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

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

                                   FORM 10-K

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

For the fiscal year ended DECEMBER 31, 2000 Commission file number 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 or any amendment to this
Form 10-K [X]

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. None 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.


                                                      No. of shares    Par Value
                                                      -------------    ---------
        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-

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Forward-Looking Statements

     This report on Form 10-K 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 expects a contract award of the FY01 requirements by March
2001. 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%. 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 vehicles comprised of a mix of
forward observation vehicles, engineer squad vehicles and
<PAGE>

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 carried at cost since there is
uncertainty regarding the Company's ability to control the repatriation of
earnings. Royalties are reported as revenues, while dividends are reported as
earnings from foreign affiliates. Dividends and royalties are paid and reported
in U.S. dollars.

     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 42% and 58%,
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 domestic and foreign
major 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.

                                       16
<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)       98,170       68,893   ||    (36,259)     (120,007)        1,541        21,645
                                             ||
Total assets          644,979      610,475   ||  1,246,083       989,741       873,998       918,094

Long term debt                                     647,800       490,343       326,757       246,491
</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
$991,080, $875,337 and $919,330 at December 31, 1998, 1999 and 2000,
respectively and its net income was ($116,462), $1,477 and $20,765 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 Army's smallest air
transports (C130 aircraft), and early fielding using off-the-shelf technology.
United Defense participated in the competitive
<PAGE>

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.
<PAGE>

     Administration Defense Review. The Bush Administration has indicated that
it is 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 2000 Compared to Year Ended December 1999.

     Revenue. Revenue of $1,183.9 million for 2000 was lower by $29.6 million,
or 2.4%, than the $1,213.5 million for 1999. The decline in revenue was due to
the winding down and closing of the Paladin production operation in June 1999,
lower billings for the Crusader development program, and the completion of
shipments for several programs in 1999. The decline was substantially offset by
the additional sales generated by business combinations consummated in 2000,
increased shipments of Bradley upgrades and by engineering development sales for
the advanced gun system for the DD21 class ship.

     Gross Profit. Gross profit increased $18.4 million, or 8.3% to $240.0
million for 2000 from $221.6 for 1999.  This gross profit increase was primarily
due to the reduced depreciation and amortization costs related to the
Acquisition purchase price and higher award fees for the Crusader programs.  The
increase was partly offset by the lower sales volume described above and a
greater impact in 2000 resulting from use of the LIFO inventory method.
<PAGE>

     Selling, general and administrative expenses. Selling, general and
administrative expenses were up $7.2 million to $175.1 million for 2000 compared
with $167.9 million for 1999. The higher spending is primarily the result of
heavy spending for marketing activity and proposals, most notably for the
Interim Armored Vehicle program, and of expenses associated with businesses
acquired in 2000. This increase in spending activity was partially offset by
lower depreciation and amortization of intangible assets established in
conjunction with the Acquisition.

     Research and development. Research and development costs were $15.8 million
for 2000 compared with $12.8 million for 1999. During 2000 research and
development spending was higher than normal to support the Company's effort to
win an award related to the Interim Armored Vehicle program. Additionally, the
net cost was lower in 1999 because of a reimbursement to the Company of research
and development costs previously incurred related to development of the advanced
gun system for the new DD21 class ship.

     Earnings from foreign affiliates. Earnings from foreign affiliates were
$2.9 million in 2000 which was $2.4 million higher than the $.5 million recorded
for 1999. The increase was due to a combination of higher operational activity
from the Saudi joint venture and the liquidation of offset requirements related
to the Turkish joint venture.

     Interest expense. Net interest expense for 2000 was $25.1 million which was
$11.9 million below the $37.0 million in 1999 as a result of lower debt levels.

     Net income. As a result of the foregoing, net income in 2000 was $21.6
million, including an extraordinary gain of $0.7 million for the early
extinguishment of bond debt, compared with net income of $1.5 million for 1999.

