  grounded  its  fleet  in
mid-October. Kiwi is under operating lease agreements for four aircraft with the
Corporation.  The aircraft are included in operating lease equipment at December
31, 1996 in the amount of $30.9  million.  During  January  1997,  Kiwi  resumed
certain of its  operations  but did not emerge from  Chapter 11. The above event
will not have a significant effect on the Corporation's  consolidated  financial
position, results of operations, or liquidity.

                                       15
<PAGE>

Foreign Outstandings

     Financing  and  leasing  assets  to  foreign  obligors,  primarily  to  the
commercial  airline industry,  are all U.S. dollar denominated and totaled $1.11
billion at December 31, 1996. The largest exposures at December 31, 1996 were to
obligors in Mexico,  $141.5  million  (0.77% of financing  and leasing  assets),
France, $130.4 million (0.71%), and the United Kingdom,  $126.9 million (0.69%).
The remaining  foreign exposure is  geographically  disbursed with no individual
country representing more than 0.51% of financing and leasing assets.

     At December  31, 1995,  financing  and leasing  assets to foreign  obligors
totaled $1.08 billion.  Outstandings  totaled $145.5 million (0.86%) to obligors
in the United Kingdom,  France,  $122.0 million (0.72%),  Mexico, $115.8 million
(0.68%) and Australia,  $97.0 million  (0.57%).  No other countries had obligors
with aggregate outstandings exceeding 0.51% of financing and leasing assets.

Highly Leveraged Transactions

     The Corporation uses the following  criteria to classify a buyout financing
or  recapitalization  which equals or exceeds $20 million as a highly  leveraged
transaction (HLT):

      o  The transaction at least doubles the borrower's liabilities and results
         in a leverage ratio (as defined) higher than 50%, or

      o  The transaction results in a leverage ratio higher than 75%, or

      o  The transaction is designated as an HLT by a syndication agent.

     A  transaction  originally  reported  as an HLT can be  removed  from  this
classification  ("delisted")  if the  leveraged  company  has  demonstrated  the
ability to operate  successfully as a highly  leveraged  entity for at least two
years after the original financing and meets one of the following criteria:

      o  The original financing has been repaid using cash flow from operations,
         planned asset sales, or a capital infusion, or
      o  The debt has been serviced  without undue  reliance on unplanned  asset
         sales,  and certain  leverage ratios (related to the original  criteria
         under which the financing qualified as an HLT) have been maintained.
      The Corporation  originates and participates in HLTs, which totaled $321.4
million (1.75% of financing and leasing  assets) at December 31, 1996, down from
$412.6  million  (2.44%) at December 31, 1995.  The decline in HLT  outstandings
during  1996 was  primarily  due to payoff of accounts as well as the removal of
two companies that met the delisting criteria described above,  partially offset
by new HLT fundings. The Corporation's HLT outstandings are generally secured by
collateral,  as  distinguished  from HLTs that rely primarily on cash flows from
operations.  Unfunded  commitments to lend in secured HLT situations were $144.1
million at December 31, 1996 compared with $220.4 million at year-end 1995.

     At December  31,  1996,  the HLT  portfolio  consisted  of 27 obligors in 3
different  industry  groups,  with  29.52% of the  outstandings  located  in the
Northeast  region of the United States and 23.77% in the Southeast.  One account
totaling  $16.0  million  and $20.1  million was  classified  as  nonaccrual  at
December 31, 1996 and 1995, respectively.


Past Due and Nonaccrual Finance  Receivables and Assets Received in Satisfaction
of Loans

     Finance  receivables  past due 60 days or more  increased to $292.3 million
(1.72% of finance receivables) at December 31, 1996, from $263.9 million (1.67%)
at December 31, 1995. The increase in delinquencies is primarily attributable to
a shift in portfolio mix toward more seasoned consumer finance receivables.

     Finance  receivables on nonaccrual status declined to $119.6 million (0.70%
of finance  receivables)  at December 31, 1996,  from $139.5 million  (0.88%) at
December 31, 1995,  primarily  due to the  transfer of  oceangoing  carriers and
cruise line vessels to assets received in satisfaction of loans.

     Assets  received in  satisfaction  of loans  increased to $47.9  million at
December  31, 1996 from $42.0  million at December  31,  1995.  The increase was
primarily due to the previously  mentioned  transfers,  offset by the sale of an
equity interest in a building supply retailer.  The Corporation has remarketed a
majority of the  oceangoing  carriers and is in the process of  remarketing  the
remaining carriers and cruise line vessels.

                                       16
<PAGE>

     The following  table  summarizes by type assets received in satisfaction of
loans.

                                                          At December 31,
                                                    -------------------------
                                                     1996               1995
                                                    -------           -------
                                                        Amounts in Millions

Transportation(a) ...............................    $ 33.6          $    8.9
Property, equipment and other ...................      14.3               9.0
Retail merchandise, property and 
  accounts receivable(b) ........................      --                24.1
                                                     ------            ------
  Total .........................................    $ 47.9            $ 42.0
                                                     ======            ======

----------
(a)  Transportation includes oceangoing carriers and cruise line vessels in 1996
     and oceangoing carriers in 1995.

(b)  Retail  merchandise,  property and accounts  receivable  included an equity
     interest in a building supply retailer.

     Total nonperforming assets,  comprised of finance receivables on nonaccrual
status and assets received in satisfaction of loans,  declined to $167.5 million
at December 31, 1996 from $181.5  million at year end 1995.  As a percentage  of
finance receivables, total nonperforming assets were 0.99% at December 31, 1996,
down from 1.15% at December 31, 1995.

Credit Risk Management

     Financing and leasing assets are evaluated for credit and  collateral  risk
both during the credit granting process and  periodically  after the advancement
of funds.  Each business unit is responsible  for developing and  implementing a
formal credit  management  process in accordance with formal uniform  guidelines
established by the Executive  Credit Committee of the Corporation  (ECC).  These
ECC  guidelines  set forth risk  acceptance  criteria  for: (1) selected  target
markets and products;  (2) the  creditworthiness of borrowers,  including credit
history,  financial condition,  adequacy of cash flow and quality of management;
and (3) the type and value of underlying  collateral and  guarantees  (including
recourse  to dealers  and  manufacturers).  As  economic  and market  conditions
change,   credit  risk  management  practices  are  reviewed  and  modified,  if
necessary, to minimize the risk of credit loss.

     Commercial  financing and leasing assets are  periodically  evaluated based
upon credit criteria  developed under the  Corporation's  uniform credit grading
system.  Concentrations  are  monitored  and limits are changed by management as
conditions warrant to minimize the risk of credit loss. Periodically, the status
of loans greater than $500,000 to obligors with higher  (riskier)  credit grades
is individually  reviewed with the Asset Quality Review Committee,  comprised of
members  of  senior  management  including  the Vice  Chairman,  Executive  Vice
President-Credit Administration and Chief Financial Officer.

     For consumer  loans,  management  has developed and  implemented  automated
credit  scoring  models  for  each  loan  type  (e.g.,   recreational  vehicles,
manufactured  housing,  home mortgage and recreational  boats) that include both
customer  demographics  and credit  bureau  characteristics.  The  Corporation's
credit criteria  include  reliance on scores combined with judgment.  The credit
scoring  models are reviewed for  effectiveness  monthly  utilizing  statistical
tools.  Consumer loans are periodically  evaluated using past due, vintage curve
and other  statistical  tools to analyze  trends and credit  performance by loan
type,  including analysis of specific credit  characteristics and other selected
subsets of the portfolios.

     Compliance  with  established  corporate  policies and  procedures  and the
credit  management  processes at each  business  unit is reviewed by an internal
credit audit group within the Corporation's  internal audit  department.  Credit
audits examine  adherence with established  credit policies and procedures,  and
test for  inappropriate  credit  practices,  including whether potential problem
accounts are being detected and reported on a timely basis.

Asset/Liability Management

     Management  strives to manage interest rate and liquidity risk and optimize
net finance  income  under  formal  policies  established  and  monitored by the
Capital Committee, which is comprised of members of senior management, including
the Chief Executive Officer, the Vice Chairman,  the Chief Financial Officer and

                                       17
<PAGE>

senior  representatives of DKB and Chase. Three members of the Capital Committee
are also members of the Corporation's Board of Directors.  The Capital Committee
establishes  and regularly  reviews  interest rate  sensitivity,  funding needs,
liquidity,  and  asset-pricing  to determine  short-term  and long-term  funding
strategies,   including  the  use  of  off-balance  sheet  derivative  financial
instruments.   The  Corporation   does  not  enter  into  derivative   financial
instruments for trading or speculative purposes.

     Derivative positions,  all of which are entered into as hedges, are managed
in such a way that the  exposure to interest  rate,  credit or foreign  exchange
risk is in  accordance  with the  overall  operating  goals  established  by the
Capital  Committee.  There  is an  approved,  diversified  list of  creditworthy
counterparties  used  for  derivative  financial  instruments  each of whom  has
specific credit exposure limits,  which are based on market value. The Executive
Credit  Committee  approves each  counterparty  and its related market value and
credit   exposure  limit  annually  or  more   frequently  if  any  changes  are
recommended.  Market values are calculated  periodically for each swap contract,
summarized by counterparty and reported to the Capital Committee. For additional
information  regarding the Corporation's  derivative  portfolio,  refer to "Note
7-Derivative   Financial  Instruments"  in  Item  8.  Financial  Statements  and
Supplementary Data.

Interest Rate Risk Management

     Changes in market interest rates or in the relationships between short-term
and long-term  market  interest rates or different  interest rate indices (basis
risk) create risks which can potentially affect net finance income. Such changes
can affect the interest  rates charged on  interest-earning  assets  differently
than the interest rates paid on interest-bearing liabilities.

     The Capital  Committee  actively manages interest rate risk by changing the
proportion of fixed and floating rate debt and by utilizing  primarily  interest
rate swaps and, to a lesser extent,  other derivative  instruments to modify the
repricing characteristics of existing interest-bearing liabilities.  Issuing new
debt or hedging the interest  rate on existing  debt through the use of interest
rate swaps and other derivative  instruments are tools in managing interest rate
risk. The decision to use one or the other or a combination of both is driven by
the relationship  between the relative  interest rate costs and effectiveness of
the alternatives,  and liquidity needs of the Corporation.  For example, a fixed
rate, fixed term loan  transaction may initially be funded by commercial  paper,
resulting in interest rate risk. To reduce this risk, the  Corporation may enter
into a hedge that has an inverse  correlation  to the interest rate  sensitivity
created,  whereby the Corporation  would pay a fixed interest rate and receive a
commercial  paper interest  rate.  Basis risk is similarly  managed  through the
issuance  of new  debt or the  utilization  of  interest  rate  swaps  or  other
derivative instruments.

     The  Corporation's  degree of interest  rate  sensitivity  is  continuously
monitored and  simulated  through  computer  modeling by measuring the repricing
characteristics of interest-sensitive assets, liabilities, and off-balance sheet
derivatives.  These  characteristics  include  the dollar  amounts,  maturities,
estimated prepayments,  interest rates, and reference rate or other market based
indices  which  are  updated  and  reviewed  periodically.  The model is used to
project net interest  income  assuming  stable interest rates as well as various
other hypothetical  interest rate scenarios and the results are reviewed monthly
by the Capital Committee.  Utilizing the Corporation's  computer modeling, if no
new fixed  rate  loans or  leases  were  extended  and no  actions  to alter the
existing  interest rate  sensitivity were taken subsequent to December 31, 1996,
an immediate hypothetical 1% parallel rise in the yield curve on January 1, 1997
would reduce net income by an estimated  $2.9  million  after-tax  over the next
twelve  months.  Although  management  believes  that this  measure  provides  a
meaningful estimate of the Corporation's interest rate sensitivity,  it does not
reflect changes in the credit quality, size and composition of the balance sheet
and other business  developments that could affect net income.  Further, it does
not necessarily  represent  management's  current view of future market interest
rate movements.

     The Corporation  periodically enters into structured  financings (involving
both the issuance of debt and an interest rate swap with corresponding  notional
principal  amount  and  maturity)  that not only  improve  liquidity  and reduce
interest  rate risk,  but result in a lower  overall  funding cost than could be
achieved by solely  issuing debt.  For example,  in order to fund LIBOR interest
rate based assets, a medium-term variable rate note based upon the Federal Funds
rate can be issued and coupled with an interest rate swap exchanging the Federal
Funds rate for a LIBOR  interest  rate.  This creates,  in effect,  a lower cost
LIBOR based  medium-term  obligation  which also reduces the interest rate basis
risk of funding LIBOR based assets with  commercial  paper or Federal Funds rate
based debt.

                                       18
<PAGE>

     Interest  rate swaps with  notional  principal  amounts of $5.26 billion at
December  31, 1996 and $5.27  billion at December  31, 1995 were  designated  as
hedges against outstanding debt and were principally used to effectively convert
the  interest  rate on  variable  rate  debt to a fixed  rate,  which  sets  the
Corporation's  fixed rate term debt borrowing cost over the life of the swap and
reduces  the  Corporation's  exposure to rising  interest  rates but reduces the
Corporation's benefits from lower interest rates.

     Interest rate swaps are further  discussed in Note  7-Derivative  Financial
Instruments in Item 8. Financial Statements and Supplementary Data.

     A comparative  analysis of the weighted average  principal  outstanding and
interest  rates paid on the  Corporation's  debt  before and after the effect of
interest rate swaps is shown in the following table.
<TABLE>
<CAPTION>

                                                          Years Ended December 31,
                              ---------------------------------------------------------------------------------
                                                1996                                      1995
                              ---------------------------------------  ----------------------------------------
                                    Before                After              Before                After
                              -------------------  ------------------  ------------------   -------------------
                                                         Dollar Amounts in Millions
<S>                           <C>          <C>     <C>          <C>    <C>           <C>    <C>           <C>  
Commercial paper and
 variable rate senior
  notes ....................  $ 9,952.2    5.48%   $ 6,774.3    5.42%  $ 9,785.4     6.03%  $ 7,226.0     6.02%
Fixed rate senior and
 subordinated notes ........    3,917.0    6.83%     7,094.9    6.68%    3,194.5     7.09%    5,753.9     6.78%
                              ---------            ---------           ---------            ---------      

Composite ..................  $13,869.2    5.86%   $13,869.2    6.06%  $12,979.9     6.29%  $12,979.9     6.36%
                              =========            =========           =========            =========    
</TABLE>

     The increases in the composite  interest  rates after the effect of hedging
activity  reflects  the greater  proportion  of debt  effectively  paying  fixed
interest rates. The weighted average interest rates before the effect of hedging
activity do not reflect the interest  expense that would have been  incurred had
the  Corporation  chosen  to  manage  interest  rate  risk  without  the  use of
derivatives.

Liquidity Risk

     The Capital  Committee  manages  liquidity  risk by monitoring the relative
maturities of assets and  liabilities and by borrowing  funds,  primarily in the
United States money and capital markets.  Such cash is used to fund asset growth
(including  the  bulk  purchase  of  receivables  and the  acquisition  of other
finance-related  businesses) and to meet debt obligations and other  commitments
on a timely and  cost-effective  basis.  The  primary  sources  of  funding  are
commercial paper  borrowings,  proceeds from the sales of medium-term  notes and
other debt securities, and securitizations.

Liquidity

     Commercial  paper  outstanding  decreased $278.6 million to $5.8 billion at
December  31, 1996 and  represented  39.9% of total debt  outstanding  (45.0% at
December 31, 1995),  while fixed rate senior and subordinated notes increased to
$5.1  billion at December 31, 1996 or 34.7% of total debt (26.8% at December 31,
1995),  an increase of $1.4 billion from  December 31, 1995.  Variable rate term
debt  totaled $3.7  billion or 25.4% of total debt  outstanding  at December 31,
1996 (28.2% at December 31, 1995).  These changes  primarily reflect the funding
of the increased level of financing and leasing assets with fixed rate debt.

     Commercial  paper  borrowings  are  supported  by a variety of bank  credit
facilities.  At December 31,  1996,  credit  lines with 60 banks  totaled  $5.18
billion and support the current  commercial  paper position as well as growth in
the  foreseeable  future.  Credit line coverage  increased to 90.2% of operating
commercial paper outstanding (commercial paper outstanding less interest-bearing
deposits)  at year-end  1996,  as compared to 77.7% at December  31, 1995 due to
higher  bank  credit  facilities  and a  decreased  level  of  commercial  paper
outstanding.  No  borrowings  have  been  made  under  credit  lines  supporting
commercial paper since 1970.

     As part of the Corporation's continuing program of accessing the public and
private asset backed  securitization  markets as an additional liquidity source,
the Corporation securitized recreational vehicle and recreational marine finance
receivables of $774.9 million,  an increase of $51.7 million over $723.2 million
of recreational vehicle and manufactured housing finance receivables in 1995. At
December 31, 1996, $211.8 million of registered but unissued securities relating
to the  Corporation's  asset backed  securitization  program remained  available
under shelf registration statements.

                                       19
<PAGE>

Capitalization

     The  following  table  presents  information  regarding  the  Corporation's
capital structure.

                                                           At December 31,
                                                    ---------------------------
                                                      1996               1995
                                                    ---------         ---------
                                                     Dollar Amounts in Millions
  Commercial paper ..............................   $ 5,827.0         $ 6,105.6
  Variable rate senior notes ....................     3,717.5           3,827.5
  Fixed rate senior and subordinated notes ......     5,061.2           3,637.0
                                                     --------          --------
  Total debt ....................................    14,605.7          13,570.1
  Stockholders' equity ..........................     2,075.4           1,914.2
                                                     --------          --------
  Total capitalization ..........................   $16,681.1         $15,484.3
                                                     ========          ========

  Debt-to-equity ratio ..........................   7.04 to 1         7.09 to 1
                                                     ========          ========

     Through March 31, 1996, the  Corporation  operated under a dividend  policy
requiring the payment of dividends by the Corporation equal to and not exceeding
50% of net operating  earnings on a quarterly  basis.  Commencing  with the 1996
second quarter  dividend,  the dividend policy of the Corporation was changed to
require the payment of  dividends  by the  Corporation  of 30% of net  operating
earnings on a quarterly  basis.  During 1996,  regular  cash  dividends of $98.9
million were paid, including $8.9 million relating to December 1995 earnings.

