PAGE 1
                                   FORM 10-K

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

(X)      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the year ended December 31, 1995
                                      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 1-1543
                                                ------
                     DAYTON AND MICHIGAN RAILROAD COMPANY
            (Exact name of registrant as specified in its charter)
             Ohio                                              31-6005583
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

500 Water Street, Jacksonville, FL.                               32202
(Address of principal executive offices)                       (Zip Code)

  Registrant's telephone number, including area code:          (904) 359-3100

          Securities registered pursuant to Section 12(b) of the Act:
                                                      Name of each exchange on
      Title of each class                                  which registered
------------------------------------                --------------------------
Preferred - par $50, 8%, guaranteed                  Cincinnati Stock Exchange
Common - par $50, 3-1/2%, guaranteed                 Cincinnati Stock Exchange

      Securities registered pursuant to Section 12(a) 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 nonaffiliates of
the registrant.  The aggregate market value of the voting stock at March 11,
1996, was $191,305, excluding the voting stock held by an affiliate of the
registrant.

Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.  The registrant has
48,066.18 shares of common stock, par value $50.00, outstanding at March 11,
1996.
                                     - 1 -



         PAGE 2                     PART I
Item 1.  Business.
           and
Item 2.  Properties.

         Dayton and Michigan Railroad Company (the "company") is a railroad
incorporated in the State of Ohio on March 5, 1851.  It owns a line of
railroad 141 miles long which lies between Dayton and Toledo, Ohio.  Under the
terms of a perpetual lease dated May 1, 1863, CSX Transportation, Inc.
("CSXT"), as successor by merger, operates the property of the company, paying
rental charges measured principally by the annual dividend requirements of the
company's outstanding shares of capital stock; consisting of two classes,
preferred and common.  The company's preferred stock ($50 par value) pays
guaranteed dividends of 8%, and its common stock ($50 par value) pays
guaranteed dividends of 3-1/2%. The lease excludes from the measure of the
rental charges the dividend requirements on the company's shares owned by
CSXT.  As of December 31, 1995, CSXT owned 66.7% of the company's preferred
stock and 80.39% of its common stock.

         In addition to the rental charges paid by CSXT to the company for the
payment of the company's dividends, CSXT directly assumes and pays all the
operating expenses of and reimburses all taxes assessed against the company.

         Since the dividends on the company's preferred and common stock are
paid from monies obtained from CSXT pursuant to a lease to CSXT, reference is
made to CSXT's Form 10-K for the year ended December 29, 1995, a copy of which
is available from Patricia J. Aftoora, Vice President and Corporate Secretary
of CSXT, S/C J-160, 500 Water Street, Jacksonville, FL  32202.

Item 3.  Legal Proceedings.

         None.

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

         None.
                                       PART II
Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters.

         The company's common stock is listed on the Cincinnati Stock
Exchange.  From a known market maker in the company's common stock, as of
March 11, 1996, a price of $20.25 per share was bid but there were no sales. 
As of March 11, 1996, there were approximately 75 common shareholders of
record.

         The principal source of quotations, The National Quotation Bureau,
Inc., indicated a bid of $20.25 for the company's common stock during the year
1995 but there were no ask quotations.  There were no bid and ask quotations
for the company's common stock during the year 1994.  There were also no bid
and ask quotations for the company's preferred stock for the two year period
1995 and 1994.  

         Dividends on the company's preferred and common stocks are guaranteed
at 8% on the preferred stock and 3-1/2% on the common stock pursuant to a
perpetual lease agreement dated May 1, 1863, as amended, between the company
and CSXT, more specifically referred to in Items 1 and 2, Business and
Properties.
                                     - 2 -



         PAGE 3    

Item 6.  Selected Financial Data.
                 and
Item 7.  Management's Discussion and Analysis of Financial Condition and   
         Results of Operations.