Year Ended December 31, 1999 Compared with Year Ended December 31, 1998

     Revenue.  Revenue for 1999 was $1,213.5 million, a slight 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 and the completion of the self-propelled howitzer and the M113 shipments
to foreign customers. This decline was offset by higher revenue from the
shipments of  vertical launcher systems, increased billings for the Crusader
program, and new deliveries of M9 armored combat earth movers, self propelled
howitzers and rebuilt AAV7 amphibious vehicles.

     Gross Profit.  Gross profit increased $103.4 million, or 87.4%, to $221.6
million for 1999 from $118.3 million for 1998. The gross profit rate improved
8.6 percentage points to 18.3% for 1999. The improvement in 1999 was due to
lower costs related to assets revalued in connection with the Acquisition. In
1998 reserves were established including a sizeable non-cash pension charge for
restructuring the Company's Armament Systems Division, the write-off of unusable
capitalized software, and other impaired assets which did not recur in 1999.
<PAGE>

     Selling, general and administrative expenses. Selling, general and
administrative expenses were $167.9 million in 1999, a decrease of $9.6 million,
or 5.4% from 1998. The marginal decrease in expenses is attributable to lower
depreciation and amortization of goodwill and other intangible assets related to
assets revalued in connection with the Acquisition.

     Earnings from Foreign Affiliates. Earnings from foreign affiliates were $.5
million in 1999, a decline of $5.7 million from 1998. The decline was due to the
establishment of additional reserves for the potential offset penalty for the
joint venture in Turkey equivalent to dividends received from the venture in
1999.

     Interest Expense. Net interest expense including the amortization of
financing costs was $37.0 million for 1999 which was $13.7 million or 27.1%
lower than 1998. The decline in interest expense was the result of lower debt
levels in 1999.

     Net Income. As a result of the foregoing, the Company earned net income of
$1.5 million for 1999 compared with a net loss of $120.0 million for 1998.

Liquity, 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.

     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, but it was adversely affected by
increases in working capital, primarily to fund an increase in receivables and a
decrease in advance payments due to the completion of several programs. In 1999
cash flow was principally due to net income plus depreciation and amortization
of $137.4 million, and significant collections of progress payments from the
U.S. Government and foreign advance payments. In 1998 the Company likewise
generated a high volume of cash resulting from net loss plus depreciation and
amortization of $58.0 million, and sizeable reductions in receivables and
inventories as the U.S. government payment office paid all billings received by
a certain
<PAGE>

deadline, and the Company 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

     Foreign Exchange Contracts. Bofors uses forward exchange contracts to
reduce the effect of fluctuating currencies on short-term foreign currency-
denominated transactions.

     The following table summarizes by major currency the contractual amounts of
Bofors' forward exchange contracts and their termination market values.


Contractual Currency    Contractual Amount  Termination Market Value
---------------------------------------------------------------------

British pound           2.0 M               1.9 M
European euro           1.2 M               1.2 M
US dollar               9.9 M               8.8 M

     At December 31, 2000, the deferred unrealized gains and losses on forward
exchange contracts were not material to the financial position or results of
operations of the Company.

<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 ............................. F6-22

UNITED DEFENSE INDUSTRIES, INC.

Report of Independent Auditors..........................................   F23

Consolidated Balance Sheets as of December 31, 1999 and 2000............   F24
Consolidated Statements of Operations for the years ended
     December 31, 1998, 1999 and 2000...................................   F25
Consolidated Statements of Stockholders' Equity for the years ended
     December 31, 1998, 1999 and 2000...................................   F26
Consolidated Statements of Cash Flows for the years ended
     December 31, 1998, 1999 and 2000...................................   F27

Notes to Consolidated Financial Statements..............................F28-48
<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
<PAGE>

                         Iron Horse Investors, L.L.C.
                          Consolidated Balance Sheets

                                (In thousands)

