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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             ----------------------
                                   FORM 10-K/A

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

       For Year Ended: December 31,2000          Commission File No. 333-43619

                         UNITED DEFENSE INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

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

                Delaware                                    52-2059782
     (State or other jurisdiction of                     (I.R.S. Employer
      incorporation or organization)                     Identification No.)

                          CO-REGISTRANTS AND GUARANTORS

            IRON HORSE INVESTORS, L.L.C.           DELAWARE 52-2059783
            UDLP HOLDINGS CORP.                    DELAWARE 52-2059780
            UNITED DEFENSE, L.P.                   DELAWARE 54-1693796

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

                       1525 Wilson Boulevard, Suite 700,
                         Arlington, Virginia, 22209-2411
                                  (703)312-6100
         (Address and telephone number of principal executive offices of
                       Registrant and each Co-Registrant)

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

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

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

         Indicate by check mark if the disclosure of delinquent filers pursuant
to Item 405 or 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/A
or any amendment to this Form 10-K/A [X]

         State the aggregate market value of the voting stock held by
non-affiliates of the registrant. None as of March 1, 2001.

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. Common Stock
outstanding as of March 1, 2001.

<TABLE>
<CAPTION>
                                                              No. of shares    Par Value
                                                              -------------    ---------
         <S>                                                  <C>              <C>
         United Defense Industries, Inc. ..................    18,036,667        $0.01
         Iron Horse Investors, L.L.C. .....................      -NONE-
         UDLP Holdings Corp. ..............................         1,000        $0.01
         United Defense, L.P. .............................      -NONE-
</TABLE>




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Amendment

     This amended report on Form 10-K provides restated financial information as
described in Note 2 to the consolidated financial statements.

Forward-Looking Statements

     This report on Form 10-K/A contains forward-looking statements that are
based on management's expectations, estimates, projections and assumptions.
Words such as "expects," "anticipates," "plans," "believes," "estimates,"
variations of these words, and similar expressions are intended to identify
forward-looking statements which include but are not limited to projections of
revenues, earnings, performance, cash flows and contract awards. Forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements are not guarantees of
future performance and involve certain risks and uncertainties which are
difficult to predict. Therefore, actual future results and trends may differ
materially from those made in or suggested by any forward-looking statements due
to a variety of factors, including: the ability of United Defense Industries,
Inc. (the "Company") to design and implement key technological improvements
(such as, in the Crusader program discussed herein) and to execute its internal
performance plans; performance issues with key suppliers and subcontractors;
developments with respect to contingencies such as legal proceedings and
environmental matters; labor negotiations; changing priorities or reductions in
the U.S. government defense budget including developments in the U.S. Army's
Medium Force Brigade initiative; the performance of, and political and other
risks associated with, the Company's international operations and joint
ventures; and termination of government contracts due to unilateral government
action. For additional information, see "Risk Factors" in the Company's
Registration Statement on Form S-4, SEC File Number 333-43619.

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ITEM 1.  Description of Business

Overview

     The Company is a subsidiary of Iron Horse Investors, L.L.C. ("Iron Horse"),
organized under the laws of the state of Delaware in 1997 for the primary
purpose of facilitating the acquisition of United Defense, L. P. ("UDLP") by
Iron Horse. Iron Horse is owned by an investment group led by the Carlyle Group
("Carlyle"). On October 6, 1997, the Company acquired 100% of the partnership
interests of UDLP from FMC Corporation ("FMC") and Harsco Corporation
("Harsco"), (collectively the "Sellers"). The Company is the only asset of Iron
Horse; therefore, except as indicated, the discussion herein is the same for
both entities.

     The Company is a supplier of tracked, armored combat vehicles and weapons
delivery systems to the U.S. Department of Defense and a number of allied
military forces worldwide. The Company's primary initiatives include production
of the Bradley Fighting Vehicle ("BFV") and its derivatives, and development for
the Crusader Field Artillery System. These two key programs comprise
approximately 40% of the Company's annual revenues. The BFV is the leading
domestically produced vehicle able to fulfill the dual role of troop transport
and armored fighting vehicle. The Company has maintained its prime contractor
position on the Bradley program since production began in 1981, and has added a
number of technology-based upgrades and derivative vehicles that continue to
extend the program's life cycle. Building on over twenty years of experience on
the M109 self-propelled howitzer and upgrades, the Company is also the prime
contractor for the development of the Crusader Field Artillery System. The U.S.
Army has identified the Crusader as its planned multi-billion dollar
next-generation field artillery system. In addition to managing the fighting
vehicle and howitzer programs, the Company serves as the prime contractor for a
number of mission critical military programs, several of which have spanned
decades, including the M88 tank recovery vehicle since 1960, the M113 armored
personnel carrier since 1960, and the U.S. Navy's Mk45 naval gun system since
1968. The Company's major programs are summarized below, in major customer
groups: Tracked Combat Vehicles (land vehicles for the U.S. Army, allied
customers, and the U.S. Marine Corps), Naval Systems (fleet programs for the U.
S. Navy) and International Operations. In general, the scale and viability of
all of the Company's programs is subject to the continued availability of
governmental funding. In seeking for such funding, the Company's programs often
compete with the funding demands of other, otherwise unrelated, military
programs, and sometimes compete as well with political demands from non-military
directions, such as civilian programs and tax reduction proposals.

Tracked Combat Vehicles ("TCVs"). TCVs are highly mobile vehicles that can cross
natural and man-made obstacles and urban terrain in all weather conditions,
while under fire from enemy combat forces. The U.S. Army and Marines use tracked
combat vehicles for four basic missions: (i) close combat, where the combination
of tanks, scout vehicles, fighting vehicles, armored personnel carriers, and
command and control vehicles provide the capability to present an integrated and
flexible combat front to face enemy forces at close

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range; (ii) fire support, by providing lethal indirect firepower through
self-propelled armament and multiple launch rocket systems; (iii) combat
support, including the provision of operational assistance, such as crossing
barriers, clearing or laying obstacles and recovering disabled systems; and (iv)
amphibious assaults, in which amphibious assault vehicles are able to initiate
attack from the sea and continue the attack on land. During 2000, 1999 and 1998,
the Company derived approximately 76%, 81%, and 84% of its revenues,
respectively, from TCVs.

     The Bradley Fighting Vehicle. The Company has been the sole-source, prime
contractor of the BFV to the U.S. Army since its initial production in 1981. The
BFV is a tracked armored vehicle with a 25mm cannon, TOW missiles and a
stabilized turret, and is the leading domestically produced vehicle able to
fulfill the dual role of troop transport and armored fighting vehicle. The BFV
is outfitted with armor and day/night sights, and can transport up to nine
people across rough terrain. The vehicle's combination of lethality,
survivability, and mobility has established it as a critical component of the
U.S. government's full-spectrum warfare strategy. A total of 6,742 BFVs have
been built, of which 400 were for the Saudi Arabian Army.

     Although new BFVs are no longer being built, the Company derives
significant revenue from upgrading the Army's existing fleet of BFVs. The
Company initiated delivery of the latest upgrade, the BFV A3 version, in October
of 1998 as part of a low rate initial production ("LRIP") contract awarded in
July of 1997. The BFV A3 provides enhancements such as situation awareness
capability, lethality, survivability and sustainability and is a key component
to the U.S. Army's program to digitize the battlefield. The U.S. Army is
currently planning to upgrade 926 older version BFVs to the A3 configuration,
with annual funding allocations over the nine year period between FY1997- 2005.
The Company has been awarded the first four of these contracts (FY1997-2000) for
a total of 203 vehicles. Of these, 61 were delivered in 2000 and 53 in prior
years. Currently a multi-year proposal for 389 additional vehicles covering
FY01-03 is being proposed and negotiated, and is projected to be under contract
by March 2001.

     BFV Derivatives and Support. The BFV has served as a platform for a number
of derivative vehicles developed by the Company. One such derivative, the
Multiple Launch Rocket System ("MLRS") carrier, was developed to provide a
carrier for a long-range rocket artillery system and is outfitted with rockets,
a launcher and fire control system developed and produced by Lockheed Martin
Missiles and Fire Control. The Company was awarded a contract to initiate an
MLRS remanufacture program, with the first delivery completed in August 1997.
Another derivative, the Fire Support Vehicle, supports armor and mechanized
forces by pinpointing enemy targets using laser technology, which allows more
accurate and timely calls for fire from the artillery. The Company provided 22
kits to convert BFVs under a workshare arrangement with Red River Army depot to
produce Fire Support Vehicles. Another such vehicle is the Command and Control
Vehicle ("C2V"). The C2V is a self-contained vehicle that keeps pace with
armored maneuver forces while providing the crew with a protected environment.
The Company was awarded the third year production contract for C2V conversions
in December 1998 with scheduled deliveries to be completed in May 2001. However,
the Army's Program Budget Decision #745, released in late 1999,

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removed additional production funding for the C2V in FY01 and cancelled the FY00
award. Finally, the Army's Linebacker air defense vehicle integrates the BFV
with Stinger missiles and adds improvements to turret fire control, target
acquisition subsystems and survivability. The Company received a new contract
for Linebacker conversions in July 1998 and completed delivery in 1999.

     In addition to the development and manufacture of BFV derivatives, the
Company provides BFV upgrade kits and field services. Kits allow for the upgrade
of BFVs to incorporate advancements in technology. The Company also deploys
experts to provide on-site training and advice to customers, complete
maintenance and repairs, and assess the necessity of replacement parts. The
Company is also under contract with the U.S. Army's Simulation, Training and
Instrumentation Command for the development and demonstration of a multi-purpose
simulator/trainer for the BFV family of vehicles. An award for the production
and installation of 13 Bradley Advanced Training Systems (BATS) was received in
July 1999 and deliveries will be completed by August 2001. A second year
production for a follow on quantity of 11 BATS is in process with an award
projected by June 2001.

     Crusader. The Crusader is an integrated and automated two-vehicle artillery
system consisting of a 155-mm, self-propelled howitzer and resupply vehicle. The
resupply vehicle has two variations, one tracked and one wheel-based. The
Company is the sole-source, prime contractor and systems integrator responsible
for the design and development of the Crusader, including delivery of a
prototype system, under a $1.7 billion Product Development Risk Reduction
contract, which is scheduled to be completed in 2003. The follow on development
phase, known as Engineering and Manufacturing Development ("EMD"), is scheduled
to begin in 2003, with delivery of the first EMD prototype in 2004. LRIP is
scheduled to begin in Elgin, Oklahoma in 2006, reflecting the Army's latest
funding schedule. The Army plan calls for fielding 480 Crusader systems, a
reduction from its earlier projected procurement of 1,138 systems.

     The Crusader is designed to achieve the U.S. Army's stated objectives for
the next-generation howitzer. These specifications include: (i) increased
mobility, (ii) increased lethality, (iii) improved survivability, (iv) better
sustainability, and (v) increased strategic deployability. The Crusader is being
designed to be the first howitzer capable of keeping pace with the mechanized
maneuver force, and will be a key part of the Army's counterattack corps. The
Crusader is also being designed to provide substantially greater responsiveness
and high rates of fire through long-range and accurate firings enabled by the
vehicle's advanced autoloading technology and actively-cooled cannon, thereby
giving it a multiple round simultaneous impact capability. This firing
capability is being designed to allow commanders to extend and dominate the
battle space and set a higher tempo for land operations. The Crusader is being
developed with an embedded digitized command, control, communications and
intelligence system for enhanced situational awareness, and for new capabilities
for battlefield movement and resupply.

     M109 Self-Propelled Howitzer ("M109"). The M109 has been the most widely
used field artillery vehicle for the U.S. military and certain foreign
governments since it was first produced by the Company in 1974. The M109 is
recognized for its ability to deliver rapid

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and high volume artillery support and to maximize survivability through
mobility. The latest generation of the M109, the M109A6 Paladin, is the most
advanced M109 upgrade fielded to date. FY00 funding will allow procurement of 7
Paladins. The Company has various non-production activities on Paladin,
specifically engineering and training contracts. The Company also designs and
produces unique configurations of the M109 and offers M109 upgrade kits,
servicing and training to various foreign governments.

     M992 Field Artillery Ammunition Supply Vehicle ("FAASV"). The single
mission of the FAASV, the battlefield partner of the M109, is to safely
transport personnel, ammunition, and supplies to howitzer artillery vehicles on
the battlefield during both firing and non-firing conditions. By utilizing
synchronized and semi-automated resupply strategies and mechanisms to carry the
M109 ammunition, the FAASV enables the howitzer to remain in the field longer
and thereby increase its lethality. The heavily armored chassis provides
ballistic protection to its munitions supply crew and accommodates all standard
155mm rounds. In 1999, the Company completed a production contract for 96 new
vehicles and 36 converted vehicles. The Company was awarded an option to deliver
6 additional converted FAASVs in 2000, and production for those vehicles was
completed in 2000.

     M88 Armored Recovery Vehicle ("M88"). The M88 currently has an installed
base of more than 3,325 vehicles in 19 countries throughout the world. The M88
performs towing, lifting and pulling tasks in the recovery of impaired tanks or
in basic tracked vehicle maintenance. In preparation for the deployment of
heavier M1 tanks by the U.S. Army, in 1986 the Company began the development
effort for the M88A2 ("Hercules") upgrade. The Hercules is the least expensive
recovery vehicle worldwide that can safely recover 70-ton tanks (for example,
the M1A1/A2). The U.S. Army has been awarding annual contracts for M88 upgrades
since 1994 and the U.S. Marine Corps ("USMC") contract started in 2000. The
Company is currently under contract to deliver vehicles through February 2002
and is in negotiations for an award of 44 additional vehicles to the U.S. Army
and USMC. The company also has an ongoing co-production contract with Egypt for
50 Hercules and an option for at least 13 additional vehicles.

     M113 Armored Personnel Carrier ("M113"). The M113 has been the main troop
transport vehicle used by the U.S. military and allied governments throughout
the world, with more than 80,000 units delivered since initial production in
1960. The Company has produced several M113 models in cooperation with U.S.
allies, including various configurations of the Armored Infantry Fighting
Vehicle, historically produced in Europe and currently produced by the Company's
Turkish affiliate, FNSS. The U.S. Army, which received its last delivery of new
M113s from the Company in 1992, continues to upgrade its M113s to the latest A3
configuration. This upgrade work currently occurs in the Company's Anniston,
Alabama facility and continues to be a source of revenue for the Company. The
upgrade work is performed in a partnering arrangement with the Anniston Army
Depot. In addition, the Company is supplying kits for the Canadian Army to
upgrade their M113A2 vehicles to the latest M113A3 configuration and to produce
the new improved Mobile Tactical Vehicle Light ("MTVL"). The MTVL variant, which
is a patented UDLP M113 derivative, has significantly more cross-country
mobility, payload capacity and under armor

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volume than the standard M113A3. The Company offered the MTVL as the foundation
for the U.S. Army's Interim Armored Vehicles program described in Item 7 below.

     M8 Armored Gun System ("M8"). The M8 was designed to meet the Army's need
for a rapidly deployable, multi-purpose tracked weapon system to support and
protect light infantry forces in conflict and peacekeeping missions worldwide.
It carries a rapid-fire, 105mm cannon and can be dropped by parachute from the
U.S. Air Force's C-130 Hercules and larger aircraft. It has armor that makes it
survivable against heavy machine guns and medium automatic cannons, and is
designed for lethality against tanks, fortifications, and enemy troops. The M8
was developed by the Company under a U.S. Army contract but did not go into
volume production, as the program was cancelled in 1997 due to Army budgetary
constraints. The Company has not to date achieved a production sale of the M8.
However, the Company offered the AGS for an important role in the U.S. Army's
Interim Armored Vehicles program described in Item 7 below, and the Company is
also continuing its efforts to market the M8 elsewhere.

     M9 Armored Combat Earthmover ("M9 ACE"). The M9 ACE is an 18-ton, fully
tracked, aluminum armored vehicle, used on the battlefield to bulldoze, rough
grade, excavate, haul and scrape. With a crew of one, the multi-purpose M9 ACE
can attain road speeds of up to 35 miles per hour, and unlike a standard
bulldozer, requires no transport vehicle. It is also small and light enough to
be transported in C-130 aircraft. The M9 ACE can serve as the prime mover of
vehicles weighing up to 39,000 pounds and can clear debris left in the wake of
battles or civil disasters. The Company completed production of 52 vehicles in
November 1999. Those vehicles have recently been fielded to Engineer Units at
Ft. Hood, Texas and Ft. Stewart, GA.

     In-Stride Breacher ("Grizzly"). The Grizzly is a 70-ton vehicle currently
under development designed to clear mines and other complex obstacles. Mounted
on a modified M1 chassis, the Grizzly features a mine-clearing blade outfitted
with complex software that provides automatic depth control. It is also equipped
with a power-driven arm for digging, grappling and lifting, as well as seven
external cameras for vision and remote operation, with full electronic
integration. Currently nearing completion of the EMD phase, the program's LRIP
funds were cancelled by the Office of the Secretary of Defense (OSD) in December
1999. This action was taken by OSD solely due to not having sufficient funds to
support the Army's Medium Force Brigade initiative. The three Heavy Armor
Divisions that remain still require the in-stride, complex obstacle breaching
capabilities that the Company believes can only be accomplished by Grizzly. As a
result of this requirement, the development program has been extended through
August 2001 and the Company is hopeful that additional funds for the Grizzly
will be restored later in 2001.

     AAV7A1 Amphibious Assault Vehicle ("AAV"). The AAV has been the U.S. Marine
Corps' amphibious assault vehicle for over two decades with more than 1,500
vehicles delivered. In July 1998, the Company was awarded a $158 million four
year contract by USMC to rebuild the existing fleet of AAVs in a partnering
arrangement with the Albany, Georgia and Barstow, California Marine Corps
Logistic Bases. The Company currently

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produces different kit configurations of the AAV for foreign customers such as
Korea, Spain and Italy, and then assists these countries in assembling the kits
locally.

     Naval Systems. The U.S. Navy's focus on land attack warfare is spurring the
development of new and modified weapon systems, including (i) a modified naval
gun system, the Mk45 Mod4; (ii) a new 155mm Advanced Gun System ("AGS"); (iii)
land attack missile integration into the Vertical Launch System ("VLS"),
requiring new canisters; and (iv) new or modified launching systems. The Company
expects that the design, engineering and production of these systems will be the
primary focus of naval ordnance for the foreseeable future. The Company is
currently under contract to modify the Mk45 gun systems to the Mod4
configuration and develop the 155mm AGS. In addition, the Company is the sole
source designer and producer of the VLS canister. Finally, the Company is the
principal subcontractor to Lockheed Martin Corporation to produce VLS launchers.

     Historically, United Defense naval ordnance systems have been on all U.S.
Navy combatants since the beginning of World War II. The company developed the
first fully automatic major caliber gun and has been the primary designer and
producer of all the automatic missile launching systems on U.S. Navy ships.
During 2000, 1999, and 1998 the Company derived approximately 23%, 19% and 16%
of its revenues, respectively, from Naval Systems.

     Mk45 Naval Gun System ("Mk45"). The Company is the sole source producer of
the Navy's 5-inch Mk45 gun system for the Navy's newest class of destroyers, the
Arleigh Burke DDG 51 class ("DDG51"). The company is under contract for FY00
requirements and just recently received a contract award of the FY01
requirements. The U.S. Navy currently plans to continue building DDG51 class
ships through FY05. The Company is also the prime contractor for the Naval
Surface Fire Support ("NSFS") program. This NSFS program includes upgrading the
Mk45 gun system with the capability to fire Extended Range Guided Munitions. Due
to the NSFS program, the Company anticipates a sole-source contract to upgrade
Mk45 guns on the Navy's Ticonderoga class ships from Mod2 to Mod4 configuration,
which extends the Mk45's range and improves surface fire support capability.
Furthermore, the U.S. government supports foreign allied navies having
compatible armaments, and has recently increased its assistance to the Company's
efforts to place Mk45s on foreign ships. Management believes the improvements
included in the Mod4 configuration which provide significantly greater range
will make the Mk45 more competitive internationally. In December 1999, the
Company made its first international sale of Mk45 Mod4 to Korea.

     Mk41 Vertical Launching System. The VLS is the U.S. Navy's primary missile
launcher on surface combatants, firing the anti-air Standard Missile, strike
mission-related Tomahawk cruise missile, anti-submarine VLASROC, and ship
self-defense Sea Sparrow missile. The VLS is manufactured under a subcontract
with Lockheed Martin Corporation, the prime contractor of the VLS launcher. The
Company is the designated mechanical design agent as well as the major
subcontractor, and is also the sole-source, prime provider of VLS canisters.
Each new missile introduced requires a new canister development

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program. UDLP, as the design agent, designs and tests the new canister and then,
as the sole source manufacturer, the units are produced and delivered. The U.S.
Navy places the VLS, like the Mk45, on all DDG51s, each of which contains twelve
8-cell VLS modules. In 1998, the Company entered into a five-year contract with
Lockheed Martin Corporation for launcher production and ancillary work for the
Company from 1998 through 2002. In 1999, the Company entered into a five-year
contract for VLS canisters. The Company is currently negotiating two additional
option years that will provide launcher production and ancillary work through
2004.

     Advanced Gun System. The U.S. Navy is currently developing its
next-generation destroyer, the Zumwalt DD21 class, with land attack as its
primary mission. The Company is the sole-source developer of AGS, the primary
gun weapon system on DD21. The Company is on both industry teams which are
competing to develop and produce the DD21. Each of the 32 planned destroyers is
expected to have two AGS on board, providing the equivalent firepower of two
battalions of Army M198 howitzers, at ranges of up to 100 nautical miles. Funded
gun development was initiated in 1999, with completion of development scheduled
for 2006. The Company is currently in EMD for the AGS. The prototype ship is
scheduled to begin construction in FY05. In addition to designing the gun and
associated magazine, the Company has been selected at the source selection
authority for projectile development.

     Overhaul, Repair, Maintenance and Other. The Company also provides
aftermarket service for the Mk45 and smaller caliber gun mounts, guided missile
launching systems, vertical launching systems, surface vessel torpedo tubes, gun
fire control systems, target and decoy launchers and other naval Combat Systems
equipment. Work is performed for the U.S. Navy and various international allied
forces. These services include engineering, repair, upgrade, maintenance,
logistic support, replacement parts and onboard technical assistance. A
significant amount of the service work is performed at the Company's Louisville
operation which is located at the facilities of the former U.S. Navy operated
Naval Ordnance Station. Other strategic work sites include San Diego, CA;
Norfolk, VA; and Mayport, FL. In addition, the Company is the sole-source
producer of propulsors for the Virginia Class submarine. Currently, the fifth
unit is being negotiated with an overall buy of 32 projected.

International Operations. The Company operates a subsidiary, joint ventures, and
co-production programs in countries throughout the world. Current operations
include Bofors Defence, a Swedish subsidiary, joint ventures in Saudi Arabia and
Turkey, and co-production programs in Egypt, South Korea and Japan.

     The Company's objective in setting up a joint venture or co-production
program is to provide the host country with an indigenous production capability
that will utilize the Company's developed programs, adapted to local
requirements. The Company uses project financing, letters of credit,
manufacturing licenses, training programs and offsets to structure programs that
meet unique customer needs.

<PAGE>

     Bofors Defence ("Bofors"). Bofors Weapon Systems, a Swedish Company, was
acquired by United Defense Industries in September 2000 from Celsius AB.
Subsequent to the acquisition the name was changed to Bofors Defence. The
purpose of this acquisition is to provide a base for the expansion of United
Defense's business within the European Union. Bofors is active in four major
business areas; Field Artillery Systems, Air Defence and Naval Gun Systems,
Combat Vehicle Systems and Product Support. Bofors' key competencies are in the
area of intelligent munitions and systems. During 2000 Bofors received key
contracts to commence the manufacture of intelligent munitions (the BONUS
program) for the Swedish Government and to adapt a battalion of CV9040 vehicles
for peacekeeping duties. Bofors entered 2001 with a backlog of approximately
$240 million. The Leopard Tank Production Program will be drawing to an end in
the fall of 2001 and the CV9040 will be drawing down substantially by 2002.
Additional orders will be required to maintain current sales volume in the
future.