         Five year selected data:


                        1995        1994        1993        1992        1991
                    ----------  ----------  ----------  ----------  ----------
Income              $  156,318  $  126,706  $  147,795  $  114,035  $  154,661
Expense                    ---         ---         ---         ---         ---
Income Tax Expense      40,527      32,850      38,317      28,934      31,344
                    ----------  ----------  ----------  ----------  ----------
Net Earnings           115,791      93,856     109,478      85,101     123,317
Dividends on          
  Preferred Stock       32,172      32,672      32,672      32,550      33,240
                    ----------  ----------  ----------  ----------  ----------
Earnings Available   
  to Common Stock   $   83,619  $   61,184  $   76,806  $   52,551  $   90,077
                    ==========  ==========  ==========  ==========  ==========
Weighted Average
  Number of Common
  Shares (a)             9,420       9,525       9,525       9,533       9,645
                    ==========  ==========  ==========  ==========  ==========
Earnings Per Common
  Share (a)         $     8.88  $     6.42  $     8.06  $     5.51  $     9.34
                    ==========  ==========  ==========  ==========  ==========
Dividends Per       
  Common Share (a)  $     1.75  $     1.75  $     1.75  $     1.75  $     1.75
                    ==========  ==========  ==========  ==========  ==========

Total Assets        $1,850,222  $1,783,088  $1,738,573  $1,678,436  $1,642,571
                    ==========  ==========  ==========  ==========  ==========

(a) This does not include shares held by CSX Transportation, Inc.
    See Note 2 to the Financial Statements.

         Net earnings for 1995 totaled $115,791, an increase of $21,935 from
1994 and an increase of $6,313 from 1993.  The 1995 increase in net earnings
compared to 1994 resulted from higher rental income and interest income.  The
1994 decrease in net earnings compared to 1993 resulted from decreases in
rental income and gain on disposition of properties which more than offset an
increase in interest income. 

Item 8.  Financial Statements and Supplementary Data.

         The financial statements and notes thereto required in response to
this item are included herein on pages 12 to 17.  (See Index to Financial
Statements on page 10).

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

         None.
                                     - 3 -



         PAGE 4
                                   PART III

Item 10.  Directors and Officers of the Registrant.

Directors and Executive Officers

         The following sets forth certain information relating to the
company's directors and executive officers as of March 11, 1996.  All
directors, with the exception of Messers. Aftoora, Eason and Schmidt, are also
executive officers of the company.  Directors are elected annually and serve
until the next annual meeting of stockholders or until their successors are
elected.  Executive officers are elected annually at the annual meeting of the
Board and hold office until the next annual meeting of the Board or until
their successors are elected.  There are no arrangements or understandings
between any director or executive officer and any other person pursuant to
which the director or officer was selected.  With the exception of Patricia J.
Aftoora and Albert B. Aftoora, who are married, there are no other family
relationships among these officers and directors.

Name, Age, Present
Position with the             Business Experience during last 5 Years,
    Company                   Company Directorships in Public Corporations
------------------            --------------------------------------------
GERALD L. NICHOLS, 60         President of the company since March 1, 1995,
President and Director        and Senior Vice President prior thereto.
                              Mr. Nichols has served in various executive
                              capacities for certain CSXT affiliates during
                              the past five years and is currently Executive
                              Vice President and Chief Operating Officer of
                              CSXT.

P. MICHAEL GIFTOS, 49         Senior Vice President of the company since
Senior Vice President         1990.  During the past five years, Mr. Giftos
and Director                  has served as an officer of certain CSXT
                              affiliates and is currently Senior Vice          
                              President and General Counsel of CSXT.

CARL N. TAYLOR, 56            Senior Vice President of the company since
Senior Vice President         December 21, 1995.  During the past five years,  
and Director                  Mr. Taylor has served as an executive            
                              officer of certain CSXT affiliates and is        
                              currently Senior Vice President-Engineering      
                              and Mechanical of CSXT.

MICHAEL J. WARD, 45           Senior Vice President of the company since
Senior Vice President         December 21, 1995.  During the past five years,
and Director                  Mr. Ward has served as an executive officer of
                              certain CSXT affiliates and is currently Senior
                              Vice President-Finance of CSXT.