     On December 24, 1996, with the consent of the  Corporation's  stockholders,
the  Corporation  paid a  special  dividend  in the  aggregate  amount of $165.0
million to its stockholders.  DKB and CBC Holding immediately contributed $165.0
million  to the  paid-in-capital  of the  Corporation  in  proportion  to  their
respective 80% and 20% ownership interests. Notwithstanding the special dividend
and subsequent  capital  contribution,  the  Corporation  intends to continue to
follow the 30% dividend policy described above.

     During the year,  $2.3  billion of variable  rate notes and $2.5 billion of
fixed rate notes were  issued  with  individual  terms  ranging  from one to ten
years.  Repayments  of debt during 1996  totaled $3.5  billion.  At December 31,
1996, $3.5 billion of registered but unissued debt securities remained available
under shelf registration statements.

     The Corporation's commercial paper, publicly issued variable rate and fixed
rate senior debt,  and senior  subordinated  long-term  notes and debentures are
rated by Moody's  Investors  Service,  Duff & Phelps Credit  Rating  Company and
Standard & Poor's Corporation.

     In  February  1997,  CIT  Capital  Trust I (the  "Trust"),  a  wholly-owned
subsidiary of the Corporation,  issued $250.0 million of 7.70% Preferred Capital
Securities in a private offering.  The Trust subsequently  invested the offering
proceeds in Junior Subordinated Debentures of the Corporation,  having identical
rates and payment dates.  Preferred Capital  Securities are further discussed in
Note  21--Subsequent  Event--Preferred  Capital  Securities in Item 8. Financial
Statements and Supplementary Data.

Recently Issued Accounting Pronouncements

     The Corporation  adopted  Statement of Financial  Accounting  Standards No.
125,   "Accounting   for  Transfers  and  Servicing  of  Financial   Assets  and
Extinguishments  of  Liabilities"  ("SFAS  125")  as  amended  by  Statement  of
Financial  Accounting  Standards  No. 127,  "Deferral of the  Effective  Date of
Certain  Provisions  of  FASB  Statement  No.  125"  (collectively  referred  to
hereafter  as "SFAS  125")  on  January  1,  1997.  SFAS  125 uses a  "financial
components"  approach that focuses on control to determine the proper accounting
for financial asset transfers,  addresses the accounting for servicing rights on
financial  assets in addition to  mortgage  loans and extends the  disaggregated
lower of cost or market  approach  for  measuring  servicing  rights  (including
excess   servicing)  on  all  financial  assets.   Securitizations   of  finance
receivables are accounted for as sales when legal and effective control over the
related  receivables  is  surrendered.   Servicing  assets  or  liabilities  are
recognized when the servicing rights are retained by the seller. The Corporation
believes that the 1997  adoption of SFAS 125 will not have a significant  impact
on the Corporation's financial position, results of operations, or liquidity.

                                       20
<PAGE>

1995 vs. 1994

Highlights

     For the year ended December 31, 1995 net income totaled $225.3 million,  an
increase of 12.0 percent from the $201.1 million for 1994, and  represented  the
eighth consecutive increase in annual earnings and the fifth consecutive year of
record earnings.  The current results reflect finance income from a higher level
of financing and leasing  assets,  improved  other income,  and lower net credit
losses, offset by an increase in borrowing costs.

     Financing  and  leasing  assets,  which  include  finance  receivables  and
operating lease equipment,  totaled a record $16.91 billion,  an increase of 8.0
percent over 1994.  Manufactured housing and recreational vehicle receivables of
$723.2 million were securitized during 1995 compared to $198.7 million in 1994.

Net Finance Income

     A comparison of the  components of 1995 and 1994 net finance  income is set
forth below.
<TABLE>
<CAPTION>

                                                      Years Ended December 31,                  Increase
                                                   ------------------------------        ----------------------
                                                      1995                1994            Amount        Percent
                                                   ----------          ----------        ---------      -------
                                                                     Dollar Amounts in Millions
<S>                                               <C>                  <C>               <C>              <C>  
Finance income ................................    $ 1,529.2            $ 1,263.8         $  265.4       21.0%
Interest expense ..............................        831.5                614.0            217.5       35.4
                                                    --------             --------          -------       ----
Net finance income ............................    $   697.7            $   649.8         $   47.9        7.4%
                                                    ========             ========          =======       ====
Average financing & leasing assets (AEA) ......    $15,377.5            $13,630.3         $1,747.2       12.8%
                                                    ========             ========          =======       ====
Net finance income as a percent of AEA                  4.54%                4.77%
                                                    ========             ========
</TABLE>

     Finance income totaled $1,529.2 million in 1995, up $265.4 million or 21.0%
over 1994. As a percentage of AEA, 1995 finance  income  increased to 9.90% from
9.19% in 1994.  Interest  expense  totaled  $831.5  million  in 1995,  up $217.5
million  or 35.4% over 1994.  As a  percentage  of AEA,  1995  interest  expense
increased to 5.36% from 4.42% in 1994.

     Net finance income (finance income less interest  expense)  increased $47.9
million  or 7.4% in 1995,  trailing  the  growth in AEA of 12.8% as higher  1995
market interest rates increased borrowing costs more rapidly than lending yields
due to heightened pricing competition, particularly from banks.

Fees and Other Income

     Fees and other income  improved $10.3 million to $184.7 million during 1995
due  to  higher  gains  from   securitizations   of  manufactured   housing  and
recreational vehicle receivables,  offset by lower factoring  commissions due to
the weak retailing environment.

                                       21
<PAGE>

Provision and Reserve for Credit Losses

     Net credit losses were $77.2 million in 1995, down $7.0 million (8.3%) from
$84.2 million in 1994 reflecting a higher level of recoveries  during 1995. As a
percentage of average finance  receivables,  net credit losses improved to 0.50%
in 1995 from 0.61% in 1994. Information concerning the provision and reserve for
credit losses is summarized in the following table.

                                                       Years ended December 31,
                                                      -------------------------
                                                         1995            1994
                                                       --------        --------
                                                     Dollar Amounts in Millions

Net credit losses ..................................     $ 77.2         $ 84.2
                                                         ======         ======
Total provision for credit losses ..................     $ 91.9         $ 96.9
                                                         ======         ======
Net credit losses as a percentage of average
   finance receivables .............................       0.50%          0.61%
                                                         ======         ======
Reserve for credit losses ..........................     $206.0         $192.4
                                                         ======         ======

Salaries and General Operating Expenses

     Salaries  and general  operating  expenses  increased  $7.8  million or 2.3
percent  to $345.7  million  in 1995 from  $337.9  million  in 1994,  reflecting
significant productivity achievements during a year of 8.0 percent financing and
leasing asset growth.  Salaries and employee  benefits rose $7.6 million  (4.0%)
and general  operating  expenses  increased $0.2 million during 1995.  Personnel
increased to 2,750 at December 31, 1995 from 2,700 at December 31, 1994.

     Management  monitors  productivity  via the  relationship  of salaries  and
general  operating  expenses to AEA, a measure of operating  expense  efficiency
based upon owned assets.  Management also monitors the  relationship of salaries
and general operating expense to average serviced assets ("ASA"), which includes
earning assets and off balance sheet securitized  finance  receivables and other
receivables serviced for third parties.  Changes in the relationship of salaries
and general operating expenses to AEA and ASA are set forth below:

                                                    1995                1994
                                                  --------            --------
Average earning assets .......................      2.25%              2.48%
Average serviced assets ......................      2.13%              2.40%

Income Taxes

     The provision  for Federal and state and local income taxes totaled  $139.8
million in 1995 compared with $123.9 million in 1994.  The effective  income tax
rate for 1995 was 38.3% compared to 38.1% in 1994.


                                       22
<PAGE>

Financing and Leasing Assets

     Financing  and  leasing  assets  (comprised  of  finance   receivables  and
operating  lease  equipment) rose $1.25 billion (8.0%) to $16.91 billion in 1995
as presented by business unit in the following table.

<TABLE>
<CAPTION>

                                                            December 31,                       Increase
                                                   -----------------------------      --------------------------
                                                      1995               1994           Amount          Percent
                                                    ---------          ---------      ----------      ----------
                                                                     Dollar Amounts in Millions

<S>                                               <C>                 <C>               <C>                <C> 
Finance Receivables
 Business Credit ...............................  $  1,471.0          $  1,442.1        $   28.9           2.0%
 Capital Equipment Financing ...................     4,548.7             4,493.5            55.2           1.2
 Commercial Services ...........................     1,743.3             1,896.2          (152.9)         (8.1)
 Credit Finance ................................       758.7               719.6            39.1           5.4
 Industrial Financing ..........................     4,929.9             4,269.7           660.2          15.4
 Consumer Finance ..............................     1,039.0               570.8           468.2          82.0
 Sales Financing ...............................     1,304.9             1,402.5           (97.6)         (6.9)
                                                    --------           --------         -------          ----
   Total Finance Receivables ...................    15,795.5            14,794.4         1,001.1           6.8
                                                    --------           --------         -------          ----
Operating Lease Equipment, net
 Capital Equipment Financing ...................       750.0               648.7           101.3          15.6
 Industrial Financing ..........................       363.0               219.2          143.8           65.6
                                                    --------            -------         -------          ----
   Total Operating Lease Equipment, net ........     1,113.0               867.9           245.1          28.2
                                                    --------            -------         -------          ----
   Total Financing and Leasing Assets ..........   $16,908.5           $15,662.3        $1,246.2           8.0%
                                                    ========           ========         =======          ====
</TABLE>

     The changes in the preceding table are discussed below.

     o Business  Credit--Record  new business  volume was largely offset by high
customer paydowns and terminations as customers access to alternative  financing
sources  increased,  resulting  in  modest  growth of 2.0% to $1.47  billion  at
December 31, 1995.

     o Capital Equipment Financing--Finance receivables and volume rose modestly
during  1995  due  to  heightened  pricing   competition  from  other  financial
institutions.  Growth in the operating lease equipment portfolio is primarily in
railcar and other transportation equipment categories.

     o Commercial Services--Finance  receivables decreased 8.1% to $1.74 billion
at December 31, 1995 as factoring  volume declined 1.9% from 1994 on weakness in
retail sales.

     o Credit  Finance--Finance  receivables in this unit continued their steady
growth, rising 5.4% in 1995 to $758.7 million.

     o Industrial  Financing--Another  record year of new business  originations
resulted in finance  receivable growth of 15.4%.  Operating lease equipment grew
$143.8 million with increases in various  collateral  types including  tractors,
trailers and buses and business aircraft.

     o Consumer  Finance--New  business volume grew 28.2% million in this unit's
third full year of operations, increasing receivables to over $1.0 billion.

     o  Sales   Financing--Higher   originations  in  recreational  vehicle  and
manufactured  housing  resulted in record new business  volume offset by finance
receivable  securitizations  of $723.2  million  (of  which  $68.7  million  was
classified   as  assets   held  for  sale  at   December   31,   1994)  and  the
reclassification of an additional $112.0 million of recreational vehicle finance
receivables to assets held for sale at December 1995.



                                       23
<PAGE>

Financing and Leasing Assets Composition

     Financing and leasing assets are composed of loans and direct financing and
leveraged leases with commercial and consumer  customers located  principally in
the United States and operating lease  equipment,  largely  commercial  aircraft
(44.9% of the operating lease portfolio),  placed with lessees both domestically
and internationally. The portfolio composition did not change significantly from
year-end 1994.

Transaction Type

     Financing  and  leasing  assets  by  transaction  type are set forth in the
following table.
<TABLE>
<CAPTION>

                                                      1995             Percent            1994         Percent
                                                    --------           -------           -------       -------
                                                                      Dollar Amounts in Millions
<S>                                                <C>                   <C>           <C>                <C>  
 Commercial ....................................   $13,451.5             79.5%         $12,821.2          81.9%
 Consumer ......................................     2,344.0             13.9            1,973.2          12.6
 Operating lease equipment, net ................     1,113.0              6.6              867.9           5.5
                                                    --------            -----           -------         -----
                                                   $16,908.5            100.0%         $15,662.3        100.0%
                                                    ========            =====           =======         =====
</TABLE>

     Business units  comprising the commercial  caption include Business Credit,
Capital Equipment Financing,  Commercial Services, Credit Finance and Industrial
Financing.  Business units  comprising  the consumer  caption  include  Consumer
Finance and Sales Financing.

Financing and Leasing Assets Concentrations

Commercial Airlines

     Commercial airline finance  receivables of $1.4 billion and operating lease
equipment of $499.4 million  totaled $1.9 billion (11.3% of total  financing and
leasing assets) at December 31, 1995 compared with $1.9 billion (12.1%) in 1994.
The  portfolio  is  secured  by  commercial   aircraft  and  related  equipment.
Management  continues  to limit the growth in this  portfolio  relative to total
financing and leasing assets.

     The following  table  presents  information  about the  commercial  airline
industry portfolio.

                                                       At December 31,
                                                 ---------------------------
                                                   1995               1994
                                                 ---------        ----------
                                                 Dollar Amounts in Millions
Finance receivables
   Amount outstanding(a) ....................    $1,412.2           $1,417.0
   Number of obligors .......................          51                 46

Operating lease equipment
   Net carrying value .......................    $  499.4           $  482.3
   Number of obligors .......................          24                 21
     Total ..................................    $1,911.6           $1,899.3
   Number of obligors(b) ....................          68                 62
   Number of aircraft(c) ....................         256                272

----------
(a)  Includes  accrued rents on operating leases which are classified as finance
     receivables in the Consolidated Balance Sheets.

(b)  Certain   obligors  have  both  finance   receivable  and  operating  lease
     transactions.

(c)  Regulations  established by the Federal Aviation Administration (the "FAA")
     limit  the  maximum  permitted  noise an  aircraft  may  make.  A Stage III
     aircraft meets a more restrictive  noise level  requirement than a Stage II
     aircraft.  The FAA has  issued  rules  which  phase out the use of Stage II
     aircraft  in the United  States  through the year 2000.  The  International
     Civil Aviation  Organization has issued similar requirements for Europe. At
     year-end  1995,  the portfolio  consisted of Stage III aircraft of $1,664.3
     million  (87.1%)  and Stage II aircraft of $207.7  million  (10.9%)  versus
     Stage III  aircraft  of $1,587.5  million  (83.6%) and Stage II aircraft of
     $262.2  million  (13.8%) at  year-end  1994.  The  decline in the number of
     aircraft from December 1994 principally reflects the maturity of loans with
     one obligor collateralized by 17 aircraft.


                                       24
<PAGE>

Foreign Outstandings

     Financing  and  leasing  assets  to  foreign  obligors,  primarily  to  the
commercial airline industry,  are all U. S. dollar denominated and totaled $1.08
billion at December 31, 1995. The largest exposures at December 31, 1995 were to
obligors in the United  Kingdom,  $145.5 million (0.86% of financing and leasing
assets), France, $122.0 million (0.72%), and Mexico, $115.8 million (0.68%). The
remaining  foreign  exposure  is  geographically  disbursed  with no  individual
country representing more than 0.57% of financing and leasing assets.

     At December  31, 1994,  financing  and leasing  assets to foreign  obligors
totaled $1.12 billion.  Outstandings  totaled $177.2 million (1.13%) to obligors
in the United Kingdom,  $140.0 million (0.89%),  Mexico, $120.2 million (0.77%),
France and $99.7 million  (0.64%) to obligors in Australia.  No other  countries
had obligors  with  aggregate  outstandings  exceeding  0.57% of  financing  and
leasing assets.

Highly Leveraged Transactions

     The Corporation  originates and  participates in HLTs, which totaled $412.6
million (2.44% of financing and leasing  assets) at December 31, 1995, down from
$436.1  million  (2.78%) at December 31, 1994.  The decline in HLT  outstandings
during 1995 was  primarily  due to payoff of accounts as well as a company  that
met  the  delisting  criteria,   partially  offset  by  new  HLT  fundings.  The
Corporation's  HLT  outstandings  are  generally   secured  by  collateral,   as
distinguished  from HLTs that rely  primarily  on cash  flows  from  operations.
Unfunded  commitments to lend in secured HLT  situations  were $220.4 million at
December 31, 1995 compared with $202.1 million at year-end 1994.

     At December  31,  1995,  the HLT  portfolio  consisted  of 33 obligors in 3
different  industry  groups,  with  34.32% of the  outstandings  located  in the
Southeast  region of the  United  States  and  24.43% in the West.  One  account
totaling  $20.1  million was  classified  as  nonaccrual  at December  31, 1995,
compared with four accounts totaling $57.7 million at year-end 1994.

Past Due and Nonaccrual Finance  Receivables 
and Assets Received in Satisfaction of Loans

     Finance  receivables  past due 60 days or more  increased to $263.9 million
(1.67% of finance receivables) at December 31, 1995, from $176.9 million (1.20%)
at December 31, 1994.  Finance  receivables of $42.9 million  collateralized  by
oceangoing  carriers  of  a  shipping  company  and  $36.6  million  of  finance
receivables  collateralized by two cruise line vessels were placed on nonaccrual
status during the third quarter of 1995. The shipping company ceased  operations
during  the third  quarter  and  during the  fourth  quarter,  the  cruise  line
discontinued  its operations  and filed for  protection  under Chapter 11 of the
Bankruptcy Code.

     Finance  receivables  on  nonaccrual  status,  included in past due finance
receivables,  rose to $139.5 million (0.88% of finance  receivables) at December
31, 1995, from $110.2 million (0.75%) at December 31, 1994, primarily due to the
loans discussed above.

     Assets  received in  satisfaction  of loans  declined  to $42.0  million at
December 31, 1995 from $86.5 million at December 31, 1994. The December 31, 1994
balance  included two commercial  aircraft which were placed on long term leases
during  1995.  

     The following  table  summarizes by type assets received in satisfaction of
loans.

                                                          At December 31,
                                                     -------------------------
                                                      1995               1994
                                                     ------             ------
                                                        Amounts in Millions
Retail merchandise, property and accounts 
  receivable(a) ...................................  $ 24.1             $ 32.3
Transportation(b) .................................     8.9                4.4
Property, equipment and other .....................     9.0               13.8
Commercial aircraft ...............................      --               36.0
                                                      -----              -----
   Total ..........................................  $ 42.0              $86.5
                                                      =====             ======
----------
(a)  Retail  merchandise,  property and accounts  receivable  includes an equity
     interest in a building supply retailer.

(b)  Transportation includes oceangoing carriers in 1995 and buses in 1994.


                                       25
<PAGE>

Item 8. Financial Statements and Supplementary Data.