     Key near term order opportunities include; 1) additional peacekeeping
vehicles for Sweden, 2) naval guns for Chile, Malaysia, and Mexico, 3) artillery
systems for India, and 4) intelligent munitions for the United States.

     FMC-Arabia. The joint venture was formed in 1994 to pursue defense
contracts within the Kingdom of Saudi Arabia. The Company's 51% interest in the
joint venture is a beneficial interest, but for administrative convenience the
venture retained the name FMC-Arabia. An application to change the name is in
process. The Company accounts for FMC-Arabia on an equity basis, due to the
Saudi partner's ability to assert supermajority rights which limit the control
of the Company. The initial contract was to provide contractor logistics support
(CLS) and training to the Royal Saudi Land Forces Infantry Corps for Bradley
Fighting Vehicles previously purchased from the Company. In early 1997,
FMC-Arabia was awarded a second contract to commence the modernization of 523 of
Saudi Arabia's M113s (from a fleet of approximately 1,700 vehicles) to an A3
configuration. Because of overall budgeting constraints affecting the Saudi
Arabian government, the funding for both the M113 and CLS programs has been
stretched out, with the result that FMC-Arabia operated both programs at reduced
levels during 1999 and 2000. Current funding will support work in Saudi Arabia
through March of 2001. FMC-Arabia is continuing to work with the Saudi Arabian
government and the U.S. government in an effort to arrange increased and more
stable funding for the programs, but there can be no assurance as to when or
whether such funding will be provided.

     FNSS-Turkey. The FNSS Savunma Sistemleri A.S. ("FNSS") joint venture was
formed in 1987 to pursue armored combat vehicle sales to the Turkish Army. The
Company owns 51% of the joint venture. The initial contract, which became
effective in 1989, was for 1,698 vehicles consisting of four types of armored
vehicles: personnel carrier, fighting vehicle, TOW missile vehicle and mortar
vehicle, all using a common chassis. The initial production contract for 1,698
vehicles has been completed, and a follow-on contract for 551 additional
personnel carrier vehicles was signed in October 2000. In 1998, FNSS signed its
first export contract with the United Arab Emirates (Abu Dhabi) to provide 133

<PAGE>

vehicles comprised of a mix of forward observation vehicles, engineer squad
vehicles and recovery vehicles, with deliveries starting mid 1999 and ending in
early 2001. In August 2000, FNSS signed a second major export order to supply
211 vehicles in eleven configurations to the government of Malaysia. This
contract will also include co-production through a sublicensee company in
Malaysia. The orders for the Turkish government and the Malaysian government
provide backlog through the end of 2004.

         FNSS is pursuing new business opportunities with the Turkish government
for amphibious vehicles, self-propelled howitzers and tank modernization. FNSS
is also pursuing additional orders with the UAE and Malaysia, as well as other
export opportunities within its licensed territory, which includes much of the
Middle East and Southeast Asia.

         The Company's investment in FNSS is accounted for on the equity basis
because it does not control the joint venture. Royalties are received in U.S.
dollars and reported as revenue.

         Egypt. In March of 1998, the Company formalized a Manufacturing
Technical Assistance Agreement with the US Army's Tank and Automotive Command
(TACOM) to provide management and technical services in support of the
co-production of 50 M88A2 Hercules in the Egyptian Tank Plant in Egypt. The
cost-plus fixed-fee contract was signed and is currently valued at $21 million.
The effort is expected to continue through 2002 with a follow-on contract to
support thirteen additional vehicles expected by the end of 2001 that will
continue the program through the end of 2003.

         In 1999, the Company also signed a contract with TACOM to provide kit
materials to support the fabrication and assembly of 50 Hercules vehicles in the
Egyptian Tank Plant. The current value of this contract is $101 million. The
contract is expected to end in 2001.

         A follow-on contract to procure long lead items for kits for thirteen
additional Hercules vehicles was awarded in 2000. The initial value of the
follow-on contract is $6 million and will be finalized in 2001 for approximately
$30 million. The follow-on contract period of performance is expected to be
through January 2003. The Company continues to receive orders for additional
tools and special parts to support the Egyptian Tank Plant's ongoing efforts.

         South Korea. In 1994, the Company formalized a teaming agreement with
Samsung Techwin to jointly produce AAV's for the South Korean Marine Corps. An
initial five year contract was signed in 1996 for $105 million. A follow-on
contract was signed in 2000 for $117 million, extending the co-production
through 2005. The initial deliveries for this contract commenced at the end of
2000.

         Japan. In 1993, the Company entered into an agreement with Komatsu to
license and support co-production of MLRS carrier vehicles in Japan. Know-how
was transferred through the mid-nineties and production was progressively
transferred to


<PAGE>

Komatsu. UDLP continues to receive royalties, and orders for special parts to
support Komatsu's ongoing production contracts.


Research and Development and Engineering Capabilities

         Among the Department of Defense's ("DoD") procurement requirements is
the research and development of new technologies for application to weapon
systems and upgrades. The Company's ability to compete for defense contracts
depends to a large extent on the impact and innovation of its research and
development programs.

         The Company's engineering capability has been a critical component of
its success. Extensive experience in simulation, systems integration, armor,
mobility, survivability and armaments, as well as its software development,
engineering and electronics capabilities have allowed the Company to stay at the
forefront of the development, manufacture and upgrade of its products.

         The Company expended $13.0 million, $12.8 million and $15.8 million on
research and development in 1998, 1999 and 2000, respectively, a substantial
portion of which was included in overhead allocable to both U.S. government and
foreign government contracts.

Government Contracts; Regulatory Matters

         Management expects that, for the foreseeable future, approximately 85%
of the Company's sales will continue to result from contracts with the U.S.
government, either directly, through prime contractors, or pursuant to the U.S.
government's Foreign Military Sales program. The Company's U.S. government
business is performed under cost-plus contracts (cost-plus-fixed-fee,
cost-plus-incentive-fee, or cost-plus-award-fee) and under fixed-price contracts
(firm fixed-price, fixed-price incentive, or fixed-price-level-of-effort).
Generally, the Company's engineering and development programs are performed
under cost-plus contracts, while the production contracts are awarded on a
fixed-price basis. Cost-plus and fixed-price contracts accounted for
approximately 33% and 67%, respectively of the Company's business in 2000.

         The Company's U.S. government business is subject to unique procurement
and administrative rules based on both laws and regulations. These laws and
rules include compliance with socio-economic requirements, the distribution of
costs to contracts and non-reimbursement of certain costs such as lobbying
expenses. The Company's contract administration and cost accounting policy and
practices are subject to oversight by government inspectors, technical
specialists and auditors.

         U.S. government contracts are, by their terms, subject to termination
by the U.S. government either for its convenience or default by the contractor.
In addition, U.S. government contracts are conditioned upon the continuing
availability of Congressional appropriations. Congress usually appropriates
funds for a given program on a September 30


<PAGE>

fiscal year basis, even though contract performance may take many years.
Consequently, at the outset of a major program, the contract is usually
partially funded, and additional monies are normally committed to the contract
by the procuring agency only as appropriations are made by Congress for future
fiscal years.


         As is common in the industry, the Company is subject to business risks,
including changes in governmental appropriations, national defense policies or
regulations, service modernization plans, and availability of funds. Any of
these factors could materially adversely affect the Company's business with the
U.S. government in the future.

Competition

         In the market it serves the Company faces a variety of major domestic
and foreign competitors including Alvis, The Boeing Company, General Dynamics
Corporation, General Motors Corporation, GIAT, Kraus Maffei Wegmann, Lockheed
Martin, Oto Breda, Raytheon Company, Steyr and Textron.

         Management believes that the Company will continue to be able to
compete successfully based upon the quality, technological advancement and cost
competitiveness of its products and services. As the electronic and software
content of the Company's products increases, the Company may encounter future
competition from electronics and aerospace companies whose activities
historically have been largely unrelated to the Company's products and programs.
The Company's ability to compete for defense contracts depends to a large extent
on the impact and innovation of its research and development programs, its
capability as a systems integrator, its willingness to partner with military
depots, its ability to offer best value to its government customers, and its
readiness in facilities, equipment and personnel to undertake the programs for
which it competes. Historically, the Company concentrated on TCVs because it
believes that TCVs provide better capability than wheeled combat vehicles.
However, the U. S. Army has recently shown a strong interest in shifting at
least some of its combat vehicles to a wheeled platform, which the Company does
not currently offer (see Item 7, Overview, Interim Armored Vehicles, below).

         In some instances, programs are sole-sourced by the U.S. government to
a single supplier, and in other cases involve a prime contractor and multiple
suppliers. In cases where the Company is the sole-source provider, there may be
other suppliers who have the capability to compete for the programs involved,
but they can only enter or reenter the market if the U.S. government should
choose to reopen the particular program to competition. The Company's customers,
particularly the industrial facilities operated by DoD, often compete with the
Company for aftermarket business, such as upgrade work and various overhaul and
servicing work performed by the Company.

Major Customers

         The Company's sales are predominantly derived from contracts with
agencies of the U.S. government. See Note 13 to the Consolidated Financial
Statements, included in Item 8.

<PAGE>

Backlog

         As of December 31, 2000, the Company's funded backlog was approximately
$1.9 billion compared with $1.4 billion at the end of 1999. Approximately one
half of the increase is due to the acquisition of Bofors during 2000. Funded
backlog does not include the awarded but unfunded portion of total contract
values. This backlog provides management with a useful tool to project sales and
plan its business on an on-going basis. A substantial majority of this backlog
is expected to be earned as revenues by the end of 2001.

Intellectual Property

         Although the Company owns a number of patents and has filed
applications for additional patents, it does not believe that its operations
depend upon its patents. In addition, the Company's U.S. government contracts
generally license it to use patents owned by others. Similar provisions in the
U.S. government contracts awarded to other companies make it impossible for the
Company to prevent the use by other companies of its patents in most domestic
work. Additionally, the Company owns certain data rights in its products under
certain of its government contracts. The protection of data developed by the
Company from use by other government contractors is from time to time a source
of negotiation between the Company and the U.S. government, and the extent of
the Company's data rights in any particular product generally depends upon the
degree to which that product was developed by the Company, rather than with U.S.
government funds. The Company routinely enters into confidentiality and
non-disclosure agreements with its employees to protect its trade secrets.

Employees

         At December 31, 2000, the Company had approximately 5,350 employees and
approximately 300 contract workers (excluding employees of the foreign joint
ventures). Approximately 1,650 of these employees at six locations are
represented by eight unions, including the Glass, Molders, Pottery, Plastics and
Allied Workers (Anniston); the International Association of Machinists
(Louisville and San Jose); the United Automobile, Aerospace and Agricultural
Implement Workers (Minneapolis); the International Guards (Minneapolis); the
International Brotherhood of Teamsters (San Jose); the United Steelworkers
(York); the Swedish Trade Union Cooperation (Sweden); and the Federation of
Salaried Employees in Industry and Services (Sweden).

<PAGE>

Sources and Availability of Raw Materials

         The Company's manufacturing operations require raw materials, primarily
aluminum and steel, which are purchased in the open market and are normally
available from a number of suppliers. The Company also purchases a variety of
electronic and mechanical components for which the Company has multiple
commercial sources. The Company has not experienced any significant delays in
obtaining timely deliveries of essential raw materials.

Environmental Matters

         The Company's operations are subject to federal, state and local laws
and regulations relating to, among other things, emissions to air, discharges to
water, the handling and disposal of hazardous and solid wastes and the cleanup
of hazardous substances ("Environmental Laws"). The Company continually assesses
its compliance status and believes that its operations currently are in
substantial compliance with Environmental Laws.

         Operating and maintenance costs associated with environmental
compliance and prevention of contamination at the Company's facilities are a
normal, recurring part of operations, are not significant relative to total
operating costs or cash flows, and are generally allowable as contract costs
under the Company's contracts with the U.S. government ("Allowable Costs"). Such
costs have not been material in the past and, based on information presently
available to the Company and on U.S. government environmental policies relating
to Allowable Costs in effect at this time (all of which are subject to change),
are not expected to have a material adverse effect on the Company.

         Based on historical experience, the Company expects that a significant
percentage of the total remediation and compliance costs associated with its
facilities will continue to be Allowable Costs. As of December 2000 the Company
has a reserve for $14 million to cover any remediation and compliance costs that
may not be allowable costs under its U.S. government contracts. Management
believes that the reserve is sufficient and does not expect that such costs will
materially adversely affect the Company. In addition, pursuant to the terms of
the acquisition agreement between Iron Horse and the Sellers, the Sellers are
required to reimburse the Company for 75% of certain non-allowable remediation
costs relating to operations prior to the acquisition.

<PAGE>

ITEM 2.         Properties

         The table below sets forth information with respect to the Company's
manufacturing facilities and properties. The Company believes that its
facilities are adequate for its operations.

Location                             Leased/Owned            Square Footage
--------                             ------------            --------------
Albany, GA                           Gov't Owned                 42,600
Arlington, VA                        Leased                      22,512
Anniston, AL                         Leased                      96,000
Anniston, AL                         Owned                      267,000
Aiken, SC                            Leased                      21,000
Aiken, SC                            Owned                      189,000
Aberdeen, SD                         Owned                      105,000
Aberdeen, SD                         Leased                      30,000
Fayette County, PA                   Leased                     179,700
Fridley, MN*                         Gov't Owned              1,712,240
Fridley, MN*                         Owned                      326,023
Louisville, KY                       Leased                     633,609
Orlando, FL                          Leased                      16,300
Hollister, CA                        Leased                       1,218 acres
Santa Clara, CA
     1125 Coleman                    Leased                      37,450
     1205 Coleman                    Leased                     124,940
     1450 Coleman                    Leased                      36,600
     340 Brokaw                      Leased                       4,400
     328 Brokaw                      Leased                     174,300
     2830 De La Cruz                 Leased                      86,785
     2890 De La Cruz                 Leased                      68,708
Triangle, VA                         Leased                       6,000
York County, PA                      Owned                      996,518
York County, PA                      Leased                      10,000
Arlington Heights, IL                Leased                      55,904
Troy, MI                             Leased                      16,814
East Moline, IL                      Leased                       2,000
Karlskoga, Sweden                    Leased                     417,500

         *The U.S. government is currently attempting to divest its Fridley,
Minnesota facility that has historically been provided rent free to the Company
for production of systems and spares for the U.S. government. UDLP is currently
in negotiations with the government for purchase of the facility. UDLP will be
required to make the facility available for the performance of government
contracts and subcontracts for a minimum of three years.

<PAGE>

ITEM 3.  Legal Proceedings

         Alliant Techsystems, Inc. ("Alliant"), a subcontractor to the Company
in connection with the M109A6 Paladin howitzer prime contract, filed a lawsuit
against the Company and its prior owners in Minnesota state court. The lawsuit
arose out of a U.S. Army-directed termination for convenience in 1996 of certain
subcontract work under the program which, until the time of termination, had
been performed by Alliant and was thereafter replaced by a subcontract which the
Company awarded to another contractor, Sechan Electronics. The breach of
contract litigation by Alliant Techsystems, Inc. against the Company was
concluded by pretrial dismissal, without any judgment, damage award, or other
adverse finding having been made against the Company. No settlement payment was
made in connection with such dismissal.

         The Company is also a defendant in a so-called qui tam case filed
jointly under the U.S. Civil False Claims Act (the "FCA") by one present and one
former employee of the Company's Armament Systems Division ("ASD") in Fridley,
Minnesota. The FCA, among other things, permits private parties (called
"relators" under the FCA) to seek, on behalf of the U.S. Government, recovery of
amounts which under certain circumstances have been improperly claimed from the
Government by its contractors. Beyond recovery of the Government's actual
damages, the FCA also authorizes the recovery of multiple penalties, and
provides as well that the relators may personally receive 15-30% of any recovery
obtained. The case, U.S. ex rel. Seman and Shukla v. United Defense, FMC Corp.,
                    -----------------------------------------------------------
and Harsco Corp., was filed against the Company and its prior owners on July 23,
----------------
1997 in the U.S. District Court for the District of Minnesota and primarily
alleges that the Company improperly obtained payment under various of ASD's
government contracts by supplying components which did not comply with
applicable technical specifications. The relators' complaint did not quantify
the alleged damages, but sought the full range of treble damages, civil
penalties, and attorney fees available under the FCA.

         Negotiations among the relators, the Company, its co-defendants, and
the U.S. Government (which chose not to be a party to the litigation, but by
statute is entitled to participate in any settlement or other recovery in qui
tam cases) to settle the Seman/Shukla litigation are nearly complete. Under the
proposed settlement agreement, the Company would pay a total of $6.0 million to
settle the case, divided into installments payable over a three-year period. No
finding of wrongdoing would be made against the Company, and no other
administrative or legal action would be taken against the Company in respect of
the matters alleged in the case. Completion of the settlement is subject to U.S.
District Court review, but management expects the settlement to be concluded on
such terms during the first part of 2001.

         The Company is also subject to other claims and lawsuits arising in the
ordinary course of business. Management believes that the outcome of any such
proceedings to which the Company is party will not have a material adverse
effect on the Company.

<PAGE>

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

     None.


ITEM 5.  Market for Registrant's Stock and Related Stockholder Matters

     The Company's common stock is not publicly traded. As of March 1, 2001,
there were thirty nine holders of record of the Company's common stock. No
dividends were paid in 2000. In addition, the Company's Senior Subordinated
Notes include provisions restricting its ability to pay dividends in the future.
See Note 8 to the Consolidated Financial Statements in Item 8 for further
information.

<PAGE>

Item 6. Selected Financial Data (In thousands)

The selected financial data presented below are derived from the Company's
consolidated financial statements, audited by Ernst & Young and should be read
in conjunction with such audited statements and the notes that are included in
Item 8.

<TABLE>
<CAPTION>
                                           Nine months     Three months
                                              ended           ended
                                          September 30,    December 31,           Year ended December 31,
                                 1996         1997            1997            1998         1999         2000
                           ------------------------------ ------------------------------------------------------
                                   (Predecessor)
<S>                        <C>            <C>             <C>             <C>          <C>          <C>
Net sales                   $ 1,029,333   $   913,925      $   342,627    $ 1,217,555  $ 1,213,526  $ 1,183,886

Net income(loss)                 74,679        78,130          (36,259)      (122,598)       2,938       18,845

Total assets                    649,632       626,658        1,246,083        977,450      853,142      895,820

Long term debt, including
 current portion                      -             -          659,800        506,986      349,843      269,577
</TABLE>


Note: As a result of the Acquisition and the related revaluation of assets, net
income and total assets for periods ended after September 30, 1997 are not
comparable to prior periods.

     Information for Iron Horse is identical except its total assets were
$978,789, $854,481 and $897,056 at December 31, 1998, 1999 and 2000,
respectively and its net income was ($118,948), $2,817 and $18,079 for the years
ended December 31, 1998, 1999 and 2000, respectively.



<PAGE>

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

     The following discussion and analysis should be read in conjunction with
the financial statements and related notes and the other financial information,
included elsewhere in this report.

Introduction

     In October 1997, the Company's direct parent, Iron Horse, was funded from
several partnerships controlled by Carlyle. The equity was invested in the
Company. On October 6, 1997, the Company acquired (the "Acquisition") directly
or through its wholly owned subsidiary, UDLP Holdings Corp., 100% of the
partnership interests in UDLP.

     United Defense Industries, Inc. is the only asset of Iron Horse.
Accordingly, Management's Discussion and Analysis of the Results of Operations
and Financial Condition is the same for both Iron Horse and United Defense
Industries, Inc. The Company's subsidiary guarantors, UDLP Holdings Corp., UDLP
and Barnes & Reinecke, Inc. ("BRI"), are directly or indirectly wholly owned by
the Company and all such subsidiary guarantors have guaranteed the Company's 8
3/4% Senior Subordinated Notes on a full, unconditional, and joint and several
basis. Accordingly, separate financial statements of those subsidiaries are not
considered material or provided herein. Note 17 to the financial statements in
Item 8 sets forth condensed consolidating Balance Sheets, Statement of
Operations and Statement of Cash Flows for guarantor and non-guarantor
subsidiaries for 2000.

Overview

     Variability in Quarterly and Annual Performance. The Company's operating
performance frequently varies significantly from period to period, depending
upon the terms of and schedules for the Company's contracts, export sales, and,
in particular, the award or expiration of one or more contracts and the timing
of manufacturing and delivery of products under such contracts. As a result,
period-to-period comparisons may show substantial increases and decreases
disproportionate to underlying business activity and results for any given
period should not be considered indicative of longer-term results.

     Interim Armored Vehicles. In October 1999 the U.S. Army embarked upon an
initiative to create a so-called medium force, intended to be lighter and less
heavily-armed than the Army's existing heavy divisions based on the M1 tank and
Bradley Fighting Vehicle, but more lethal and survivable than lighter Army units
such as the airborne forces. To equip the new units, known as Interim Brigade
Combat Teams ("IBCT"), in April 2000 the Army commenced a solicitation for
so-called Interim Armored Vehicles ("IAV"), emphasizing a thirty eight thousand
pounds weight limit, rapid deployability using the Air Force's smallest air
transports (C130 aircraft), and early

<PAGE>

fielding using off-the-shelf technology. United Defense participated in the
competitive bidding for the IAVs, proposing the use of its tracked MTVL
(stretched and upgraded M113) and M8 Armored Gun System vehicles (see Item 1.
Description of Business) at a total price of $1.9 billion. Certain competitors
proposed wheeled vehicles for the IAV program. For military combat vehicles,
there are substantial manufacturing, design, and engineering differences between
wheeled and tracked vehicles, and the Company historically has not produced
wheeled vehicles.

     On November 16, 2000, the Army announced its award of the IAV contract at a
price of $4.3 billion to a joint venture formed by General Motors of Canada and
General Dynamics Land Systems (GM/GD). As many as 2,100 vehicles could be
acquired under the IAV contract for up to six IBCT brigades over approximately a
six-year period. The IAVs provided by GM/GD would be upgraded or redesigned
versions of the Swiss light-duty LAV-III wheeled vehicle. On December 4, 2000,
United Defense filed a formal protest with the General Accounting Office ("GAO")
relating to the Army's IAV award, primarily on the grounds that (i) in a
procurement where early fielding was stated to be of paramount importance, the
LAV-III vehicles cannot be fielded, depending on specific vehicle type, until
one to three years or more after their UDLP counterparts; (ii) the Army favored
GM/GD during the competition by secretly applying new, unannounced evaluation
factors which biased the selection in favor of a wheeled vehicle outcome; and
(iii) in a best value procurement, the LAV-III selection cannot be justified
when the vehicle is inferior in performance, requires an extensive development
effort of uncertain outcome before it can ever be fielded, and will cost the
Army more than double the price of the United Defense vehicles.

     UDLP's protest is pending before the GAO, whose decision is expected on or
about March 14, 2001. By law, performance on the announced GM/GD contract is
suspended until the GAO renders its decision. In adjudicating a protested
procurement, the GAO can dismiss the protest, call for the competition to be
reopened, or recommend that the procuring agency's award be cancelled and the
contract be rewarded to the protester. Beyond the GAO proceeding, the
procurement may also be challenged in federal court. Although the Company
believes that its arguments to overturn the Army's IAV award are compelling,
management cannot predict the outcome of the GAO proceeding, or the likelihood
of further legal proceedings regarding the IAV program.

     Regardless of the ultimate outcome of the IAV procurement decision,
significant uncertainties will affect the future of the IAV program, including
whether (i) the Bush Administration chooses to support the program and (ii)
Congress chooses to fund the program in future years. To some degree, U.S.
Government funding for other significant UDLP programs, such as the Crusader
artillery system and upgrades to the Bradley fleet (see Item 1, Description of
Business, above), may be adversely impacted by funding for the IAV program.
Also, assuming that the IAV program were to proceed on some substantial scale,
the Company's profits and revenues would likely be affected by whether the IAVs
were procured from the Company, or instead from a competitor.