PATRICIA J. AFTOORA, 56       Vice President of the company since 1990
Vice President,               and Corporate Secretary of the company since
Corporate Secretary           1980.  Mrs. Aftoora has served as an officer
and Director                  of CSX and certain CSX affiliates during the 
                              past five years and is currently Vice President
                              and Corporate Secretary of CSXT.
                                     - 4 -



         PAGE 5

Name, Age, Present
Position with the                 Business Experience during last 5 Years,
    Company                       Company Directorships in Public Corporations
------------------                -------------------------------------------
C.J.O. WODEHOUSE, JR., 48         Vice President and Controller of the company
Vice President and Controller     since December 21, 1995.  During the past  
and Director                      five years, Mr. Wodehouse has served as an   
                                  officer of CSX and certain CSX affiliates    
                                  and is currently Vice President and          
                                  Controller of CSXT.

ALBERT B. AFTOORA, 56             Mr. Aftoora has served as an officer of
Director                          certain CSXT affiliates during the past five
                                  years and is currently Vice President-       
                                  Corridor Development of CSXT.

BILLIE C. EASON, 47               During the past five years, Mr. Eason has
Director                          served as an officer of certain CSXT
                                  affiliates and is currently Vice President-
                                  Service Lanes of CSXT.

THOMAS P. SCHMIDT, 48             Mr. Schmidt has served as an officer         
Director                          of certain CSXT affiliates during the past   
                                  five years and is currently Vice President-  
                                  Network Operations of CSXT.

MAURICE LAZENBY, III, 52          Assistant Vice President and Treasurer of
Assistant Vice President          of the company since December 21, 1995.
and Treasurer                     During the past five years, Mr. Lazenby has  
                                  served as an officer of certain CSXT         
                                  affiliates and is currently Assistant Vice
                                  President and Treasurer of CSXT.

         There have been no events under any bankruptcy act, no criminal
proceedings, orders, judgments, decrees or injunctions material to the
evaluation of the ability and integrity of any director or executive officer
during the past five years.

Item 11.  Executive Compensation

         All directors and officers of the company are also officers and
employees of CSXT and serve without compensation from the company.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         As of March 11, 1996, 80.39 percent of the voting securities of the
company (38,619 shares of $50 par value common stock) were beneficially held
by CSXT, which, in turn, is beneficially owned by CSX Corporation (CSX),
Richmond, Virginia, through ownership of 100 percent of CSXT's outstanding
voting securities.





                                     - 5 -



         PAGE 6     

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

         As of March 11, 1996, all directors and officers of the company as a
group (10 persons) beneficially owned 1,103,217 shares of $1 par value common
stock of CSX, (including 524,680 shares exercisable under option within 60
days), representing less than 1% of the outstanding shares.  The number of CSX
shares owned by each director as of March 11, 1996, is set forth below:

                                                            Number of
                                   Number of              shares of CSX
                                 shares of CSX         exercisable within
                              beneficially owned       60 days under stock
     Name                 as of March 11, 1996 (1)(2)     option plans
     ----                 ---------------------------  -------------------

     A. B. Aftoora                   58,574                   34,320
     P. J. Aftoora                   63,794                   39,055
     B. C. Eason                     72,924                   39,000
     P. M. Giftos                   157,127                   79,196
     G. L. Nichols                  235,110                   88,734
     T. P. Schmidt                   96,614                   37,800
     C. N. Taylor                   187,923                  103,843
     M. J. Ward                     106,242                   48,800
     C. J. O. Wodehouse, Jr.         78,641                   31,332

    (1)  Includes shares pledged to secure loans under the CSX 1991 Stock
         Purchase and Loan Plan, which shares were acquired under that plan.

    (2)  Includes shares held in trust under certain deferred compensation
         plans.

Item 13.  Certain Relationships and Related Transactions

         None.

                                       PART IV

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

        (a)  1.  Financial Statements

                    See Index to Financial Statements on page 9.

             2.  Financial Statement Schedules

                    None.