<TABLE>
<CAPTION>
Assets                                                 December 31, 1999              December 31, 2000
                                                   ------------------------------------------------------
<S>                                                <C>                              <C>
Current assets:
     Cash and marketable securities                $               94,325           $             113,357
     Trade receivables                                             57,198                         109,705
     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                                            254,276                         191,720
Prepaid pension and postretirement benefit cost                   119,883                         123,100
Restricted cash                                                         -                          23,528
Other assets                                                        6,156                           4,824
                                                   ------------------------------------------------------
Total assets                                       $              875,337           $             919,330
                                                   ======================================================

Liabilities and Capital
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:
    Accrued pension and postretirement benefit cost                 5,075                          28,515
    Long-term debt net of current portion                         326,757                         246,491
    Other liabilities                                              35,675                          41,428
                                                   ------------------------------------------------------
Total liabilities                                                 849,637                         872,199

Minority interest                                                   3,944                           4,766

Commitments and contingencies (Notes 8 & 9)

Members' capital                                                   21,756                          42,365
                                                   ------------------------------------------------------

Total liabilities and members' capital             $              875,337           $             919,330
                                                   ======================================================
</TABLE>

See accompanying notes.
<PAGE>


                         Iron Horse Investors, 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                   177,449        167,877           175,075
     Research and development                    13,021         12,782            15,760
                                            --------------------------------------------
          Total expenses                      1,289,761      1,172,566         1,134,727

     Earnings related to investments
        in foreign affiliates                     6,208            533             2,919
                                            --------------------------------------------
(Loss) income from operations                   (65,998)        41,493            52,078

Other income (expense):
     Interest income                              1,396          1,820             4,152
     Interest expense                           (52,155)       (38,835)          (29,265)
                                            --------------------------------------------
Total other expense                             (50,759)       (37,015)          (25,113)
                                            ---------------------------------------------

(Loss) income before income taxes
      and minority interest                    (116,757)         4,478            26,965

Provision for income taxes                        3,250          2,937             6,000
                                            --------------------------------------------
(Loss) income before minority interest         (120,007)         1,541            20,965
Minority interest                                 3,545            (64)             (880)
                                            --------------------------------------------

(Loss) income before extraordinary item        (116,462)         1,477            20,085
Extraordinary item - net gain from early
      extinguishment of bond debt                     -              -               680
                                            --------------------------------------------
Net (loss) income                           $  (116,462)   $     1,477       $    20,765
                                            ============================================
</TABLE>

See accompanying notes.
<PAGE>

                          Iron Horse Investors, LLC.

                  Consolidated Statements of Members' Capital

                                (In thousands)

              Balance, December 31, 1997                $ 136,741
              Net loss for the year
                   ended December 31, 1998               (116,462)
                                                        ---------
              Balance, December 31, 1998                   20,279
              Net income for the year
                   ended December 31, 1999                  1,477
                                                        ---------
              Balance, December 31, 1999                   21,756
              Repurchase of common stock (excess
                   over paid in capital)                     (156)
              Net income for the year
                   ended December 31, 2000                 20,765
                                                        ---------
              Balance, December 31, 2000                $  42,365
                                                        =========

                            See accompanying notes.
<PAGE>

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

                                (In thousands)

<TABLE>
<CAPTION>
                                                                     For year ended December 31
                                                               1998             1999              2000
                                                            ---------------------------------------------
<S>                                                         <C>               <C>              <C>
Operating activities
Net (loss)income                                            $ (116,462)       $   1,477        $   20,765
Adjustments to reconcile net (loss) income to cash
  provided by operating activities:
   Depreciation                                                 83,153           55,528            23,882
   Amortization                                                 94,806           80,317            72,562
   Minority interest                                            (3,545)              64               880
   Net gain from early retirement of bond 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                                                  1,636              474               700
   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 by subsidiary              6,057               29                95
   Repurchase of common stock by subsidiary                          -                -              (206)
                                                            ---------------------------------------------
Cash used in financing activities                             (146,757)        (157,114)          (79,182)
                                                            ---------------------------------------------

Increase in cash and marketable securities                      49,897            8,805            19,032
Cash and marketable securities, beginning of year               35,623           85,520            94,325
                                                            ---------------------------------------------
Cash and marketable securities, end of year                 $   85,520        $  94,325        $  113,357
                                                            =============================================
</TABLE>

See accompanying notes.