     Administration Defense Review. The Bush Administration has indicated that
it is


<PAGE>

conducting a comprehensive review of the priorities, missions, and programs of
the Department of Defense (DoD). The outcome of this review is uncertain, but
the Administration's findings may have significant implications for the
organization and funding of various elements and major weapons programs in each
of the armed services. Accordingly, such outcome may beneficially or adversely
affect programs in which the Company has a significant interest, including the
Crusader and DD21 destroyer (both described in Item 1. Description of Business),
as well as programs in which the Company may have an interest, such as the IAV
program (described in Item 7. Overview, Interim Armored Vehicles, above),
depending upon whether any such program was cancelled, scaled back, delayed,
endorsed, expanded, or accelerated. Such outcome(s) would likely be determined
both by the specific results of the Administration review and by the
Congressional reaction thereto. As the Administration has to date withheld
comment about the specific nature and content of its review, as well as its
potential outcome, management is unable to predict the eventual impact thereof
on the Company's products, operations, revenues, or profitability.

     Senior Subordinated Notes. The Company received authorization from its
bank-lending group in February 1999 to purchase up to $50 million of the Senior
Subordinated Notes. During December 2000 the Company acquired approximately $17
million of the notes. This authorization was granted due to the Company's
performance of making bank debt prepayments in excess of scheduled amortization
payments.

     The Company will continue to purchase the Senior Subordinated Notes in the
open market if market conditions are appropriate and if excess cash is available
to make a purchase. However, the Company may decide to continue to apply any
excess cash balances towards the prepayment of bank debt as it has to date.


Results of Operations

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999.

     Revenue. Our 2000 revenue of $1,183.9 million declined $29.6 million, or
2.4%, from revenue of $1,213.5 million for 1999. The decrease primarily resulted
from the winding down and closing of the Paladin production operation in June
1999, which accounted for $45.8 million in sales during the first six months of
1999, a decrease of $67.8 million in billings for the Crusader development
program and the completion of shipments for several programs in 1999. These
declines were partially offset by the additional sales of $58.5 million
generated by Barnes & Reinecke and Bofors Defence, both of which we acquired in
2000, increased shipments of $61.2 million of Bradley upgrades and by
engineering development sales for the Advanced Gun System.

     Gross Profit. Gross profit increased $18.4 million, or 8.3%, to $240.0
million for 2000. This gross profit increase was primarily due to the reduced
depreciation and amortization costs of $28.0 million related to assets revalued
in connection with our acquisition of United Defense, L.P. and higher award fees
for the Crusader program,

<PAGE>

partially offset by the lower sales volume described above and the effects of
LIFO accounting.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.8 million, or 3.5%, to $173.7 million for
2000. This increase was primarily the result of heavy spending for marketing
activity and proposals, principally for the Interim Armored Vehicle program, and
expenses associated with businesses acquired in 2000. These increases were
partially offset by lower depreciation and amortization of intangible assets
revalued in connection with our acquisition of United Defense, L.P.

     Research and Development. Research and development costs were $15.8 million
for 2000, a $3.0 million, or 23.3%, increase over 1999. During 2000, research
and development spending increased to support our effort to win an award related
to the Interim Armored Vehicle program. In addition, our net research and
development cost in 1999 was favorably affected by the reimbursement of research
and development costs incurred in prior periods in connection with the
development of the Advanced Gun System.

     Earnings from Foreign Affiliates. The loss recognized from foreign
affiliates was $1.3 million in 2000. The $2.9 million decrease from the prior
year was primarily due to a loss in 2000 related to our Turkish joint venture.

     Net Interest Expense. Net interest expense for 2000 was $25.1 million, an
$11.9 million decrease from 1999 as a result of lower debt levels.

     Net Income. As a result of the foregoing, we had net income of $18.8
million in 2000, including an extraordinary gain of $0.7 million from the early
retirement of debt, compared to net income of $2.9 million for 1999.



<PAGE>

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.

          Revenue. Revenue for 1999 was $1,213.5 million, a decline of $4.0
million, or 0.3%, from 1998. The lower revenue was largely due to the winding
down of the Paladin artillery upgrade program at the end of the second quarter
of 1999 resulting in a $69.5 million reduction and the completion of
self-propelled howitzer and armored personnel carrier shipments to foreign
customers. These declines were offset by higher revenue from the shipments of
Vertical Launch Systems, increased billings for the Crusader program and new
deliveries of armored combat earth movers, self propelled howitzers and rebuilt
assault amphibious vehicles.

          Gross Profit. Gross profit increased $103.4 million, or 87.4%, to
$221.6 million for 1999. Our gross profit margin improved to 18.3% for 1999 from
9.7% for 1998. This improvement was due to lower costs related to assets
revalued in connection with our acquisition of United Defense, L.P. In addition,
in 1998 we incurred a non-cash pension charge of $27.5 million related to
restructuring one of our business units, and we wrote off and charged cost of
sales for unusable capitalized software related to manufacturing systems and
other impaired manufacturing assets totaling $11.7 million.

          Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $167.9 million in 1999, a decrease of $5.0 million,
or 2.9%, from 1998. This decrease in expenses resulted from lower depreciation
and amortization of goodwill and other intangible assets compared to 1998.


          Earnings from Foreign Affiliates. Earnings from foreign affiliates
were $1.6 million in both 1998 and 1999.

          Net Interest Expense. Net interest expense declined 27.1% from 1998 to
$37.0 million for 1999 as a result of lower debt levels in 1999.

          Net Income. As a result of the foregoing, we had net income of $2.9
million for 1999 compared with a net loss of $122.6 million for 1998.

Liquidity, Capital Resources and Financial Condition

          The Company's liquidity requirements depend on a number of factors
relative to the timing of production and deliveries under its U.S. government
and direct foreign sales ("DFS") contracts. The Company generally receives
performance based payments or progress payments on U.S. government contracts
based either on meeting performance milestones or on a percentage of contract
expenditures, and it generally negotiates for the payment of advances from
customers on DFS contracts. Advances on DFS contracts vary depending on the
specific programs involved. These payments reduce the need for Company financed
working capital, and changes in working capital between periods are frequently
due to program status changes and the level of such payments for the specific
programs by period.

<PAGE>

          Cash provided by operating activities. Cash provided by operating
activities for 2000, 1999 and 1998 was $95.3 million, $189.6 million and $197.3
million, respectively. During 2000, cash provided by operating activities was
significantly lower than in recent years. The majority of cash was generated by
net income plus depreciation and amortization of $113.9 million, but it was
adversely affected by increases in working capital, primarily to fund an
increase in receivables. Cash provided by operating activities in 2000 was also
adversely affected by non-recurring costs (net of recoveries of allowable costs
under U.S. Government contracts) of $9.4 million incurred in connection with our
unsuccessful bid for the Interim Armored Vehicle program. In 1999 cash flow was
principally due to net income plus depreciation and amortization of $136.7
million, and significant collections of progress payments from the U.S.
Government and foreign advance payments. In 1998 we also generated a high volume
of cash resulting from net loss plus depreciation and amortization of $58.1
million, and sizeable reductions in receivables and inventories as the U.S.
Government payment office paid all billings received by a certain deadline, and
we aggressively reduced inventories consistent with shipping schedules.


          Current financial resources (working capital and short-term borrowing
arrangements) and anticipated funds from operations are expected to be adequate
to meet cash requirements in the year 2001.

          Cash (used in)provided by investing activities. Cash provided by
investing activities was $2.9 million in 2000 while cash used in investing
activities was $23.7 million in 1999 and $.6 million in 1998. The generation of
funds in 2000 was primarily due to cash acquired from the Bofors acquisition,
which was $45.6 million in excess of the purchase price.

          Financing activities. Cash used for financing activities included the
pay down of $79.1 million in debt for 2000, $157.1 million for 1999 and $152.8
million for 1998. In 1998, the Company raised $6.1 million from the sale of
additional shares of its common stock to certain officers, directors and other
management members of the Company and to individuals affiliated with Iron Horse.



<PAGE>

Item 7A.     MARKET RISK

          All of our financial instruments that are sensitive to market risk are
entered into for purposes other than trading.

   Forward Currency Exchange Risk

          We conduct some of our operations outside the U.S. in functional
currencies other than the U.S. dollar. To mitigate the risk associated with
fluctuating currencies on short term foreign currency-denominated transactions,
Bofors Defence enters into foreign currency forward exchange contracts. The
Company does not enter into foreign currency forward exchange contracts for
trading purposes. The following table provides information concerning the U.S.
dollar functional currency of Bofors' forward exchange contracts at December 31,
2000. The table presents the U.S. dollar equivalent notional amounts and
weighted average contractual exchange rates by expected maturity dates. These
notional amounts generally are used to calculate the contractual payments to be
exchanged under the contract.

                                                Expected Maturity
                                                      Date
                                                                          Fair
                                                                          ----
        (US $ equivalent in thousands):          2001    2002    Total    Value
        -------------------------------          ----    ----    -----    -----

Receive Swedish krona/pay U.S. dollars
     Contract amount                            $  847  $ 8,670  $9,517  $10,603
     Average contractual exchange rate            8.65     8.24    8.28

Receive British pounds/pay Swedish krona
     Contract amount                            $3,664  $    --  $3,664  $ 3,561
     Average contractual exchange rate           15.15       --   15.15

Receive euro/pay Swedish krona
     Contract amount                            $  115  $ 1,099  $1,214  $ 1,182
     Average contractual exchange rate            9.83     8.40    8.54

<PAGE>

        ITEM 8. Consolidated Financial Statements and Supplementary Data

        The following consolidated financial statements of Iron Horse
Investors, L.L.C. and United Defense Industries, Inc. are provided in response
to the requirements of Item 8:

IRON HORSE INVESTORS, L.L.C. AND UDLP

Report of Independent Auditors ..........................................  F1

Consolidated Balance Sheets as of December 31, 1999 and 2000 ............  F2
Consolidated Statements of Operations for the years ended
         December 31, 1998, 1999 and 2000 ...............................  F3
Consolidated Statements of Members' Capital for the years
         ended December 31, 1998, 1999 and 2000 .........................  F4
Consolidated Statements of Cash Flows for the years ended
         December 31, 1998, 1999 and 2000 ...............................  F5

Notes to Consolidated Financial Statements .............................. F6-19

UNITED DEFENSE INDUSTRIES, INC.

Report of Independent Auditors ..........................................  F20

Consolidated Balance Sheets as of December 31, 1999 and 2000 ............  F21
Consolidated Statements of Operations for the years ended
          December 31, 1998, 1999 and 2000 ..............................  F22
Consolidated Statements of Stockholders' Equity for the years ended
         December 31, 1998, 1999 and 2000 ...............................  F23
Consolidated Statements of Cash Flows for the years ended
         December 31, 1998, 1999 and 2000 ...............................  F24

Notes to Consolidated Financial Statements .............................. F25-42


<PAGE>
                Report of Ernst & Young LLP, Independent Auditors


Board of Directors
Iron Horse Investors, L.L.C.

We have audited the accompanying consolidated balance sheets of Iron Horse
Investors, L.L.C. and subsidiaries as of December 31, 1999 and 2000 and the
related consolidated statements of operations, members' capital, and cash flows
for each of the three years in the period ended December 31, 2000. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Iron Horse
Investors, L.L.C. and subsidiaries at December 31, 1999 and 2000 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.



                                                 /s/ Ernst & Young LLP


February 1, 2001
McLean, VA

                                      F-1

<PAGE>
                          Iron Horse Investors, L.L.C.
                           Consolidated Balance Sheets

                                 (In thousands)

<TABLE>
<CAPTION>

                                                                December 31,   December 31,
                                                                    1999           2000
                                                                ------------   ------------
<S>                                                              <C>           <C>
Assets
Current assets:
     Cash and cash equivalents ............................     $     94,325   $    113,357
     Trade receivables ....................................           57,198        109,705
     Long-term contract inventories .......................          254,750        259,238
     Other current assets .................................            4,056         13,083
                                                                ------------   ------------
Total current assets ......................................          410,329        495,383
Property, plant and equipment, net ........................           84,693         80,775
Intangible assets, net ....................................          220,274        162,340
Prepaid pension and postretirement benefit cost ...........          119,883        123,100
Restricted cash ...........................................               --         23,528
Other assets ..............................................           19,302         11,930
                                                                ------------   ------------
Total assets ..............................................     $    854,481   $    897,056
                                                                ------------   ------------

Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
     Current portion of long-term debt ....................     $     23,086   $     23,086
     Accounts payable, trade and other ....................           64,639         86,117
     Advanced payments ....................................          303,065        342,394
     Accrued and other liabilities ........................           91,340        104,168
                                                                ------------   ------------
     Total current liabilities ............................          482,130        555,765

Long-term liabilities:
     Long-term debt, net of current portion ...............          326,757        246,491
     Accrued pension and postretirement benefit cost ......            5,075         28,515
     Other liabilities ....................................           16,013         23,148
                                                                ------------   ------------
Total liabilities .........................................          829,975        853,919

Minority Interest .........................................            3,896          4,604
Commitments and contingencies (Notes 8 & 9) ...............
Members' Capital ..........................................           20,610         38,533
                                                                ------------   ------------
Total liabilities and members' capital ....................     $    854,481   $    897,056
                                                                ============   ============

</TABLE>

See accompanying notes. Amounts are as restated (Note 2).

                                      F-2

<PAGE>

                                Iron Horse L.L.C.
                      Consolidated Statements of Operations

                                 (In thousands)

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                   -----------------------------------------
                                                      1998            1999           2000
                                                   -----------    -----------    -----------
<S>                                                <C>            <C>            <C>
Revenue:
      Sales .....................................  $ 1,217,555    $ 1,213,526    $ 1,183,886
Costs and expenses:
      Cost of sales .............................    1,099,291        991,907        943,892
      Selling, general and administrative
         expenses ...............................      172,888        167,877        173,694
      Research and development ..................       13,021         12,782         15,760
                                                   -----------    -----------    -----------
               Total expenses ...................    1,285,200      1,172,566      1,133,346

(Loss) income from operations ...................      (67,645)        40,960         50,540
Other income (expense):
      Earnings (loss) related to investments
        in foreign affiliates ...................        1,647          1,639         (1,262)
      Interest income ...........................        1,396          1,820          4,152
      Interest expense ..........................      (52,155)       (38,835)       (29,265)
                                                   -----------    -----------    -----------
Total other expense .............................      (49,112)       (35,376)       (26,375)
(Loss) income before income taxes and
      minority interest .........................     (116,757)         5,584         24,165
Provision for income taxes ......................        5,841          2,646          6,000
                                                   -----------    -----------    -----------
(Loss) income before minority interest ..........     (122,598)         2,938         18,165
Minority Interest ...............................        3,650           (121)          (766)
                                                   -----------    -----------    -----------
(Loss)income before extraordinary item ..........     (118,948)         2,817         17,399
Extraordinary item--net gain (loss) from
  extinguishment of debt ........................           --             --            680
                                                   -----------    -----------    -----------
Net (loss) income ...............................  $  (118,948)   $     2,817    $    18,079
                                                   ===========    ===========    ===========
</TABLE>

See accompanying notes. Amounts are as restated (Note 2).

                                      F-3

<PAGE>

                                Iron Horse L.L.C.
                   Consolidated Statements of Members' Capital

                                 (In thousands)


        Balance, December 31, 1997 ...................... $ 136,741
        Net loss for the year ended December 31, 1998 ...  (118,948)
                                                          ---------
        Balance, December 31, 1998 ......................    17,793
        Net income for the year ended December 31, 1999 .     2,817
                                                          ---------
        Balance, December 31, 1999 ......................    20,610
        Repurchase of common stock (excess over
           paid in capital) .............................      (156)
        Net income for the year ended December 31, 2000 .    18,079
                                                          ---------
        Balance, December 31, 2000 ...................... $  38,533
                                                          =========



See accompanying notes. Amounts are as restated (Note 2).



                                      F-4

<PAGE>

                                Iron Horse L.L.C.
                      Consolidated Statements of Cash Flows

                                 (In thousands)


<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                               ----------------------------
                                                              1998         1999         2000
                                                           ---------    ---------    ---------
<S>                                                        <C>          <C>          <C>
Operating activities
Net (loss) income .......................................  $(118,948)   $   2,817    $  18,079
Adjustments to reconcile net (loss) income to cash
 provided by operating activities:
    Depreciation ........................................     83,153       55,528       23,882
    Amortization ........................................     91,895       72,408       68,422
    Amortization of financing costs .....................      5,660        5,791        2,759
    Net (gain) loss from early extinguishment of debt ...         --           --         (680)
    Minority interest ...................................     (3,650)         121          766
    Other ...............................................      5,291        1,123           --
Changes in assets and liabilities:
    Trade receivables ...................................     30,452        7,197      (35,954)
    Inventories .........................................     76,030         (407)      11,608
    Other assets ........................................      1,478        1,195        4,881
    Prepaid pension and postretirement benefit cost .....     15,519        4,029       (3,217)
    Accounts payable, trade and other ...................     (5,144)     (23,858)       9,525
    Advanced payments ...................................     (3,006)      44,670       (9,522)
    Accrued and other liabilities .......................     14,360       28,554        3,125
    Accrued pension and postretirement benefit cost .....      4,212       (9,535)       1,672
                                                           ---------    ---------    ---------
Cash provided by operating activities ...................    197,302      189,633       95,346
                                                           ---------    ---------    ---------

Investing activities
    Capital spending ....................................    (24,020)     (25,246)     (19,721)
    Disposal of property, plant and equipment ...........      7,298        1,532          560
    Adjustment to purchase price of business ............     16,074           --           --
    Purchase of Barnes & Reinecke, net of $1.2
     million cash acquired ..............................         --           --       (1,634)
    Purchase of Bofors Weapon Systems, net of
     $45.6 million cash acquired ........................         --           --       23,663
                                                           ---------    ---------    ---------
Cash (used in) provided by investing activities .........       (648)     (23,714)       2,868
                                                           ---------    ---------    ---------

Financing activities
    Payments on long-term debt ..........................   (152,814)    (157,143)     (79,071)
    Proceeds from sale of common stock ..................      6,057           29           95
    Repurchase of common stock ..........................         --           --         (206)
                                                           ---------    ---------    ---------
Cash (used in) provided by financing activities .........   (146,757)    (157,114)     (79,182)
                                                           ---------    ---------    ---------
Effect of exchange rate changes on cash .................         --           --           --
                                                           ---------    ---------    ---------
Increase (decrease) in cash and cash equivalents ........     49,897        8,805       19,032
Cash and cash equivalents, beginning of period ..........     35,623       85,520       94,325
                                                           ---------    ---------    ---------
Cash and cash equivalents, end of period ................  $  85,520    $  94,325    $ 113,357
                                                           =========    =========    =========
</TABLE>


See accompanying notes. Amounts are as restated (Note 2).

                                      F-5

<PAGE>

                          Iron Horse Investors, L.L.C.

                   Notes to Consolidated Financial Statements

1.   Basis of Presentation and Recapitalization

     Iron Horse Investors, L.L.C. together with its subsidiaries, (the
"Company") was formed for the primary purpose of facilitating the acquisition of
United Defense, L.P. ("UDLP") via its investment in United Defense Industries,
Inc. ("UDI").

     In October 1997, the Company was funded from an investment group led by the
Carlyle Group ("Carlyle"), which was invested in UDI. On October 6, 1997, UDI
acquired 100% of the partnership interests of UDLP from FMC Corporation ("FMC")
and Harsco Corporation ("Harsco") (the "Sellers").

     The Company's business through UDI operated in a single reportable segment
involving the design, development and production of combat vehicles, artillery,
naval guns, missile launches and precision munitions used by the U.S. Department
of Defense and allied militaries around the world. The Company believes its
operating results are driven principally by the business activities related to
its major military programs. Currently the Company is the sole-source, prime
contractor to the U.S. Department of Defense for many of these programs.

     The financial statements include the accounts of the Company and its
subsidiaries. Intercompany accounts and transactions are eliminated in
consolidation.

2.   Summary of Significant Accounting Policies

Reclassifications and Restatement

     The Company's previously reported financial statements for 1998 through
2000 have been restated to account for the Company's investment in a Turkish
joint venture under the equity method.

     The impact on operating results was as follows:.

                                                 Year Ended December 31,
                                          -------------------------------------
                                            1998           1999          2000
                                          ---------     ---------     ---------
                                                      (In thousands)
     (Decrease) increase

     Earnings related to investments
       in foreign affiliates ...........    $(4,561)      $ 1,106       $(4,181)

     Net (loss) income .................     (2,486)        1,340        (2,686)

     This change also resulted in certain reclassifications on the balance sheet
and income statement. The Company had previously separately reported intangible
assets related to the investment and an accrual related to a potential offset
obligation (see Note 9), which are now included in the investment account within
other assets on the balance sheet. On the income statement, certain amortization
costs included in selling, general and administrative expenses related to the
investment were reclassified to earnings related to investments in foreign
affiliates.

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 amounts reported in the financial statements and
accompanying notes, in particular, estimates of contract cost and revenues used
in the earnings recognition process. Actual results could differ from those
estimates.

Cash and Cash Equivalents

     Cash and cash equivalents consist of investments with initial maturities of
three months or less.

                                      F-6

<PAGE>

                          Iron Horse Investors, L.L.C.

              Notes to Consolidated Financial Statements (Continued)

Property, Plant and Equipment

     Property, plant and equipment is recorded at cost. Depreciation is provided
principally on the sum-of-the-years digits and straight-line methods over
estimated useful lives of the assets (land improvements--twenty years;
buildings--twenty to thirty-five years; and machinery and equipment--two to
twelve years).

     Maintenance and repairs are expensed as incurred. Expenditures that extend
the useful life of property, plant and equipment or increase its productivity
are capitalized and depreciated.

Long-lived Assets, Including Intangible Assets and Goodwill

     The Company evaluates on a quarterly basis its long-lived assets to be held
and used, including certain identifiable intangible assets and goodwill, to
determine whether any events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company bases its
evaluation on such impairment indicators as the nature of the assets, the future
economic benefit of the assets, any historical or future profitability
measurements, as well as other external market conditions or factors that may be
present. If such impairment indicators are present or other factors exist that
indicate that the carrying amount of the asset may not be recoverable, the
Company would use an estimate of the undiscounted value of expected future
operating cash flows to determine whether the asset is recoverable and measure
the amount of any impairment as the difference between the carrying amount of
the asset and its estimated fair value.

Investments in Affiliated Companies

     The Company's investment in 51% owned foreign joint ventures in Turkey and
Saudi Arabia are accounted for by using the equity method because the Company
does not control the joint ventures although it has the ability to exercise
significant influence over their operating and financial policies. Equity in
earnings from these investments was $1.6 million, $1.6 million and $(1.3)
million for the years ended December 31, 1998, 1999 and 2000. The following
table summarizes financial information for these joint ventures (in thousands):

                                                        December 31
                                                --------------------------
                                                   1999            2000
                                                ----------      ----------
                Current assets .............    $   81,910      $  161,902
                Noncurrent assets ..........        41,195          32,806
                Current liabilities ........       120,917         199,577
                Long-term liabilities ......         2,031             975


                                                 Year ended December 31
                                             ------------------------------
                                               1998       1999       2000
                                             --------   --------   --------
                    Sales .................  $131,531   $127,115   $ 76,735
                    Cost of sales .........    92,364     89,447     61,053
                    Net income ............    17,627     16,490     (2,486)

     The difference between the carrying amounts of the joint ventures recorded
by the Company and its proportionate share of the underlying equity in the net
assets of the joint ventures was $7.2 million and $5.6 million as of December
31, 1999 and 2000, respectively. The difference relates to the step up in the
carrying amount of the investments to their fair value in connection with the
application of purchase

                                      F-7

<PAGE>

                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

accounting for the acquisition of UDLP in 1997, which is being amortized over up
to five years based on the earnings in the joint ventures recognized by the
Company, consistent with the valuation method used to determine the purchase
price adjustment.