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
The CIT Group Holdings, Inc.:

     We have audited the  accompanying  consolidated  balance  sheets of The CIT
Group Holdings,  Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated  statements of income, changes in stockholders' equity, and
cash flows for each of the years in the  three-year  period  ended  December 31,
1996. These  consolidated  financial  statements are the  responsibility  of the
Corporation's  management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance  about  whether  the  financial  statements  are free from
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 consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of The CIT
Group  Holdings,  Inc. and  subsidiaries  at December 31, 1996 and 1995, and the
results  of  their  operations  and  cash  flows  for  each of the  years in the
three-year period ended December 31, 1996 in conformity with generally  accepted
accounting principles.

                                                           KPMG PEAT MARWICK LLP

Short Hills, New Jersey
January 17, 1997, except as to Note 21 
  which is as of February 21, 1997



                                       26
<PAGE>

                  THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     Assets

                                                              December 31,
                                                        ------------------------
                                                            1996         1995
                                                        -----------  -----------
                                                          Amounts in Millions
Financing and leasing assets
Loans
   Commercial .......................................  $  10,195.6  $  10,356.3
   Consumer .........................................      3,239.0      2,344.0
Lease receivables ...................................      3,562.0      3,095.2
                                                       -----------  -----------
   Finance receivables (Note 3) .....................     16,996.6     15,795.5
Reserve for credit losses (Note 4) ..................       (220.8)      (206.0)
                                                       -----------  -----------
   Net finance receivables ..........................     16,775.8     15,589.5
Operating lease equipment, net (Note 5) .............      1,402.1      1,113.0
Cash and cash equivalents ...........................        103.1        161.5
Other assets ........................................        651.5        556.3
                                                       -----------  -----------
        Total assets ................................  $  18,932.5  $  17,420.3
                                                       ===========  ===========

                      Liabilities and Stockholders' Equity

Debt (Notes 6 and 7)
Commercial paper ....................................  $   5,827.0  $   6,105.6
Variable rate senior notes ..........................      3,717.5      3,827.5
Fixed rate senior notes .............................      4,761.2      3,337.0
Subordinated fixed rate notes .......................        300.0        300.0
                                                       -----------  -----------
        Total debt ..................................     14,605.7     13,570.1
Credit balances of factoring clients ................      1,134.1        980.9
Accrued liabilities and payables ....................        594.0        485.9
Deferred Federal income taxes (Note 11) .............        523.3        469.2
                                                       -----------  -----------
        Total liabilities ...........................     16,857.1     15,506.1
Stockholders' equity (Note 8)
Common stock   -- authorized, issued and
   outstanding -- 1,000 shares ......................        250.0        250.0
Paid-in capital .....................................        573.3        408.3
Retained earnings ...................................      1,252.1      1,255.9
                                                       -----------  -----------
        Total stockholders' equity ..................      2,075.4      1,914.2
                                                       -----------  -----------
        Total liabilities and stockholders' equity ..  $  18,932.5  $  17,420.3
                                                       ===========  ===========

See accompanying notes to consolidated financial statements.



                                       27
<PAGE>

                  THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                             -------------------------------------
                                                                1996           1995          1994
                                                             ---------      ---------     --------
                                                                      Amounts in Millions
<S>                                                           <C>            <C>          <C>     
Finance income ..........................................     $1,646.2       $1,529.2     $1,263.8

Interest expense ........................................        848.3          831.5        614.0
                                                             ---------      ---------     --------
    Net finance income ..................................        797.9          697.7        649.8

Fees and other income (Note 9) ..........................        244.1          184.7        174.4
                                                             ---------      ---------     --------
    Operating revenue ...................................      1,042.0          882.4        824.2
                                                             ---------      ---------     --------
Salaries and general operating expenses (Note 10) .......        393.1          345.7        337.9

Provision for credit losses (Note 4) ....................        111.4           91.9         96.9

Depreciation on operating lease equipment (Note 5) ......        121.7           79.7         64.4
                                                             ---------      ---------     --------
    Operating expenses ..................................        626.2          517.3        499.2
                                                             ---------      ---------     --------
    Income before provision for income taxes ............        415.8          365.1        325.0

Provision for income taxes (Note 11) ....................        155.7          139.8        123.9
                                                             ---------      ---------     --------
    Net income ..........................................    $   260.1      $   225.3     $  201.1
                                                             =========      =========     ========
</TABLE>

See accompanying notes to consolidated financial statements.



                                       28
<PAGE>

                  THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                      ----------------------------------
                                                         1996        1995        1994
                                                      ----------  ----------  ----------
                                                              Amounts in Millions
<S>                                                   <C>         <C>         <C>       
Common stock

Balance, beginning and end of period ..............   $    250.0  $    250.0  $    250.0
                                                      ----------  ----------  ----------

Paid-in capital

Balance, beginning of period ......................   $    408.3  $    408.3  $    408.3

Capital contribution from stockholders (Note 1) ...        165.0      --          --
                                                      ----------  ----------  ----------

 Balance, end of period ...........................   $    573.3  $    408.3  $    408.3
                                                      ----------  ----------  ----------

Retained earnings

Balance, beginning of period ......................   $  1,255.9  $  1,134.7  $  1,033.9

Net income ........................................        260.1       225.3       201.1

Dividends paid -- regular .........................        (98.9)     (104.1)     (100.3)

               -- special (Note 1) ................       (165.0)     --          --
                                                      ----------  ----------  ----------

Balance, end of period ............................      1,252.1     1,255.9     1,134.7
                                                      ----------  ----------  ----------

    Total stockholders' equity (Note 8) ...........   $  2,075.4  $  1,914.2  $  1,793.0
                                                      ==========  ==========  ==========
</TABLE>

See accompanying notes to consolidated financial statements.



                                       29
<PAGE>

                  THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                                -------------------------------------
                                                                    1996         1995         1994
                                                                -----------  -----------  -----------
                                                                          Amounts in Millions
<S>                                                             <C>          <C>          <C>        
Cash flows from operations

Net income ..................................................   $     260.1  $     225.3  $     201.1
Adjustments to reconcile net income to net cash
   flows from operations:

       Provision for credit losses ..........................         111.4         91.9         96.9
       Depreciation and amortization ........................         140.3         88.7         75.4
       Provision for deferred Federal income taxes ..........          54.1         42.5         27.7
       Gains on sales of equipment, other investments and

         receivable sales and securitizations ...............         (78.9)       (36.8)       (26.1)
       Increase in accrued liabilities and payables .........         108.1        131.2         24.2
       Increase in other assets .............................         (65.9)       (17.7)        (0.1)
       Other ................................................          (3.7)       (22.7)       (17.2)
                                                                -----------  -----------  -----------
          Net cash flows provided by operations .............         525.5        502.4        381.9
                                                                -----------  -----------  -----------
Cash flows from investing activities
Loans extended ..............................................     (31,414.4)   (30,567.6)   (23,610.9)
Collections on loans ........................................      30,355.8     28,750.8     22,394.0
Purchases of assets to be leased ............................      (1,664.0)    (1,079.8)    (1,039.7)
Proceeds from asset and receivable sales ....................       1,144.9        816.8        535.6
Collections on lease receivables ............................         776.4        712.9        632.2
Purchases of finance receivables portfolios .................        (661.3)       (22.7)      (181.7)
Proceeds from sales of assets received in
   satisfaction of loans ....................................          76.7         26.2         40.4
Purchases of investment securities ..........................         (20.8)       (12.1)       (21.1)
Net decrease (increase) in short-term
   factoring receivables ....................................          (0.3)       123.6       (207.4)
Acquisition of Barclays Commercial Corporation ..............        --           --           (435.6)
Other .......................................................         (25.5)       (43.4)       (26.7)
                                                                -----------  -----------  -----------
          Net cash flows used for investing activities ......      (1,432.5)    (1,295.3)    (1,920.9)
                                                                -----------  -----------  -----------
Cash flows from financing activities
Proceeds from the issuance of variable and
   fixed rate notes .........................................       4,776.0      3,698.6      3,985.8
Repayments of variable and fixed rate notes .................      (3,461.8)    (2,966.0)    (1,529.6)
Net (decrease) increase in commercial paper .................        (278.6)       445.4       (855.9)
Cash dividends paid .........................................        (263.9)      (104.1)      (100.3)
Capital contribution from stockholders ......................         165.0       --           --
Repayments of non-recourse leveraged lease debt .............        (146.2)      (135.7)      (103.1)
Proceeds from non-recourse leveraged lease debt .............          58.1          9.7         47.0
                                                                -----------  -----------  -----------
          Net cash flows provided by financing activities ...         848.6        947.9      1,443.9
                                                                -----------  -----------  -----------
Net (decrease) increase in cash and
   cash equivalents .........................................         (58.4)       155.0        (95.1)
Cash and cash equivalents, beginning of year ................         161.5          6.5        101.6
                                                                -----------  -----------  -----------
Cash and cash equivalents, end of year ......................   $     103.1  $     161.5  $       6.5
                                                                -----------  -----------  -----------
Supplemental disclosures
Interest paid ...............................................   $     842.6  $     958.8  $     616.8
Federal and State and local income taxes paid ...............   $     102.5  $      95.0  $      98.9
Noncash transfer of finance receivables to other
   assets (principally securitizations) .....................   $     778.9  $     772.5  $     117.1
Noncash transfers of finance receivables to assets
   received in satisfaction of loans ........................   $      91.8  $      30.8  $      80.5
Noncash transfer of assets received in satisfaction
   of loans to finance receivables ..........................   $      10.9  $      40.6  $    --
Noncash transfer of finance receivables to
   operating lease equipment ................................   $      14.4  $    --      $    --
Noncash transfers of assets received in satisfaction
   of loans to operating lease equipment ....................   $    --      $    --      $      17.3
</TABLE>

 See accompanying notes to consolidated financial statements 

                                       30
<PAGE>

                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1--The Corporation

     The CIT Group Holdings,  Inc. (the "Corporation") engages in commercial and
consumer  financial  services  activities  through  a  nationwide   distribution
network.

     The  Dai-Ichi  Kangyo  Bank,  Limited  ("DKB")  owns 80% of the  issued and
outstanding   stock  of  the  Corporation,   60%  of  which  it  purchased  from
Manufacturers  Hanover  Corporation  ("MHC") in 1989. DKB acquired an additional
20% of the Corporation  from Chemical  Banking  Corporation  ("CBC") in December
1995. The remaining 20% of the  Corporation's  issued and  outstanding  stock is
owned by The Chase Manhattan  Corporation ("Chase") which merged with CBC during
1996.  DKB has an option  expiring  December 15, 2000 to purchase the  remaining
twenty percent (20%) common stock interest from Chase.

     On  December  24,  1996,  the  Corporation  paid a special  dividend in the
aggregate  amount of $165.0  million to its  stockholders,  DKB and  Chase.  The
stockholders  then immediately  contributed  $165.0 million to the Corporation's
paid-in  capital  in  proportion  to their 80% and 20%  common  stock  ownership
interests, respectively.

Note 2--Summary of Significant Accounting Policies

Basis of Presentation

     The consolidated  financial  statements and accompanying  notes include the
accounts of The CIT Group Holdings,  Inc. and its subsidiaries.  All significant
intercompany   transactions   have  been   eliminated.   Prior  period  amounts,
principally in the Consolidated Statements of Cash Flows, have been reclassified
to conform to the current presentation.

Financing and Leasing Assets

     The Corporation  provides  funding for a variety of financing  arrangements
including term loans,  lease financing and operating  leases.  Lease receivables
include leveraged  leases,  for which a major portion of the funding is provided
by third party lenders,  on a nonrecourse basis, with the Corporation  providing
the balance and acquiring  title to the  property.  The amounts  outstanding  on
loans and leases are referred to as finance  receivables and, when combined with
the net book value of operating lease equipment, represent financing and leasing
assets.

Income Recognition

     Finance  income  includes  interest on loans,  the  accretion  of income on
direct financing leases, and rents on operating leases.  Related origination and
other nonrefundable fees and direct origination costs are deferred and amortized
as  an  adjustment  of  finance  income  over  the   contractual   life  of  the
transactions.  Income on  finance  receivables  other than  leveraged  leases is
recognized on an accrual  basis  commencing  in the month of  origination  using
methods that generally  approximate the interest method.  Leveraged lease income
is recognized  on a basis  calculated  to achieve a constant  after-tax  rate of
return for periods in which the  Corporation  has a positive  investment  in the
transaction, net of related deferred tax liabilities. Rental income on operating
leases is recognized on an accrual basis.

     The  accrual of  finance  income is  suspended  and an account is placed on
nonaccrual status either when a payment is contractually  delinquent for 90 days
or more and collateral is insufficient  to cover both the outstanding  principal
and accrued finance income or immediately if, in the opinion of management, full
collection of all principal and income is doubtful.  For certain consumer loans,
the  accrual  of  finance  income  is  suspended  at  either  120  days  when no
contractual payments are received or at 180 days when partial payments have been
received. Accrued but uncollected income at the date finance income is suspended
is reversed and charged against income to the extent the estimated fair value of
collateral  does not satisfy both the principal and accrued income  outstanding.
Such accrued but uncollected income is immaterial. Subsequent income received is
applied to the outstanding  principal  balance until such time as the account is
collected, charged-off or returned to accrual status.

                                       31
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     Fees and other income includes: (1) factoring commissions,  (2) commitment,
facility,  letters of credit and  syndication  fees,  (3) servicing fees and (4)
gains and losses from the sales of equipment,  other  investments  and the sales
and securitizations of finance receivables.

Lease Financing

     Direct  financing leases are recorded at the aggregate future minimum lease
payments plus estimated residual values less unearned finance income.  Operating
lease  equipment  is  carried  at  cost  less  accumulated  depreciation  and is
depreciated to estimated residual value using the straight-line  method over the
lease term or  projected  economic  life of the  asset.  Equipment  acquired  in
satisfaction of loans and subsequently  placed on operating lease is recorded at
the lower of carrying  value or estimated  fair value when  acquired.  Leveraged
leases are recorded at the aggregate value of future minimum lease payments plus
estimated residual value, less amounts due to non-recourse  third-party  lenders
and  unearned  finance  income.  Management  performs  periodic  reviews  of the
estimated  residual values with other than temporary  impairment,  if any, being
recognized in the current period.

Reserve for Credit Losses on Finance Receivables

     The reserve for credit losses is established and periodically  reviewed for
adequacy  based on the  nature and  characteristics  of the  obligors,  economic
conditions  and  trends,  charge-off  experience,  delinquencies,  and  value of
underlying   collateral  and  guarantees  (including  recourse  to  dealers  and
manufacturers).  It is management's  judgment that the reserve for credit losses
is adequate to provide for potential credit losses.

Charge-off of Finance Receivables

     Finance receivables are reviewed  periodically to determine the probability
of loss.  Charge-offs are taken after considering such factors as the customer's
financial  condition  and the  value of  underlying  collateral  and  guarantees
(including recourse to dealers and manufacturers). Such charge-offs are deducted
from the carrying value of the related finance  receivables.  To the extent that
an  unrecovered  balance  remains due, a final  charge-off  is taken at the time
collection efforts are no longer deemed useful.  Although certain consumer loans
are reviewed individually for charge-offs, automatic charge-offs are recorded on
consumer loans when no contractual payments are received for 120 days, or at 180
days when partial payments have been received.

Impaired Loans

     The Corporation  adopted  Statement of Financial  Accounting  Standards No.
114, "Accounting by Creditors for Impairment of a Loan", as amended by Statement
of  Financial  Accounting  Standards  No.  118,  "Accounting  by  Creditors  for
Impairment  of a Loan  -  Income  Recognition  and  Disclosures",  (collectively
referred to hereafter as "SFAS 114") on January 1, 1995.  SFAS 114 requires that
the value of an  impaired  loan be measured  based upon 1) the present  value of
expected future cash flows discounted at the loan's effective  interest rate or,
2) at the fair value of the collateral, if the loan is collateral dependent.

     Impaired  loans include any loan  transaction  on nonaccrual  status or any
troubled debt  restructuring  entered into after  December 31, 1994,  subject to
periodic review by the Corporation's Asset Quality Review Committee ("AQR"). The
AQR  is  comprised  of  members  of  senior  management,  which  covers  finance
receivables of $500,000 or more meeting certain credit risk grading  parameters.
Excluded from impaired loans are: 1) certain  individual small dollar commercial
nonaccrual  loans (under  $500,000) for which the collateral  value supports the
outstanding balance, 2) consumer loans which are subject to automatic charge-off
procedures,  and 3) short-term factoring customer receivables,  generally having
terms of no more than 30 days.  In general,  the impaired  loans are  collateral
dependent.  Any shortfall  between the value and the recorded  investment in the
loan is recognized by recording a provision for credit losses.

Other Assets

     At the time management  decides to proceed with a securitization  of loans,
such loans are  considered  available  for sale,  classified as other assets and
carried at the lower of aggregate cost or market value.

                                       32
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     Certain  consumer loans are  originated and sold to trusts which,  in turn,
issue  asset-backed  securities  to  investors.   The  Corporation  retains  the
servicing  rights and  participates  in certain  cash flows from the loans.  The
present  value of expected net cash flows which  exceeds the  estimated  cost of
servicing  is  recorded  at the time of sale as "excess  servicing  assets".  In
determining  expected net cash flows, the Corporation  considers  assumptions of
prepayment  and loss  experience and market  interest  rates.  Excess  servicing
assets  are  stated  at the  lower of  amortized  cost or fair  value,  which is
determined  by  adjusting  the  present  value of the  remaining  cash flows for
anticipated prepayment and loss experience. Amortization is recognized on excess
servicing  assets  systematically  in  relation  to the  excess  cash  flows  of
securitizations.

     In  1996,  the  Corporation  adopted  Statement  of  Financial   Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights" ("SFAS 122"). SFAS
122 requires an  enterprise  that acquires  mortgage  servicing  rights  through
either  the  purchase  or  origination  of  mortgage  loans  and  then  sells or
securitizes  those loans with  servicing  rights  retained to allocate the total
cost between the mortgage servicing rights and the loans based on their relative
fair  values.  This  Statement  applies  to the sale or  securitization  of home
mortgage or manufactured housing finance receivables when servicing is retained.
The Statement also requires that the enterprise assess its capitalized  mortgage
servicing  rights for  impairment  based on the fair value of those rights.  The
adoption  of SFAS 122 did not affect the  Corporation's  consolidated  financial
position,  results of operations  or liquidity  for the year ended  December 31,
1996.