<PAGE>

                          Iron Horse Investors, L.L.C

                  Notes to Consolidated Financial Statements


1. Basis of Presentation

     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 through UDI designs, develops and manufactures various tracked
armored combat vehicles and a wide spectrum of weapons delivery systems for the
armed forces of the United States and nations around the world.

     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

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 Marketable Securities

     Cash and marketable securities consist of investments with initial
maturities of three months or less.

<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 a majority owned foreign joint venture in
Turkey is carried at cost since there is uncertainty regarding the ability to
control the venture or to repatriate earnings.  Income is recognized as
dividends are received.  Dividends received net of amounts accrued for taxes and
future obligations were $4.6 million for the year ended December 31, 1998 and
$1.4 million for the year ended December 31, 2000.  A provision of $1.1 million
was recorded for the year ended December 31, 1999.

     The Company's investment in a foreign joint venture in Saudi Arabia is
accounted for by using the equity method.  Equity in earnings from this
investment was $1.6 million,  $1.6 million and $1.5 million for the years ended
December 31, 1998, 1999 and 2000, respectively.

<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


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 when funded, 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.

Stock-Based Compensation

     Provided the option price is not less than fair value of the common stock
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.


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.

<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


Reclassifications

     Certain prior year amounts have been reclassified to conform with the
current year presentation.

New Accounting Standards

     Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," as amended,
requires companies to recognize all derivatives as either assets or liabilities
in the balance sheet and measure such instruments at fair value.  SFAS 133,
which the Company will adopt effective January 1, 2001, is not expected to have
a material impact to the Company's consolidated financial statements.

3. Business Purchase

     On October 5, 1997, the Company  via its direct investment in UDI, 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 (see Note 8).  The
acquisition was accounted for using the purchase method of accounting.

     On March 6, 2000, the Company via its direct investment in UDI, 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 UDI. As
consideration for the purchase, the Company paid its 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 via its direct investment in UDI,
acquired all of the outstanding stock of 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 UDI and each of Bofors and Bofors Defense Holding AB will
be restricted subsidiaries as defined in the indenture to which the Company is a
party with respect to the 8 3/4% Senior Subordinated Notes due 2007 issued by
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.







<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)

     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 (in thousands) assume the
acquisition occurred at the beginning of each year presented.

                                        Year ended December 31
                                        1999             2000
                                   ------------------------------

             Sales                   $1,470,016       $1,270,904
             Net income              $    8,676       $   22,098


     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 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.

<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)
                                                --------------------------
       Net property, plant and equipment        $  84,693        $  80,775
                                                ==========================

6. Intangible Assets

     Intangible assets consist of the following (in thousands):

                                                    December 31
                                               1999             2000
                                             --------------------------
       Software and other intangibles        $  92,119        $  94,432
       Firm business and ongoing programs      225,103          225,103
       Goodwill                                124,339          132,473
                                             --------------------------
                                               441,561          452,008
       Less:  accumulated amortization        (187,285)        (260,288)
                                             --------------------------
       Net intangible assets                 $ 254,276        $ 191,720
                                             ==========================


     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.

<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


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.

<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>

<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:

                                         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

Pension Benefits                            1998         1999        2000
----------------                          ----------------------------------
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 (income)cost         $ 23,891     $ (1,510)    $  1,192
                                          ==================================


                                                Year ended December 31

Postretirement Benefits                    1998         1999        2000
-----------------------                  ---------------------------------
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.
<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


     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):

<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:

                                          December 31

                                     1999             2000
                                 -------------------------
Senior credit facility           $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
                                 =========================

Senior 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 $149,843 and
$86,757 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.
<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


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

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 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 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 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
                                                     =========
<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


     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.