Restricted Cash

         Restricted cash consists mainly of cash held in escrow as required
under the Bofors purchase agreement (See note 3). The restricted cash relates to
certain letters of credit, and the restriction will expire upon release of the
former owners of Bofors as guarantors under the letters of credit.

Advanced Payments

         Advanced payments by customers for deposits on orders not yet billed
and progress payments on contracts-in-progress are recorded as current
liabilities.

Revenue and Profit Recognition for Contracts-in-Progress

         The Company recognizes sales on most production contracts as deliveries
are made or accepted. Gross margin on sales is based on the estimated margin to
be realized over the life of the related contract. Sales under cost
reimbursement contracts for research, engineering, prototypes, repair and
maintenance and certain other contracts are recorded as costs are incurred and
include estimated fees in the proportion that costs incurred to date bear to
total estimated costs. Changes in estimates for sales and profits are recognized
in the period in which they are determinable using the cumulative catch-up
method. Claims are considered in the estimated contract performance at such time
as realization is probable. Any anticipated losses on contracts (i.e., cost of
sales exceeds sales) are charged to operations as soon as they are determinable.

         At December 31, 1999 and 2000, included in trade receivables are $8.1
million and $7.3 million related to contractual revenue that had not been billed
to customers. These amounts are generally billable within the following year.

Stock-Based Compensation

         Provided the option price is not less than fair value of the common
stock as estimated by management at the date an option is granted, the Company
records no compensation expense in its consolidated statements of operations.
See Note 10 for the pro forma effect on operating results had the Company
recorded compensation expense for the fair value of stock options. No
compensation expense has been recognized related to stock option grants.

Income Taxes

         As a limited liability company, income which has not been taxed
previously is passed through to its members. The Company's corporate
subsidiaries are responsible for income taxes on earnings at that level, and
accordingly the Company's subsidiaries provide for income taxes at the corporate
level determined under the liability method. Under this method, deferred tax
assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws expected to be effective when these differences
reverse.

Changes in Accounting Principle

         Effective January 1, 2001, the Company adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended. The
statement requires that an entity recognize all derivatives as either assets or
liabilities.

         The Company's subsidiary Bofors had forward exchange contracts with a
notional contract value of $14.4 million at December 31, 2000. These contracts
which were designated as cash flow hedges were entered into to hedge firm
commitments related to purchases or sales denominated in foreign currencies. The
fair value of the contracts was a liability of $0.95 million at December 31,
2000. The transition adjustment to implement this new standard on January 1,
2001 will be presented as a cumulative effect of change in accounting principle
within members' capital in 2001.

3.   Business Purchase

                                      F-8

<PAGE>

                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

         On October 6, 1997, the Company acquired 100% of the partnership
interests of UDLP and certain other related business assets of FMC. The purchase
price including expenses was $864 million after an adjustment of $16 million
agreed to during 1998. The Company financed the acquisition through a cash
equity investment and debt. The excess purchase price over the book value of the
net assets acquired in the amount of $733 million was allocated to inventory;
property, plant and equipment; other tangible assets; and intangible assets
based on management's estimate of their fair values. The excess purchase price
over the fair value of the net assets acquired was allocated to goodwill.

         On March 6, 2000, the Company acquired all of the outstanding stock of
Barnes & Reinecke, Inc. ("BRI"), a subsidiary of Allied Research Corporation
("ARC"), headquartered in Arlington Heights, Illinois. BRI specializes in
providing systems technical support and performance upgrades of defense
equipment for U.S. and foreign governments. BRI retained its current management
structure and became a wholly owned subsidiary of the Company. As consideration
for the purchase, the Company paid BRI's former owner, ARC, $3.7 million in cash
and notes. The transaction was accounted for as a purchase. Accordingly, the
financial statements reflect the results of operations of BRI since the date of
acquisition.

         On September 6, 2000, the Company acquired all of the outstanding stock
of Bofors Defence ("Bofors") through a newly-created wholly-owned Swedish
subsidiary of the Company, Bofors Defense Holding AB. The acquisition was
structured so that Bofors will be an indirectly wholly owned Swedish subsidiary
of the Company. As consideration for the purchase, the Company paid Bofors'
former owner, Celsius AB, 187.3 million Swedish Krona (approximately US $19.4
million), which was determined based on arm's length negotiation. The
acquisition was accounted for as a purchase. Accordingly, the financial
statements reflect the results of operations of Bofors since the date of
acquisition.

         Bofors produces artillery systems, air defense and naval guns, combat
vehicle turrets and smart munitions. Although the Swedish government is the
primary customer, Bofors is dependent on exports for approximately half of its
total sales.

         The unaudited pro forma results below assume the Bofors acquisition
occurred at the beginning of each year presented (in thousands, except per share
data).

                                                        1999             2000
                                                     ----------       ----------
Sales .............................................  $1,470,016       $1,270,904
Net income before extraordinary item ..............      10,073           18,618
Net income ........................................      10,073           19,298

         The unaudited pro forma combined results of operations are not
necessarily indicative of the actual results that would have occurred had the
acquisition been consummated at the beginning of the year indicated or of future
operations under the ownership and management of the Company.

4.   Inventories

         The majority of the Company's inventories are related to contracts in
process and are recorded at cost determined on a LIFO basis. Inventory costs
include manufacturing overhead.

         The current replacement cost of LIFO inventories exceeded their
recorded values by approximately $5.2 million at December 31, 1998 and 1999, and
$12.6 million at December 31, 2000.

                                      F-9

<PAGE>

                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

5.   Property, Plant and Equipment

         Property, plant and equipment consist of the following (in thousands):


                                                            December 31
                                                     --------------------------
                                                       1999              2000
                                                     ---------        ---------

         Buildings ................................  $  39,978        $  42,413
         Machinery and equipment ..................    166,257          175,501
         Land and improvements ....................      8,126            8,338
         Construction in progress .................      7,754            7,848
                                                     ---------        ---------
                                                       222,115          234,100
         Less: accumulated depreciation ...........   (137,422)        (153,325)
                                                     ---------        ---------
         Property, plant and equipment, net .......  $  84,693        $  80,775
                                                     =========        =========


6.   Intangible Assets

         Intangible assets consist of the following (in thousands):

                                                            December 31
                                                     -------------------------
                                                       1999           2000
                                                     ---------      ---------

         Software and other intangibles ...........  $  39,752      $  42,065
         Firm business and ongoing programs .......    225,103        225,103
         Goodwill .................................    115,662        123,796
                                                     ---------      ---------
                                                       380,517        390,964
         Less: accumulated amortization ...........   (160,243)      (228,624)
                                                     ---------      ---------
         Net intangible assets ....................  $ 220,274      $ 162,340
                                                     =========      =========

         The Company's software and other intangibles are being amortized over
their estimated useful lives on a straight-line basis over three to five years
or using other methods based on revenues of related contracts or programs. The
excess of purchase cost over the fair value of the net assets acquired
(goodwill) that resulted from the application of purchase accounting for the
acquisition of UDLP is being amortized over thirty years.

7.   Pensions and Other Postretirement Benefits

         The majority of the Company's domestic employees are covered by
retirement plans. Plans covering salaried employees provide pension benefits
based on years of service and compensation. Plans covering hourly employees
generally provide benefits of stated amounts for each year of service. The
Company's funding policy is to make contributions based on the projected unit
credit method and to limit contributions to amounts that are currently
deductible for tax purposes.

         With the exception of Bofors, most of the Company's employees are also
covered by postretirement health care and life insurance benefit programs.
Employees generally become eligible to receive benefits under these plans after
they retire when they meet minimum retirement age and service requirements. The
cost of providing most of these benefits is shared with retirees. The Company
has reserved the right to change or eliminate these benefit plans.

         Bofors has a statutory pension obligation of $23.0 million which is
included in "accrued pension and postretirement benefit cost" on the
consolidated balance sheet at December 31, 2000. Bofors pension obligation is
administered by an agent of the Swedish government using methods and assumptions
different from those used to determine domestic amounts. Accordingly, the
following tables do not include this liability.

                                      F-10

<PAGE>

                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

         The change in benefit obligation and plan assets of the plans and
prepaid or accrued pension and postretirement costs recognized in the balance
sheets at December 31, 1999 and 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                      Pension Benefits       Postretirement Benefits
                                                                   ----------------------    -----------------------
                                                                     1999         2000         1999           2000
                                                                   ---------    ---------    ---------     ---------
<S>                                                                <C>          <C>          <C>           <C>
Change in benefit obligation
Benefit obligation at beginning of year ....................       $ 442,651    $ 422,314    $  54,795     $  49,187
Service cost ...............................................          13,747       14,256        1,489         1,260
Interest cost ..............................................          27,982       32,847        3,420         3,565
Net benefits paid, including settlements ...................         (25,174)     (22,895)      (5,594)       (4,486)
Actuarial (gain) loss ......................................         (38,130)      13,309       (4,923)         (296)
Plan amendments ............................................           1,238       11,803           --            --
                                                                   ---------    ---------    ---------     ---------
Benefit obligation at end of year ..........................         422,314      471,634       49,187        49,230

Change in plan assets
Fair value of plan assets at beginning of year .............         548,003      537,769       60,412        51,828
Actual return on plan assets ...............................          13,874       78,974       (6,558)       11,581
Employer contributions .....................................           1,066          958        3,568         2,893
Net benefits paid, including settlements ...................         (25,174)     (22,895)      (5,594)       (4,486)
                                                                   ---------    ---------    ---------     ---------
Fair value of plan assets at end of year ...................         537,769      594,806       51,828        61,816
                                                                   ---------    ---------    ---------     ---------

Funded status ..............................................         115,455      123,945        2,641        12,586
Unrecognized actuarial (gain) loss .........................          (6,012)     (25,029)      (1,514)       (8,418)
Unrecognized prior service cost ............................           4,238       14,528           --            --
                                                                   ---------    ---------    ---------     ---------
Net amount recognized ......................................       $ 113,681    $ 113,444    $   1,127     $   4,168
                                                                   =========    =========    =========     =========

Amounts recognized in the consolidated balance sheet
   consist of:
      Prepaid pension and postretirement benefit cost ......       $ 118,756    $ 118,932    $   1,127     $   4,168
      Accrued pension and postretirement benefit cost ......          (5,075)      (5,488)          --            --
                                                                   ---------    ---------    ---------     ---------
Net amount recognized ......................................       $ 113,681    $ 113,444    $   1,127     $   4,168
                                                                   =========    =========    =========     =========
</TABLE>

                                      F-11

<PAGE>

                          Iron Horse Investors, L.L.C.

              Notes to Consolidated Financial Statements (Continued)

         The following table summarizes the assumptions used in the
determination of net pension and postretirement benefit costs and benefit
obligations for the years ended December 31, 1998, 1999 and 2000:


<TABLE>
<CAPTION>
                                                       Year ended December 31,
                                                     ---------------------------
                                                      1998      1999       2000
                                                     ------    ------     ------
<S>                                                 <C>        <C>       <C>
Weighted-average assumptions

Discount rate ...................................    6.50%     7.50%      7.50%
Expected return on plan assets ..................    9.00%     9.00%      9.00%
Rate of compensation increase ...................    3.50%     5.00%      5.00%

</TABLE>

     The following tables show the components of the net periodic benefit cost
(in thousands):
<TABLE>
<CAPTION>
                                                            Year ended December 31,
                                                       --------------------------------
                                                         1998        1999        2000
                                                       --------    --------    --------
<S>                                                    <C>        <C>       <C>
Pension Benefits

Service cost ....................................       $ 11,751    $ 13,747    $ 14,256
Interest cost ...................................         27,017      27,982      32,847
Expected return on plan assets ..................        (43,080)    (45,213)    (47,904)
Net amortization and recognized losses ..........            703       1,324       1,993
Special termination benefits and curtailments ...         27,500         650          --
                                                        --------    --------    --------
Net periodic benefit cost (income) ..............       $ 23,891    $ (1,510)   $  1,192
                                                        ========    ========    ========

</TABLE>

<TABLE>
<CAPTION>
                                                            Year ended December 31,
                                                       --------------------------------
                                                         1998        1999        2000
                                                       --------    --------    --------
<S>                                                    <C>         <C>        <C>
Postretirement benefits

Service cost ....................................      $  1,382    $  1,489    $  1,260
Interest cost ...................................         3,515       3,420       3,565
Expected return on plan assets ..................        (4,422)     (4,797)     (4,938)
Net amortization and recognized losses ..........            --          --         (35)
                                                       --------    --------    --------
Net periodic benefit cost(income) ...............      $    475    $    112    $   (148)
                                                       ========    ========    ========

</TABLE>


         Pension special termination benefits and curtailments cost relates to
various early retirement incentive and involuntary workforce reduction programs
related to the Company's downsizing and consolidation of operations.

         The projected benefit obligation, accumulated benefit obligation, and
fair value of plan assets for the pension plan with accumulated benefit
obligations in excess of plan assets were $6.7 million, $3.2 million and zero,
respectively, at December 31, 1999 and $12.6 million, $6.8 million and zero,
respectively, at December 31, 2000.

         For measurement purposes, a 4% annual rate of increase in the per
capita cost of covered health care benefits is assumed for 2001 and future
years. Assumed health care cost trend rates have an effect on the amounts
reported for the postretirement health care plan. A one-percentage-point change
in assumed health care cost trend rates would have the following effects (in
thousands):


                                      F-12

<PAGE>

                          Iron Horse Investors, L.L.C.

              Notes to Consolidated Financial Statements (Continued)

<TABLE>
<CAPTION>
                                                           1% Increase   1% Decrease
                                                           -----------   -----------
<S>                                                        <C>           <C>
Effect on total of service and interest cost components ..    $   159       $  (132)
Effect on the postretirement benefit obligation ..........    $ 1,296       $(1,097)
</TABLE>

8.   Long-term Debt

         Borrowings under long-term debt arrangements are as follows (in
thousands):

                                                              December 31
                                                        ------------------------
                                                          1999            2000
                                                        --------        --------
          Senior secured credit facilities .........    $149,843        $ 86,757
          Senior subordinated notes ................     200,000         182,820
                                                        --------        --------
                                                         349,843         269,577
          Less: current portion ....................      23,086          23,086
                                                        --------        --------
                                                        $326,757        $246,491
                                                        ========        ========

$725 Million Senior Secured Credit Facility

         In October 1997, the Company entered into a senior credit facility that
included $495 million of term loan facilities and a $230 million revolving
credit facility. Outstanding borrowings on the term loan were $149.8 million and
$86.8 million at December 31, 1999 and 2000, respectively.

         The term loan facilities bear interest at variable rates with a
weighted average rate of 8.82% and 7.91% at December 31, 1999 and 2000,
respectively. These loans are due through 2006 and provide for quarterly
principal payments.

         The revolving credit facility provides for loans and letters of credit
and matures in 2003. The Company has outstanding letters of credit under the
facility of $142 million at December 31, 2000. There was $88 million available
under the revolving credit facility at December 31, 2000. The Company is
obligated to pay a fee of 0.25% on the unused revolving credit facility.

         Amounts outstanding under the senior credit facility are secured by a
lien on all the assets of the Company and its domestic subsidiaries.

         Mandatory prepayments and reductions of outstanding principal amounts
are required upon the occurrence of certain events. The senior credit facility
contains customary covenants restricting the incurrence of debt, encumbrances on
and sales of assets, limitations on mergers and certain acquisitions,
limitations on changes in control,



                                      F-13

<PAGE>

                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

provision for the maintenance of certain financial ratios, and various other
financial covenants and restrictions.

$200 Million Senior Subordinated Notes

     In October 1997, the Company issued $200 million of senior subordinated
notes. The senior subordinated notes are unsecured, bear interest at 8.75%
payable semiannually, and mature in 2007. The payment of principal and interest
is subordinated in right of payment to all senior debt.

     The senior subordinated notes are not redeemable other than in connection
with a public equity offering or a change in control prior to November 2002, at
which time the notes may be redeemed at a premium, initially at 104.375% of the
principal amount. The senior subordinated notes have customary covenants for
subordinated debt facilities including the right to require repurchase upon a
change in control, restrictions on payment of dividends, and restrictions on the
acquisition of equity interests by the Company.

     The Company received authorization from its bank-lending group in February
1999 to purchase up to $50 million of the senior subordinated notes. During 2000
the Company purchased approximately $17 million of its senior subordinated notes
in the open market.

Annual Maturities

Annual maturities of long-term debt are as follows (in thousands):

                Year ended December 31
                ----------------------
                         2001 .................  $ 23,086
                         2002 .................    23,086
                         2003 .................    23,085
                         2004 .................         -
                         2005 .................     8,903
                      Thereafter ..............   191,417
                                                 --------
                         Total ................  $269,577
                                                 ========

     Cash paid for interest was $45.4 million, $36.2 million and $26.5 million
for the years ended December 31, 1998, 1999 and 2000.

9. Commitments and Contingencies

Operating Leases

     The Company leases office space, plants and facilities, and various types
of manufacturing, data processing and transportation equipment. Rent expense for
the years ended December 31, 1998, 1999, and 2000 was $13.5 million, $12.4
million and $14.2 million, respectively. Minimum future rentals under
noncancellable leases are estimated to be $12.8 million in 2001, $13.0 million
in 2002, $11.2 million in 2003, $10.6 million in 2004, $9.9 million in 2005 and
$9.0 million thereafter.

Legal Proceedings

     Alliant Techsystems, Inc. ("Alliant"), a subcontractor to the Company in
connection with the M109A6 Paladin howitzer prime contract, filed a lawsuit
against the Company and its prior owners in Minnesota state court. The lawsuit
arose out of a U.S. Army-directed termination for convenience in 1996 of certain
subcontract work under the program which, until the time of termination, had
been performed by Alliant and was thereafter replaced by a subcontract which the
Company awarded to another contractor,

                                      F-14

<PAGE>

                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

     Sechan Electronics. The breach of contract litigation by Alliant against
the Company was concluded by pretrial dismissal, without any judgment, damage
award, or other adverse finding having been made against the Company. No
settlement payment was made in connection with such dismissal.

     The Company was a defendant in a qui tam case filed jointly under the U.S.
Civil False Claims Act (the "FCA") by one present and one former employee of
ours in Fridley, Minnesota. The case, U.S. ex rel. Seman and Shukla v. United
Defense, FMC Corp., and Harsco Corp., was filed against the Company and its
prior owners on July 23, 1997 in the U.S. District Court for the District of
Minnesota and primarily alleged that the Company improperly obtained payment
under various of our government contracts by supplying components which did not
comply with applicable technical specifications. The relators' complaint did not
quantify the alleged damages, but sought the full range of treble damages, civil
penalties, and attorney fees available under the FCA.

     A complete settlement of such action was negotiated by the parties, and
consented to by the U.S. Government, under which the Company is to pay a total
of $6 million to settle the case, divided into installments payable over a
three-year period. The amount of the settlement had been fully accrued as of
December 31, 2000 in accrued and other liabilities. No finding of wrongdoing was
made against the Company, and no other administrative or legal action is to be
taken against the Company in respect of matters alleged in the case. Completion
of the settlement is subject to U.S. District Court review, but management
expects the settlement to be concluded on such terms during the first part of
2001.

     The Company is also subject to other claims and lawsuits arising in the
ordinary course of business. Management believes that the outcome of any such
proceedings to which the Company is party will not have a material adverse
effect on the Company.

Environmental Matters

     The Company spends certain amounts annually to maintain compliance with
environmental laws and to remediate contamination. Operating and maintenance
costs associated with environmental compliance and prevention of contamination
at the Company's facilities are a normal, recurring part of operations, are not
significant relative to total operating costs or cash flows, and are generally
allowable as contract costs under the Company's contracts with the U.S.
government (Allowable Costs).

     As with compliance costs, a significant portion of the Company's
expenditures for remediation at its facilities consists of Allowable Costs. As
of December 31, 2000 the Company has accrued $14 million to cover any
remediation and compliance costs that may not be Allowable Costs under U.S.
government contracts. The amount accrued is based on estimated liabilities for
each site in which the Company is able to make reasonable estimates. The Company
does not believe there are significant uncertainties affecting the estimated
liabilities or amounts that will be paid in the near term. The most significant
of the estimated liabilities is based on the Company's experience related to
ongoing remediation efforts. In addition, pursuant to the terms of the
acquisition of UDLP, the Sellers are required to reimburse the Company for 75%
of certain remediation costs relating to operations prior to the acquisition
that are Non-Allowable Costs. The Company has recorded a receivable for $1.8
million expected to be reimbursed by one of the Sellers under the terms of the
acquisition agreement which it expects to realize over the next 7 years.

Turkey Joint Venture Offset Obligation

     The Company's joint venture in Turkey is required by agreement with its
customer to achieve a significant level of export sales by October 2002 (this
commitment is commonly referred to as an "offset" obligation) or pay a penalty
of 9% of the shortfall in required export sales which penalty could be as high
as $40 million. There can be no assurances that the joint venture will be able
to completely fulfill its offset obligation or renegotiate an acceptable
alternative, in which case the Company may have to fund its 51% share of the
joint venture's obligation through additional investments in the joint venture.
At December 31, 2000, the Company's equity accounting for the joint venture
assumed the joint venture would be obligated for approximately $30 million of
the total penalty exposure of which the Company's 51% share would be
approximately $15 million.

     The joint venture's accrual for this obligation was made prior to 1998. The
Company's equity in earnings from the joint venture was not significantly
affected by changes in the joint venture's offset


                                      F-15

<PAGE>
                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

obligation during 1998, 1999 and 2000. Production from a newly signed
contract with the government of Malaysia may partially satisfy the
liability.

     The Company accounts for its 51% investment in the joint venture by using
the equity method rather than consolidating it because the Company does not
control the joint venture, although it does have the ability to exercise
significant influence over the operating and financial policies of the joint
venture.

10.  Subsidiary Equity Plans

     During 1998, UDI adopted the 1998 Stock Option Plan (the "Option Plan")
under which 1,492,600 shares of common stock were reserved for issuance at
December 31, 2000. The options generally vest over a period of 10 years;
however, vesting may be accelerated over 5 years if certain targets related to
earnings and cash flow are met.


<TABLE>
<CAPTION>



                                                       Weighted average              Weighted average              Weighted average
                                            1998        exercise price      1999      exercise price      2000      exercise price
                                         ----------    ---------------   ----------   ---------------  ----------   ---------------
<S>                                      <C>            <C>               <C>         <C>              <C>          <C>

Options outstanding, beginning of year ..        --          $--          1,436,000      $10.00         1,457,900      $10.17
Options granted ......................... 1,436,000        10.00             31,000       20.00            23,000       21.73
Options canceled ........................        --           --             (6,200)      18.07           (40,000)      10.00
Options exercised .......................        --           --             (2,900)      10.00            (4,500)      10.00
                                         ----------                      ----------                    ----------
Options outstanding end of year ......... 1,436,000        10.00          1,457,900       10.17         1,436,400      $10.37
                                         ==========                      ==========                    ==========
Options exercisable end of year .........        --           --            418,425       10.42           682,230      $10.30
                                         ==========                      ==========                    ==========

</TABLE>


     The following table summarizes options data as of December 31, 2000:


<TABLE>
<CAPTION>
                                                   Options Outstanding                                    Options Exercisable
                                  ------------------------------------------------------------     --------------------------------
                                  Number as of                               Weighted average       Number as of
                                   December 31,         Weighted average        remaining            December 31,  Weighted average
Range of exercise prices             2000               exercise price        contractual life           2000       exercise price
------------------------          -------------         --------------        ----------------      -------------   --------------
<S>                                 <C>                  <C>                     <C>                  <C>           <C>
$10.00 .....................        1,387,400              10.00                    7.6                661,130          10.00
$20.00-25.00 ...............           49,000              20.81                    8.9                 21,100          20.09
                                    ---------                                                          -------
Total ......................        1,436,400              10.37                    7.6                682,230          10.30
                                    =========                                                          =======

</TABLE>



                                      F-16

<PAGE>

                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

     Options granted in 1998 were at $10 per share and had an estimated grant
date fair value of $4.51 per option. Options granted in 1999 were at $20 per
share and had an estimated grant date fair value of $9.56 per option. Options
were granted at $20 and $25 during the year ended December 31, 2000 and had an
estimated weighted average fair value on the date of grant of $6.95.