     The excess of  purchase  price over fair  market  value of assets  acquired
(goodwill) in connection  with business  acquisitions is amortized on a straight
line basis over a period not to exceed 20 years.

     Assets  received  in  satisfaction  of loans  are  carried  at the lower of
carrying value or estimated fair value less selling costs,  with  write-downs at
the time of receipt  recognized  by  recording  a provision  for credit  losses.
Subsequent write-downs of such assets, which may be required due to a decline in
estimated  fair market value after receipt,  are reflected in general  operating
expenses.

     Fixed  assets  are  stated  at  cost  less  accumulated   depreciation  and
amortization.  Depreciation and amortization are computed  principally using the
straight-line method over the estimated useful lives of the related assets.

Derivative Financial Instruments

     The  Corporation  enters into interest rate swap  agreements as part of its
overall  interest rate risk management.  These  transactions are entered into as
hedges  against  the  effects  of  future   interest  rate   fluctuations   and,
accordingly,  are not carried at fair market  value.  The  Corporation  does not
enter into derivative financial instruments for trading or speculative purposes.

     The net interest differential, including premiums paid or received, if any,
on interest  rate swaps is  recognized  on an accrual  basis as an adjustment to
finance  income or  interest  expense to  correspond  with the  hedged  asset or
liability  position,  respectively.  In the event  that early  termination  of a
derivative instrument occurs, the net proceeds paid or received are deferred and
amortized  over the  shorter  of the  remaining  original  contract  life of the
interest rate swap or the maturity of the hedged asset or liability position.

     The  Corporation  will also  utilize  derivative  instruments  to hedge the
interest  rate  used to price the  anticipated  securitization  of  loans.  Such
transactions are designated as hedges against a securitization  that is probable
and for which the significant characteristics and terms have been identified but
for which there is no legally  binding  obligation.  The loans to be securitized
are considered held for sale and reclassified to other assets.  The net interest
differential on the derivative  instrument,  including premium paid or received,
if any, is recognized as an adjustment to the basis of the corresponding  assets
at the time of sale. In the event the anticipated securitization does not occur,
the related hedge position would be liquidated  with any gain or loss recognized
at such time, and the related assets would be reclassified to loans.

                                       33
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Income Taxes

     Deferred  tax  assets and  liabilities  are  recognized  for the future tax
consequences   attributable  to  temporary  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective tax bases.  Deferred tax assets and liabilities are determined  using
enacted  tax  rates  expected  to apply in the  year in  which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income at the
time of enactment.

     Federal  investment  tax credits  realized for income tax purposes on lease
financing  transactions have been deferred for financial  statement purposes and
are  included in  deferred  Federal  income  taxes on the  Consolidated  Balance
Sheets.  Such credits are  amortized as a reduction of the  provision for income
taxes using an actuarial method over the related lease term.

Consolidated Statements of Cash Flows

     Cash and cash  equivalents  includes  cash and  interest-bearing  deposits,
which  generally  represent  overnight  money market  investments of excess cash
borrowed in the commercial  paper market and maintained for liquidity  purposes.
Cash inflows and outflows from  commercial  paper  borrowings and most factoring
receivables  are  presented  on a net basis in the  Statements  of Cash Flows as
their term is generally less than 90 days.

Use of Estimates

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

Note 3--Finance Receivables

     Included in lease  receivables  at December 31, 1996 and 1995 are leveraged
lease receivables of $648.8 million and $576.7 million, respectively.  Leveraged
lease  receivables  exclude the portion of lease  receivables  offset by related
non-recourse  debt  payable  to  third-party  lenders  of $2.1  billion  at both
December 31, 1996 and 1995,  including  amounts owed to  affiliates of DKB which
totaled  $486.6  million at year-end  1996, and $501.3 million at year-end 1995.
Also excluded from finance  receivables are $1.4 billion of finance  receivables
at  December  31,  1996 ($0.9  billion in 1995)  previously  securitized  by the
Corporation.

     Commercial  and  consumer  loans are  presented  net of unearned  income of
$540.4 million and $571.2  million at December 31, 1996 and 1995,  respectively.
Lease  receivables  are  presented  net of unearned  income of $1.0  billion and
$978.9 million at December 31, 1996 and 1995, respectively.

     The  following  table  sets  forth the  contractual  maturities  of finance
receivables.
<TABLE>
<CAPTION>

                                                        December 31, 1996                 December 31, 1995
                                                    -----------------------            ----------------------
                                                      Amount        Percent             Amount        Percent
                                                    ----------      -------            ---------      -------
                                                                     Dollar Amounts in Millions
<S>                                                 <C>               <C>              <C>             <C>   
Due Within One Year .............................   $  5,698.2        33.53%           $ 5,523.6       34.97%
Due Within One to Two Years .....................      2,515.6        14.80              2,488.8       15.76
Due Within Two to Four Years ....................      3,647.0        21.46              3,288.7       20.82
Due After Four Years ............................      5,135.8        30.21              4,494.4       28.45
                                                     ---------       ------            ---------      ------
      Total......................................    $16,996.6       100.00%           $15,795.5      100.00%
                                                     =========       ======            =========      ======
</TABLE>

                                       34
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     Information  about  concentrations of credit risk is set forth in "Industry
Composition" and "Geographic Composition" in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.

     The following table sets forth information regarding finance receivables on
nonaccrual status and assets received in satisfaction of loans.

                                                       At December 31,
                                                  -------------------------
                                                    1996              1995
                                                  --------          -------
                                                     Amounts in Millions

Nonaccrual finance receivables ..................  $119.6            $139.5
Assets received in satisfaction of loans ........    47.9              42.0
                                                   ------            ------
  Total nonperforming assets ....................  $167.5            $181.5
                                                   ======            ======
Percent to finance receivables ..................    0.99%             1.15%
                                                   ======            ======

     The amount of finance  income  recognized  on year-end  nonaccrual  finance
receivables  totaled $8.5 million,  $8.0 million and $6.2 million in 1996,  1995
and 1994,  respectively.  The amount of  finance  income  which  would have been
recorded under contractual terms for such nonaccrual  receivables  totaled $24.7
million, $29.3 million, and $20.7 million in 1996, 1995 and 1994, respectively.

     At December 31, 1996 and 1995, the recorded  investment in impaired  loans,
which are generally  collateral  dependent,  totaled  $103.9  million and $159.3
million,  respectively. The fair value of the collateral or the present value of
expected  future cash flows equaled or exceeded the recorded  investment for the
impaired loans and, as such,  there was no related SFAS 114 allowance for credit
losses. The average monthly recorded  investment in the impaired loans was $89.4
million  and $116.9  million  for the years  ended  December  31, 1996 and 1995,
respectively.  There was no finance  income  recorded on these loans during 1996
after being classified as impaired.  During 1995, finance income of $1.0 million
was  recognized  on these loans after being  classified as impaired  loans.  The
adoption  of  SFAS  114 on  January  1,  1995  had  no  material  effect  on the
Corporation's 1995 financial condition, results of operation or liquidity.

     At December 31, 1996, and 1995, the Corporation had $10.8 million and $30.0
million,  respectively, of finance receivables that met the criteria of troubled
debt  restructurings,  which were not included in the preceding  table.  Finance
income  recognized on troubled debt  restructurings  totaled $0.7 million,  $2.8
million and $0.8 million in 1996, 1995 and 1994, respectively. Finance income on
these  restructured  receivables would have been $1.3 million,  $3.3 million and
$2.1  million  for  1996,  1995  and  1994,  respectively,   based  on  original
contractual terms.

                                       35
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 4--Reserve for Credit Losses

     The following table presents changes in the reserve for credit losses.
<TABLE>
<CAPTION>

                                                                       1996       1995       1994
                                                                      -------    -------    -------
                                                                           Amounts in Millions
<S>                                                                    <C>        <C>        <C>   
Balance, January 1 .................................................   $206.0     $192.4     $169.4
                                                                       ------     ------     ------
Finance receivables charged-off ....................................   (122.2)     (96.9)     (95.4)
Recoveries on finance receivables previously 
   charged-off .....................................................     20.7       19.7       11.2
                                                                       ------     ------     ------
   Net credit losses ...............................................   (101.5)     (77.2)     (84.2)
                                                                       ------     ------     ------
Provision for credit losses ........................................    111.4       91.9       96.9
Portfolio acquisitions (dispositions), net .........................      4.9       (1.1)      10.3
                                                                       ------     ------     ------
Net addition to the reserve for credit losses ......................    116.3       90.8      107.2
                                                                       ------     ------     ------
Balance, December 31 ...............................................   $220.8     $206.0     $192.4
                                                                       ======     ======     ======
Reserve for credit losses as a percentage of finance
   receivables .....................................................     1.30%      1.30%      1.30%
                                                                       ======     ======     ====== 
</TABLE>

Note 5--Operating Lease Equipment

     The following  table provides an analysis of operating  lease  equipment by
equipment  type, net of accumulated  depreciation  of $287.7 million in 1996 and
$198.1 million in 1995.

                                                      At December 31,
                                                 -------------------------
                                                   1996             1995
                                                 --------         --------
                                                    Amounts in Millions
Commercial aircraft ........................... $  624.0          $  499.4
Railroad equipment ............................    273.2             153.4
Business aircraft .............................    167.8             141.2
Trucks, trailers and buses ....................    160.1             163.2      
Other .........................................    177.0             155.8
                                                --------          --------
  Total ....................................... $1,402.1          $1,113.0
                                                ========          ========

     Included in the preceding table is equipment not currently subject to lease
agreements  of $1.9  million and $24.4  million at  December  31, 1996 and 1995,
respectively.

     During the first  quarter of 1996,  the  Corporation  adopted  Statement of
Financial  Accounting  Standard  No.  121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of" ("SFAS  121").
SFAS 121 requires that a review for impairment be performed  whenever  events or
changes in circumstances  indicate that the carrying amount of long-lived assets
may not be recoverable. Recoverability of assets to be held and used is measured
by a  comparison  of the  carrying  amount of an asset to future  net cash flows
expected  to be  generated  by the asset.  If such assets are  considered  to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed 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. The adoption of SFAS 121 did not have a significant impact on the
Corporation's   consolidated  financial  position,   results  of  operations  or
liquidity.

                                       36
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     Rental  income on operating  leases,  included in finance  income,  totaled
$182.4  million in 1996,  $128.8  million in 1995 and $97.2 million in 1994. The
following  table  presents  future  minimum  lease  rentals  on   noncancellable
operating leases as of December 31, 1996.  Excluded from this table are variable
rentals calculated on the level of asset usage, re-leasing rentals, and expected
sales proceeds from remarketing  operating lease equipment at lease  expiration,
all of which are important components of operating lease profitability.

                                                            Amounts
Years Ended December 31,                                  in Millions
-----------------------                                   -----------

1997 ..................................................     $193.7
1998 ..................................................      162.7
1999 ..................................................      126.3
2000 ..................................................       91.9
2001 ..................................................       70.1
Thereafter ............................................       89.8
                                                            ------
  Total ...............................................     $734.5
                                                            ======
Note 6--Debt

     The following table presents data on commercial paper borrowings.
<TABLE>
<CAPTION>

                                                                      1996             1995           1994
                                                                    ---------       ----------      ---------
                                                                            Dollar Amounts in Millions
<S>                                                                  <C>             <C>             <C>     
At December 31,
Borrowings outstanding ..........................................    $5,827.0        $6,105.6        $5,660.2
Weighted average interest rate ..................................        5.45%           5.75%           5.65%
Weighted average maturity .......................................     32 days         45 days         22 days

For the year ended December 31,
Daily average borrowings ........................................    $5,817.7        $5,800.1        $6,532.5
Maximum amount outstanding ......................................    $6,591.3        $6,672.1        $7,207.3
Weighted average interest rate (excluding amounts related
   to interest bearing deposits) ................................        5.44%           5.95%           4.31%

</TABLE>

                                       37
<PAGE>

                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     The following  table presents the  contractual  maturities of total debt at
December 31, 1996.
<TABLE>
<CAPTION>

                                                            Commercial    Variable rate    1996         1995
                                                              paper       senior notes     Total        Total
                                                            ----------    ------------     -----        -----
                                                                            Amounts in Millions

<S>                                                          <C>           <C>             <C>          <C>     
Due in 1996 (rates ranging from 5.55% to 5.95%) ...........  $   --        $    --         $   --     $8,505.6
Due in 1997 (rates ranging from 5.04% to 6.14%) ...........   5,827.0       2,856.0        8,683.0       806.0
Due in 1998 (rates ranging from 5.47% to 6.03%)(1) ........      --           461.5          461.5       241.5
Due in 1999 (rates ranging from 5.04% to 6.06%) ...........      --           380.0          380.0       380.0
Due after 2001 (rate of 5.85%) ............................      --            20.0           20.0         --
                                                             --------      --------       --------    --------
        Total..............................................  $5,827.0      $3,717.5       $9,544.5    $9,933.1
                                                             ========      ========       ========    ========
</TABLE>
<TABLE>
<CAPTION>


                                                                 Fixed Rate Notes          1996         1995
                                                              Senior      Subordinated     Total        Total
                                                            ----------    ------------     -----        -----
                                                                             Amounts in Millions
<S>                                                          <C>           <C>            <C>         <C>     
Due in 1996 (rates ranging from 4.75% to 8.88%) ...........  $   --        $     --       $    --     $1,030.0
Due in 1997 (rates ranging from 5.50% to 8.75%) ...........     700.2            --          700.2       702.0
Due in 1998 (rates ranging from 5.63% to 8.75%) ...........   1,550.0            --        1,550.0       800.0
Due in 1999 (rates ranging from 5.38% to 6.63%) ...........   1,070.0            --        1,070.0        20.0
Due in 2000 (rate of 6.15%) ...............................      20.0            --           20.0        20.0
Due in 2001 (rates ranging from 5.63% to 9.25%) ...........     500.0         200.0          700.0       200.0
Due after 2001 (rates ranging from 5.37% to 7.13%)(2) .....     928.6         100.0        1,028.6       870.2
                                                             --------      --------       --------    --------
Face amount of maturities .................................   4,768.8         300.0        5,068.8     3,642.2
Issue discount ............................................      (7.6)           --           (7.6)       (5.2)
                                                             --------      --------       --------    --------
    Total .................................................  $4,761.2      $  300.0       $5,061.2    $3,637.0
                                                             ========      ========       ========    ========
</TABLE>

----------
(1)  $61.5  million  may be repaid at the  option  of the  holder  upon 30 days'
     notice.

(2)  $100.0  million  may be repaid at the  option of the  holder  upon 30 days'
     notice.

     Fixed rate senior and  subordinated  debt outstanding at December 31, 1996,
matures at various  dates  through 2008 at interest  rates ranging from 5.38% to
9.25%. The consolidated weighted average interest rates on fixed rate senior and
subordinated  debt  at  December  31,  1996  and  1995  were  6.52%  and  7.00%,
respectively.  Variable rate senior notes  outstanding at December 31, 1996 with
interest rates ranging from 5.25% to 5.94% mature at various dates through 2003.
The  consolidated  weighted average interest rates on variable rate senior notes
at December 31, 1996 and 1995 were 5.44% and 5.64%, respectively.

     The following table represents  information on unsecured revolving lines of
credit with 60 banks which support  commercial  paper borrowings at December 31,
1996.

 Maturity                                                        Amount
 --------                                                   -----------------
                                                           Amounts in Millions

 May 1997 ..............................................        $1,212.0
 September 1997 ........................................            81.0
 May 2001 ..............................................         3,638.0
 September 2001 ........................................           244.0
                                                                --------
   Total ...............................................        $5,175.0
                                                                ========

     The credit line  agreements  contain clauses which allow the Corporation to
extend the termination dates upon written consent from the participating  banks.
There have been no borrowings  under credit lines  supporting  commercial  paper
since 1970.

                                       38
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 7--Derivative Financial Instruments

     As part of managing the exposure to changes in market interest  rates,  the
Corporation,   as  an  end-user,   enters  into  various   interest   rate  swap
transactions,  all of which are  transacted in  over-the-counter  (OTC) markets,
with other financial institutions acting as principal counterparties,  including
subsidiaries  of DKB and Chase.  The  Corporation's  objectives  and  strategies
regarding the management of interest rate risk,  including the use of derivative
instruments,  are  discussed in the  Interest  Rate Risk  Management  section of
"Asset/Liability  Management" in Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.

     The  following  table  presents the notional  principal  amounts,  weighted
average  interest  rates  expected to be  received  or paid and the  contractual
maturities of interest rate swaps at December 31, 1996.

<TABLE>
<CAPTION>
Years ending                 Floating to                     Fixed to                            Floating to
December 31,                 Fixed Rate                    Floating Rate                        Floating Rate
------------      -----------------------------      ----------------------------        --------------------------
                                                     Notional Amounts in Millions

                   Notional    Receive     Pay        Notional   Receive      Pay       Notional    Receive     Pay
                    Amount      Rate      Rate         Amount     Rate       Rate        Amount      Rate      Rate
                   --------    -------    ----        --------   -------     ----        -------    ------     ----
<C>                <C>          <C>        <C>         <C>         <C>       <C>          <C>        <C>        <C>  
1997 ............  $1,425.0     5.86%      5.99%       $250.2      6.94%     5.97%        $456.0     5.54%      5.56%
1998 ............     700.0     6.27%      6.61%         --         --        --            --        --         --
1999 ............     980.0     5.75%      6.15%         --         --        --           130.0     5.55%      5.76%
2000 ............     700.0     5.93%      7.05%         20.0      6.15%     5.76%          --        --         --
2001 ............     200.0     5.80%      7.45%        200.0      5.82%     5.50%          --        --         --
2002-2008 .......      --        --         --          200.0      5.92%     5.58%          --        --         --
                    -------     -----      -----       ------     ------    ------        ------     -----      -----
                   $4,005.0                            $670.2                             $586.0
                    =======                            ======                             ======
Weighted                                                                              
average rate ....               5.91%      6.40%                   6.28%     5.71%                   5.54%      5.60%
                                =====      =====                   =====     =====                   =====      =====
</TABLE>
                                                                               
     All rates were those in effect at December  31,  1996.  Variable  rates are
based on the contractually  determined rate or other market rate indices and may
change significantly, affecting future cash flows.

      The following  table presents the notional  principal  amounts of interest
rate swaps by class and the corresponding hedged liability position.