     The Company is 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 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 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.  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.
<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


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 a reserve of $14 million to cover any
remediation and compliance costs that may not be Allowable Costs under U.S.
government contracts.  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 an asset for the amounts expected to
be reimbursed by the Sellers under the terms of the acquisition agreement.

Turkey Joint Venture Offset Reserves

     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 to meet
the "offset" requirements of the contract or pay a penalty of 9% of the unpaid
offset obligations.  Such payment could be as high as $40 million if no
additional offset sales are completed. There can be no assurance that the joint
venture will be able to completely fulfill its offset obligations or renegotiate
an acceptable alternative.  The Company has established reserves for its share
of the potential "offset" obligation at December 31, 2000.  Production from a
newly signed contract with the government of Malaysia will partially satisfy the
liability.
<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


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.


                                                 Year ended December 31
                                             1998         1999         2000
                                          ------------------------------------

Options outstanding, beginning of year             -    1,436,000    1,457,900
Options granted                            1,436,000       31,000       23,000
Options canceled                                   -       (6,200)     (40,000)
Options exercised                                  -       (2,900)      (4,500)
                                          ------------------------------------
Options outstanding, end of year           1,436,000    1,457,900    1,436,400
                                          ====================================
Options excercisable, end of year                  -      418,425      682,230
                                          ====================================


     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.  The
weighted-average exercise price and weighted-average remaining contractual life
of the stock options outstanding at December 31, 2000 was $10.30 and eight
years, respectively.

     Had compensation cost for the UDI'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 increased by approximately $560,000, the net income in 1999 would
have decreased by approximately $1,459,000, and the net income in 2000 would
have decreased by approximately $1,250,000.  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.
<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


Employee Stock Purchase Plan

     Under the Employee Stock Purchase Plan (the "ESPP") adopted by UDI, certain
employees are provided the opportunity to purchase shares of the UDI's common
stock at its estimated fair value.  Certain of these purchases were eligible for
financing provided by UDI.  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 for year ended December 31, 1998 was solely
for federal  income taxes payable by the Company's Foreign Sales Corporation
("FSC") subsidiary.  The FSC incurred income taxes 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 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.

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

<TABLE>
<CAPTION>
                                                                    December 31
                                                                 1999         2000
                                                              -----------------------
      <S>                                                     <C>           <C>
      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                     $      -      $       -
                                                              =======================
</TABLE>
<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


     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.

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 for $53.4 million at 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
<PAGE>

                          Iron Horse Investors, L.L.C

            Notes to Consolidated Financial Statements (continued)


$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.

15. Restructuring

     During the third quarter of 1998, the Company approved a restructuring plan
designed to rationalize production and lower costs at the Armament Systems
Division's Fridley, Minnesota facility.  The plan calls 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.
<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 wholly owned 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

<PAGE>

                        United Defense Industries, Inc.
                          Consolidated Balance Sheets

                                (In thousands)

<TABLE>
<CAPTION>
Assets                                                                   December 31, 1999              December 31, 2000
                                                                        -------------------------------------------------
<S>                                                                     <C>                             <C>
Current assets:
     Cash and marketable securities                                     $            94,325             $         113,357
     Trade receivables                                                               57,198                       109,705
     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                                                              254,276                       191,720
Prepaid pension and postretirement benefit cost                                     119,883                       123,100
Restricted cash                                                                           -                        23,528
Other assets                                                                          4,817                         3,588
                                                                       --------------------------------------------------
Total assets                                                            $            873,998            $         918,094
                                                                        =================================================

Liabilities and Equity
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:
    Accrued pension and postretirement benefit cost                                    5,075                       28,515
    Long-term debt net of current portion                                            326,757                      246,491
    Other liabilities                                                                 35,675                       41,428
                                                                       --------------------------------------------------
Total liabilities                                                                    849,637                      872,199