     Had compensation cost for the Company's stock option plans been determined
based upon the fair value at the grant date for awards under the plan consistent
with the methodology prescribed under Statement of Financial Accounting Standard
No. 123, Accounting for Stock-Based Compensation, the Company's net loss in 1998
would have been approximately $119.5 million, the net income in 1999 would have
been approximately $1.4 million, and the net income in 2000 would have been
approximately $16.8 million. The effect of applying SFAS No. 123 on the net
income as stated above is not necessarily representative of the effects on
reported net income (loss) for future years due to, among other things, (1) the
vesting period of the stock options and (2) additional stock options that may be
granted in future years.

     The fair value of each option grant is estimated on the date of grant using
the minimum value model with the following assumptions used for grants in 1998,
1999 and 2000: dividend yield of 0%; risk-free interest rate of 6%, 6.5% and
5.5%; and expected life of the option term of 10 years, 10 years and 7 years.

Employee Stock Purchase Plan

     Under the Employee Stock Purchase Plan (the "ESPP"), certain employees are
provided the opportunity to purchase shares of the Company's common stock at its
estimated fair value. Certain of these purchases were eligible for financing
provided by the Company. Related loans including interest at 7.5%, are due in
five years. During 1998, 739,624 shares were sold at a price of $10 per share.

11.  Income Taxes

     The provision for income taxes includes federal income taxes payable by the
Company's Foreign Sales Corporation subsidiary amounting to $3.3 million, $1.7
million and $2.7 million during the years ended December 31, 1998, 1999 and
2000, respectively. For the year ended December 31, 1998, the provision for
income taxes also includes foreign withholding taxes of $2.6 million. For the
years ended December 31, 1999 and 2000, the provision for income taxes also
includes alternative minimum tax currently payable by the Company of $1.2
million and $1.9 million, respectively. For the year ended December 31, 2000,
the provision also includes foreign income taxes related to Bofors of $1.4
million on income before income taxes of approximately $3 million. All other
pretax earnings for 1998 through 2000 were from domestic sources.

     The Company's effective tax rate differed from the statutory federal income
tax rate because of the following differences:

                                                 1998       1999       2000
                                                ------     ------     ------
Statutory federal tax rate .................... (35.0%)     35.0%      35.0%
Effect of taxes on joint venture/foreign
earnings ......................................   3.0%     103.9%       0.5%
Foreign Sales Corporation/extraterritorial
income exclusion benefit ......................   1.8%     (52.6%)     (0.4%)
Disallowed expenses and other .................  (5.8%)     30.5%       9.7%
Change in valuation allowance .................  41.0%     (69.4%)    (20.0%)



                                      F-17

<PAGE>

                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

                                             ======     ======     ======
Effective tax rate .......................    5.0%      47.4%      24.8%
                                             ======     ======     ======

     The components of the net deferred tax asset are as follows (in thousands):

                                                        December 31,
                                                  -------------------------
                                                      1999         2000
                                                  ------------  -----------
Deferred tax assets:
Accrued expenses ................................ $  43,113    $  35,428
Net operating loss carryforwards ................    88,093       53,882
Depreciation ....................................    13,701       11,369
Other ...........................................     2,954        1,633
                                                  ---------    ---------
                                                    147,861      102,312
Deferred tax liabilities:
Intangibles, accrued compensation, and benefits .   (84,994)     (65,476)
Other ...........................................        --        4,563
                                                  ---------    ---------
                                                    (84,994)     (60,913)
                                                  ---------    ---------
Net deferred tax asset ..........................    62,867       41,399
Valuation allowance .............................   (62,867)     (41,399)
                                                  ---------    ---------
Net deferred taxes on balance sheet ............. $      --    $      --
                                                  =========    =========

     Based on historical net operating losses in recent years, the net deferred
tax asset at December 31, 1999 and 2000 has been offset by a valuation
allowance. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will be realized. The ultimate realization of the deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which the temporary differences become deductible and subject to any
limitations applied to the use of carryforward tax attributes.

     The Company has approximately $135 million in net operating loss
carryforwards which expire at varying dates through 2018.

12.  Fair Value of Financial Instruments

     The carrying amount of the Company's financial instruments included in
current assets and current liabilities approximates their fair value due to
their short-term nature. At December 31, 1999, the fair market value of the
Company's long-term debt was estimated to be $149.8 million and $191.5 million
for the senior credit facility and subordinated debt, respectively. At December
31, 2000, fair market value of the Company's long-term debt was estimated to be
$86.6 million and $171.9 million for the senior credit facility and subordinated
debt, respectively.

     The fair values of the senior credit facility represent management's best
estimates based on other financial instruments with similar characteristics.
Since the facility has variable rate debt, its fair value



                                      F-18

<PAGE>
                          Iron Horse Investors, L.L.C.

             Notes to Consolidated Financial Statements (Continued)

approximates its carrying amount. The fair values of the subordinated debt are
based on quoted market prices.

13.  Significant Customer and Export Sales

     Sales to various agencies of the U.S. Government aggregated $968.3 million,
$995.0 million and $832.9 million during the years ended December 31, 1998, 1999
and 2000, respectively.

     At December 31, 1999 and 2000, trade accounts receivable from the U.S.
Government totaled $29.8 million and $66.8 million, respectively.

     Export sales, including sales to foreign governments transacted through the
U.S. Government, were $230.3 million, $218.6 million and $297.6 million during
the years ended December 31, 1998, 1999 and 2000, respectively. In addition
there were sales to foreign governments transacted by the Company's foreign
subsidiary of $53.4 million during the year ended December 31, 2000.

14.  Related Party Transactions

     During 1998, Carlyle provided consulting assistance in development of
management operating policies and procedures, for which the Company incurred a
charge to operations of $2.0 million. Additionally, the management agreement
between the Company and Carlyle requires an annual fee of $2.0 million for
various management services. During December 31, 1998, 1999 and 2000, the
Company recorded charges of $2.0 million each year relating to these services.

     One of the Company's directors was formerly affiliated with a law firm that
provides services to the Company. Amounts paid to the law firm for such services
were approximately $132,000, $51,000 and $138,000 for the years ended December
31, 1998, 1999 and 2000, respectively.

15.  Restructuring

     During the third quarter of 1998, the Company approved a restructuring plan
designed to rationalize production and lower costs at its Fridley, Minnesota
facility. The plan called for shifting a significant portion of production and
final assembly to other Company sites and outsourcing certain other operations.
In 1998 the Company recorded a charge of $36.2 million for estimated employee
termination expenses, acceleration of recognition for benefit costs that were
curtailed, and charges for impaired assets. This charge did not significantly
impact operating funds as it mostly represents either asset write-offs or costs
that will be provided for out of an overfunded pension plan. Remaining accrued
expenses are $1.1 million at December 31, 2000.

16.  Employees' Thrift Plan

     Substantially all of the Company's domestic employees are eligible to
participate in defined contribution savings plans designed to comply with the
requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and
Section 401(k) of the Internal Revenue Code. Charges against income for matching
contributions to the plans were $8.1 million, $8.1 million, and $7.9 million in
the years ended December 31, 1998, 1999 and 2000, respectively.


                                      F-19

<PAGE>

                Report of Ernst & Young LLP, Independent Auditors


Board of Directors
United Defense Industries, Inc.

     We have audited the accompanying consolidated balance sheets of United
Defense Industries, Inc. (a subsidiary of Iron Horse Investors, L.L.C.) and
subsidiaries as of December 31, 1999 and 2000 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 2000. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of United Defense
Industries, Inc. and subsidiaries at December 31, 1999 and 2000 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.

                                            /s/ Ernst & Young LLP

February 1, 2001
McLean, VA






                                      F-20

<PAGE>

                         United Defense Industries, Inc.
                           Consolidated Balance Sheets

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                 December 31,    December 31,
                                                                     1999           2000
                                                                --------------  --------------

     Assets
<S>                                                               <C>             <C>
     Current assets:

          Cash and cash equivalents .........................     $  94,325       $ 113,357
          Trade receivables .................................        57,198         109,705
          Long-term contract inventories ....................       254,750         259,238
          Other current assets ..............................         4,056          13,083
                                                                  ---------       ---------
     Total current assets ...................................       410,329         495,383
     Property, plant and equipment, net .....................        84,693          80,775
     Intangible assets, net .................................       220,274         162,340
     Prepaid pension and postretirement benefit cost ........       119,883         123,100
     Restricted cash ........................................            --          23,528
     Other assets ...........................................        17,963          10,694
                                                                  ---------       ---------
     Total assets ...........................................     $ 853,142       $ 895,820
                                                                  =========       =========
     Liabilities and Stockholders' Equity (Deficit)

     Current liabilities:

          Current portion of long-term debt .................     $  23,086       $  23,086
          Accounts payable, trade and other .................        64,639          86,117
          Advanced payments .................................       303,065         342,394
          Accrued and other liabilities .....................        91,340         104,168
                                                                  ---------       ---------
          Total current liabilities .........................       482,130         555,765

     Long-term liabilities:
          Long-term debt, net of current portion ............       326,757         246,491
          Accrued pension and postretirement benefit cost ...         5,075          28,515
          Other liabilities .................................        16,013          23,148
                                                                  ---------       ---------
     Total liabilities ......................................       829,975         853,919

     Commitments and contingencies (Notes 8 & 9)

     Stockholders' Equity (Deficit):
     Common Stock $.01 par value, 20,000,000 shares
          authorized; 18,042,524 shares and 18,036,667 shares
          issued and outstanding at December 31, 1999
          and 2000 ..........................................           180             180

     Additional paid-in capital .............................       180,245         180,031
     Stockholders' loans ....................................        (1,339)         (1,236)
     Retained deficit .......................................      (155,919)       (137,074)
                                                                  ---------       ---------
     Total stockholders' equity (deficit) ...................        23,167          41,901
                                                                  ---------       ---------
     Total liabilities and stockholders' equity (deficit) ...     $ 853,142       $ 895,820
                                                                  =========       =========
</TABLE>

See accompanying notes. Amounts are as restated (Note 2).

                                      F-21

<PAGE>

                         United Defense Industries, Inc.
                      Consolidated Statements of Operations

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                    -----------------------------------------
                                                                        1998           1999           2000
                                                                    -----------    -----------    -----------
<S>                                                                 <C>            <C>            <C>
      Revenue:
           Sales ............................................       $ 1,217,555    $ 1,213,526    $ 1,183,886
      Costs and expenses:
           Cost of sales ....................................         1,099,291        991,907        943,892
           Selling, general and administrative
              expenses ......................................           172,888        167,877        173,694
           Research and development .........................            13,021         12,782         15,760
                                                                    -----------    -----------    -----------
                 Total expenses .............................         1,285,200      1,172,566      1,133,346


      (Loss) income from operations .........................           (67,645)        40,960         50,540
      Other income (expense):
           Earnings (loss) related to investments in
              foreign affiliates ............................             1,647          1,639         (1,262)
           Interest income ..................................             1,396          1,820          4,152
           Interest expense .................................           (52,155)       (38,835)       (29,265)
                                                                    -----------    -----------    -----------
      Total other expense ...................................           (49,112)       (35,376)       (26,375)

      (Loss) income before income taxes and
         extraordinary item .................................          (116,757)         5,584         24,165
      Provision for income taxes ............................             5,841          2,646          6,000
                                                                    -----------    -----------    -----------
      (Loss) income before extraordinary item ...............          (122,598)         2,938         18,165
      Extraordinary item--net gain (loss) from
         extinguishment of debt .............................                --             --            680
                                                                    -----------    -----------    -----------
      Net (loss) income .....................................       $  (122,598)   $     2,938    $    18,845
                                                                    ===========    ===========    ===========

</TABLE>

See accompanying notes. Amounts are as restated (Note 2).



                                      F-22

<PAGE>

                         United Defense Industries, Inc.
                           Consolidated Statements of
                         Stockholders' Equity (Deficit)

                                (In thousands)

<TABLE>
<CAPTION>

                                      Common        Paid-In         Retained      Stockholders'
                                      Stock         Capital         Deficit           Loans         Total
                                   ------------  --------------  --------------  --------------- -----------
<S>                                 <C>            <C>             <C>            <C>             <C>
Balance, December 31, 1997 ......   $     173      $ 172,827       $ (36,259)     $    --         $ 136,741
Issuance of Common Stock ........           7          7,389            --           (1,339)          6,057
Net loss for the year
     ended December 31, 1998 ....        --             --          (122,598)          --          (122,598)
                                    ---------      ---------       ---------      ---------       ---------
Balance, December 31, 1998 ......         180        180,216        (158,857)        (1,339)         20,200
Issuance of Common Stock ........        --               29            --             --                29
Net income for the year
     ended December 31, 1999 ....        --             --             2,938           --             2,938
                                    ---------      ---------       ---------      ---------       ---------
Balance, December 31, 1999 ......         180        180,245        (155,919)        (1,339)         23,167
Issuance of Common Stock ........        --               45            --               50              95
Repurchase of Common Stock ......        --             (259)           --               53            (206)
Net income for the year
     ended December 31, 2000 ....        --             --            18,845           --            18,845
                                    ---------      ---------       ---------      ---------       ---------
Balance, December 31, 2000 ......         180        180,031        (137,074)        (1,236)         41,901
</TABLE>

See accompanying notes. Amounts are as restated (Note 2).



                                      F-23


<PAGE>

                         United Defense Industries, Inc.
                      Consolidated Statements of Cash Flows


                                 (In thousands)

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                        ---------------------------
                                                                     1998          1999          2000
                                                                   ----------   ----------    ---------
<S>                                                                 <C>          <C>          <C>
Operating activities

Net (loss) income ...........................................       $(122,598)   $   2,938    $  18,845
Adjustments to reconcile net (loss) income to cash
provided by operating
    activities:
       Depreciation .........................................          83,153       55,528       23,882
       Amortization .........................................          91,895       72,408       68,422
       Amortization of financing costs ......................           5,660        5,791        2,759
       Net (gain) loss from early extinguishment of debt ....              --           --         (680)
       Other ................................................           5,291        1,123           --
Changes in assets and liabilities:
       Trade receivables ....................................          30,452        7,197      (35,954)
       Inventories ..........................................          76,030         (407)      11,608
       Other assets .........................................           1,478        1,195        4,881
       Prepaid pension and postretirement benefit cost ......          15,519        4,029       (3,217)
       Accounts payable, trade and other ....................          (5,144)     (23,858)       9,525
       Advanced payments ....................................          (3,006)      44,670       (9,522)
       Accrued and other liabilities ........................          14,360       28,554        3,125
       Accrued pension and postretirement benefit cost ......           4,212       (9,535)       1,672
                                                                    ---------    ---------    ---------

Cash provided by operating activities .......................         197,302      189,633       95,346
                                                                    ---------    ---------    ---------
Investing activities

       Capital spending .....................................         (24,020)     (25,246)     (19,721)
       Disposal of property, plant and equipment ............           7,298        1,532          560
       Adjustment to purchase price of business .............          16,074           --           --
       Purchase of Barnes & Reinecke, net of $1.2 million
          cash acquired .....................................              --           --       (1,634)
       Purchase of Bofors Weapon Systems, net of $45.6
          million cash acquired .............................              --           --       23,663
                                                                    ---------    ---------    ---------

Cash (used in) provided by investing activities .............            (648)     (23,714)       2,868
                                                                    ---------    ---------    ---------
Financing activities

       Payments on long-term debt ...........................        (152,814)    (157,143)     (79,071)
       Proceeds from sale of common stock ...................           6,057           29           95
       Repurchase of common stock ...........................              --           --         (206)
                                                                    ---------    ---------    ---------

Cash (used in) provided by financing activities .............        (146,757)    (157,114)     (79,182)
                                                                    ---------    ---------    ---------
Increase (decrease) in cash and cash equivalents ............          49,897        8,805       19,032
Cash and cash equivalents, beginning of period ..............          35,623       85,520       94,325
                                                                    ---------    ---------    ---------

Cash and cash equivalents, end of period ....................       $  85,520    $  94,325    $ 113,357
                                                                    =========    =========    =========
</TABLE>


See accompanying notes. Amounts are as restated (Note 2).



                                      F-24

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements


1.   Basis of Presentation and Recapitalization

     United Defense Industries, Inc. (the "Company") is a subsidiary of Iron
Horse Investors, L.L.C. ("Iron Horse") and was formed for the primary purpose of
facilitating the acquisition of United Defense, L.P. ("UDLP") by Iron Horse.
Iron Horse is owned by an investment group led by The Carlyle Group ("Carlyle").
On October 6, 1997, the Company acquired 100% of the partnership interests of
UDLP from FMC Corporation ("FMC") and Harsco Corporation ("Harsco") (the
"Sellers").


     The Company's business is operated in a single reportable segment involving
the design, development and production of combat vehicles, artillery, naval
guns, missile launchers and precision munitions used by the U.S. Department of
Defense and allied militaries around the world. The Company believes its
operating results are driven principally by the business activities related to
its major military programs. Currently the Company is the sole-source, prime
contractor to the U.S. Department of Defense for many of these programs.


     The financial statements include the accounts of the Company and its
subsidiaries. Intercompany accounts and transactions are eliminated in
consolidation.

2.   Summary of Significant Accounting Policies


Reclassifications and Restatement

     The Company's previously reported financial statements for 1998 through
2000 have been restated to account for the Company's investment in a Turkish
joint venture under the equity method.


     The impact on operating results was as follows:.

                                                    Year Ended December 31,
                                          --------------------------------------
                                               1998        1999          2000
                                          -----------  -----------  ------------
                                                     (In thousands)
(Decrease) increase
Earnings related to investments in
     foreign affiliates ................  $ (4,561)     $ 1,106       $ (4,181)
Net (loss) income ......................    (2,591)       1,397         (2,800)


          This change also resulted in certain reclassifications on the balance
sheet and income statement. The Company had previously separately reported
intangible assets related to the investment and an accrual related to a
potential offset obligation (see Note 9), which are now included in the
investment account within other assets on the balance sheet. On the income
statement, certain amortization costs included in selling, general and
administrative expenses related to the investment were reclassified to earnings
related to investments in foreign affiliates.


Use of Estimates


                                      F-25

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes, in particular, estimates of contract cost and revenues used
in the earnings recognition process. Actual results could differ from those
estimates.

Cash and Cash Equivalents

     Cash and cash equivalents consist of investments with initial maturities of
three months or less.

Property, Plant and Equipment

     Property, plant and equipment is recorded at cost. Depreciation is provided
principally on the sum-of-the-years digits and straight-line methods over
estimated useful lives of the assets (land improvements--twenty years;
buildings--twenty to thirty-five years; and machinery and equipment--two to
twelve years).

     Maintenance and repairs are expensed as incurred. Expenditures that extend
the useful life of property, plant and equipment or increase its productivity
are capitalized and depreciated.

Long-lived Assets, Including Intangible Assets and Goodwill

     The Company evaluates on a quarterly basis its long-lived assets to be held
and used, including certain identifiable intangible assets and goodwill, to
determine whether any events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company bases its
evaluation on such impairment indicators as the nature of the assets, the future
economic benefit of the assets, any historical or future profitability
measurements, as well as other external market conditions or factors that may be
present. If such impairment indicators are present or other factors exist that
indicate that the carrying amount of the asset may not be recoverable, the
Company would use an estimate of the undiscounted value of expected future
operating cash flows to determine whether the asset is recoverable and measure
the amount of any impairment as the difference between the carrying amount of
the asset and its estimated fair value.

Investments in Affiliated Companies

     The Company's investment in 51% owned foreign joint ventures in Turkey and
Saudi Arabia are accounted for by using the equity method because the Company
does not control the joint ventures although it has the ability to exercise
significant influence over their operating and financial policies. Equity in
earnings from these investments was $1.6 million, $1.6 million and $(1.3)
million for the years ended December 31, 1998, 1999 and 2000. The following
table summarizes financial information for these joint ventures (in thousands):



                                                       December 31
                                               -------------------------
                                                  1999          2000
                                               -------------------------
          Current assets ..................    $   81,910       $161,902
          Noncurrent assets ...............        41,195         32,806
          Current liabilities .............       120,917        199,577
          Long-term liabilities ...........         2,031            975



                                      F-26

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

                                        Year ended December 31
                                    ------------------------------
                                      1998       1999       2000
                                    --------   --------   --------
                Sales ...........   $131,531   $127,115   $ 76,735
                Cost of sales ...     92,364     89,447     61,053
                Net income ......     17,627     16,490     (2,486)

     The difference between the carrying amounts of the joint ventures recorded
by the Company and its proportionate share of the underlying equity in the net
assets of the joint ventures was $7.2 million and $5.6 million as of December
31, 1999 and 2000, respectively. The difference relates to the step up in the
carrying amount of the investments to their fair value in connection with the
application of purchase accounting for the acquisition of UDLP in 1997, which is
being amortized over up to five years based on the earnings in the joint
ventures recognized by the Company, consistent with the valuation method used to
determine the purchase price adjustment.

Restricted Cash

     Restricted cash consists mainly of cash held in escrow as required under
the Bofors purchase agreement (See note 3). The restricted cash relates to
certain letters of credit, and the restriction will expire upon release of the
former owners of Bofors as guarantors under the letters of credit.

Advanced Payments

     Advanced payments by customers for deposits on orders not yet billed and
progress payments on contracts-in-progress are recorded as current liabilities.

Revenue and Profit Recognition for Contracts-in-Progress

     The Company recognizes sales on most production contracts as deliveries are
made or accepted. Gross margin on sales is based on the estimated margin to be
realized over the life of the related contract. Sales under cost reimbursement
contracts for research, engineering, prototypes, repair and maintenance and
certain other contracts are recorded as costs are incurred and include estimated
fees in the proportion that costs incurred to date bear to total estimated
costs. Changes in estimates for sales and profits are recognized in the period
in which they are determinable using the cumulative catch-up method. Claims are
considered in the estimated contract performance at such time as realization is
probable. Any anticipated losses on contracts (i.e., cost of sales exceeds
sales) are charged to operations as soon as they are determinable.

     At December 31, 1999 and 2000, included in trade receivables are $8.1
million and $7.3 million related to contractual revenue that had not been billed
to customers. These amounts are generally billable within the following year.

Stock-Based Compensation

     Provided the option price is not less than fair value of the common stock
as estimated by management at the date an option is granted, the Company records
no compensation expense in its consolidated statements of operations. See Note
10 for the pro forma effect on operating results had the Company recorded
compensation expense for the fair value of stock options. No compensation
expense has been recognized related to stock option grants.

Income Taxes

     The Company accounts for income taxes under the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws expected to be
effective when these differences reverse.



                                      F-27

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

Changes in Accounting Principle

     Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended. The statement
requires that an entity recognize all derivatives as either assets or
liabilities.

     The Company's subsidiary Bofors had forward exchange contracts with a
notional contract value of $14.4 million at December 31, 2000. These contracts
which were designated as cash flow hedges were entered into to hedge firm
commitments related to purchases or sales denominated in foreign currencies. The
fair value of the contracts was a liability of $0.95 million at December 31,
2000. The transition adjustment to implement this new standard on January 1,
2001 will be presented as a cumulative effect of change in accounting principle
as a charge to accumulated other comprehensive loss within stockholders' equity
in 2001.