                                     - 6 -



         PAGE 7


             3.  Exhibits

                 (3.1) Articles of Incorporation incorporated herein by
                       reference to Registrant's Form 12 Application for
                       Registration, filed on March 24, 1935.

                 (3.2) Code of Regulations incorporated herein by reference
                       to Registrant's report on Form 8-K filed June 3,   
                       1966.

                 (10)  Material Contracts

                       Lease Agreement dated May 1, 1863, as amended   
                       between the Registrant and CSX Transportation, Inc.
                       (successor to The Cincinnati, Hamilton and Dayton 
                       Railroad company) incorporated herein by reference
                       to Registrant's Form 12 Application for 
                       Registration, filed on March 24, 1935.

                       Supplemental Agreement modifying original lease  
                       agreement dated December 23, 1944, incorporated
                       herein by reference to Registrant's report on
                       Form 8-K filed on July 1, 1954.

        (b)      No reports on Form 8-K were filed for the fourth quarter
                 of the year ended December 31, 1995.




























                                    - 7 -  



         PAGE 8

         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, on the 26th day
of March, 1996.


                                      DAYTON AND MICHIGAN RAILROAD COMPANY


                                      /s/ GREGORY R. WEBER
                                      ------------------------------------ 
                                      Gregory R. Weber        
                                      (Principal Accounting Officer)

March 27, 1996








































                                     - 8 - 



         PAGE 9

         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. 

/s/Gerald L. Nichols                President and Director         
------------------------            (Principal Executive Officer)  
   Gerald L. Nichols* 

/s/P. Michael Giftos                Senior Vice President, General Counsel
------------------------            and Director
   P. Michael Giftos*

/s/Michael J. Ward                  Senior Vice President and Director
------------------------            (Principal Finance Officer)
   Michael J. Ward*                         

/s/Carl N. Taylor                   Senior Vice President and Director
------------------------
   Carl N. Taylor*

/s/Patricia J. Aftoora              Vice President, Corporate Secretary
------------------------            and Director
   Patricia J. Aftoora*                                     

/s/C. J. O. Wodehouse, Jr.          Vice President, Controller and Director
---------------------------
   C. J. O. Wodehouse, Jr.*

/s/Thomas P. Schmidt                Director
------------------------
   Thomas P. Schmidt*

/s/Albert B. Aftoora                Director
------------------------
   Albert B. Aftoora*   

/s/Billie C. Eason                  Director
------------------------
   Billie C. Eason*

         Patricia J. Aftoora, by signing her name hereto, does hereby sign and
execute this report on behalf of each of the above-named officers and
directors of Dayton and Michigan Railroad Company pursuant to powers of
attorney executed by each of such officers and directors and filed with the
Securities and Exchange Commission as an exhibit to this report.



/s/ PATRICIA J. AFTOORA                               
------------------------     
Patricia J. Aftoora                                          March 27, 1996
*(Attorney-in-Fact)



                                    - 9 -  



         PAGE 10
                     DAYTON AND MICHIGAN RAILROAD COMPANY

                         Index to Financial Statements



                                                                        Page
                                                                        ----
Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . .    11

Financial Statements and Notes to Financial
  Statements Submitted Herewith:

    Statements of Earnings - Years Ended
      December 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . .    12

    Statements of Cash Flows - Years Ended                    
      December 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . .    13

    Statements of Financial Position - December 31,
      1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . .    14

    Statements of Retained Earnings (Deficit) - Years
      Ended December 31, 1995, 1994 and 1993. . . . . . . . . . . . .    15

    Notes to Financial Statements . . . . . . . . . . . . . . . . . .    16 






         All schedules are omitted because of the absence of the conditions
under which they are required or because the required information is set forth
in the financial statements or related notes thereto. 





















                                     - 10 -



         PAGE 11



               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


The Shareholders and Board of Directors
Dayton and Michigan Railroad Company


         We have audited the accompanying statements of financial position of
Dayton and Michigan Railroad Company as of December 31, 1995 and 1994, and the
related statements of earnings, cash flows, and retained earnings (deficit)
for each of the three years in the period ended December 31, 1995.  These
financial statements are the responsibility of the company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

         We conducted our audits 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 of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation.  We believe that our audits provide
a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above (appearing
on pages 12-17) present fairly, in all material respects, the financial
position of Dayton and Michigan Railroad Company at December 31, 1995 and
1994, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.