                              Notional Amounts
Interest Rate Swaps             in Millions             Comments
-------------------             -----------             --------
Floating to fixed rate swaps
 
 Hedging commercial paper        $3,005.0    Effectively  converts  the interest
                                             rate  on an  equivalent  amount  of
                                             commercial paper to a fixed rate.

 Hedging variable rate notes      1,000.0    Effectively  converts  the interest
                                             rate  on an  equivalent  amount  of
                                             variable  rate notes  with  matched
                                             terms  to  a  fixed  rate.
                                  -------    ----------------------------------
 Total floating to fixed rate
  swaps                           4,005.0
                                  -------
Fixed to floating rate swaps
 Hedging fixed rate notes           670.2    Effectively  converts  the interest
                                             rate  on an  equivalent  amount  of
                                             fixed  rate  notes  to  a  variable
                                             rate.
                                             -----------------------------------
Basis swaps
 Hedging variable rate debt         586.0    Effectively    fixes   the   spread
                                             between the rates on an  equivalent
                                             amount of  variable  rate notes and
                                             various   market    interest   rate
                                             indices.                    
                                  -------    -----------------------------------
Total interest rate swaps        $5,261.2
                                  =======    

                                       39
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     The  Corporation's  hedging  activity  increased  interest expense by $27.8
million,  $7.8 million and $27.3 million in 1996,  1995 and 1994,  respectively,
over the interest  expense that would have been incurred with an identical  debt
structure  but  without  the  Corporation's  hedging  activity.   However,  this
calculation  of  interest  expense  does not take into  account  any actions the
Corporation  could have  taken to reduce  interest  rate risk in the  absence of
hedging activity,  such as issuing more fixed rate debt which would also tend to
increase interest expense.

     Basis swap agreements  involve the exchange of two different  floating rate
interest  payment  obligations  and are used to manage  the basis  risk  between
floating rate indices.

     Additionally, there were cross-currency interest rate swaps with a notional
principal  amount of $218.6 million on which the Corporation was paying interest
at a  weighted  average  rate of 5.67% at  December  31,  1996 that  effectively
converted  yen  denominated  fixed  rate debt  into  variable  rate U.S.  dollar
obligations. These swaps have maturities ranging from 1999 to 2006 to correspond
with the terms of the debt.

     The  Corporation  is  exposed to credit  risk to the extent a  counterparty
fails to perform under the terms of an interest rate swap. This risk is measured
as the  market  value of  interest  rate  swaps  with a  positive  fair value at
December  31,  1996,  reduced by the  effects of master  netting  agreements  as
presented in Footnote 16 --Fair Values of Financial Instruments. However, due to
the  investment  grade credit  ratings of all  counterparties  and limits on the
exposure with any individual counterparty, the Corporation's actual counterparty
credit risk is not considered significant.

Note 8--Stockholders' Equity

     Under the most restrictive provisions of agreements relating to outstanding
debt, the Corporation may not,  without the consent of the holders of such debt,
permit stockholders' equity to be less than $300.0 million.

Note 9--Fees and Other Income

     The following table sets forth the components of fees and other income.
<TABLE>
<CAPTION>

                                                                              Years ended December 31,
                                                                         -------------------------------
                                                                           1996        1995         1994
                                                                         -------      -------     -------
                                                                                 Amounts in Millions

<S>                                                                       <C>         <C>          <C>   
Commissions, fees and other ...........................................   $165.2      $147.9       $148.3
Gains on equipment and other investment sales .........................     54.6        10.5         10.1
Gains on sales and securitizations of finance receivables .............     24.3        26.3         16.0
                                                                          ------      ------       ------
                                                                          $244.1      $184.7       $174.4
                                                                          ======      ======       ======
</TABLE>

Note 10--Salaries and General Operating Expenses

     The  following  table sets forth the  components  of  salaries  and general
operating expenses.

                                                    Years ended December 31,
                                               --------------------------------
                                                1996         1995         1994
                                               --------    ---------    -------
                                                       Amounts in Millions


Salaries and employee benefits ..............   $223.0      $193.4       $185.8
General operating expenses ..................    170.1       152.3        152.1
                                                ------      ------       ------
                                                $393.1      $345.7       $337.9
                                                ======      ======       ======

                                       40
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 11--Income Taxes

     The effective tax rate of the Corporation varied from the statutory Federal
corporate income tax rate as follows:

                                                    Years ended December 31,
                                              ---------------------------------
                                                1996         1995         1994
                                              ---------    ---------    -------
                                                 Percentage of Pretax Income

  Federal income tax rate ..................      35.0%       35.0%       35.0%
  Increase (decrease) due to:
   State and local income taxes, net
     of Federal income tax benefit .........       4.5         5.1         5.3
   Investment tax credits ..................      (0.3)       (0.3)       (0.3)
   Other ...................................      (1.8)       (1.5)       (1.9)
                                                  ----        ----        ----
   Effective tax rate ......................      37.4%       38.3%       38.1%
                                                  ====        ====        ====

     The provision for income taxes is comprised of the following:

                                                    Years ended December 31,
                                               --------------------------------
                                                1996         1995         1994
                                               --------    ---------    -------
                                                       Amounts in Millions

Current Federal income tax provision .......   $   72.9    $   68.5    $   69.5
Deferred Federal income tax provision ......       54.1        42.5        27.7
                                                 ------      ------      ------
Total Federal income taxes .................      127.0       111.0        97.2
State and local income taxes ...............       28.7        28.8        26.7
                                                 ------      ------      ------
Total provision for income taxes ...........   $  155.7    $  139.8    $  123.9
                                                 ======      ======      ======

     The tax  effects of  temporary  differences  that give rise to  significant
portions of the deferred Federal income tax assets and liabilities are presented
below.

                                                      Years ended December 31,
                                                    ---------------------------
                                                      1996                1995
                                                    ---------           -------
                                                         Amounts in Millions
Assets
   Provision for credit losses ..................   $  (83.8)          $  (73.8)
   Loan origination fees ........................      (10.5)              (9.1)
   Other ........................................      (37.8)             (20.2)
                                                      ------             ------

   Total deferred tax assets ....................     (132.1)            (103.1)
                                                      ------             ------

Liabilities
   Leasing transactions .........................      610.0              549.5
   Market discount income .......................       23.8                 --
   Amortization of intangibles ..................        9.2               11.2
   Prepaid pension costs ........................        2.0                2.3
   Depreciation of fixed assets .................        2.7                0.3
   Other ........................................        2.7                2.7
                                                      ------              -----
         Total deferred tax liabilities .........      650.4              566.0
                                                      ------              -----
Net deferred tax liability ......................    $ 518.3            $ 462.9
                                                      ======             ======

     Also, included in deferred Federal income taxes on the Consolidated Balance
Sheets are  unamortized  investment tax credits of $5.0 million and $6.3 million
at December  31,  1996 and  December  31,  1995,  respectively.  Included in the
accrued liabilities and payables caption in the Consolidated  Balance Sheets are
state and local  deferred tax  liabilities of $97.4 million and $86.4 million at
December  31,  1996  and  December  31,  1995,  respectively,  arising  from the
temporary differences shown in the above tables.

                                       41
<PAGE>

                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 12--Postretirement and Other Benefit Plans

Retirement Plan

     Substantially  all employees of the Corporation who have completed one year
of service and are 21 years of age participate in The CIT Group  Holdings,  Inc.
Retirement Plan (the "Plan").  The retirement  benefits under the Plan are based
on the employee's age, years of benefit service,  and a percentage of qualifying
compensation  during  the final  years of  employment.  Plan  assets  consist of
marketable securities,  including common stock and government and corporate debt
securities.  The Corporation  funds the plan to the extent the funding qualifies
for an income tax  deduction.  Such  funding is charged to salaries and employee
benefits expense.

     The  accompanying  table sets  forth the funded  status of the Plan and the
amounts recognized in the Consolidated Balance Sheets.

<TABLE>
<CAPTION>
                                                                         A December 31,
                                                                  ---------------------------
                                                                   1996       1995      1994
                                                                  ------     ------    ------
                                                                      Amounts in Millions
<S>                                                             <C>        <C>        <C>    
Actuarial present value of benefit obligations:
 Accumulated benefit obligation including vested benefits
 of $54.8 in 1996, $54.0 in 1995, and $36.2 in 1994 ........      $ 61.6     $ 58.1     $39.7
                                                                  ======     ======     =====
Plan assets at fair market value ...........................      $109.9     $101.2     $81.5
Projected benefit obligation ...............................       (84.0)     (79.9)    (55.8)
                                                                  ------     ------     -----
Excess plan assets .........................................        25.9       21.3      25.7
Unrecognized prior service cost ............................         1.8        1.9       2.1
Unrecognized net gain ......................................        15.9       10.5      13.8
                                                                  ------     ------     -----
Prepaid pension cost .......................................      $  8.2     $  8.9     $ 9.8
                                                                  ======     ======     =====
Pension cost included the following components:

Service cost-benefits earned during the period .............      $  5.3     $  3.8     $ 4.0
Interest cost on projected benefit obligation ..............         5.7        4.9       4.5
Actual (return)/loss on plan assets ........................       (11.5)     (21.9)      2.7
Net amortization and deferral ..............................         1.2       14.1     (11.0)
                                                                  ------     ------     -----
Pension cost ...............................................      $  0.7     $  0.9     $ 0.2
                                                                  ======     ======     =====
</TABLE>

     The following  assumptions were used for calculating the projected  benefit
obligations shown in the preceding table.


                                                       1996     1995      1994
                                                       ----     ----      ----
                                                     
Discount rate .....................................    7.50%    7.25%    8.75%
Rate of increase in compensation ..................    4.50%    4.50%    5.00%
Expected long-term rate of return on plan assets ..   10.00%   10.00%    9.00%
                                                   
Postretirement Medical and Life Insurance Benefits

     The Corporation provides certain health care and life insurance benefits to
eligible retired employees.  Salaried participants generally become eligible for
retiree  health care  benefits  after  reaching  age 55 with 10 years of benefit
service and 11 years of medical plan participation. Generally, the medical plans
pay a stated percentage of most medical expenses reduced by a deductible as well
as by payments made by government  programs and other group coverage.  The plans
are unfunded.

                                       42
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     The postretirement  benefit liability at December 31, 1996 and December 31,
1995 is set forth in the following table.

                                                               1996       1995
                                                              ------     ------
                                                            Amounts in Millions
Accumulated postretirement benefit obligation ("APBO"):
  Retirees ...............................................     $22.5      $21.8
  Fully eligible, active plan participants ...............       4.1        4.8
  Other active plan participants .........................       8.3       13.8
                                                               -----      -----
Unfunded postretirement obligation .......................      34.9       40.4
Unrecognized prior service cost ..........................      --         (0.5)
Unrecognized net gain ....................................      (7.7)      (0.8)
Unrecognized transition obligation .......................      26.2       28.3
                                                               -----      -----
Accrued postretirement benefit obligation ................     $16.4      $13.4
                                                               =====      =====

     The components of net periodic postretirement benefit cost were as follows.
<TABLE>
<CAPTION>

                                                                                Years ended December 31,
                                                                           ---------------------------------
                                                                           1996           1995          1994
                                                                           -----          -----         ----
                                                                                   Amounts in Millions
<S>                                                                         <C>           <C>           <C> 
Service cost, benefits earned during the period .........................   $1.1          $1.1          $1.2
Interest cost on accumulated postretirement benefit obligation ..........    2.4           3.2           2.8
Amortization of unrecognized transition obligation ......................    1.7           1.7           1.7
Amortization of gain ....................................................   (0.6)          --             --
Amortization of unrecognized prior service cost .........................     --          (0.1)           --
                                                                            ----          ----          ----

 Net periodic postretirement benefit cost ...............................   $4.6          $5.9          $5.7
                                                                            ====          ====          ====
</TABLE>

     The following  assumptions  were used for calculating the APBO shown in the
preceding tables.

<TABLE>
<CAPTION>
                                                                            1996          1995          1994
                                                                           -------       -------       -------
<S>                                                                          <C>            <C>          <C>  
  Discount Rate .........................................................    7.50%          7.25%        8.75%
  Rate of increase in compensation ......................................    4.50%          4.50%        5.00%
  Assumed Health Care Cost Trend Rate:
       Retirees prior to reaching age 65 ................................    9.00%         10.00%       11.00%
       Retirees older than 65 ...........................................    6.00%          7.00%        8.00%
</TABLE>

     The assumed  health care cost trend rates  decline to an ultimate  level of
4.75%  in 2001  for  retirees  prior to  reaching  age 65 and  4.75% in 1998 for
retirees  older than 65 for 1996,  4.75% in 2003 for retirees  prior to reaching
age 65 and 4.75% in 2000 for  retirees  older than 65 for 1995 and 6.25% in 2001
for all retirees for 1994.

     If the health care cost trend rate were  increased by 1%, the APBO relating
to the medical  benefits as of December  31,  1996,  would be  increased by $2.4
million (9.5%),  and the sum of the service cost and interest cost components of
net periodic  postretirement  benefit cost relating to the medical  benefits for
1996 would be increased by $0.3 million (12.4%).

Savings Incentive Plan

     Certain employees of the Corporation participate in The CIT Group Holdings,
Inc.  Savings  Incentive  Plan.  This plan qualifies under section 401(k) of the
Internal  Revenue  Code.  The   Corporation's   expense  is  based  on  specific
percentages  of  employee   contributions  and  plan  administrative  costs  and
aggregated $9.1 million,  $8.2 million and $8.0 million for 1996, 1995 and 1994,
respectively.

                                       43
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 13--Lease Commitments

     The Corporation has entered into noncancellable  long-term lease agreements
for premises and equipment.  The following table presents future minimum rentals
under such noncancellable  leases that have initial or remaining terms in excess
of one year at December 31, 1996.

At December 31,                                         Amounts in Millions
---------------                                         -------------------

   1997 ...............................................       $ 23.8
   1998 ...............................................         22.3
   1999 ...............................................         18.9
   2000 ...............................................         15.6
   2001 ...............................................         14.5
   Thereafter .........................................         60.5
                                                              ------
    Total .............................................       $155.6
                                                              ======

     In addition to fixed lease rentals,  leases require  payment of maintenance
expenses  and  real  estate  taxes,  both of which  are  subject  to  escalation
provisions.  Minimum  payments have not been reduced by minimum sublease rentals
of $19.6 million due in the future under noncancellable subleases.

     Rental expense,  net of sublease  income on premises and equipment,  was as
follows.

                                                  Years ended December 31,
                                          -------------------------------------
                                            1996           1995          1994
                                           -------       --------       -------
                                                      Amounts in Millions

  Premises                                  $18.0         $18.0         $18.3
  Equipment                                   6.3           5.7           5.2
  Less sublease income                       (1.2)         (1.3)         (1.3)
                                            -----         -----         -----
      Total                                 $23.1         $22.4         $22.2
                                            =====         =====         =====

     Rental  expense paid to Chase totaled $0.5  million,  $0.6 million and $1.6
million in 1996, 1995 and 1994, respectively.

Note 14--Legal Proceedings

     In the ordinary  course of business,  there are various  legal  proceedings
pending  against  the  Corporation.   Management  believes  that  the  aggregate
liabilities,  if any, arising from such actions will not have a material adverse
effect  on  the  consolidated  financial  position,  results  of  operations  or
liquidity of the Corporation.

Note 15--Credit-Related Commitments

     In the normal course of meeting the financing  needs of its customers,  the
Corporation  enters into various  credit-related  commitments.  These  financial
instruments  generate fees and involve,  to varying degrees,  elements of credit
risk in excess of the amounts recognized in the Consolidated  Balance Sheets. To
minimize potential credit risk, the Corporation  generally  requires  collateral
and other  credit-related  terms and conditions  from the customer.  At the time
credit-related  commitments are granted,  management  believes the fair value of
the underlying collateral and guarantees approximates or exceeds the contractual
amount of the  commitment.  In the event a customer  defaults on the  underlying
transaction,  the  maximum  potential  loss to the  Corporation  represents  the
contractual amount  outstanding less the value of all underlying  collateral and
guarantees.

                                       44
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     The accompanying table summarizes the contractual amounts of credit-related
commitments.

<TABLE>
<CAPTION>

                                                                Due to expire             
                                                           ----------------------          Total         Total
                                                            Within         After        outstanding   outstanding
At December 31,                                             one year     one year          1996          1995
--------------                                             --------      --------       ----------   -----------
                                                                             Amounts in Millions
<S>                                                        <C>              <C>           <C>          <C>     
Unused commitments to extend credit
    Loans ..............................................   $1,457.2         $30.2         $1,487.4     $1,244.1
    Leases .............................................       50.9            --             50.9         61.6
Letters of credit and acceptances
    Standby letters of credit ..........................      144.8           6.8            151.6        176.9
    Other letters of credit ............................      221.2          10.5            231.7        197.2
    Acceptances ........................................       14.6            -              14.6          3.9
Guarantees .............................................       51.9          28.0             79.9        101.2
Foreign exchange contracts .............................        0.8             -              0.8          0.1

</TABLE>

Note 16--Fair Values of Financial Instruments

     Statement of Financial  Accounting  Standards No. 107,  "Disclosures  About
Fair Value of Financial  Instruments"  ("SFAS 107")  requires  disclosure of the
estimated  fair  value of the  Corporation's  financial  instruments,  excluding
leasing  transactions  accounted for under SFAS 13. The fair value estimates are
made at a  discrete  point in time  based on  relevant  market  information  and
information about the financial instrument.  Since no established trading market
exists for a significant  portion of the  Corporation's  financial  instruments,
fair value  estimates  are based on judgments  regarding  future  expected  loss
experience,   current  economic  conditions,  risk  characteristics  of  various
financial  instruments,  and other  factors.  These  estimates are subjective in
nature,  involving  uncertainties  and  matters  of  significant  judgment  and,
therefore,  cannot be  determined  with  precision.  Changes in  assumptions  or
estimation methods may significantly  affect the estimated fair values.  Because
of these limitations,  management  provides no assurance that the estimated fair
values presented would necessarily be realized upon disposition or sale.