3. Business Purchase

     On October 6, 1997, the Company acquired 100% of the partnership interests
of UDLP and certain other related business assets of FMC. The purchase price
including expenses was $864 million after an adjustment of $16 million agreed to
during 1998. The Company financed the acquisition through a cash equity
investment and debt. The excess purchase price over the book value of the net
assets acquired in the amount of $733 million was allocated to inventory;
property, plant and equipment; other tangible assets; and intangible assets
based on management's estimate of their fair values. The excess purchase price
over the fair value of the net assets acquired was allocated to goodwill.

     On March 6, 2000, the Company acquired all of the outstanding stock of
Barnes & Reinecke, Inc. ("BRI"), a subsidiary of Allied Research Corporation
("ARC"), headquartered in Arlington Heights, Illinois. BRI specializes in
providing systems technical support and performance upgrades of defense
equipment for U.S. and foreign governments. BRI retained its current management
structure and became a wholly owned subsidiary of the Company. As consideration
for the purchase, the Company paid BRI's former owner, ARC, $3.7 million in cash
and notes. The transaction was accounted for as a purchase. Accordingly, the
financial statements reflect the results of operations of BRI since the date of
acquisition.

     On September 6, 2000, the Company acquired all of the outstanding stock of
Bofors Defence ("Bofors") through a newly-created wholly-owned Swedish
subsidiary of the Company, Bofors Defense Holding AB. The acquisition was
structured so that Bofors will be an indirectly wholly owned Swedish subsidiary
of the Company. As consideration for the purchase, the Company paid Bofors'
former owner, Celsius AB, 187.3 million Swedish Krona (approximately US $19.4
million), which was determined based on arm's length negotiation. The
acquisition was accounted for as a purchase. Accordingly, the financial
statements reflect the results of operations of Bofors since the date of
acquisition.

     Bofors produces artillery systems, air defense and naval guns, combat
vehicle turrets and smart munitions. Although the Swedish government is the
primary customer, Bofors is dependent on exports for approximately half of its
total sales.

     The unaudited pro forma results below assume the Bofors acquisition
occurred at the beginning of each year presented (in thousands).

                                                       1999         2000
                                                    ----------   ----------
Sales ........................................      $1,470,016   $1,270,904
Net income before extraordinary item .........          10,073       18,618
Net income ...................................          10,073       19,298

     The unaudited pro forma combined results of operations are not necessarily
indicative of the actual results that would have occurred had the acquisition
been consummated at the beginning of the year indicated or of future operations
under the ownership and management of the Company.

4. Inventories

     The majority of the Company's inventories are related to contracts in
process and are recorded at cost determined on a LIFO basis. Inventory costs
include manufacturing overhead.



                                      F-28

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

     The current replacement cost of LIFO inventories exceeded their recorded
values by approximately $5.2 million at December 31, 1998 and 1999, and $12.6
million at December 31, 2000.


5. Property, Plant and Equipment

     Property, plant and equipment consist of the following (in thousands):

                                                        December 31
                                                  ------------------------
                                                     1999          2000
                                                  ----------    ----------
     Buildings ............................        $  39,978     $  42,413
     Machinery and equipment ..............          166,257       175,501
     Land and improvements ................            8,126         8,338
     Construction in progress .............            7,754         7,848
                                                  ----------    ----------
                                                     222,115       234,100
     Less: accumulated depreciation .......         (137,422)     (153,325)
                                                  ----------    ----------
     Property, plant and equipment, net ...        $  84,693     $  80,775
                                                  ==========    ==========

6. Intangible Assets

     Intangible assets consist of the following (in thousands):

                                                        December 31
                                                  ------------------------
                                                     1999          2000
                                                  ----------    ----------
     Software and other intangibles ..........     $  39,752     $  42,065
     Firm business and ongoing programs ......       225,103       225,103
     Goodwill ................................       115,662       123,796
                                                  ----------    ----------
                                                     380,517       390,964
     Less: accumulated amortization ..........      (160,243)     (228,624)
                                                  ----------    ----------
     Net intangible assets ...................     $ 220,274     $ 162,340
                                                  ==========    ==========

     The Company's software and other intangibles are being amortized over their
estimated useful lives on a straight-line basis over three to five years or
using other methods based on revenues of related contracts or programs. The
excess of purchase cost over the fair value of the net assets acquired
(goodwill) that resulted from the application of purchase accounting for the
acquisition of UDLP is being amortized over thirty years.

7. Pensions and Other Postretirement Benefits

     The majority of the Company's domestic employees are covered by retirement
plans. Plans covering salaried employees provide pension benefits based on years
of service and compensation. Plans covering




                                      F-29

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

hourly employees generally provide benefits of stated amounts for each year of
service. The Company's funding policy is to make contributions based on the
projected unit credit method and to limit contributions to amounts that are
currently deductible for tax purposes.

     With the exception of Bofors, most of the Company's employees are also
covered by postretirement health care and life insurance benefit programs.
Employees generally become eligible to receive benefits under these plans after
they retire when they meet minimum retirement age and service requirements. The
cost of providing most of these benefits is shared with retirees. The Company
has reserved the right to change or eliminate these benefit plans.

     Bofors has a statutory pension obligation of $23.0 million which is
included in "accrued pension and postretirement benefit cost" on the
consolidated balance sheet at December 31, 2000. Bofors pension obligation is
administered by an agent of the Swedish government using methods and assumptions
different from those used to determine domestic amounts. Accordingly, the
following tables do not include this liability.


                                      F-30

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

          The change in benefit obligation and plan assets of the plans and
prepaid or accrued pension and postretirement costs recognized in the balance
sheets at December 31, 1999 and 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                            Pension Benefits       Postretirement Benefits
                                                                         ----------------------    -----------------------
                                                                            1999         2000         1999         2000
                                                                         ---------    ---------    ---------    ----------
<S>                                                                      <C>          <C>          <C>          <C>
Change in benefit obligation
Benefit obligation at beginning of year ..........................       $ 442,651    $ 422,314    $  54,795    $  49,187
Service cost .....................................................          13,747       14,256        1,489        1,260
Interest cost ....................................................          27,982       32,847        3,420        3,565
Net benefits paid, including settlements .........................         (25,174)     (22,895)      (5,594)      (4,486)
Actuarial (gain) loss ............................................         (38,130)      13,309       (4,923)        (296)
Plan amendments ..................................................           1,238       11,803           --           --
                                                                         ---------    ---------    ---------    ---------
Benefit obligation at end of year ................................         422,314      471,634       49,187       49,230

Change in plan assets
Fair value of plan assets at beginning of
year .............................................................         548,003      537,769       60,412       51,828
Actual return on plan assets .....................................          13,874       78,974       (6,558)      11,581
Employer contributions ...........................................           1,066          958        3,568        2,893
Net benefits paid, including settlements .........................         (25,174)     (22,895)      (5,594)      (4,486)
                                                                         ---------    ---------    ---------    ---------
Fair value of plan assets at end of year .........................         537,769      594,806       51,828       61,816
                                                                         ---------    ---------    ---------    ---------

Funded status ....................................................         115,455      123,945        2,641       12,586
Unrecognized actuarial (gain) loss ...............................          (6,012)     (25,029)      (1,514)      (8,418)
Unrecognized prior service cost ..................................           4,238       14,528           --           --

                                                                         ---------    ---------    ---------    ---------
Net amount recognized ............................................       $ 113,681    $ 113,444    $   1,127    $   4,168
                                                                         =========    =========    =========    =========
Amounts recognized in the consolidated balance
     sheet consist of:
          Prepaid pension and postretirement benefit cost ........       $ 118,756    $ 118,932    $   1,127    $   4,168
          Accrued pension and postretirement benefit cost ........          (5,075)      (5,488)          --           --
                                                                         ---------    ---------    ---------    ---------
Net amount recognized ............................................       $ 113,681    $ 113,444    $   1,127    $   4,168
                                                                         =========    =========    =========    =========
</TABLE>




                                      F-31

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements


          The following table summarizes the assumptions used in the
determination of net pension and postretirement benefit costs and benefit
obligations for the years ended December 31, 1998, 1999 and 2000:


                                                Year ended December 31,
                                            ------------------------------
                                             1998         1999       2000
                                            ------       ------     ------
Weighted-average assumptions

Discount rate ..........................     6.50%        7.50%     7.50%
Expected return on plan assets .........     9.00%        9.00%     9.00%
Rate of compensation increase ..........     3.50%        5.00%     5.00%

          The following tables show the components of the net periodic benefit
cost (in thousands):

                                                Year ended December 31,
                                        ----------------------------------
                                            1998        1999         2000
                                        -----------  ----------   --------
Pension Benefits

Service cost ...........................  $ 11,751    $ 13,747    $ 14,256
Interest cost ..........................    27,017      27,982      32,847
Expected return on plan assets .........   (43,080)    (45,213)    (47,904)
Net amortization and recognized losses .       703       1,324       1,993
Special termination benefits and
curtailments ...........................    27,500         650          --
                                          --------    --------    --------
Net periodic benefit cost (income) .....  $ 23,891    $ (1,510)   $  1,192
                                          ========    ========    ========

                                                Year ended December 31,
                                        ----------------------------------
                                            1998        1999        2000
                                        -----------  ----------   --------
Postretirement benefits

Service cost ...........................  $   1,382   $  1,489    $  1,260
Interest cost ..........................      3,515      3,420       3,565
Expected return on plan assets .........     (4,422)    (4,797)     (4,938)
Net amortization and recognized losses .         --         --         (35)
                                          ---------   --------    --------
Net periodic benefit cost(income) ......  $     475   $    112    $   (148)
                                          =========   ========    ========

          Pension special termination benefits and curtailments cost relates to
various early retirement incentive and involuntary workforce reduction programs
related to the Company's downsizing and consolidation of operations.


          The projected benefit obligation, accumulated benefit obligation, and
fair value of plan assets for the pension plan with accumulated benefit
obligations in excess of plan assets were $6.7 million, $3.2 million and zero,
respectively, at December 31, 1999 and $12.6 million, $6.8 million and zero,
respectively, at December 31, 2000.


          For measurement purposes, a 4% annual rate of increase in the per
capita cost of covered health care benefits is assumed for 2001 and future
years. Assumed health care cost trend rates have an effect on the amounts
reported for the postretirement health care plan. A one-percentage-point change
in assumed health care cost trend rates would have the following effects (in
thousands):



                                      F-32

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                             1% Increase           1% Decrease
                                                          -----------------    -------------------
<S>                                                       <C>                  <C>
Effect on total of service and interest cost components .        $    159           $   (132)
Effect on the postretirement benefit obligation .........        $  1,296           $ (1,097)
</TABLE>

8.   Long-term Debt

     Borrowings under long-term debt arrangements are as follows (in thousands):

                                                   December 31
                                            ------------------------
                                               1999         2000
                                            ----------   -----------
Senior secured credit facilities ......       $149,843    $   86,757
Senior subordinated notes .............        200,000       182,820
                                            ----------   -----------
                                               349,843       269,577
Less: current portion .................         23,086        23,086
                                            ----------   -----------

                                              $326,757    $  246,491
                                            ==========   ===========


$725 Million Senior Secured Credit Facility

         In October 1997, the Company entered into a senior credit facility that
included $495 million of term loan facilities and a $230 million revolving
credit facility. Outstanding borrowings on the term loan were $149.8 million and
$86.8 million at December 31, 1999 and 2000, respectively.

         The term loan facilities bear interest at variable rates with a
weighted average rate of 8.82% and 7.91% at December 31, 1999 and 2000,
respectively. These loans are due through 2006 and provide for quarterly
principal payments.

         The revolving credit facility provides for loans and letters of credit
and matures in 2003. The Company has outstanding letters of credit under the
facility of $142 million at December 31, 2000. There was $88 million available
under the revolving credit facility at December 31, 2000. The Company is
obligated to pay a fee of 0.25% on the unused revolving credit facility.

         Amounts outstanding under the senior credit facility are secured by a
lien on all the assets of the Company and its domestic subsidiaries.

         Mandatory prepayments and reductions of outstanding principal amounts
are required upon the occurrence of certain events. The senior credit facility
contains customary covenants restricting the incurrence of debt, encumbrances on
and sales of assets, limitations on mergers and certain acquisitions,
limitations on changes in control,


                                      F-33

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

provision for the maintenance of certain financial ratios, and various other
financial covenants and restrictions.

$200 Million Senior Subordinated Notes

         In October 1997, the Company issued $200 million of senior subordinated
notes. The senior subordinated notes are unsecured, bear interest at 8.75%
payable semiannually, and mature in 2007. The payment of principal and interest
is subordinated in right of payment to all senior debt.

         The senior subordinated notes are not redeemable other than in
connection with a public equity offering or a change in control prior to
November 2002, at which time the notes may be redeemed at a premium, initially
at 104.375% of the principal amount. The senior subordinated notes have
customary covenants for subordinated debt facilities including the right to
require repurchase upon a change in control, restrictions on payment of
dividends, and restrictions on the acquisition of equity interests by the
Company.

         The Company received authorization from its bank-lending group in
February 1999 to purchase up to $50 million of the senior subordinated notes.
During 2000 the Company purchased approximately $17 million of its senior
subordinated notes in the open market.

Annual Maturities

Annual maturities of long-term debt are as follows (in thousands):

                         Year ended December 31
                         ----------------------
                                  2001                          $ 23,086
                                  2002                            23,086
                                  2003                            23,085
                                  2004                                --
                                  2005                             8,903
                               Thereafter                        191,417
                                                                --------
                                  Total                         $269,577
                                                                ========

         Cash paid for interest was $45.4 million, $36.2 million and $26.5
million for the years ended December 31, 1998, 1999 and 2000.

9.    Commitments and Contingencies

Operating Leases

         The Company leases office space, plants and facilities, and various
types of manufacturing, data processing and transportation equipment. Rent
expense for the years ended December 31, 1998, 1999, and 2000 was $13.5 million,
$12.4 million and $14.2 million, respectively. Minimum future rentals under
noncancellable leases are estimated to be $12.8 million in 2001, $13.0 million
in 2002, $11.2 million in 2003, $10.6 million in 2004, $9.9 million in 2005 and
$9.0 million thereafter.

Legal Proceedings

         Alliant Techsystems, Inc. ("Alliant"), a subcontractor to the Company
in connection with the M109A6 Paladin howitzer prime contract, filed a lawsuit
against the Company and its prior owners in Minnesota state court. The lawsuit
arose out of a U.S. Army-directed termination for convenience in 1996 of certain
subcontract work under the program which, until the time of termination, had
been performed by Alliant and was thereafter replaced by a subcontract which the
Company awarded to another contractor, Sechan Electronics. The breach of
contract litigation by Alliant against the Company was concluded by pretrial
dismissal, without any judgment, damage award, or other adverse finding having
been made against the Company. No settlement payment was made in connection with
such dismissal.

                                      F-34

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

         The Company was a defendant in a qui tam case filed jointly under the
U.S. Civil False Claims Act (the "FCA") by one present and one former employee
of ours in Fridley, Minnesota. The case, U.S. ex rel. Seman and Shukla v. United
Defense, FMC Corp., and Harsco Corp., was filed against the Company and its
prior owners on July 23, 1997 in the U.S. District Court for the District of
Minnesota and primarily alleged that the Company improperly obtained payment
under various of our government contracts by supplying components which did not
comply with applicable technical specifications. The relators' complaint did not
quantify the alleged damages, but sought the full range of treble damages, civil
penalties, and attorney fees available under the FCA.

         A complete settlement of such action was negotiated by the parties, and
consented to by the U.S. Government, under which the Company is to pay a total
of $6 million to settle the case, divided into installments payable over a
three-year period. The amount of the settlement had been fully accrued as of
December 31, 2000 in accrued and other liabilities. No finding of wrongdoing was
made against the Company, and no other administrative or legal action is to be
taken against the Company in respect of matters alleged in the case. Completion
of the settlement is subject to U.S. District Court review, but management
expects the settlement to be concluded on such terms during the first part of
2001.

         The Company is also subject to other claims and lawsuits arising in the
ordinary course of business. Management believes that the outcome of any such
proceedings to which the Company is party will not have a material adverse
effect on the Company.

Environmental Matters

         The Company spends certain amounts annually to maintain compliance with
environmental laws and to remediate contamination. Operating and maintenance
costs associated with environmental compliance and prevention of contamination
at the Company's facilities are a normal, recurring part of operations, are not
significant relative to total operating costs or cash flows, and are generally
allowable as contract costs under the Company's contracts with the U.S.
government (Allowable Costs).

         As with compliance costs, a significant portion of the Company's
expenditures for remediation at its facilities consists of Allowable Costs. As
of December 31, 2000 the Company has accrued $14 million to cover any
remediation and compliance costs that may not be Allowable Costs under U.S.
government contracts. The amount accrued is based on estimated liabilities for
each site in which the Company is able to make reasonable estimates. The Company
does not believe there are significant uncertainties affecting the estimated
liabilities or amounts that will be paid in the near term. The most significant
of the estimated liabilities is based on the Company's experience related to
ongoing remediation efforts. In addition, pursuant to the terms of the
acquisition of UDLP, the Sellers are required to reimburse the Company for 75%
of certain remediation costs relating to operations prior to the acquisition
that are Non-Allowable Costs. The Company has recorded a receivable for $1.8
million expected to be reimbursed by one of the Sellers under the terms of the
acquisition agreement which it expects to realize over the next 7 years.

Turkey Joint Venture Offset Obligation

         The Company's joint venture in Turkey is required by agreement with its
customer to achieve a significant level of export sales by October 2002 (this
commitment is commonly referred to as an "offset" obligation) or pay a penalty
of 9% of the shortfall in required export sales which penalty could be as high
as $40 million. There can be no assurances that the joint venture will be able
to completely fulfill its offset obligation or renegotiate an acceptable
alternative, in which case the Company may have to fund its 51% share of the
joint venture's obligation through additional investments in the joint venture.
At December 31, 2000, the Company's equity accounting for the joint venture
assumed the joint venture would be obligated for approximately $30 million of
the total penalty exposure of which the Company's 51% share would be
approximately $15 million.

         The joint venture's accrual for this obligation was made prior to 1998.
The Company's equity in earnings from the joint venture was not significantly
affected by changes in the joint venture's offset obligation during 1998, 1999
and 2000. Production from a newly signed contract with the government of
Malaysia may partially satisfy the liability.


                                      F-35

<PAGE>

                         United Defense Industries, Inc.

                   Notes to Consolidated Financial Statements

         The Company accounts for its 51% investment in the joint venture by
using the equity method rather than consolidating it because the Company does
not control the joint venture, although it does have the ability to exercise
significant influence over the operating and financial policies of the joint
venture.

10.   Stockholders' Equity

Common Stock Options

         During 1998, the Company adopted the 1998 Stock Option Plan (the
"Option Plan") under which 1,492,600 shares of common stock were reserved for
issuance at December 31, 2000. The options generally vest over a period of 10
years; however, vesting may be accelerated over 5 years if certain targets
related to earnings and cash flow are met.

<TABLE>
<CAPTION>

                                                      Weighted average               Weighted average              Weighted average
                                            1998      exercise options       1999    exercise options      2000    exercise options
                                         ----------   ----------------   ----------  ----------------  ----------  ----------------
<S>                                      <C>          <C>                <C>         <C>               <C>           <C>
Options outstanding, beginning of year .         --        $   --         1,436,000       $10.00        1,457,900       $10.17
Options granted ........................  1,436,000         10.00            31,000        20.00           23,000        21.73
Options canceled .......................         --            --            (6,200)       18.07          (40,000)       10.00
Options exercised ......................         --            --            (2,900)       10.00           (4,500)       10.00
                                         ----------                      ----------                    ----------
Options outstanding end of year ........  1,436,000        $10.00         1,457,900       $10.17        1,436,400       $10.37
                                         ==========                      ==========                    ==========
Options exercisable end of year ........         --                         418,425       $10.42          682,230       $10.30
                                         ==========                      ==========                    ==========
</TABLE>


         The following table summarizes options dated as of December 31, 2000:
<TABLE>
<CAPTION>

                                                Options Outstanding                         Options Exercisable
                                 -------------------------------------------------    --------------------------------
                                 Number as of                     Weighted average    Number as of
                                 December 31,   Weighted average     remaining        December 31,   Weighted average
Range of exercise prices             2000        exercise price   contractual life        2000        exercise price
------------------------         ------------   ----------------  ----------------    ------------   ----------------
<S>                              <C>            <C>               <C>                 <C>            <C>
$10.00.........................   1,387,400         $10.00              7.6             661,130          $10.00
$20.00-$25.00..................      49,000          20.81              8.9              21,100           20.09
                                  ---------                                             -------
Total..........................   1,436,400          10.37              7.6             682,230           10.30
                                  =========                                             =======
</TABLE>

                                      F-36

<PAGE>

                         United Defense Industries, Inc.

             Notes to Consolidated Financial Statements (Continued)

         Options granted in 1998 were at $10 per share and had an estimated
grant date fair value of $4.51 per option. Options granted in 1999 were at $20
per share and had an estimated grant date fair value of $9.56 per option.
Options were granted at $20 and $25 during the year ended December 31, 2000 and
had an estimated weighted average fair value on the date of grant of $6.95.

         Had compensation cost for the Company's stock option plans been
determined based upon the fair value at the grant date for awards under the plan
consistent with the methodology prescribed under Statement of Financial
Accounting Standard No. 123, Accounting for Stock-Based Compensation, the
Company's net loss in 1998 would have been approximately $123.2 million, the net
income in 1999 would have been approximately $1.7 million, and the net
income in 2000 would have been approximately $17.6 million. The effect of
applying SFAS No. 123 on the net income as stated above is not necessarily
representative of the effects on reported net income (loss) for future years due
to, among other things, (1) the vesting period of the stock options and (2)
additional stock options that may be granted in future years.

         The fair value of each option grant is estimated on the date of grant
using the minimum value model with the following assumptions used for grants in
1998, 1999 and 2000: dividend yield of 0%; risk-free interest rate of 6%, 6.5%
and 5.5%; and expected life of the option term of 10 years, 10 years and 7
years.

Employee Stock Purchase Plan

         Under the Employee Stock Purchase Plan (the "ESPP"), certain employees
are provided the opportunity to purchase shares of the Company's common stock at
its estimated fair value. Certain of these purchases were eligible for financing
provided by the Company. Related loans including interest at 7.5%, are due in
five years. During 1998, 739,624 shares were sold at a price of $10 per share.

11.  Income Taxes

         The provision for income taxes includes federal income taxes payable by
the Company's Foreign Sales Corporation subsidiary amounting to $3.3 million,
$1.7 million and $2.7 million during the years ended December 31, 1998, 1999 and
2000, respectively. For the year ended December 31, 1998, the provision for
income taxes also includes foreign withholding taxes of $2.6 million. For the
years ended December 31, 1999 and 2000, the provision for income taxes also
includes alternative minimum tax currently payable by the Company of $1.2
million and $1.9 million, respectively. For the year ended December 31, 2000,
the provision also includes foreign income taxes related to Bofors of $1.4
million on income before income taxes of approximately $3 million. All other
pretax earnings for 1998 through 2000 were from domestic sources.

         The Company's effective tax rate differed from the statutory federal
income tax rate because of the following differences:

                                                1998       1999       2000
                                               ------     ------     ------
Statutory federal tax rate ..................   (35.0%)     35.0%      35.0%
Effect of taxes on joint venture/foreign
earnings ....................................     3.0%     103.9%       0.5%
Foreign Sales Corporation/extraterritorial
  income exclusion benefit ..................     1.8%     (52.6%)     (0.4%)
Disallowed expenses and other ...............    (5.8%)     30.5%       9.7%
Change in valuation allowance ...............    41.0%     (69.4%)    (20.0%)
                                               ======     ======     ======

                                      F-37

<PAGE>

                         United Defense Industries, Inc.