Commitments and contingencies  (Notes 8 & 9 )

Stockholders' Equity :
    Common Stock $.01 par value, 20,000,000 shares authorized;
     18,042,524 and 18,036,667 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                                                               (154,725)                    (133,080)
                                                                       --------------------------------------------------
     Total stockholders' equity                                                       24,361                       45,895
                                                                       --------------------------------------------------

Total liabilities and stockholders' equity                             $             873,998            $         918,094
                                                                       ==================================================
</TABLE>


See accompanying notes.
<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                  177,449       167,877         175,075
     Research and development                   13,021        12,782          15,760
                                          ------------------------------------------
          Total expenses                     1,289,761     1,172,566       1,134,727

     Earnings related to investments
        in foreign affiliates                    6,208           533           2,919
                                          ------------------------------------------
(Loss) income from operations                  (65,998)       41,493          52,078

Other income (expense):
     Interest income                             1,396         1,820           4,152
     Interest expense                          (52,155)      (38,835)        (29,265)
                                          ------------------------------------------
Total other expense                            (50,759)      (37,015)        (25,113)
                                          ------------------------------------------

(Loss) income before income taxes
      and extraordinary item                  (116,757)        4,478          26,965

Provision for income taxes                       3,250         2,937           6,000
                                          ------------------------------------------
(Loss) income before extraordinary item       (120,007)        1,541          20,965

Extraordinary item - net gain from
     extinguishment of bond debt                     -             -             680
                                          ------------------------------------------
Net (loss)income                          $   (120,007)  $     1,541     $    21,645
                                          ==========================================
</TABLE>

See accompanying notes.
<PAGE>

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

                                (In thousands)

<TABLE>
<CAPTION>
                                              Additional
                                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          -               -        (120,007)               -         (120,007)
                               --------------------------------------------------------------------------
Balance, December 31, 1998          180         180,216        (156,266)          (1,339)          22,791
Issuance of Common Stock              -              29               -                -               29
Net income for the year
     ended December 31, 1999          -               -           1,541                -            1,541
                               --------------------------------------------------------------------------
Balance, December 31, 1999          180         180,245        (154,725)          (1,339)          24,361
Issuance of Common Stock              -              45               -               50               95
Repurchase of Common Stock            -            (259)              -               53             (206)
Net income for the year
     ended December 31, 2000          -               -          21,645                -           21,645
                               --------------------------------------------------------------------------
Balance, December 31, 2000     $    180       $ 180,031       $(133,080)      $   (1,236)      $   45,895
                               ==========================================================================
</TABLE>

See accompanying notes.
<PAGE>

                        United Defense Industries, Inc.
                     Consolidated Statements of Cash Flows

                                (In thousands)

<TABLE>
<CAPTION>
                                                                                  Year ended December 31

                                                                           1998            1999            2000
                                                                        -------------------------------------------
<S>                                                                     <C>             <C>             <C>
Operating activities
Net (loss) income                                                      $  (120,007)     $     1,541     $    21,645
Adjustments to reconcile net (loss) income to cash
  provided by operating activities:
   Depreciation                                                             83,153           55,528          23,882
   Amortization                                                             94,806           80,317          72,562
   Net gain from early retirement of bond 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                                                              1,636              474             700
   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 financing activities                                         (146,757)        (157,114)        (79,182)
                                                                       --------------------------------------------

Increase in cash and marketable securities                                  49,897            8,805          19,032
Cash and marketable securities, beginning of year                           35,623           85,520          94,325
                                                                       --------------------------------------------
Cash and marketable securities, end of year                            $    85,520      $    94,325     $   113,357
                                                                       ============================================
</TABLE>

See accompanying notes.

<PAGE>

                        United Defense Industries, INC

                  Notes to Consolidated Financial Statements



1. Basis of Presentation

     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 designs, develops and manufactures various tracked armored
combat vehicles and a wide spectrum of weapons delivery systems for the armed
forces of the United States and nations around the world.