     Actual fair values in the  marketplace  are  affected by other  significant
factors,  such as supply and demand,  investment  trends and the  motivations of
buyers  and  sellers,  which  are  not  considered  in the  methodology  used to
determine the estimated fair values presented. In addition, fair value estimates
are based on existing on- and off-balance  sheet financial  instruments  without
attempting to estimate the value of future business  transactions  and the value
of assets and liabilities that are part of the  Corporation's  overall value but
are not considered  financial  instruments.  Significant  assets and liabilities
that are not considered  financial  instruments include customer base, operating
lease  equipment,  premises and equipment,  assets  received in  satisfaction of
loans,  and deferred tax  balances.  In  addition,  tax effects  relating to the
unrealized  gains and losses  (differences in estimated fair values and carrying
values) have not been  considered in these  estimates and can have a significant
effect  on fair  value  estimates.  The  carrying  amounts  for  cash  and  cash
equivalents approximate fair value because they have short maturities and do not
present significant credit risks.  Credit-related  commitments,  as disclosed in
Note 15, are  primarily  short-term  floating  rate  contracts  whose  terms and
conditions are individually negotiated, taking into account the creditworthiness
of the customer and the nature,  accessibility and quality of the collateral and
guarantees.   Therefore,  the  fair  value  of  credit-related  commitments,  if
exercised, would approximate their contractual amounts.

                                       45
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     Estimated fair values,  recorded  carrying  values and various  assumptions
used in valuing the Corporation's financial instruments at December 31, 1996 and
1995 are set forth below.

<TABLE>
<CAPTION>

                                                                   1996                         1995
                                                        --------------------------   -------------------------
                                                           Carrying      Estimated      Carrying     Estimated
                                                            Value       Fair Value       Value       Fair Value
                                                        ----------       ---------    ----------     ---------
                                                            Asset          Asset         Asset         Asset
                                                         (Liability)    (Liability)   (Liability)   (Liability)
                                                        ----------       ---------    ----------     ---------
                                                                           Amounts in Millions

<S>                                                      <C>            <C>             <C>          <C>      
Finance Receivables-Loans(a) ........................    $13,275.2      $13,480.1       $12,563.4    $12,844.1
Other Assets(b) .....................................    $   389.7      $   424.4       $   305.5    $   333.2
Commercial Paper(c) .................................    $(5,827.0)     $(5,827.0)      $(6,105.6)   $(6,105.6)
Fixed rate senior notes and
  subordinated fixed rate notes(d) ..................    $(5,061.2)     $(5,091.6)      $(3,637.0)   $(3,762.2)
Variable rate notes(d) ..............................    $(3,717.5)     $(3,714.3)      $(3,827.5)   $(3,827.5)
Credit balances of factoring clients and
    accrued liabilities and payables(e) .............    $(1,578.9)     $(1,578.9)      $(1,344.8)   $(1,344.8)
Derivative Financial Instruments(f)
  Interest Rate Swaps
    Off-balance sheet assets ........................    $     --       $     6.3       $     --     $      2.8
    Off-balance sheet liabilities ...................    $     --        $  (64.6)      $     --     $   (107.8)
    Cross currency interest rate swaps ..............    $     --       $    14.1       $     --     $     36.8
  Forward interest rate agreement ...................    $     --       $     --        $     --     $     (0.5)

</TABLE>
  
----------------                                               
(a)  The fair value of performing  fixed-rate  loans was estimated  based upon a
     present value discounted cash flow analysis, using interest rates that were
     being  offered  at the end of the  year for  loans  with  similar  terms to
     borrowers of similar  credit  quality.  Discount  rates used in the present
     value calculation range from 7.96% to 9.37% for 1996 and 8.46% to 9.99% for
     1995. The  maturities  used  represent the average  contractual  maturities
     adjusted for prepayments.  For floating rate loans that reprice  frequently
     and have no significant  change in credit quality,  fair values approximate
     carrying  value.  The net carrying value of lease finance  receivables  not
     subject  to fair value  disclosure  totaled  $3.5  billion in 1996 and $3.0
     billion in 1995. 

(b)  Other assets  subject to fair value  disclosure  include  accrued  interest
     receivable, excess servicing assets and investment securities. The carrying
     amount of accrued  interest  receivable  approximates  fair value. The fair
     value of excess  servicing  assets was  determined by adjusting the present
     value  of  remaining  cash  flows  for  anticipated   prepayment  and  loss
     experience.  Investment  securities  actively traded in a secondary  market
     were valued using quoted available market prices.  Investments not actively
     traded in a secondary market were valued based upon recent selling price or
     present value  discounted  cash flow analysis.  The carrying value of other
     assets not subject to fair value disclosure  totaled $261.8 million in 1996
     and $250.8 million in 1995.

(c)  The estimated fair value of commercial  paper  approximates  carrying value
     due to its relatively short maturity.

(d)  Fixed rate notes were valued  using a present  value  discounted  cash flow
     analysis  with a  discount  rate  approximating  current  market  rates for
     issuances by the  Corporation  of similar term debt at the end of the year.
     Discount rates used in the present value  calculation  ranged from 5.53% to
     6.95% in 1996 and  5.30% to 6.25% in 1995.  The  estimated  fair  value for
     variable rate notes  differs from  carrying  value as a result of a foreign
     denominated issuance.

(e)  The  estimated  fair  value  of  credit   balances  of  factoring   clients
     approximates  carrying value due to their short settlement  terms.  Accrued
     liabilities  and payables with no stated  maturities have an estimated fair
     value  which  approximates  carrying  value.  The  carrying  value of other
     liabilities not subject to fair value disclosure  totaled $672.5 million in
     1996 and $591.2 million in 1995.

(f)  As previously  disclosed in Note 7-Derivative  Financial  Instruments,  the
     notional  principal  amount of  interest  rate swaps  designated  as hedges
     against the  Corporation's  debt totaled $5.26 billion at December 31, 1996
     ($1.80  billion of which  related to interest  rate swaps whose fair market
     value represented an asset and $3.46 billion related to interest rate swaps
     whose fair market value represented a liability, after adjusting for master
     netting agreements) and $5.27 billion at December 31, 1995 ($0.7 billion of
     assets and $4.6 billion of liabilities).  The notional  principal amount of
     cross  currency  interest rate swaps totaled $218.6 million at December 31,
     1996 and $190.2  million at December 31, 1995. The estimated fair values of
     derivative  financial  instruments  are  obtained  from  dealer  quotes and
     represent the net amount  receivable or payable to terminate the agreement,
     taking into account current market interest rates and  counterparty  credit
     risk.

                                       46
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 17--Investments in Debt and Equity Securities

     At  December  31,  1996  and  1995,  the book  value  of the  Corporation's
investments in debt and equity securities  subject to the provision of Statement
of Financial  Accounting  Standards No. 115, "Accounting for Certain Investments
in Debt  and  Equity  Securities"  totaled  $24.4  million  and  $22.3  million,
respectively,  all of which was  designated  as available  for sale.  Unrealized
gains and losses, representing the difference between amortized cost and current
fair market value were immaterial.

Note 18--Accounting for Stock-Based Compensation

     The  Corporation's  Long Term  Incentive  Plan (the "CIT  Career  Incentive
Plan") awards phantom shares of stock to selected  executives.  The  performance
period for each plan is three  consecutive  calendar years and performance goals
are a function of net income  growth  targets and return on equity  performance.
The value of the  shares is  determined  at the end of each  performance  period
based upon a price/earnings  multiplier determined by the Executive Committee of
the Board of Directors of the  Corporation.  Following  the end of a performance
period,  one-third of the shares vest  immediately and one-third vest at the end
of each of the next two years.  All vested shares are settled in cash.  Prior to
January 1, 1996, the Corporation  accounted for the CIT Career Incentive Plan in
accordance  with the  provisions of Accounting  Principles  Board Opinion No. 25
"Accounting  for Stock  Issued to  Employees"  and related  interpretations.  On
January 1, 1996,  the  Corporation  adopted  Statement of  Financial  Accounting
Standards No. 123, "Accounting for Stock-Based  Compensation" ("SFAS 123") which
did not change the accounting for plans settled in cash and,  therefore,  had no
impact on the Corporation.  Compensation  cost is recognized over the periods in
which  the  participants'  services  are  rendered  and  a  liability  has  been
established  for  the  estimated   payments  to  participants.   The  amount  of
compensation  cost recorded for the CIT Career  Incentive Plan during 1996, 1995
and 1994 was $9.5 million, $3.8 million and $4.0 million, respectively.

Note 19--Acquisition of Barclays Commercial Corporation

     On  February  28,  1994,  the  Corporation  acquired,  for  cash,  Barclays
Commercial  Corporation  ("BCC"), a company of the Barclays Group. BCC had total
assets of approximately  $700.0 million at December 31, 1993 and total factoring
volume of approximately $5.0 billion for the year then ended.

Note 20--Certain Relationships and Related Transactions

     The  Corporation  has in the past and may in the future  enter into certain
transactions  with affiliates of the  Corporation.  It is anticipated  that such
transactions will be entered into at a fair market value for the transaction.

     The Corporation's  interest-bearing  deposits generally represent overnight
money  market  investments  of excess  cash that are  maintained  for  liquidity
purposes.   At  December  31,  1995,  the  Corporation  had  $135.0  million  of
interest-bearing deposits with DKB. At December 31, 1996, the Corporation had no
such  deposits.  From time to time, the  Corporation  may maintain such deposits
with DKB or Chase.

     At December 31, 1996, the Corporation's  credit line coverage with 60 banks
totaled $5.18 billion of committed facilities.  Additional information regarding
these credit lines can be found in Note 6-Debt.  At December 31, 1996, DKB was a
committed bank under a $3.6 billion revolving credit facility,  a $244.0 million
revolving credit  facility,  a $1.2 billion  revolving  credit facility,  and an
$81.0 million  revolving  credit  facility,  with commitments of $108.8 million,
$93.8 million, $36.3 million and $31.3 million,  respectively.  DKB is the agent
under the $244.0 million facility and the $81.0 million facility.  Chase is both
the agent and a committed bank under the $3.6 billion  revolving credit facility
and the $1.2  billion  revolving  credit  facility  with  commitments  of $187.5
million and $62.5 million, respectively.

     At December 31, 1995, the Corporation's  credit line coverage with 69 banks
totaled $4.64 billion of committed  facilities.  At December 31, 1995, DKB was a
committed bank under a $1.25 billion revolving credit facility, a $770.0 million
revolving credit facility, and a $325.0 million revolving credit facility,  with

                                       47
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

commitments of $55.0 million,  $80.0 million and $105.0  million,  respectively.
DKB was a co-agent under the $1.25 billion and $770.0 million  revolving  credit
facilities and the Agent under the $325.0 million facility.

     The  Corporation  has entered into  interest  rate swap and cross  currency
interest rate swap  agreements with financial  institutions  acting as principal
counterparties, including affiliates of DKB and Chase. At December 31, 1996, the
notional  principal amount outstanding on interest rate swap agreements with DKB
and Chase totaled $270.0 million and $705.0 million,  respectively.  At December
31, 1995,  the  notional  principal  amount  outstanding  on interest  rate swap
agreements  with DKB and  Chase  totaled  $270.0  million  and  $300.0  million,
respectively.  The notional  principal  amount  outstanding on foreign  currency
swaps totaled  $168.0  million and $140.2  million with DKB at year-end 1996 and
1995, respectively.

     The Corporation has entered into leveraged leasing  arrangements with third
party loan participants, including affiliates of DKB. Amounts owed to affiliates
of DKB are discussed in Note 3-Finance Receivables.

     The  Corporation  held a $9.0  million  letter  of  credit  from  Chase  as
additional  collateral  on a business  aircraft  loaned to a third party with an
outstanding  balance of $22.2 million and $23.1 million at December 31, 1996 and
1995,  respectively.  Chase is also indebted to the Corporation in the amount of
$7.3 million and $7.7 million, at December 31, 1996 and 1995, respectively,  for
financing relating to the purchase of a business aircraft by Chase.

     The  Corporation  has also entered into  various  noncancellable  long-term
facility lease agreements with Chase.  Future minimum rentals under these leases
are $0.5  million in 1997,  $0.5  million in 1998,  $0.4  million in 1999,  $0.1
million in 2000.

     At  December  31,  1996  and  1995,  the   Corporation   had  entered  into
credit-related  commitments  with DKB in the form of letters of credit  totaling
$19.8 million and $21.7 million, respectively, equal to the amount of the single
lump sum premium  necessary to provide group life insurance  coverage to certain
eligible  retired  employees  and an amount  to fund  certain  overseas  finance
receivables.

     The Corporation  purchased finance receivables  totaling $33.4 million from
Chase during 1996.

     The  Corporation  has entered into cash collateral loan agreements with DKB
pursuant  to which DKB made loans to four  separate  cash  collateral  trusts in
order to provide  additional  security for payments on the  certificates  of the
related  contract  trusts.  These contract trusts were formed for the purpose of
securitizing  certain  recreational  vehicle  and  recreational  marine  finance
receivables.  At December 31, 1996 and 1995, the principal amount outstanding on
the cash collateral loans was $40.7 million and $12.3 million, respectively. The
Corporation  has entered into multiple trust  agreements with Chase with respect
to certain securitization transactions.

Note 21--Subsequent Event--Preferred Capital Securities

     In  February  1997,  CIT Capital  Trust I, (the  "Trust"),  a  wholly-owned
subsidiary of the Corporation,  issued $250.0 million of 7.70% Preferred Capital
Securities  (the  "Capital  Securities")  in  a  private  offering.   The  Trust
subsequently  invested the offering proceeds in Junior  Subordinated  Debentures
(the "Debentures") of the Corporation, having identical rates and payment dates.
The  Debentures  of the  Corporation  represent  the sole  assets of the  Trust.
Holders  of  the  Capital   Securities   are  entitled  to  receive   cumulative
distributions  at an annual rate of 7.70% through either the redemption  date or
maturity of the  Debentures  (February  15, 2027).  Both the Capital  Securities
issued and the Trust owned Debentures of the Corporation are redeemable in whole
or in part on or after  February 15, 2007 or at anytime in whole upon changes in
specific  tax  legislation,   bank  regulatory  guidelines  or  securities  law.
Distributions  by the Trust are guaranteed by the Corporation to the extent that
the Trust has funds available for distribution.

                                       48
<PAGE>
                 THE CIT GROUP HOLDINGS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

     For financial reporting purposes,  the Capital Securities will be presented
in the  consolidated  balance sheet of the  Corporation  as a separate line item
directly above stockholders' equity and captioned  "Redeemable preferred capital
securities  of  subsidiary  holding  solely  parent  company  debentures".   For
financial reporting purposes,  the Corporation will record distributions payable
on the  Capital  Securities  as an expense  in the  consolidated  statements  of
income.

Note 22--Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>

                                                                               1996
                                              ------------------------------------------------------------------
                                              First           Second           Third        Fourth
                                             Quarter          Quarter         Quarter       Quarter        Year
                                              ------          -------         ------        ------       -------
                                                                       Amounts in Millions
<S>                                           <C>              <C>            <C>           <C>           <C>   
Net finance income .........................  $195.4           $197.3         $201.4        $203.8        $797.9
Fees and other income ......................    52.7             73.2           50.9          67.3         244.1
Salaries and general operating expenses ....    95.9             97.6           97.9         101.7         393.1
Provision for credit losses ................    27.8             26.6           24.2          32.8         111.4
Depreciation on operating
 lease equipment ...........................    27.5             28.8           28.0          37.4         121.7
Provision for income taxes .................    37.1             45.1           37.1          36.4         155.7
Net income .................................  $ 59.8           $ 72.4         $ 65.1        $ 62.8        $260.1
                                              ------------------------------------------------------------------
                                                                              1995
                                              ------------------------------------------------------------------
                                              First           Second           Third        Fourth
                                             Quarter          Quarter         Quarter       Quarter        Year
                                              ------          -------         ------        ------        ------
                                                                       Amounts in Millions

Net finance income .........................  $164.5           $171.5         $178.8        $182.9        $697.7
Fees and other income ......................    43.4             41.9           47.8          51.6         184.7
Salaries and general
 operating expenses ........................    84.8             82.3           85.9          92.7         345.7
Provision for credit losses ................    21.0             22.2           24.0          24.7          91.9
Depreciation on operating
 lease equipment ...........................    17.6             17.2           21.4          23.5          79.7
Provision for income taxes .................    31.7             35.2           36.8          36.1         139.8
Net income .................................  $ 52.8           $ 56.5         $ 58.5        $ 57.5        $225.3
                                              ------------------------------------------------------------------
</TABLE>

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

     None.

                                       49
<PAGE>

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant.

     The  names  and  ages of all  directors,  executive  officers  and  certain
significant  employees  of  the  Corporation  as  of  February  1,  1997,  and a
biographical  summary of each such person,  appear on the  following  pages.  No
family  relationship  exists among these  persons.  The executive  officers were
appointed by and hold office at the will of the Board of Directors.