             Notes to Consolidated Financial Statements (Continued)

Effective tax rate                          5.0%     47.4%      24.8%
                                         ======   =======    =======

         The components of the net deferred tax asset are as follows (in
thousands):

                                                       December 31,
                                                  ----------------------
                                                     1999         2000
                                                  ---------    ---------
Deferred tax assets:
Accrued expenses ................................ $  43,113    $  35,428
Net operating loss carryforwards ................    88,093       53,882
Depreciation ....................................    13,701       11,369
Other ...........................................     2,954        1,633
                                                  ---------    ---------
                                                    147,861      102,312
Deferred tax liabilities:

Intangibles, accrued compensation, and benefits..   (84,994)     (65,476)
Other ...........................................        --        4,563
                                                  ---------    ---------
                                                    (84,994)     (60,913)
                                                  ---------    ---------
Net deferred tax asset ..........................    62,867       41,399
Valuation allowance .............................   (62,867)     (41,399)
                                                  ---------    ---------
Net deferred taxes on balance sheet ............. $      --    $      --
                                                  =========    =========

         Based on historical net operating losses in recent years, the net
deferred tax asset at December 31, 1999 and 2000 has been offset by a valuation
allowance. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will be realized. The ultimate realization of the deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which the temporary differences become deductible and subject to any
limitations applied to the use of carryforward tax attributes.

         The Company has approximately $135 million in net operating loss
carryforwards which expire at varying dates through 2018.

12.  Fair Value of Financial Instruments

         The carrying amount of the Company's financial instruments included in
current assets and current liabilities approximates their fair value due to
their short-term nature. At December 31, 1999, the fair market value of the
Company's long-term debt was estimated to be $149.8 million and $191.5 million
for the senior credit facility and subordinated debt, respectively. At December
31, 2000, fair market value of the Company's long-term debt was estimated to be
$86.6 million and $171.9 million for the senior credit facility and subordinated
debt, respectively.

         The fair values of the senior credit facility represent management's
best estimates based on other financial instruments with similar
characteristics. Since the facility has variable rate debt, its fair value
approximates its carrying amount. The fair values of the subordinated debt are
based on quoted market prices.

                                      F-38

<PAGE>
                         United Defense Industries, Inc.

             Notes to Consolidated Financial Statements (Continued)

13.  Significant Customer and Export Sales

     Sales to various agencies of the U.S. Government aggregated $968.3 million,
$995.0 million and $832.9 million during the years ended December 31, 1998, 1999
and 2000, respectively.

     At December 31, 1999 and 2000, trade accounts receivable from the U.S.
Government totaled $29.8 million and $66.8 million, respectively.

     Export sales, including sales to foreign governments transacted through the
U.S. Government, were $230.3 million, $218.6 million and $297.6 million during
the years ended December 31, 1998, 1999 and 2000, respectively. In addition
there were sales to foreign governments transacted by the Company's foreign
subsidiary of $53.4 million during the year ended December 31, 2000.

14.  Related Party Transactions

     During 1998, Carlyle provided consulting assistance in development of
management operating policies and procedures, for which the Company incurred a
charge to operations of $2.0 million. Additionally, the management agreement
between the Company and Carlyle requires an annual fee of $2.0 million for
various management services. During December 31, 1998, 1999 and 2000, the
Company recorded charges of $2.0 million each year relating to these services.

     One of the Company's directors was formerly affiliated with a law firm that
provides services to the Company. Amounts paid to the law firm for such services
were approximately $132,000, $51,000 and $138,000 for the years ended December
31, 1998, 1999 and 2000, respectively.

15.  Restructuring

     During the third quarter of 1998, the Company approved a restructuring plan
designed to rationalize production and lower costs at its Fridley, Minnesota
facility. The plan called for shifting a significant portion of production and
final assembly to other Company sites and outsourcing certain other operations.
In 1998 the Company recorded a charge of $36.2 million for estimated employee
termination expenses, acceleration of recognition for benefit costs that were
curtailed, and charges for impaired assets. This charge did not significantly
impact operating funds as it mostly represents either asset write-offs or costs
that will be provided for out of an overfunded pension plan. Remaining accrued
expenses are $1.1 million at December 31, 2000.

16.  Employees' Thrift Plan

     Substantially all of the Company's domestic employees are eligible to
participate in defined contribution savings plans designed to comply with the
requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and
Section 401(k) of the Internal Revenue Code. Charges against income for matching
contributions to the plans were $8.1 million, $8.1 million, and $7.9 million in
the years ended December 31, 1998, 1999 and 2000, respectively.

17.  Financial Information for Subsidiary Guarantors and Non-Guarantors

     The outstanding loans under the senior credit facility and senior
subordinated notes are general obligations of the Company and are jointly and
severally guaranteed by the wholly-owned subsidiary guarantors of the Company
(Note 8). Bofors is the only subsidiary non-guarantor of the Company.

The following information presents a consolidating Balance Sheet, Statement of
Operations and Statement of Cash Flows for the year ended December 31, 2000.

                                      F-39

<PAGE>

                         United Defense Industries, Inc.
                           Consolidating Balance Sheet
                             As of December 31, 2000
                                  (In millions)

<TABLE>
<CAPTION>
                                                                         Subsidiary
                                                              Subsidiary    Non-
                                                      Parent  Guarantors Guarantors Eliminations  Consolidated
                                                    -------------------------------------------------------------
<S>                                                   <C>     <C>         <C>       <C>           <C>
Assets
Current assets:
     Cash and maketable securities ................   $    -    $   63.6    $   49.8     $     -    $  113.4
     Trade receivables ............................        -        88.1        21.6           -       109.7
     Inventories ..................................        -       247.8        11.4           -       259.2
     Other current assets .........................        -         3.9         9.2           -        13.1
                                                    -------------------------------------------------------------
  Total current assets ............................        -       403.4        92.0           -       495.4

Property, plant and equipment, net ................        -        77.6         3.2           -        80.8

Intangible assets, net ............................        -       157.5         4.8           -       162.3
Prepaid pension and postretirement benefit cost ...        -       123.1           -           -       123.1
Restricted cash ...................................        -           -        23.5           -        23.5
Due from subsidiary ...............................     19.9           -           -       (19.9)          -
Investments in and advances to subsidiaries .......    291.5           -           -      (291.5)          -
Other assets                                               -        10.2         0.5           -        10.7
                                                    -------------------------------------------------------------
Total assets ......................................   $311.4    $  771.8    $  124.0     $(311.4)   $  895.8
                                                    =============================================================

Liabilities and Equity
Current liabilities:
     Current portion of long-term debt ............   $ 23.1    $      -    $      -     $     -    $   23.1
     Accounts payable, trade and other ............        -        73.5        12.6           -        86.1
     Advanced payments ............................        -       295.2        47.2           -       342.4
     Accrued and other liabilities ................        -        94.4         9.8           -       104.2
                                                    -------------------------------------------------------------
     Total current liabilities ....................     23.1       463.1        69.6           -       555.8

Long-term liabilities:
     Due to parent ................................        -           -        19.9       (19.9)          -
     Accrued pension and postretirement benefit
       cost .......................................        -         5.5        23.0           -        28.5
     Long-term debt net of current portion ........    246.4           -           -           -       246.4
     Other liabilities ............................        -        15.9         7.2           -        23.1
                                                    -------------------------------------------------------------
Total liabilities .................................    269.5       484.5       119.7       (19.9)      853.8


Stockholders' Equity:
     Common Stock .................................      0.2           -           -           -         0.2
     Additional paid-in-capital ...................    180.0           -           -           -       180.0
     Stockholders' loans ..........................     (1.2)          -           -           -        (1.2)
     Retained earnings/(deficit) ..................   (137.1)      287.3         4.3      (291.5)     (137.1)
                                                    -------------------------------------------------------------
     Total stockholders' equity ...................     41.9       287.3         4.3      (291.5)       42.0
                                                    -------------------------------------------------------------
Total liabilities and stockholders' equity ........   $311.4    $  771.8    $  124.0     $(311.4)   $  895.8
                                                    =============================================================
</TABLE>


                                      F-40

<PAGE>

                         United Defense Industries, Inc.
                      Consolidating Statement of Operations
                   For the Fiscal Year ended December 31, 2000

                                  (In millions)


<TABLE>
<CAPTION>
                                                                            Subsidiary
                                                              Subsidiary       Non-
                                                 Parent       Guarantors    Guarantors   Eliminations  Consolidated
                                             ----------------------------------------------------------------------
<S>                                          <C>           <C>              <C>          <C>           <C>
Revenue:
     Sales ...............................   $       -     $  1,130.5        $   53.4      $      -     $  1,183.9

Costs and expenses:
     Cost of sales .......................           -          900.1            43.8             -          943.9
     Selling, general and
         administrative expenses .........           -          167.9             5.8             -          173.7
     Research and development ............           -           14.6             1.2             -           15.8
                                             ---------------------------------------------------------------------
          Total expenses .................           -        1,082.6            50.8             -        1,133.4

Income(loss) from operations .............           -           47.9             2.6             -           50.5

Other income (expense):
     Earnings related to investments
         in foreign affiliates and
         subsidiaries ....................        51.2           (1.3)              -         (51.2)          (1.3)
     Interest income .....................         0.4            3.3             1.0          (0.5)           4.2
     Interest expense ....................       (29.3)             -            (0.5)          0.5          (29.3)
                                             ---------------------------------------------------------------------
Total other expense ......................        22.3            2.0             0.5         (51.2)         (26.4)

Income(loss) before income taxes
     and extraordinary item ..............        22.3           49.9             3.1         (51.2)          24.1

Provision for income taxes ...............         4.6              -             1.4             -            6.0
                                             ---------------------------------------------------------------------

Income(loss) before extraordinary item ...        17.7           49.9             1.7         (51.2)          18.1

Extraordinary item - net gain from
     extinguishment of bond debt .........         1.1           (0.4)              -             -            0.7
                                             ---------------------------------------------------------------------
Net income(loss) .........................   $    18.8      $    49.5        $    1.7      $  (51.2)    $     18.8
                                             =====================================================================
</TABLE>

                                      F-41

<PAGE>

                         United Defense Industries, Inc.
                 Consolidating Condensed Statement of Cash Flows
                                December 31, 2000

                                  (In millions)


<TABLE>
<CAPTION>
                                                                                Subsidiary
                                                                    Subsidiary     Non-
                                                           Parent   Guarantors  Guarantors Eliminations  Consolidated
                                                       ---------------------------------------------------------------
<S>                                                    <C>          <C>         <C>        <C>           <C>
Cash provided by operating activities ...............   $ 155.6     $  124.7   $   4.2          $ (189.1)    $   95.4

Cash (used in)provided by investing activities ......     (76.4)       (20.4)     23.3              76.4          2.9

Cash (used in)provided by financing activities ......     (79.2)      (135.0)     22.3             112.7        (79.2)
                                                       --------------------------------------------------------------

Net change in cash and marketable securities ........         -        (30.7)     49.8                 -         19.1

Cash and marketable securities, beginning of
  period ............................................         -         94.3         -                 -         94.3
                                                       --------------------------------------------------------------
Cash and marketable securities, end of period .......  $      -     $   63.6   $  49.8          $      -     $  113.4
                                                       ==============================================================
</TABLE>

                                      F-42

<PAGE>

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

None.

<PAGE>

ITEM 10:  Directors and Executive Officers

     The following table sets forth certain information with respect to the
members of the Board of Directors and the executive officers of the Company.
Executive officers of the Company are chosen by the Board of Directors and serve
at its discretion. The Board of Directors maintains an Executive Committee, a
Compensation Committee, and an Audit and Ethics Committee. Bill Conway and Allan
Holt serve as President and Chairman, respectively, of Iron Horse; and Peter
Clare, Daniel D'Aniello and David Rubenstein each serve as Vice Presidents of
Iron Horse. Messrs. D'Aniello and Rubenstein have been Managing Directors of The
Carlyle Group for the past six years. Officers of Iron Horse receive no
compensation for their position.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                                                             Years with
       Name                                       Position                             Age     Co. /1/
--------------------------------------------------------------------------------------------------------
<S>                        <C>                                                         <C>   <C>
William E. Conway, Jr.     Chairman                                                    51        --
--------------------------------------------------------------------------------------------------------
Frank C. Carlucci          Director                                                    70        --
--------------------------------------------------------------------------------------------------------
Peter J. Clare             Director                                                    35        --
--------------------------------------------------------------------------------------------------------
Allan M. Holt              Director                                                    49        --
--------------------------------------------------------------------------------------------------------
Robert M. Kimmitt          Director                                                    53        --
--------------------------------------------------------------------------------------------------------
J.H. Binford Peay, III     Director                                                    60        --
--------------------------------------------------------------------------------------------------------
John M. Shalikashvili      Director                                                    64        --
--------------------------------------------------------------------------------------------------------
Thomas W. Rabaut           Director, President, Chief Executive Officer                52        23
--------------------------------------------------------------------------------------------------------
Francis Raborn             Director, Vice President & Chief Financial Officer          57        23
--------------------------------------------------------------------------------------------------------
David V. Kolovat           Vice President, General Counsel & Secretary                 56        12
--------------------------------------------------------------------------------------------------------
Arthur L. Roberts          Vice President, General Manager-International Division      60        33
--------------------------------------------------------------------------------------------------------
Frederick M. Strader       Vice President, General Manager-Armament Systems Div.       48        20
--------------------------------------------------------------------------------------------------------
Dennis A. Wagner, III      Vice President, Business Development & Marketing            50        19
--------------------------------------------------------------------------------------------------------
Peter C. Woglom            Vice President, General Manager-Ground Systems Division     56        27
--------------------------------------------------------------------------------------------------------
</TABLE>


     William E. Conway, Jr. was elected as a Director of the Company in 1997. He
has been a Managing Director of The Carlyle Group, a Washington, DC-based global
investment firm, since 1987. Mr. Conway was Senior Vice President and Chief
Financial Officer of MCI Communications Corporation from 1984 until 1987, and
was a Vice President and Treasurer of MCI from 1981 to 1984. Mr. Conway
presently serves on the Board of Directors of Nextel Communications, Inc.,
Global Crossing Ltd., and several privately held companies.

     Frank C. Carlucci was elected as a Director of the Company in 1997. He is
Chairman of The Carlyle Group, a Washington, DC-based global investment firm.
Prior to joining The Carlyle Group in 1989, Mr. Carlucci served as Secretary of
Defense from 1987-1989. Previously, he had served as President Reagan's National
Security Advisor in 1987. Mr. Carlucci is Chairman of the following boards:
Neurogen Corporation; Nortel Networks; and the US-ROC (Taiwan) Business Council.
He also serves a member on the following Boards: Ashland, Inc.; Kaman
Corporation; The Quaker Oats Company; SunResorts, Ltd., NV; Texas Biotechnology
Corporation; Pharmacia Corporation; and the Board of Trustees for the RAND
Corporation.

<PAGE>

     Peter J. Clare was elected as a Director of the Company in 1997. He is
currently a Managing Director with The Carlyle Group, a Washington, DC-based
global investment firm, which he joined in 1992. Mr. Clare was previously with
First City Capital, a private investment group. From 1987 to 1989, he worked in
the mergers and acquisitions and merchant banking groups at Prudential-Bache.
Mr. Clare currently serves on the board of KorAm Bank, as well as several
privately held companies.

     Allan M. Holt was elected as a Director of the Company in 1997. He is a
Managing Director of The Carlyle Group, a Washington, DC-based global investment
firm, which he joined in 1991. Mr. Holt was previously with Avenir Group, a
private investment and advisory group, and from 1984 to 1987 was Director of
Planning and Budgets at MCI Communications Corporation, which he joined in 1982.
Mr. Holt currently serves on the boards of several privately-held companies.

     Robert M. Kimmitt was elected as a Director of the Company in 1998. He is
Vice Chairman and President of Commerce One, Inc., an e-commerce company
headquartered in Pleasanton, California. Previously, from 1997-2000, he was a
partner in the law firm of Wilmer, Cutler and Pickering. From 1993 to 1997, he
was a Managing Director of Lehman Brothers. Mr. Kimmitt served as American
Ambassador to Germany from 1991 to 1993. Previously, he served as Under
Secretary of State for Political Affairs, General Counsel to the Treasury
Department, and a member of the National Security Council Staff. Mr. Kimmitt
serves on the Boards of Allianz Life Insurance Company of North America,
Mannesmann AG, Siemens AG, and Xign Corporation, as well as numerous non-profit
boards.

     J. H. Binford Peay, III was elected as a Director of the Company in 1997.
General Peay is a career U.S. Army officer who attained the rank of General and
retired from the Army on October 1, 1997. He is the former Commander-In-Chief of
the U.S. Central Command (1994-1997), and also served as Vice Chief of Staff,
United States Army (1993-1994). Prior to serving as Vice Chief of Staff, he was
Deputy Chief of Staff for Operations and Plans, Department of the Army and
Senior Army Member, U.S. Military Committee, United Nations in Washington, DC
(1991-1993), and was Commanding General, 101st Airborne Division (Air Assault)
at Ft. Campbell, Kentucky (1989 to 1991), leading the Division during Operations
Desert Shield and Desert Storm and its attack into Iraq. General Peay serves as
the Chairman and Chief Executive Officer of Allied Research Corporation, and is
a Trustee of George C. Marshall Foundation, and a Trustee of Virginia Military
Institute Foundation. He is also the President and Chief Executive Officer of
the Fort Campbell Historical Foundation, Inc.

     John M. Shalikashvili was elected as Director of the Company in June 1998.
He currently is a visiting Professor to the Center for International Security at
Stanford University. Previously, General Shalikashvili was a career U.S. Army
Officer who attained the rank of General and retired from the Army in September
1997. He was appointed the 13th Chairman of the Joints Chiefs of Staff on
October 25, 1993. Prior major commands were Supreme Allied Commander, Commander
Operation PROVIDE COMFORT (the relief operation that returned hundreds of
thousands of Kurdish refugees to Northern Iraq), Deputy Commander-In-Chief,
United States Army, Europe and Seventh Army, and Commander of the 9th Infantry
Division (Motorized). The General was born in Warsaw, Poland on June 27, 1936.
General Shalikashvili serves on the Boards of the Boeing Company, L3
Communications Corporation, the Frank Russell Trust Company, and Plug Power,
Inc.

<PAGE>

     Thomas W. Rabaut has been President and Chief Executive Officer of UDLP
since its formation in 1994. Before joining UDLP, Mr. Rabaut worked at FMC since
1977 and held several executive positions, including General Manager of FMC's
Steel Products Division from 1986 to 1988, Operations Director and then Vice
President and General Manager of FMC's Ground Systems Division from 1988 to
1993, and General Manager of FMC's Defense Systems Group, overseeing operations
in the U.S., Turkey, Pakistan, and Saudi Arabia for U.S. and allied armies,
navies, and marines from 1993 to 1994. In 1994, he was also elected Vice
President of FMC. Mr. Rabaut graduated from the U.S. Military Academy at West
Point and from the Harvard Business School. Mr. Rabaut is Chairman of the Board
of Directors of the National Defense Industrial Association, and is a Trustee of
Stevens Institute of Technology.

     Francis Raborn was elected as a Director of the Company in 1997. He has
been Vice President and Chief Financial Officer of UDLP since its formation in
1994, with responsibility for financial, contract, administrative and government
compliance matters. Mr. Raborn joined FMC in 1977, and held a variety of
financial and accounting positions, including Controller of FMC's Defense
Systems Group from 1985 to 1993, and Controller of FMC's Special Products Group
from 1979 to 1985. Mr. Raborn received a B.S. in Economics from the University
of Pennsylvania's Wharton School and an MBA from UCLA.

     David V. Kolovat has been Vice President and General Counsel of UDLP since
its formation in 1994. He has also served as FMC's Associate General Counsel in
charge of defense business legal work from 1988 until consummation of the
Acquisition. Mr. Kolovat served as Vice President and General Counsel of
Premisys, Inc., from 1986 to 1988, during which Premisys was acquired by Pacific
Telesis Corporation, and from 1984 to 1986 as Vice President and General Counsel
of Robot Defense Systems, Inc. Mr. Kolovat received his undergraduate degree
from the University of Iowa, and his law degree from Stanford Law School.

     Arthur L. Roberts has been Vice President and General Manager-International
Division of UDLP since its formation in 1994. His responsibilities include
management of joint ventures in Turkey and Saudi Arabia and development of new
co-production programs. Prior to joining UDLP, Mr. Roberts was General Manager
of FMC's Defense Systems International Division since 1993. Mr. Roberts held a
number of positions at FMC since 1967, including management of the Turkey joint
venture program from its initial proposal in 1988 through 1992. Mr. Roberts
holds a Bachelor's Degree in Mechanical Engineering from Yale University and an
MBA from Harvard Business School.

     Frederick M. Strader has been Vice President and General Manager-Armament
Systems Division of UDLP since May 1994. Prior to joining UDLP, Mr. Strader was
Division Manager of FMC's Agricultural Machinery Division from October 1992 to
May 1994, and Manager of FMC's Strategic Planning Group from September 1991 to
October 1992. Prior thereto, he held a number of operations, planning and
financial positions at the Steel Products Division of FMC. Mr. Strader received
his BA Degree from Ripon College and his MBA Degree from the Wharton School at
the University of Pennsylvania.


<PAGE>

     Dennis A. Wagner, III has been Vice President, Business Development and
Marketing of UDLP since its formation in 1994 with responsibility for the
development and coordination of world-wide strategies for the design,
manufacture, and sale of combat vehicles. Mr. Wagner joined FMC's Defense
Systems Group in 1982 and held a number of marketing and management positions,
including Division General Manager of FMC's Steel Products Division from 1989 to
1994 and Program Director for the M113 family of vehicles from 1987 to 1989. Mr.
Wagner received a BS in General Engineering from the U.S. Military Academy and
an MBA in Finance from the University of Detroit.

     Peter C. Woglom has been Vice President and General Manager-Ground Systems
Division of UDLP since 1994. Prior thereto, he held a number of line and
executive positions at FMC after joining FMC in 1973, including Vice President
and General Manager of FMC's Ground Systems Division from 1993 to 1994, and Vice
President and Director, Business Strategies and Initiatives for FMC's Defense
Systems Group from 1990 to 1993. Mr. Woglom received BSCE and Master of
Engineering Degrees from Cornell University and an MBA from the University of
Pittsburgh.


<PAGE>

ITEM 11: Executive Compensation

         The following table sets forth information with respect to the
compensation paid by the Company for services rendered for the years ended
December 31, 2000, 1999, and 1998 to the Chief Executive Officer and to each of
the four other most highly compensated executive officers of the Company (the
"Named Executive Officers").

                           Summary Compensation Table
                           --------------------------

<TABLE>
<CAPTION>
                                         Annual Compensation                         Long-Term Compensation
                            --------------------------------------------   ------------------------------------------
                                                                                      Awards                  Payouts
                                                                           ----------------------------       -------
                                                                 Other
                                                                Annual     Restricted       Securities                 All Other
         Name and                                               Compen-      Stock          Underlying        LTIP      Compen-
        Principal                      Salary      Bonus        sation      Award(s)          Options        Payouts    sation
         Position           Year        ($)         ($)         ($)/1/       ($)/2/             (#)            ($)       ($)/3/
--------------------------  ----        ---         ---      -----------   -----------      ----------       -------   ---------
<S>                         <C>       <C>         <C>         <C>          <C>              <C>              <C>       <C>
Thomas W. Rabaut .........  2000      401,083     386,052         0               0                0             0       39,554
  President & CEO           1999      364,167     421,341         0               0                0             0       40,094
                            1998      331,547     393,082         0               0          200,000             0       31,650

Peter C. Woglom ..........  2000      257,087     180,989         0               0                0             0       22,849
  Vice President,           1999      245,587     237,728         0               0                0             0       20,895
  General Manager -         1998      234,528     239,922         0               0          100,000             0       15,997
  Ground Systems


Francis Raborn ...........  2000      248,400     198,919         0               0                0             0       21,386
  Vice President &          1999      210,600     206,177         0               0                0             0       20,161
  CFO                       1998      201,993     211,083         0               0          100,000             0       14,361


Frederick M. Strader .....  2000      214,078     180,853         0               0                0             0       18,264
  Vice President,           1999      198,749     158,721         0               0                0             0       22,137
  General Manager -         1998      192,348     168,420         0               0          100,000             0       21,108
  Armament Systems

Arthur L. Roberts ........  2000      185,796     204,376         0               0                0             0       17,163
  Vice President,           1999      182,645     133,806         0               0                0             0       20,797
  General Manager -         1998      174,427     166,927         0               0           65,000             0       17,845
  International Division
</TABLE>

______________________
/1/  Amounts of less than $50,000 or 10% of the Named Executive Officer's
     compensation are excluded.
/2/  There are no Company Restricted Stock Awards.
/3/  Includes matching contributions under the Company's 401(k) Plan for
     salaried employees for 1999 and 1998


<PAGE>

Directors Compensation
----------------------

         The three outside directors (Messrs. Peay, Kimmitt and Shalikashvili)
are paid annual retainers of $25,000 for all services rendered. There are no
other fees paid for attendance at meetings, etc. These three directors may elect
to receive their annual retainer in cash, options to purchase Company stock, or
a combination. The Company does not maintain a medical, dental, or retirement
benefits plan for these directors. The remaining directors are employed either
by The Carlyle Group or the Company, and are not separately compensated for
their service as directors.

Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------

         The Compensation Committee of the Board of Directors is a standing
committee charged with the responsibilities, subject to full Board approval, of
establishing, periodically re-evaluating and (as appropriate) adjusting, and
administering policies concerning compensation of management personnel,
including the CEO and all of the Company's other executive officers. The
Compensation Committee was established in 1998 and Messrs. Peay and Clare serve
on the Committee. Mr. Clare is a member of The Carlyle Group, which is the
majority stockholder of the Company.

         By virtue of his position as President and Chief Executive Officer, Mr.
Rabaut has been invited to attend all meetings of the Committee, but he is not a
voting member.

Retirement Plan
---------------

         Each Named Executive Officer is covered under the UDLP Salaried
Employees' Retirement Plan (the "Pension Plan") and the UDLP Excess Pension Plan
(the "Excess Plan") described below. The following table shows the estimated
annual pension benefits under such plans for the specified compensation and
years of service.

         A portion of the retirement benefits for service prior to 1986,
computed under the Pension Plan, is payable from annuity contracts maintained by
Aetna Life Insurance Company.

Pension Plan Table
------------------

              Estimated Annual Retirement Benefits
                                For years of Service Indicated
              ------------------------------------------------------------------
  Final
  Average
 Earnings      15 Years      20 Years      25 Years      30 Years      35 Years
----------    ----------    ----------    ----------    ----------    ----------

 $ 150,000      $ 31,270      $ 41,693      $ 52,117      $ 62,540      $ 72,963
   250,000        53,770        71,693        89,617       107,540       125,463
   350,000        76,270       101,693       127,117       152,540       177,963
   450,000        98,770       131,693       164,617       197,540       230,463
   550,000       121,270       161,693       202,117       242,540       282,963
   650,000       143,770       191,693       239,617       287,540       335,463
   900,000       200,020       266,693       333,367       400,040       466,713


<PAGE>

     Compensation included in the final average earnings for the pension benefit
computation includes base annual salary and annual bonuses, but excludes
payments for most other compensation. Unreduced retirement pension benefits are
calculated pursuant to the Pension Plan's benefit formula as an individual life
annuity payable at age 65. Benefits may also be payable as a joint and survivor
annuity or a level income option. Final average earnings in the above table
means the average of covered remuneration for the highest 60 consecutive
calendar months out of the 120 calendar months immediately preceding retirement.
Benefits applicable to a number of years of service or final average earnings
different from those in the above table are equal to the sum of (A) 1 percent of
allowable Social Security Covered Compensation ($33,066) for a participant
retiring at age 65 in 1999 times years of credited service and (B) 1.5 percent
of the difference between final average earnings and allowable Social Security
Covered Compensation times years of credited service. ERISA limits the annual
benefits that may be paid from a tax-qualified retirement plan. Accordingly, as
permitted by ERISA, the Company has adopted the excess plan to maintain total
benefits upon retirement at the levels shown in the table. Messrs. Rabaut,
Woglom, Strader, Raborn, and Roberts currently have 23, 27, 20, 23 and 33 years
of service under the Pension Plan, respectively.

     The Company also maintains the Supplemental Thrift and Savings Plan
designed to provide select employees a benefit equal to the benefit the
participant would receive under the 401(k) plan if the Code and such plan did
not require the exclusion of compensation above a certain level. All Named
Executive Officers are eligible to participate in the Supplemental Thrift and
Savings Plan.

Severance Arrangements
----------------------

     In 1999, the Company entered into executive compensation agreements with
certain management employees. These agreements generally provide that in the
event the executive's employment is terminated by the company other than for
"cause" or by the executive with "good reason" (each as defined therein),
including an acquisition or merger, the executive will be entitled to (i) a
payment equal to a multiple (ranging from one to three) of the executive's base
pay and target bonus; (ii) Company-paid outplacement services; and (iii) the
right to continue to participate in the Company's health, life and accidental
death and dismemberment and long-term disability benefits plan for one year to
three years at the rates in effect for active employees.

     The Company also maintains a severance plan that generally covers most
salaried and non-union hourly employees, and provides severance payments in the
event of the employee's involuntary termination of employment due to a reduction
in force. Severance payments are calculated as a percentage (up to 100% maximum)
of base pay.

Stock Option Plan
-----------------

     The Company adopted an option plan for key employees (including the Named
Executive Officers) of the Company, pursuant to which options to purchase an
aggregate of approximately 8% of the Company's fully-diluted common stock at the
Closing Date were granted, subject to vesting requirements based on performance
and/or length of service after the options were granted. None of the Named
Executive Officers received option grants in 2000.

<PAGE>

                      AGGREGATED OPTIONS EXERCISED IN 2000
                      ------------------------------------

     Shown below is information with respect to options to purchase the
Company's common stock awarded to the Named Executive Officers and the value and
number of unexercised options held at December 31, 2000 by such Named Executive
Officers.

<TABLE>
<CAPTION>
                                  Aggregated Options Exercised in 2000
                                     And Option Values at 12/31/00
---------------------------------------------------------------------------------------------------
                       Shares                  Number of Securities
                    Acquired on     Value     Underlying Unexercised        Value of Unexercised
     Name             Exercise    Realized          Underlying                     Options *
     ----          ------------- ---------- --------------------------   --------------------------
                                            Exercisable  Unexercisable   Exercisable  Unexercisable
                                            -----------  -------------   -----------  -------------
  <S>              <C>           <C>        <C>          <C>             <C>          <C>
  TW Rabaut ......       0            0        90,000       110,000       $2,250,000    $2,750,000

  PC Woglom ......       0            0        50,000        50,000       $1,250,000    $1,250,000

  FM Strader .....       0            0        50,000        50,000       $1,250,000    $1,250,000

  F Raborn .......       0            0        50,000        50,000       $1,250,000    $1,250,000

  AL Roberts .....       0            0        32,500        32,500       $  812,500    $  812,500
</TABLE>




* The value of the unexercised options is based on an internal valuation
prepared by the Company in 2000 of $25 per share.

<PAGE>

Item 12: Principal Stockholders

     The following table sets forth certain information regarding the beneficial
ownership of the common stock of the Company by each person known by the Company
to be the owner of 5% or more of the common stock of the Company, by each person
who is a Director or Named Executive Officer of the Company and by all Directors
and Executive Officers of the Company as a group:


                                                               Percentage of All
                Beneficial Owner/(1)/               Number of      Outstanding
                                                       Shares        Shares
       TCG Holdings, L.L.C./(2)(3)/ .............  17,300,000          96%
       William E. Conway, Jr./(3)(5)/ ...........     100,000           *
       Allan M. Holt/(3)(5)/ ....................      25,000           *
       Peter J. Clare/(3)(5)/ ...................      20,000           *
       Frank C. Carlucci/(3)(5)/ ................      20,000           *
       Robert M. Kimmitt/(4)/ ...................       5,000           *
       J. H. Binford Peay, III/(4)/ .............           -           *
       John M. Shalikashvili/(4)/ ...............           -           *
       Thomas W. Rabaut/(4)/ ....................      10,000           *
       Francis Raborn/(4)/ ......................      75,000           *
       David V. Kolovat/(4)/ ....................      31,428           *
       Arthur L. Roberts/(4)/ ...................      34,000           *
       Frederick M. Strader/(4)/ ................      20,000           *
       Dennis A. Wagner, III/(4)/ ...............       5,000           *
       Peter C. Woglom/(4)/ .....................      10,000           *
       All Directors and Executive
          Officers as a Group/(14)/ .............     355,428           2%



----------
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
Except as otherwise indicated, each beneficial owner has the sole power to vote,
as applicable, and to dispose of all Units owned by such beneficial owner.

(2) Carlyle Partners II, L.P., a Delaware limited partnership, Carlyle Partners
III, L.P., a Delaware limited partnership, Carlyle International Partners II,
L.P., a Cayman Islands limited partnership, Carlyle International Partners III,
L.P., a Cayman Islands limited partnership, and certain additional partnerships
formed by Carlyle (collectively, the "Investment Partnerships") and certain
investors with respect to which TC Group, L.L.C. or an affiliate exercises
investment discretion and management constitute all of the members of Iron
Horse. TC Group, L.L.C. is the sole general partner of the Investment
Partnerships, and TCG Holdings, L.L.C., a Delaware limited liability company, is
the sole managing member of TC Group, L.L.C. William E. Conway, Jr., Daniel
A.D'Aniello, and David M. Rubenstein, as the managing members of TCG Holdings,
L.L.C. may be deemed to share beneficial ownership of the shares shown as
beneficially owned by TCG Holdings, L.L.C. Such persons disclaim such beneficial
ownership.

(3) The address of such person is c/o The Carlyle Group, 1001 Pennsylvania
Avenue, NW, Washington, DC 20004.

(4) The address of such person is c/o United Defense Industries, Inc., 1525
Wilson Boulevard, Suite 700, Arlington, Virginia 22209-2411.

(5) Individual also owns an interest in Iron Horse through Carlyle - UDLP
Partners, L.P.

*Denotes less than 1% beneficial ownership.


<PAGE>

ITEM 13.   Certain Transactions

     Concurrently with the closing of the acquisition, the Company entered into
a management agreement (the "Management Agreement") with TCG Holdings, L.L.C.
(or another affiliate of Carlyle) for certain management and financial advisory
services and oversight to be provided to the Company and its subsidiaries. The
Management Agreement provides for the payment to Carlyle of an annual management
fee of $2.0 million


<PAGE>

ITEM 14. Exhibits and Financial Data Schedule

(a)      The index of the financial statements has been included with Item 8.
(b)      Reports on Form 8-K filed in the third quarter of 2000.
                           None.
(c)      Index of Exhibits.


                                  EXHIBIT INDEX

Exhibit                                 Description
Number                                  -----------
------

         +2.1  Purchase Agreement dated as of August 25, 1997 among FMC
               Corporation, Harsco Corporation, Harsco UDLP Corporation and Iron
               Horse Acquisition Corp. (a copy of the schedules to this
               agreement will be furnished supplementally upon request of the
               Commission).
        ++2.2  Supplemental Agreement No. 1 to Purchase Agreement dated as of
               August 25, 1997 among FMC Corporation, Harsco Corporation, Harsco
               UDLP Corporation and Iron Horse Acquisition Corp.
        +3.1a  Certificate of Incorporation of Iron Horse Acquisition Corp.
               (n/k/a) United Defense Industries, Inc.
        +3.1b  Certificate of Amendment of Certificate of Incorporation Before
               Payment of Any Part of the Capital of Iron Horse Acquisition
               Corp. (n/k/a United Defense Industries, Inc.)
        +3.1c  Certificate of Amendment of the Certificate of Incorporation of
               United Defense Industries, Inc.
     ++++3.1d  Certificate of Amendment of the Certificate of Incorporation of
               United Defense Industries, Inc.
         +3.2  By-laws of United Defense Industries, Inc.
         +3.3  Certificate of Incorporation of UDLP Holdings Corp.
         +3.4  By-laws of UDLP Holdings Corp.
         +3.5  Amended and Restated Agreement of Limited Partnership of United
               Defense, L.P.
         +3.6  Certificate of Amendment to Certificate of Limited Partnership of
               United Defense, L.P.
         +3.7  Certificate of Formation of Iron Horse Investors, L.L.C.
         +3.8  Limited Liability Company Agreement of Iron Horse Investors,
               L.L.C.
         +4.1  Indenture dated as of October 6, 1997 among United Defense
               Industries, Inc., United Defense, L.P., UDLP Holdings Corp. and
               Norwest Bank Minnesota, National Association
         +4.2  Specimen Certificate of 83 3/4% Senior Subordinated Notes due
               2007 (included in Exhibit 4.1 hereto)
         +4.3  Purchase Agreement dated October 1, 1997 among United Defense
               Industries, Inc., UDLP Holdings Corp., Iron Horse Investors,
               L.L.C., United Defense, L.P., Lehman Brothers Inc., BT Alex.
               Brown Incorporated and Chase Securities Inc.
         +4.4  Registration Rights Agreement dated as of October 6, 1997 among
               United Defense Industries, Inc., United Defense, L.P., UDLP
               Holdings Corp., Iron Horse Investors, L.L.C., Lehman Brothers
               Inc., BT Alex. Brown Incorporated and Chase Securities Inc.
        ++4.5  Credit Agreement dated as of October 6, 1997 among Iron Horse
               Investors, L.L.C., United Defense Industries, Inc., various
               lending institutions party thereto, Citicorp USA, Inc. and Lehman
               Commercial Paper Inc. as Documentation Agents, and Bankers Trust
               Company as Administrative Agent and as Syndication Agent
      ++++4.7  Form of Stockholders Agreement, by and among Iron Horse
               Investors, L.L.C., United Defense Industries, Inc. and each other
               holder of Common Stock.
      ++++4.8  Stockholders Agreement, dated as of July 22, 1998, by and
               between Iron Horse Investors, L.L.C., United Defense Industries,
               Inc., the UDLP Non-Qualified Trust and United Defense, L.P.


<PAGE>

      ++++4.9  UDLP Amended and Restated Supplemental Retirement and Savings
               Plan. (1)
     ++++4.10  United Defense Stock Option Plan. (1)
     ++++4.11  Form of Option Contract. (1)
     ++++4.12  United Defense Industries, Inc. Equity Purchase Plan. (1)
       ++10.1  Lease Agreement dated as of June 1, 1994 among Calhoun Economic
               Development Council and United Defense, L.P.
        *10.2  Facilities use agreement number M67004-99-C0022 dated April 12,
               1999 among United Defense, L.P. and the Marine Corps Logistics
               Base, Albany, Georgia for the use of the government owned
               property located at Building 1121, Bay 4 and rail sidings, and
               associated maintenance service agreement.
       ++10.3  Sub-Lease Agreement among the Louisville/Jefferson County
               Development Authority, Inc. and United Defense, L.P., as amended
               by that certain First Amendment to Sublease of Real and Personal
               Property Agreement among the Louisville/Jefferson County
               Development Authority, Inc. and United Defense, L.P.
       ++10.4  Facilities contract number N00024-93-E-8521, dated November 16,
               1992 among United Defense, L.P., Armament Systems Divisions and
               the U.S. Government Naval Sea Systems Command for the use of the
               government owned facility located at 4800 East River Road,
               Minneapolis, MN 55459.
       ++10.5  Lease Agreement dated January 22, 1996 among Lewis F. Holmes III
               and United Defense, L.P.
       ++10.6  Lease Agreement dated November 1, 1993 among Brier Hill Steel
               Company, Inc. and Harsco Corporation, as amended by that certain
               Lease Novation Agreement among Harsco Corporation, Brier Hill
               Steel Company, Inc. and United Defense, L.P. and by that certain
               Lease Modification dated June 17, 1996 among United Defense, L.P.
               and Brier Hill Steel Company, Inc.
        *10.7  Lease Agreements dated April 1999 among ATP Associates L.P. and
               United Defense L.P. (Buildings A and C).
       +10.11  Transition Services Agreement dated as of October 6, 1997 among
               FMC Corporation, United Defense, L.P. and United Defense
               Industries, Inc.
       +10.12  Technology and Environmental Services Agreement dated as of
               October 6, 1997 among FMC Corporation and United Defense
               Industries, Inc.
       +10.13  Amended and Restated Lease Agreement dated as of October 6, 1997
               among FMC Corporation and United Defense, L.P.
       +10.14  Amended and Restated Harsco Intellectual Property Agreement
               dated as of October 6, 1997 among Harsco Corporation and United
               Defense, L.P.
       +10.15  Amended and Restated FMC Intellectual Property Agreement dated
               as of October 6, 1997 among FMC Corporation and United Defense,
               L.P.
       +10.16  Management Agreement dated October 6, 1997 among United Defense
               Industries, Inc., United Defense, L.P. and TC Group Management,
               L.L.C.
     +++10.17  Professional Service Agreement with J.H. Binford Peay, III.
     +++10.18  Professional Service Agreement with John M. Shalikashvili.
   +++++10.19  Professional Service Agreement with Robert M. Kimmitt.
      **10.20  Executive Compensation Agreement with Thomas W. Rabaut.
      **10.22  Executive Compensation Agreement with Frederick M. Strader.
      **10.23  Executive Compensation Agreement with Peter C. Woglom.
      **10.24  Executive Compensation Agreement with David V. Kolovat.
      **10.25  Executive Compensation Agreement with Francis Raborn.
      **10.26  Executive Compensation Agreement with Dennis A. Wagner, III.
      ***21.1  Subsidiaries of United Defense Industries, Inc.
        *23.1  Consent of Ernst & Young LLP, Independent Auditors

            *  Filed herewith
           **  Incorporated by reference to the identical exhibit number in the
               Company's Report on Form 10-Q for
          ***  Previously filed herewith

<PAGE>

               the quarter ended June 30, 1999
           +   Incorporated by reference to the identical exhibit number in the
               Company's Registration Statement on Form S-4 (333-43619) filed
               with the Securities and Exchange Commission on December 22, 1997.
          ++   Incorporated by reference to the identical exhibit number in the
               Company's Amendment No. 1 to Form S-4 (333-43619) filed with the
               Securities and Exchange Commission February 6, 1998.
         +++   Incorporated by reference to exhibits to the Company's Report on
               Form 10-Q for the quarter ended June 30, 1998.
        ++++   Incorporated by reference to the identical exhibit number in the
               Company's Registration Statement on Form S-8 (333-60207) filed
               with the Securities and Exchange Commission on July 30, 1998.
       +++++   Incorporated by reference to the identical exhibit number in the
               Company's Report on Form 10-K for the year ended December 31,
               1998.





(d) Financial Statement Schedules


         Report of Ernst & Young LLP, Independent Auditors on Schedule

Board of Directors
United Defense Industries, Inc.

We have audited the consolidated financial statements of United Defense
Industries, Inc. (a subsidiary of Iron Horse Investors, L.L.C.) and subsidiaries
as of December 31, 1999 and 2000, and for each of the three years in the period
ended December 31, 2000, and have issued our report thereon dated February 1,
2001. Our audits also included the financial statement schedule listed in Item
14(d) of this Annual Report. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

February 1, 2001
McLean, VA


                                      II-3

<PAGE>




The following schedule shows information on our valuation and qualifying
accounts:



<TABLE>
<CAPTION>
                                                                   Additions
                                                             -----------------------
                                                 Balance at  Charged to   Charged to            Balance at
                                                Beginning of   Costs &      Other   Deductions/   End of
Description                                        Period      Expenses   Accounts    Payments    Period
-----------                                        ------      --------   --------    --------    ------
<S>                                              <C>          <C>         <C>         <C>          <C>
Year Ended December 31, 1998:
  Reserve for remediation and compliance costs     $12,930     $    --       $--      $    --    $12,930
  Restructuring reserve                                 --      36,200        --       27,500      8,700
  Litigation reserve                                    --          --        --           --         --
  Allowance for doubtful accounts                      153       1,197        --           23      1,327
                                                   -------     -------       ---      -------    -------
    Total                                          $13,083     $37,397       $--      $27,523    $22,957
                                                   =======     =======       ===      =======    =======

Year Ended December 31, 1999:
  Reserve for remediation and compliance costs     $12,930     $   170       $--      $    --    $13,100
  Restructuring reserve                              8,700          --        --        7,100      1,600
  Litigation reserve                                    --       5,100        --           --      5,100
  Allowance for doubtful accounts                    1,327         677        --        1,177        827
                                                   -------     -------       ---      -------    -------
    Total                                          $22,957     $ 5,947       $--      $ 8,277    $20,627
                                                   =======     =======       ===      =======    =======

Year Ended December 31, 2000:
  Reserve for remediation and compliance costs     $13,100     $ 1,155       $--      $    --    $14,255
  Restructuring reserve                              1,600          --        --          500      1,100
  Litigation reserve                                 5,100       3,000        --        1,854      6,246
  Allowance for doubtful accounts                      827         274        --           38      1,063
                                                   -------     -------       ---      -------    -------
    Total                                          $20,627     $ 4,429       $--      $ 2,392    $22,664
                                                   =======     =======       ===      =======    =======
</TABLE>

Remaining schedules have been omitted because the information required to be
shown in the schedules is not applicable or is included elsewhere in our
financial statements or accompanying notes.



<PAGE>
SIGNATURES

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


                                By: /s/ Francis Raborn
                                    -----------------------
                                    Francis Raborn
                                    Chief Financial Officer and Principal
                                    Financial and Accounting Officer of the
                                    Registrant and each Co-Registrant

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

<TABLE>
<CAPTION>
          Name                                  Title                                 Date
          ----                                  -----                                 ----
<S>                                  <C>                                        <C>
/s/ Thomas W. Rabaut                 President, Chief Executive                 December 10, 2001
---------------------------------
  Thomas W. Rabaut                      Officer and Director of United
                                        Defense Industries, Inc. ("UDI")
                                        and UDLP Holdings Corp.
                                        (for UDLP Holdings Corp.
                                        itself and as the corporate
                                        general partner of United
                                        Defense, L.P.)

/s/ Francis Raborn                   Director of UDI and UDLP                   December 10, 2001
---------------------------------
  Francis Raborn                        Holdings Corp. (for UDLP
                                        Holdings Corp. itself and as
                                        the corporate general
                                        partner of United Defense, L.P.)

/s/ William E. Conway, Jr.           Chairman of the Board of UDI               December 10, 2001
---------------------------------
  William E. Conway, Jr.

/s/ Frank C. Carlucci                Director of UDI                            December 10, 2001
---------------------------------
  Frank C. Carlucci

/s/ Peter J. Clare                   Director of UDI
---------------------------------
  Peter J. Clare                                                                December 10, 2001

/s/ Allan M. Holt                    Director of UDI and Chairman               December 10, 2001
---------------------------------
  Allan M. Holt                      of Iron Horse Investors, L.L.C.

/s/ Robert M. Kimmitt                Director of UDI                            December 10, 2001
---------------------------------
  Robert M. Kimmitt

/s/ John M. Shalikashvili            Director of UDI                            December 10, 2001
---------------------------------
    John M. Shalikashvili

/s/ J. H. Binford Peay, III          Director of UDI                            December 10, 2001
---------------------------------
  J.H. Binford Peay, III

/s/ David V. Kolovat                 Director of UDLP                           December 10, 2001
---------------------------------
David V. Kolovat                     Holdings Corp. (for UDLP
                                     Holdings Corp. itself and as
                                     the corporate general partner
                                     of United Defense, L.P.)

/s/ Robert N. Sankovich              Director of UDLP                           December 10, 2001
---------------------------------
  Robert N. Sankovich                Holdings Corp. (for UDLP
                                     Holdings Corp. itself and as
                                     the corporate general partner
                                     of United Defense, L.P.)
</TABLE>