     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

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 Marketable Securities

     Cash and marketable securities consist of investments with initial
maturities of three months or less.
<PAGE>

                        United Defense Industries, INC

            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 a majority owned foreign joint venture in
Turkey is carried at cost since there is uncertainty regarding the ability to
control the venture or to repatriate earnings.  Income is recognized as
dividends are received.  Dividends received net of amounts accrued for taxes and
future obligations were $4.6 million for the year ended December 31, 1998 and
$1.4 million for the year ended December 31, 2000.  A provision of $1.1 million
was recorded for the year ended December 31, 1999.

     The Company's investment in a foreign joint venture in Saudi Arabia is
accounted for by using the equity method.  Equity in earnings from this
investment was $1.6 million,  $1.6 million and $1.5 million for the years ended
December 31, 1998, 1999 and 2000, respectively.
<PAGE>

                        United Defense Industries, INC

            Notes to Consolidated Financial Statements (continued)


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 when funded, 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.

Stock-Based Compensation

     Provided the option price is not less than fair value of the common stock
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.

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.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current
year presentation.
<PAGE>

                        United Defense Industries, INC

            Notes to Consolidated Financial Statements (continued)


New Accounting Standards

     Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," as amended,
requires companies to recognize all derivatives as either assets or liabilities
in the balance sheet and measure such instruments at fair value.  SFAS 133,
which the Company will adopt effective January 1, 2001, is not expected to have
a material impact to the Company's consolidated financial statements.

3. Business Purchase

     On October 5, 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 its 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 and each of Bofors and Bofors Defense Holding AB will be
restricted subsidiaries as defined in the indenture to which the Company is a
party with respect to the 8 3/4% Senior Subordinated Notes due 2007 issued by
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
<PAGE>

                        United Defense Industries, INC

            Notes to Consolidated Financial Statements (continued)


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 (in thousands) assume the acquisition
occurred at the beginning of each year presented.

                                    Year ended December 31
                                    1999              2000
                                 ----------        ----------
               Sales             $1,470,016        $1,270,904
               Net profit        $    8,676        $   22,098

     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 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.
<PAGE>

                        United Defense Industries, INC

            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)
                                              ------------------------
          Net property, plant and equipment   $  84,693      $  80,775
                                              ========================


6. Intangible Assets

    Intangible assets consist of the following (in thousands):


                                                           December 31
                                                      1999             2000
                                                   --------------------------
          Software and other intangibles           $  92,119        $  94,432
          Firm business and ongoing programs         225,103          225,103
          Goodwill                                   124,339          132,473
                                                   --------------------------
                                                     441,561          452,008
          Less:  accumulated amortization           (187,285)        (260,288)
                                                   --------------------------
          Net intangible assets                    $ 254,276        $ 191,720
                                                   ==========================


     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.
<PAGE>

                        United Defense Industries, INC

            Notes to Consolidated Financial Statements (continued)


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.
<PAGE>

                        United Defense Industries, INC

            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>
<PAGE>

                        United Defense Industries, Inc.

            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:

                                           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

Pension Benefits                             1998        1999        2000
----------------                          ---------------------------------
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

Postretirement Benefits                     1998           1999        2000
-----------------------                   -----------------------------------
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
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated financial Statements (continued)


$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):

<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:

                                       December 31
                                  1999             2000
                                -------------------------
Senior credit facility          $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
                                =========================


Senior 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 $149,843 and
$86,757 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.
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated financial Statements (continued)


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

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 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 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 subordinated notes in the
open market.
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated financial Statements (continued)


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.
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated financial Statements (continued)


     The Company is 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 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 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.  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.

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 a reserve of $14 million to cover any
remediation and compliance costs that may not be Allowable Costs under U.S.
government contracts.  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-
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated financial Statements (continued)


Allowable Costs.   The Company has recorded an asset for the amounts expected to
be reimbursed by the Sellers under the terms of the acquisition agreement.