<TABLE>
<CAPTION>

                                                                                         Other Positions/Offices
                                   Current Positions/Offices                         Held During the Past Five Years
     Name and Age                   and Date of Appointment                              and Date of Appointment
-----------------------    --------------------------------------------      ----------------------------------------------
<S>                  <C>                                           <C>       <C>                                       <C> 

DIRECTORS

Hisao Kobayashi      61    Senior Advisor, The Dai-Ichi Kangyo     5/95      Senior Managing Director, DKB             5/93
                           Bank, Limited ("DKB")                             Managing Director, DKB                    6/91
                           Chairman,The CIT Group Holdings,        7/92                                               
                           Inc. ("CIT")                                                                               
                           Director, CIT                          12/89                                               
                                                                                                                      
Albert R. Gamper Jr. 54    President & Chief Executive            12/89      Not applicable                           
                           Officer, CIT                                                                               
                           Director, CIT                           5/84                                               
                                                                                                                      
Takasuke Kaneko      54    Director CIT                            6/95      Director and General Manager,             8/94
                           Managing Director, DKB                  5/95      International Planning and                
                                                                             Coordination Division, DKB                
                                                                             Director and General Manager,             6/94
                                                                             International Planning Division, DKB      
                                                                             General Manager, International            5/94
                                                                             Planning Division, DKB                    
                                                                             General Manager, International            5/93
                                                                             Finance Division, DKB                     
                                                                             Senior Executive Vice President, CIT      1/90
                                                                             Director, CIT                            12/89
                                                                                                                       
Kenji Nakamura       53    Director, CIT                          6/95       General Manager,                          5/95
                           Director and General Manager,          6/95       New York Branch and Cayman                
                           New York Branch, DKB                              Branch, DKB                               
                                                                             General Manager,                         10/93
                                                                             Otemachi Branch, DKB                      
                                                                             Deputy General Manager,                   5/92
                                                                             Personnel Division, DKB                   
                                                                             Deputy General Manager,                   6/91    
                                                                             Personnel Planning Division, DKB         
                                                                                                                      
Joseph A. Pollicino  57    Vice Chairman, CIT                     12/89      Not applicable                           
                           Director, CIT                          8/86                                                
                                                                                                                      
Paul N. Roth         57    Director, CIT                          12/89      Not applicable                           
                           Partner, Schulte Roth & Zabel          8/69                                                
                                                                                                                         
Peter J. Tobin       52    Chief Financial Officer,               4/96       Chief Financial Officer, Chemical         1/92
                           The Chase Manhattan Corporation                   Bank & Chemical Banking                     
                           Director, CIT                          5/84       Corporation                                 
                                                                                                                         
Keiji Torii          49    Senior Executive Vice President, CIT   4/96       Executive Vice President, CIT             5/93
                           Director, CIT                          5/93       Chief Inspector,                          2/93
                                                                             Inspecting Division, DKB                    
                                                                             Assistant General Manager,                6/90
                                                                             Securities Division, DKB                    
                                                                                                                      
Yasuo Tsunemi        49    Director, CIT                          4/96       General Manager, International Banking    8/94
                           General Manager, International         5/95       Coordination Division, DKB                
                           Planning and Coordination Division, DKB           General Manager, Americas Division, DKB   5/94
                                                                             Credit Supervisor, International Credit   1/92
                                                                             Supervision Division, DKB                 
                                                                                                                       
Yukiharu Uno         44    Executive Vice President, CIT          4/96       Assistant General Manager of the Americas 8/94
                           Director, CIT                          4/96       Group, International Banking Coordination
                                                                             Division, DKB                                
                                                                             Head of CIT Office,                       9/93
                                                                             Americas Division, DKB                       
                                                                             Manager, Americas Division, DKB           4/91
</TABLE>
                                                                               
                                       50                                     
<PAGE>                                                                         
<TABLE>
<CAPTION>
                                                                                                                            
                                                                                         Other Positions/Offices
                                   Current Positions/Offices                         Held During the Past Five Years
     Name and Age                   and Date of Appointment                              and Date of Appointment
-----------------------    --------------------------------------------      ----------------------------------------------
<S>                  <C>                                           <C>       <C>                                       <C> 
                                                                                                                      
EXECUTIVE OFFICERS (1)                                                                                                
                                                                                                                      
Thomas L. Abbate     51    Executive Vice President, Chief        8/90       Not applicable                           
                           Credit Officer, The CIT Group/                                                             
                           Industrial Financing & Executive Vice                                                   
                           President, Credit Administration,                   
                           The CIT Group                                                                              
                                                                                                                      
Thomas C. Bloch      52    President & CEO, The CIT Group/        2/96       Executive Vice President, The CIT Group/   4/94
                           Business Credit                                   Business Credit                       
                                                                             Senior Vice President, The CIT Group/      4/85
                                                                             Capital Equipment Financing           

James J. Egan Jr.    57    President & CEO, The CIT               9/87       Not applicable                        
                           Group/Sales Financing                                                                   
                                                                                                                   
George J. Finguerra  56    Senior Executive Vice President,       1/97       Senior Executive Vice President,           4/91
                           The CIT Group/Equipment Financing                 The CIT Group/Capital                 
                                                                             Equipment Financing                   
                                                                                                                   
Thomas B. Hallman    44    President & CEO, The CIT Group/        5/95       President & Director, National Product     6/94
                           Consumer Finance                                  Division, Globe Mortgage Company      
                                                                             Director, National Residential Lending,    3/93
                                                                             First Nationwide Bank                 
                                                                             Director, National Mortgage Origination,   8/85
                                                                             Citibank, N.A. & Citicorp             
                                                                                                                   
Thomas A. Johnson    50    General Auditor, CIT                   1/90       Not applicable                        
                                                                                                                   
Joseph M. Leone      43    Executive Vice President &             7/95       Executive Vice President, The CIT          6/91
                           Chief Financial Officer, CIT                      Group/Sales Financing                 
                                                                                                                   
Lawrence A. Marsiello 47   President & CEO, The CIT               1/92       Not applicable                        
                           Group/Commercial Services                                                               
                                                                                                                   
Robert J. Merritt    55    President & CEO, The CIT               12/86      Not applicable                        
                           Group/Industrial Financing                          
                                                                                                                   
William M. O'Grady   57    Executive Vice President,              1/86       Not applicable                        
                           Administration, The CIT Group                                                           
                                                                                                                   
Thomas J. O'Rourke   58    Senior Vice President, Marketing,      10/84      Not applicable                        
                           The CIT Group                                                                           
                                                                                                                   
Sharon L. Spector    51    President & CEO, The CIT Group/        1/97       Senior Executive Vice President,      
                           Credit Finance                                    The CIT Group/Commercial Services          5/94
                                                                             Executive Vice President,             
                                                                             The CIT Group/Commercial Services          5/88
                                                                                                                   
Ernest D. Stein      56    Executive Vice President,              2/94       Senior Vice President & Deputy General     4/93
                           General Counsel & Secretary, CIT                  Counsel, CIT                          
                                                                             Senior Vice President & Assistant          3/92
                                                                             General Counsel, CIT
                                                                             Executive Vice President & General        12/85
                                                                             Counsel, Manufacturers Hanover Corp.

Nikita Zdanow        59    President & CEO, The CIT Group/        4/85       Not applicable
                           Capital Equipment Financing

</TABLE>

----------
(1)  Messrs. Gamper, Pollicino, Torii, and Uno, whose biographical summaries are
     listed  on  the  preceding  page,  are  also  Executive   Officers  of  the
     Corporation.

Stockholders Agreement

     The Corporation entered into a Stockholders  Agreement  simultaneously with
the  acquisition  of a sixty percent (60%)  interest in the  Corporation by DKB,
which  agreement  was  amended on  December  15,  1995  simultaneously  with the
acquisition  of an additional  twenty percent (20%) common stock interest in the
Corporation by DKB from CBC Holding. The agreement,  as amended,  provides for a
Board of  Directors  consisting  of ten  directors.  CBC  Holding,  as  minority
stockholder,  has the right to designate one nominee for director. DKB agreed to
vote for the nominees for director of CBC Holding. Regular meetings of the Board
of Directors are held quarterly. See Item 1 "Business--General".

Outside Directorships

     As  indicated  in the  table,  some  of the  Directors  of the  Corporation
concurrently  hold positions as directors or executive  officers of Chase or CBC
or of subsidiaries or other  affiliates of the  Corporation,  DKB, or Chase. Mr.
Kobayashi is a director of AFLAC, Inc., a life insurance  company,  which is not
affiliated  with the  Corporation  and  which is  listed  on the New York  Stock
Exchange.  A number of the  Executive  Officers are also  directors of privately
held and not-for-profit organizations not affiliated with the Corporation.


                                       51
<PAGE>

Item 11.    Executive Compensation.

     The table below sets forth the annual and long-term compensation, including
bonuses and deferred compensation, of the President and Chief Executive Officer,
the Vice  Chairman,  and the  other  three  most  highly  compensated  executive
officers of the  Corporation  for  services  rendered in all  capacities  to the
Corporation  and its  subsidiaries  during the fiscal  years ended  December 31,
1996, 1995, and 1994. 

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                      Long-Term 
                                                                                    Compensation
                                                                                    ------------
                                                   Annual Compensation                 Payouts
                                         ----------------------------------------    ----------
         (a)                    (b)          (c)           (d)           (e)             (f)          (g)
     Name and                                                        Other Annual       LTIP        All Other
Principal Position             Year        Salary        Bonus(1)   Compensation(2)  Payouts(3)  Compensation(4)
------------------             ----        ------         -----     -------------     -------    ------------
<S>                             <C>       <C>            <C>            <C>           <C>           <C>    
Albert R. Gamper, Jr. ........  1996      $600,002       $785,000       $74,319       $722,369      $33,000
President and Chief ..........  1995      $542,302       $675,000       $87,626       $722,369      $30,692
Executive Officer ............  1994      $530,379       $600,000       $46,092       $295,748      $30,215
Joseph A. Pollicino ..........  1996      $439,998       $550,000       $44,775       $433,400      $26,600
Vice Chairman ................  1995      $401,523       $475,000       $51,205       $433,400      $25,061
                                1994      $392,294       $425,000       $28,340       $177,440      $24,692
Lawrence A. Marsiello ........  1996      $246,231       $235,000       $14,882       $173,360      $18,849
President and Chief ..........  1995      $237,000       $220,000       $19,490       $173,360      $18,480
Executive Officer ............  1994      $227,308       $200,000       $12,035       $ 73,948      $18,092
Commercial Services
Robert J. Merritt ............  1996      $279,039       $285,000       $16,803       $198,606      $20,162
President and Chief ..........  1995      $268,064       $240,000       $22,726       $198,606      $19,723
Executive Officer ............  1994      $257,115       $210,000       $13,359       $ 81,312      $19,285
Industrial Financing
Nikita Zdanow ................  1996      $281,024       $225,000       $17,196       $198,606      $20,241
President and Chief ..........  1995      $270,054       $250,000       $22,224       $198,606      $19,802
Executive Officer ............  1994      $261,404       $250,000       $14,637       $ 96,128      $19,456
Capital Equipment Financing
</TABLE>

----------
(1)  Under The CIT Group Bonus Plan,  cash awards for each  calendar year may be
     paid in  amounts  determined  by the  Executive  Committee  of the Board of
     Directors  in its  discretion.  Senior  Officer  awards  are  reviewed  and
     approved  by the Board of  Directors.  The  amount of awards  depends  on a
     variety  of  factors,   including  corporate   performance  and  individual
     performance  during the calendar  year for which awards are made.  All or a
     part  of a cash  award  for a  particular  year  may be paid  currently  or
     deferred and paid upon  retirement  in up to 5 annual  installments  at the
     option of the participant.  All awards are subject to appropriate taxes and
     deferred amounts are credited annually with interest.

(2)  The  payments  set forth  under Other  Annual  Compensation  represent  the
     dividends paid under the CIT Career  Incentive  Plan.  For the  performance
     period 1990-1992 under the CIT Career Incentive Plan, Mr. Gamper held 6,666
     phantom shares of stock, Mr. Pollicino 4,000 phantom shares,  Mr. Marsiello
     1,666 phantom shares, Mr. Merritt 1,833 phantom shares and Mr. Zdanow 2,166
     phantom  shares,  all of which  were  vested and paid out  pursuant  to the
     scheduled  payout as of  December  31,  1994.  For the  performance  period
     1993-1995,  Mr. Gamper was awarded 20,000 phantom shares, Mr. Pollicino was
     awarded  12,000  phantom  shares,  Mr.  Marsiello was awarded 4,800 phantom
     shares,  Mr. Merritt was awarded 5,500 phantom  shares,  and Mr. Zdanow was
     awarded 5,500 phantom shares. The shares awarded for the performance period
     1993-1995 are vested in one-third  increments  commencing January 1996. For
     the performance  period  1996-1998 under the CIT Career Incentive Plan, Mr.
     Gamper was  awarded  20,000  phantom  shares of stock,  Mr.  Pollicino  was
     awarded  12,000  phantom  shares,  Mr.  Marsiello was awarded 3,225 phantom
     shares,  Mr.  Merritt was awarded 3,600  phantom  shares and Mr. Zdanow was
     awarded  3,750  shares.  The  shares  awarded  for the  performance  period
     1996-1998 will vest in one-third  increments  commencing  January 1999. 

(3)  The payments set forth under LTIP  Payouts  represent  the payout of shares
     vested  under the CIT  Career  Incentive  Plan.  The  payout in 1994 is for
     shares awarded for the performance  period  1990-1992.  The payouts in 1995
     and 1996 are for  shares  awarded  for the  performance  period  1993-1995.
     Dividends  received  under  this  Plan are set  forth  under  Other  Annual
     Compensation.  (The CIT Career  Incentive  Plan is  described in "Long Term
     Incentive Plan".)

(4)  The payments set forth under All Other Compensation  represent the matching
     employer  contribution  to  each  participant's  account  and  an  employer
     flexible retirement  contribution to each participant's flexible retirement
     account under The CIT Group Holdings, Inc. Savings Incentive Plan (the "CIT
     Savings Plan").  The matching  employer  contribution is made pursuant to a
     compensation  deferral feature of the CIT Savings Plan under Section 401(k)
     of the  Internal  Revenue  Code of 1986.  The  payments set forth under All
     Other  Compensation  also  represent  contributions  to each  participant's
     account under the Supplemental  Savings Plan of CIT (the "CIT  Supplemental
     Savings Plan"), which is an unfunded, non-qualified plan.


                                       52
<PAGE>

LONG-TERM INCENTIVE PLAN

     Under The CIT Group Holdings,  Inc. Career  Incentive Plan (the "CIT Career
Incentive  Plan"),  awards are granted in the form of phantom shares of stock by
the  Executive   Committee  of  the  Board  of  Directors  in  its   discretion.
Participants  in the CIT Career  Incentive  Plan are  selected by the  Executive
Committee from among the executives of the Corporation and its  subsidiaries who
are in a position to make a substantial  contribution to the long-term financial
success of the  Corporation  or its  subsidiaries.  Grants to the members of the
Executive  Committee are made by the Board of  Directors.  The amount of phantom
shares eligible for allocation during a Performance  Period is determined by the
Executive  Committee.  The  Performance  Period  is at least  three  consecutive
calendar years.  The Executive  Committee  determines the Performance  Goals for
each Performance Period,  which are tied to net income growth targets and return
on equity performance.  The value of the phantom shares is determined at the end
of each Performance Period and compared against the pre-established  Performance
Goals. Following the end of a Performance Period, one-third vest immediately and
one-third  vest at the end of each of the  next two  years.  Cash  dividends  on
individual  shares  are paid  quarterly  during the  performance  period and the
vesting  period based on the number of phantom  shares granted to a participant.
The basis of the dividend is the quarterly return on equity of the Corporation.

     All or a part of the value of a vested  award may either be paid  currently
in cash  or  deferred  in up to 5  annual  installments.  Deferred  amounts  are
credited with interest at a rate determined annually by the Executive Committee.

                            LONG-TERM INCENTIVE PLANS
                           AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                   Estimated Future Payouts
                                                                              Under Non-Stock Price-Based Plans
       (a)                             (b)               (c)                 (d)            (e)              (f)
                                 Number of Shares,   Performance or      ----------------------------------------------
                                  Units or Other   Other Period Until     Threshold        Target          Maximum
      Name                          Rights (#)    Maturation or Payout  ($ per share)   ($ per share)   ($ per share)(1)
-----------------------------------------------------------------------------------------------------------------------
<S>                                   <C>              <C>                   <C>             <C>             <C>   
Albert R. Gamper, Jr. ..........      20,000           1996-1998              --            176.52          355.13
President and Chief                                                        
Executive Officer                                                          
Joseph A. Pollicino ............      12,000           1996-1998              --            176.52          355.13
Vice Chairman                                                              
Lawrence A. Marsiello ..........       3,225           1996-1998              --            176.52          355.13
President and Chief                                                        
Executive Officer                                                          
Commercial Services                                                        
Robert J. Merritt ..............       3,600           1996-1998              --            176.52          355.13
President and Chief                                                        
Executive Officer                                                          
Industrial Financing                                                       
Nikita Zdanow ..................       3,750           1996-1998              --            176.52          355.13
President and Chief                                                        
Executive Officer                                                       
Capital Equipment
Financing

</TABLE>

----------
(1)  The aggregate  amount of all award payouts shall not exceed 3% of the total
     pre-tax income of the Corporation during the Performance Period.

DEFINED BENEFIT PLANS

Retirement Plans

     Effective  January 1, 1990, The CIT Group  Holdings,  Inc.  Retirement Plan
(the "CIT Retirement  Plan") was  established.  Assets necessary to fund the CIT
Retirement  Plan  were  transferred  from the MHC  Retirement  Plan,  Inc.,  the
predecessor plan in which the Corporation's employees participated.  Accumulated
years of benefit  service  under the MHC  Retirement  Plan are  included  in the
benefit formula of the CIT Retirement  Plan,  which covers officers and salaried
employees who have one year of service and have attained age 21.

                                       53
<PAGE>

     Subject  to certain  exceptions,  at the  normal  retirement  age of 65, an
employee's  pension is 1.25% of final average salary, as defined below, for each
of the  first 20 years of  benefit  service  as a  participant  and .75% of such
salary for each year of the next 20 years of benefit  service.  In  general,  an
employee who was a participant in the MHC  Retirement  Plan before 1985 will not
receive a pension of less than 2% of final average  salary for each of the first
20 years of benefit  service as a participant  and 1% of such salary for each of
the  next 20 years  of  benefit  service,  reduced  by .4% of the  participant's
covered compensation for each year of such benefit service up to a maximum of 35
years and further reduced by the value of certain benefits under the CIT Savings
Plan. An employee who was a  participant  in the former CIT  Retirement  Plan on
June 30,  1986,  will not  receive a pension of less than 1.1% of final  average
salary up to certain Social  Security  limits plus 1.5 % of final average salary
in excess of the Social Security  limits,  for each year of benefit service to a
maximum of 35 years,  reduced by certain  benefits  under the CIT Savings  Plan.
"Final average salary" is the highest average annual salary received in any five
consecutive years in the last ten years. "Salary" includes all wages paid by the
Corporation, including before-tax contributions made to the CIT Savings Plan and
salary   reduction   contributions  to  any  Section  125  Plan,  but  excluding
commissions,   bonuses,  incentive  compensation,   overtime,  reimbursement  of
expenses, directors' fees, severance pay, and deferred compensation. This salary
is comparable to the "Salary"  shown in the Summary  Compensation  Table.  After
completing  5  years  of  service,   an  employee  whose   employment  with  the
participating  company  has  terminated  is  entitled  to a  benefit,  as of the
employee's  normal  retirement  date, equal to the benefit earned to the date of
termination of employment,  or an actuarially  reduced benefit commencing at any
time after age 55 if the participant is eligible for early  retirement under the
CIT Retirement Plan.  Certain death benefits are available to eligible surviving
spouses of participants.