                                                 /s/ ERNST & YOUNG LLP
                                                 ---------------------
                                                 Ernst & Young LLP



Richmond, Virginia
January 31, 1996












                                    - 11 -



         PAGE 12
                     DAYTON AND MICHIGAN RAILROAD COMPANY
                            STATEMENTS OF EARNINGS



                                                     Years Ended          
                                           -------------------------------
                                           Dec. 31,   Dec. 31,    Dec. 31,
                                             1995       1994        1993
                                           --------   --------    --------

INCOME

  Rental Income                            $ 89,238   $ 82,191    $ 87,606
  Interest Income                            67,080     44,515      33,362
  Gain on Disposition of Properties             ---        ---      26,827
                                           --------   --------    --------

EARNINGS BEFORE INCOME TAXES                156,318    126,706     147,795

INCOME TAX EXPENSE                           40,527     32,850      38,317
                                           --------   --------    --------

NET EARNINGS                               $115,791   $ 93,856    $109,478
                                           ========   ========    ========

EARNINGS PER COMMON SHARE                  $   8.88   $   6.42    $   8.06
                                           ========   ========    ========






See accompanying Notes to Financial Statements.





















                                     - 12 -



         PAGE 13
                     DAYTON AND MICHIGAN RAILROAD COMPANY
                           STATEMENTS OF CASH FLOWS



                                                     Years Ended          
                                           -------------------------------
                                           Dec. 31,   Dec. 31,    Dec. 31,
                                             1995       1994        1993
                                           --------   --------    --------

OPERATING ACTIVITIES

  Net Earnings                              $115,791   $ 93,856    $109,478
  Gain on Disposition of Properties              ---        ---     (26,827)
                                            --------   --------    --------
      Net Cash Provided by Operating
        Activities                           115,791     93,856      82,651
                                            --------   --------    --------
INVESTING ACTIVITIES

  Proceeds from Property Dispositions            ---        ---      26,827
  Advances to CSXT, Net                      (67,134)   (44,515)    (60,137)
                                            --------   --------    --------
      Net Cash Used by Investing Activities  (67,134)   (44,515)    (33,310)
                                            --------   --------    --------
FINANCING ACTIVITIES
  
  Cash Dividends Paid - Preferred            (32,172)   (32,672)    (32,672)
                      - Common               (16,485)   (16,669)    (16,669)
                                            --------   --------    --------
      Net Cash Used by Financing Activities  (48,657)   (49,341)    (49,341)
                                            --------   --------    --------
CASH AND CASH EQUIVALENTS

Net Change in Cash and Cash Equivalents          ---        ---         ---

Cash and Cash Equivalents 
   at Beginning of Year                          ---        ---         ---
                                            --------   --------    --------
Cash and Cash Equivalents
   at End of Year                           $    ---   $    ---    $    ---
                                            ========   ========    ========


See accompanying Notes to Financial Statements.










                                     - 13 -



         PAGE 14
                     DAYTON AND MICHIGAN RAILROAD COMPANY
                       STATEMENTS OF FINANCIAL POSITION



                                              Dec. 31,          Dec. 31,
                                                1995              1994
                                             -----------       -----------
ASSETS
  
  Land and Improvements                     $   681,006       $   684,954

  Advances to CSXT                            1,169,216         1,098,134
                                            -----------       -----------
     Total Assets                           $ 1,850,222       $ 1,783,088
                                            ===========       ===========

SHAREHOLDERS' EQUITY 

  Preferred Stock, Non Voting Par
    Value $50; Authorized 74,000 Shares;
    Issued and Outstanding                                       
    24,225 Shares                           $ 1,211,250       $ 1,211,250
  Common Stock, Par Value $50;             
    Authorized 60,000 Shares; Issued
    and Outstanding 48,066.18 Shares          2,403,309         2,403,309
  Retained Deficit                           (1,764,337)       (1,831,471)
                                            -----------       -----------
     Total Shareholders' Equity             $ 1,850,222       $ 1,783,088
                                            ===========       ===========



See accompanying Notes to Financial Statements.






