     Since various laws and regulations set limits on the amounts allocable to a
participant  under the CIT Savings  Plan and benefits  under the CIT  Retirement
Plan, the Corporation has a supplemental  retirement plan (the "CIT Supplemental
Retirement  Plan").  The CIT  Supplemental  Retirement Plan provides  retirement
benefits on an unfunded basis to  participants  who retire from the  Corporation
(whose benefits under the CIT Retirement Plan would be restricted by the limits)
of an amount  equal to the  difference  between the annual  retirement  benefits
permitted  and the  amount  that  would  have been paid but for the  limitations
imposed.  

     The amounts  set forth in the table are the amounts  which would be paid to
employees  hired  before 1985  pursuant to the CIT  Retirement  Plan and the CIT
Supplemental  Retirement Plan at a participant's  normal retirement age assuming
the indicated  final average salary and the indicated  years of benefit  service
and assuming  that the straight life annuity form of benefit will be elected and
that CIT  Supplemental  Retirement  Plan benefits will be paid in the form of an
annuity.  The amounts may be  overstated  to the extent that they do not reflect
the reduction for any benefits under the CIT Savings Plan.

                               PENSION PLAN TABLE
<TABLE>
<CAPTION>

  

  Final  
  Average                                  Annual Benefits Based on Years of Credited Service (1)
 Salary of                    -------------------------------------------------------------------------------
 Employee                         15            20            25             30           35            40
-----------                      ----          ----          ----           ----         ----          ----
<S>                            <C>           <C>            <C>            <C>           <C>           <C>   
$150,000 .................     43,242        57,656         64,570         71,484        78,397        85,897
 200,000 .................     58,242        77,656         87,070         96,484       105,897       115,897
 250,000 .................     73,242        97,656        109,570        121,484       133,397       145,897
 300,000 .................     88,242       117,656        132,070        146,484       160,897       175,897
 350,000 .................    103,242       137,656        154,570        171,484       188,397       205,897
 400,000 .................    118,242       157,656        177,070        196,484       215,897       235,897
 450,000 .................    133,242       177,656        199,570        221,484       243,397       265,897
 500,000 .................    148,242       197,656        222,070        246,484       270,897       295,897
 550,000 .................    163,242       217,656        244,570        271,484       298,397       325,897
 600,000 .................    178,242       237,656        267,070        296,484       325,897       355,897
 650,000 .................    193,242       257,656        289,570        321,484       353,397       385,897

</TABLE>

----------
(1)  At December 31, 1996, Messrs. Gamper,  Pollicino,  Marsiello,  Merritt, and
     Zdanow had 29, 32, 21, 22 and 29 years of benefit service, respectively.

                                       54
<PAGE>

Executive Retirement Plan

     Executive officers of the Corporation, including Mr. Gamper, Mr. Pollicino,
Mr. Marsiello,  Mr. Merritt and Mr. Zdanow, are participants under the Executive
Retirement  Plan. The benefit  provided is life insurance equal to approximately
three times salary  during such  participant's  employment,  with a life annuity
option payable monthly by the Corporation upon retirement.  The participant pays
a portion of the annual premium and the  Corporation  pays the balance on behalf
of the participant.  The Corporation is entitled to recoup its payments from the
proceeds of the policy. Upon the participant's  retirement,  a life annuity will
be payable  out of the current  income of the  Corporation  and the  Corporation
anticipates  recovering  the cost of the life annuity out of the proceeds of the
life insurance policy payable upon the death of the participants. 

     In addition to the table of pension  benefits shown on the preceding  page,
the  Corporation is  conditionally  obligated to make annual  payments under the
Executive  Retirement Plan in the amounts  indicated to the following persons at
retirement:  Mr. Gamper,  $343,130,  Mr.  Pollicino,  $217,642,  Mr.  Marsiello,
$163,608, Mr. Merritt, $181,983 and Mr. Zdanow, $127,116.

Compensation Committee Interlocks and Insider Participation

     The  Executive  Committee  of  the  Board  of  Directors  functions  as the
compensation  committee  and sets the  compensation  for all  executives  except
Messrs. Gamper, Pollicino, Torii and Uno. The members of the Executive Committee
are as follows:
                     ALBERT R. GAMPER, JR.
                     JOSEPH A. POLLICINO
                     PETER J. TOBIN
                     KEIJI TORII
                     YUKIHARU UNO

     The Board of Directors,  except for Messrs.  Gamper and Pollicino,  who are
absent  from any  portion of  meetings  when their  compensation  is  discussed,
deliberates  over  the  compensation  of  Messrs.  Gamper  and  Pollicino.   DKB
determines the compensation for Messrs. Torii and Uno. Mr. Tobin is an executive
of Chase.

EMPLOYMENT AGREEMENTS

     Mr. Gamper has an employment  agreement with the Corporation which provides
that he will serve as the Chief Executive  Officer,  President,  Chairman of the
Executive Committee and member of the Board of Directors of the Corporation. His
employment  agreement  initially ran for five years from December 29, 1989,  and
subsequently  was extended until  December 1997. The agreement  provides for the
payment of an annual base salary of $400,000,  to be reviewed at least  annually
by the Board of Directors of the  Corporation,  subject to increases  but not to
decreases.  Mr.  Gamper's  employment  agreement  also  provides  for  executive
incentive  compensation  under  Incentive  Plans which will be designed to be no
less  favorable to him than the Incentive  Plans in effect prior to the purchase
by DKB of 60% of the Corporation's shares.

     Mr.  Pollicino  has an  employment  agreement  with the  Corporation  which
provides  that he shall  serve as the Vice  Chairman  and member of the Board of
Directors of the Corporation. Mr. Pollicino's employment agreement initially ran
for five years from  December  29, 1989,  and  subsequently  was extended  until
December 1997.  The agreement  provides for the payment of an annual base salary
of $300,000,  to be reviewed at least  annually by the Board of Directors of the
Corporation,  subject  to  increases  but  not  to  decreases.  Mr.  Pollicino's
employment  agreement also provides for executive  incentive  compensation under
Incentive  Plans which will be designed to be no less  favorable to him than the
Incentive  Plans  in  effect  prior  to  the  purchase  by  DKB  of  60%  of the
Corporation's shares.

     In addition to Mr. Gamper and Mr. Pollicino, Mr. Marsiello, Mr. Merritt and
Mr.  Zdanow  have  employment  agreements  with the  Corporation,  each of which
initially  ran for three years from  December 29, 1989,  and  subsequently  were
extended  until December 1998.  Their  agreements  provide for the payment of an
annual base salary of not less than the amount received prior to the purchase by
DKB of 60% of the Corporation's  shares, to be reviewed at least annually by the
Chief  Executive  Officer,  subject to  increases  but not to  decreases.  Their
employment  agreements also provide for executive  incentive  compensation under
Incentive  Plans which will be designed to be no less favorable to them than the
Incentive  Plans  in  effect  prior  to  the  purchase  by  DKB  of  60%  of the
Corporation's shares.

                                       55
<PAGE>

TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS

     Mr. Gamper's and Mr. Pollicino's employment agreements with the Corporation
provide that if their employment is terminated  without cause (as defined in the
agreement) or if they resign for good reason (as defined in the agreement)  they
will be entitled to receive  severance  payments  equal to their base salary for
the greater of  thirty-six  months or the  remainder of the term,  provided that
they do not violate the  non-competition  or  confidentiality  provisions of the
agreement,  in which case the  Corporation  would have no obligation to make any
remaining payments.  Further, if Mr. Gamper's and Mr. Pollicino's  employment is
terminated  without  cause or if they  resign  for  good  reason,  they  will be
entitled to receive,  among other things, full employee welfare benefit coverage
as if they had  retired  with the  Corporation's  consent  at age 55, a  pension
benefit  commencing at age 55 in an amount equal to their accrued  benefit under
the  Corporation's  Retirement  Plan as of the  date  of  their  termination  of
employment  as if they had attained age 55 and had retired on such date with the
Corporation's  consent,  a lump  sum  equal  to the  then  full  value  of their
restricted  stock award under the Long Term Incentive  Program of  Manufacturers
Hanover  Corporation and its  subsidiaries  (the "MHC Long Term Incentive Plan")
and any vested  award  under any  similar  plan as may have been  adopted by the
Corporation,  and a single life  annuity  equivalent  to the single life annuity
they would have  normally  been  entitled  to  receive  under the  Corporation's
Executive Retirement Plan.

     The  employment  agreements of Mr.  Marsiello,  Mr.  Merritt and Mr. Zdanow
provide that if their employment is terminated  without cause (as defined in the
agreement) or if they resign for good reason (as defined in the agreement), they
will be entitled to receive  severance  payments  equal to their base salary for
the greater of  twenty-four  months or the remainder of the term,  provided that
they do not violate the  non-competition  or  confidentiality  provisions of the
agreement,  in which case the  Corporation  would have no obligation to make any
remaining  payments.  Further,  if the employment of such  executive  officer is
terminated  without cause or if he resigns for good reason,  he will be entitled
to continued  participation  in employee  welfare benefit  coverage for eighteen
months,  a lump sum equal to the then full value of his  restricted  stock award
under the MHC Long Term Incentive Program and any vested award under any similar
plan as may have been adopted by the Corporation,  and if age 55 or older on the
date of  termination,  the benefits  payable under the  Corporation's  Executive
Retirement  Plan or if under  age 55 a lump sum  payment  which  represents  the
equivalent  of the net  after-tax  present value of the single life annuity that
would have been payable to the individual executive officer at age 55.

     If, during the Term of their respective employment agreements, a "Change of
Control" occurs, Mr. Gamper, Mr. Pollicino,  Mr. Marsiello,  Mr. Merritt and Mr.
Zdanow  will be  entitled  to  receive a "Special  Payment."  The amount of such
Special  Payment shall equal,  with respect to Mr. Gamper,  the sum of his prior
four  years  annual  bonuses  under  the CIT Bonus  Plan,  with  respect  to Mr.
Pollicino,  the sum of his prior three years annual  bonuses under the CIT Bonus
Plan, and with respect to Mr. Marsiello,  Mr. Merritt and Mr. Zdanow, the sum of
their  prior two years  annual  bonuses  under The CIT Bonus  Plan.  The Special
Payment  will be payable  over a two year period as follows:  1/3 of the payment
shall be paid within 30 days after the Change of  Control;  1/3 shall be paid on
or before the first anniversary date of such Change of Control; and 1/3 shall be
paid on or before the second  anniversary  date of such  Change of  Control.  If
during the two year period  commencing on the date of such Change of Control and
ending on the second anniversary of such date, their employment is involuntarily
terminated by the Company for cause or they voluntarily terminate employment for
any reason other than "Good  Reason" as defined in their  respective  employment
agreements or they breach the non-compete or confidentiality provisions of their
agreements,  they shall not receive any remaining  unpaid  installments  of this
Special Payment.

                                       56
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management.

     The  following  table  sets  forth the  ownership  of all of the issued and
outstanding common stock of the Corporation, as of March 1, 1997.

      Name and Address of Owner              Shares Owned           Percentage
      -------------------------              ------------           ----------

The Dai-Ichi Kangyo Bank, Limited                 800                  80%
   1-5, Uchisaiwaicho 1-chome
   Chiyoda-ku, Tokyo 100

CBC Holding (Delaware) Inc.                       200                  20%
   270 Park Avenue
   New York, NY 10017

     No officer or  director  of the  Corporation  owns any common  stock of the
Corporation.  In addition,  the voting  securities of any class of securities of
DKB and Chase, the parent of CBC Holding,  owned by each officer and director of
the Corporation  individually,  and all officers and directors as a group,  does
not exceed one percent of the issued and outstanding  securities  comprising any
such class of stock so owned.

Item 13. Certain Relationships and Related Transactions.

Transactions with Management and Others

     The  Corporation  has in the past and may in the future  enter into certain
transactions  with affiliates of the  Corporation.  It is anticipated  that such
transactions  will be entered into at a fair market  value for the  transaction.
Additional  information  regarding  these  transactions  can be found in Item 8.
Financial Statements and Supplementary Data, "Note 20--Certain Relationships and
Related Transactions".

     Schulte  Roth & Zabel LLP, of which Mr. Roth is a partner,  provides  legal
services to the  Corporation.  Schulte Roth & Zabel LLP has been retained in the
past and will continue in the future to serve as outside counsel for DKB.


                                       57
<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.

     (a) The  following  documents  are filed with the  Securities  and Exchange
Commission as part of this report:

1.                 The financial statements of The CIT Group Holdings,  Inc. and
                   Subsidiaries as set forth on pages 27-49.
           
2.                 All schedules are omitted  because they are not applicable or
                   because the required  information appears in the consolidated
                   financial statements or the notes thereto.
           
3.                 The  following is an index of the  Exhibits  required by Item
                   601 of Regulation  S-K filed with the Securities and Exchange
                   Commission as part of this report:

          3(a)     Restated  Certificate  of  Incorporation  of  The  CIT  Group
                   Holdings, Inc., amended as of December 29, 1989 (incorporated
                   by  reference  to  Exhibit  3(a) to Form  10-K  filed  by the
                   Corporation for the fiscal year ended December 31, 1989).

          3(b)     By-Laws  of The  CIT  Group  Holdings,  Inc.,  amended  as of
                   December 29, 1989  (incorporated by reference to Exhibit 3(b)
                   to Form 10-K filed by the  Corporation  for the  fiscal  year
                   ended December 31, 1989).

          4(a)     Upon the request of the Securities  and Exchange  Commission,
                   the  Registrant  will  furnish  a  copy  of  all  instruments
                   defining  the  rights of  holders  of  long-term  debt of the
                   Registrant.

          10(a)(1) Stockholders Agreement  (incorporated by reference to Exhibit
                   10(a) to Form 10-K  filed by the  Corporation  for the fiscal
                   year ended December 31, 1989).

          10(a)(2) Amendment,  dated  December  15,  1995,  to the  Stockholders
                   Agreement, dated December 29, 1989 (incorporated by reference
                   to Exhibit 10(a) to Form 8-K dated December 15, 1995).

          10(a)(3) Registration  Rights  Agreement,   dated  December  15,  1995
                   (incorporated by reference to Exhibit 10(b) to Form 8-K dated
                   December 15, 1995).

          10(b)(1) Employment  Agreement of Albert R. Gamper, Jr.  (incorporated
                   by  reference  to  Exhibit  10(b) to Form  10-K  filed by the
                   Corporation for the fiscal year ended December 31, 1989).

          10(b)(2) Extension of  Employment  Agreement of Albert R. Gamper,  Jr.
                   (incorporated  by reference to Exhibit  10(b)(2) to Form 10-K
                   filed by the  Corporation  for the fiscal year ended December
                   31, 1992).

          10(b)(3) Extension of  Employment  Agreement of Albert R. Gamper,  Jr.
                   (incorporated  by reference to Exhibit  10(b)(3) to Form 10-K
                   filed by the  Corporation  for the fiscal year ended December
                   31, 1994).

          10(c)    Employment Agreement of Nikita Zdanow.

          10(d)    The CIT  Group  Bonus  Plan  (incorporated  by  reference  to
                   Exhibit 10(d) to Form 10-K filed by the  Corporation  for the
                   fiscal year ended December 31, 1992).

          10(e)    The  CIT  Group   Holdings,   Inc.   Career   Incentive  Plan
                   (incorporated  by  reference  to  Exhibit  10(e) to Form 10-K
                   filed by the  Corporation  for the fiscal year ended December
                   31, 1992).

          10(f)    The  CIT  Group  Holdings,  Inc.  Supplemental  Savings  Plan
                   (incorporated  by  reference  to  Exhibit  10(f) to Form 10-K
                   filed by the  Corporation  for the fiscal year ended December
                   31, 1992).

          10(g)    The CIT Group  Holdings,  Inc.  Supplemental  Retirement Plan
                   (incorporated  by  reference  to  Exhibit  10(g) to Form 10-K
                   filed by the  Corporation  for the fiscal year ended December
                   31, 1992).


                                       58
<PAGE>

          12       Computation of Ratios of Earnings to Fixed Charges.

          21       Subsidiaries of the Registrant.

          23       Consent of KPMG Peat Marwick LLP.

          24       Powers of Attorney.

          27       Financial Data Schedule (filed electronically)


     (b) A Current  Report on Form 8-K dated October 17, 1996 was filed with the
Commission  reporting the Corporation's  announcement of results for the quarter
ended September 30, 1996.

     A Current  Report on Form 8-K dated  December  24,  1996 was filed with the
Commission  reporting a special  dividend by the Corporation to its stockholders
and a subsequent  capital  contribution in a like aggregate  principal amount by
the stockholders to the Corporation in December 1996.

     A Current  Report on Form 8-K dated  January 23,  1997,  as amended by Form
8-K/A dated  February  14, 1997,  was filed with the  Commission  reporting  the
Corporation's announcement of results for the year ended December 31, 1996.

                                       59
<PAGE>

                                   SIGNATURES

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

                                           By:     /s/ ERNEST D. STEIN
                                           ------------------------------------
                                                      Ernest D. Stein
                                                Executive Vice President, 
                                              General Counsel and Secretary

March 5, 1997

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

   Signature and Title                                                Date
   -------------------                                                ----


       ALBERT R. GAMPER, JR.*
----------------------------------
President, Chief Executive Officer
          and Director
   (principal executive officer)

        HISAO KOBAYASHI*
----------------------------------
            Director

        TAKASUKE KANEKO*
----------------------------------
            Director

         KENJI NAKAMURA*
----------------------------------
            Director


      JOSEPH A. POLLICINO*            *By:  /s/ Ernest D. Stein    March 5, 1997
----------------------------------        ----------------------
            Director                          Ernest D. Stein
                                              Attorney-In-Fact
          PAUL N. ROTH*
----------------------------------
            Director

         PETER J. TOBIN*
----------------------------------
            Director

          KEIJI TORII*
----------------------------------
            Director

         YASUO TSUNEMI*
----------------------------------
            Director

          YUKIHARU UNO*
----------------------------------
            Director


       /S/ JOSEPH M. LEONE                                         March 5, 1997
----------------------------------
         Joseph M. Leone
  Executive Vice President and
     Chief Financial Officer
 (principal accounting officer)

     Original powers of attorney  authorizing  Albert R. Gamper,  Jr., Ernest D.
Stein,  and  Donald  J.  Rapson  and  each of them  to  sign  on  behalf  of the
above-mentioned  directors  are  held  by  the  Corporation  and  available  for
examination by the Securities and Exchange Commission pursuant to Item 302(b) of
Regulation S-T.

                                       60