                                    - 14 -



         PAGE 15
                     DAYTON AND MICHIGAN RAILROAD COMPANY
                   STATEMENTS OF RETAINED EARNINGS (DEFICIT)


                                                    Years Ended
                                       --------------------------------------
                                        Dec. 31,      Dec. 31,       Dec. 31,
                                          1995          1994           1993
                                       ---------     ---------      ---------

Beginning Balance                    $(1,831,471)  $(1,875,986)   $(1,936,123)

Net Earnings                             115,791        93,856        109,478 

Dividends
  Preferred Stock--$4.00 Per Share       (32,172)      (32,672)       (32,672)
  Common Stock--$1.75 Per Share          (16,485)      (16,669)       (16,669)
                                     -----------   -----------    ----------- 
Ending Balance                       $(1,764,337)  $(1,831,471)   $(1,875,986)
                                     ===========   ===========    =========== 




See accompanying Notes to Financial Statements. 































                                     - 15 -



         PAGE 16
                     DAYTON AND MICHIGAN RAILROAD COMPANY
                         NOTES TO FINANCIAL STATEMENTS

NOTE 1.  CAPITAL STOCK AND PRINCIPAL SHAREHOLDER.

         CSX Transportation, Inc. (CSXT) owns 66.7% of the company's preferred
stock and 80.35% of its common stock at December 31, 1995.  Dividends paid in
the accompanying financial statements reflect amounts related to shares held
by other than CSXT.  CSXT is engaged principally in the business of railroad
transportation and operates a system comprising 18,645 miles of first main
line track in 20 states principally east of the Mississippi River (exclusive
of New England), southern Ontario and the District of Columbia.

NOTE 2.  LEASE AGREEMENT.  

         The company has no operations.  It owns a line of railroad 141 miles
long which lies between Dayton and Toledo, Ohio.  This property is leased in
perpetuity to CSXT and is maintained and operated by, for and in the name of
CSXT.  As rent, CSXT pays the company's income taxes and guaranteed dividends
on the company's 3-1/2% common and 8% preferred stocks on shares held by other
than CSXT.  All other expenses of the company are paid directly by CSXT and
are not shown in the accompanying financial statements.  Interest income is
earned on amounts due from CSXT based on interest rates earned by CSX
Corporation on its short-term investment portfolio.

NOTE 3.  INCOME TAXES.  

         The income tax provision reconciled to the tax computed at statutory
rates was:
                                           1995          1994          1993
                                         --------     ---------      --------
         Tax at statutory rate           $ 54,711      $ 44,347      $ 51,728
         Income tax reimbursement effect  (14,184)      (11,497)      (13,411)
                                         --------      --------      --------
         Income taxes                    $ 40,527      $ 32,850      $ 38,317
                                         ========      ========      ========

NOTE 4.  EARNINGS PER SHARE.  

         Earnings per common share are computed after giving effect to
preferred stock dividend requirements and are based on the weighted average
number of common shares outstanding, excluding shares held by CSXT.

NOTE 5.  PROPERTIES.  

         Properties are carried principally at cost.  Additions, retirements
and depreciation are charged directly to amounts due from CSXT.  There were no
significant changes in properties during 1995, 1994 or 1993.  

NOTE 6.  CASH AND CASH EQUIVALENTS.

         All of the company's cash has been advanced to CSXT for investment
purposes.  Future cash requirements of the company will be funded by CSXT. 
The carrying amount of advances to CSXT approximates their fair value.


                                    - 16 -



         PAGE 17

NOTE 7.  USE OF ESTIMATES.

         In preparing the company's financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates in reporting the amounts of certain revenues and expenses for each
year and certain assets and liabilities at the end of each year.  Actual
results may differ from those estimates.
















































                                    - 17 -