Turkey Joint Venture Offset Reserves

     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 to meet
the "offset" requirements of the contract or pay a penalty of 9% of the unpaid
offset obligations.  Such payment could be as high as $40 million if no
additional offset sales are completed. There can be no assurance that the joint
venture will be able to completely fulfill its offset obligations or renegotiate
an acceptable alternative.  The Company has established reserves for its share
of the potential "offset" obligation at December 31, 2000.  Production from a
newly signed contract with the government of Malaysia will partially satisfy the
liability.

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.


                                                Year ended December 31
                                            1998         1999         2000
                                         ------------------------------------

Options outstanding, beginning of year            -    1,436,000    1,457,900
Options granted                           1,436,000       31,000       23,000
Options canceled                                  -       (6,200)     (40,000)
Options exercised                                 -       (2,900)      (4,500)
                                         ------------------------------------
Options outstanding, end of year          1,436,000    1,457,900    1,436,400
                                         ====================================
Options excercisable, end of year                 -      418,425      682,230
                                         ====================================


     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. The
weighted-average exercise price and weighted-average
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated financial Statements (continued)


remaining contractual life of the stock options outstanding at December 31, 2000
was $10.30 and eight years, respectively.

     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 increased by approximately $560,000, the net income in 1999 would
have decreased by approximately $1,459,000, and the net income in 2000 would
have decreased by approximately $1,250,000.  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 for year ended December 31, 1998 was solely
for federal income taxes payable by the Company's Foreign Sales Corporation
("FSC") subsidiary. The FSC incurred income taxes 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 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.
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated financial Statements (continued)


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

<TABLE>
<CAPTION>
                                                                         December 31
                                                                     1999           2000
                                                                   -----------------------
           <S>                                                     <C>          <C>
           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                    $      -     $        -
                                                                   =======================
</TABLE>

     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
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated financial Statements (continued)


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.

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 for $53.4 million at 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.


15. Restructuring

     During the third quarter of 1998, the Company approved a restructuring plan
designed to rationalize production and lower costs at the Armament Systems
Division's Fridley, Minnesota facility.  The plan calls 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
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated financial Statements (continued)


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.
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated Financial Statements (continued)


                        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                                           -          186.9               4.8              -           191.7
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                  295.5              -                 -         (295.5)              -
Other assets                                                     -            3.1               0.5              -             3.6
                                                       ---------------------------------------------------------------------------
Total assets                                           $     315.4  $       794.1      $      124.0    $    (315.4)   $      918.1
                                                       ===========================================================================

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                                            -           34.3               7.2              -            41.5
                                                       ---------------------------------------------------------------------------
Total liabilities                                            269.5          502.9             119.7          (19.9)          872.2

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)                            (133.1)         291.2               4.3         (295.5)         (133.1)
                                                       ---------------------------------------------------------------------------
     Total stockholders' equity                               45.9          291.2               4.3         (295.5)           45.9
                                                       ---------------------------------------------------------------------------
Total liabilities and stockholders' equity             $     315.4  $       794.1      $      124.0    $    (315.4)   $      918.1
                                                       ===========================================================================
</TABLE>
<PAGE>

                        United Defense Industries, Inc.

            Notes to Consolidated Financial Statements (continued)

                        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                          -         169.3          5.8              -          175.1
     Research and development                          -          14.5          1.2              -           15.7
                                                 ----------------------------------------------------------------
          Total expenses                               -       1,084.0         50.8              -        1,134.7

     Earnings related to investments
        in foreign affiliates and subsidiaries      54.0           2.9            -          (54.0)           2.9
                                                 ----------------------------------------------------------------
Income(loss) from operations                        54.0          49.4          2.6          (54.0)          52.1

Other income (expense):
     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                                (28.9)          3.3          0.5              -          (25.1)
                                                 ----------------------------------------------------------------
Income(loss) before income taxes
       and extraordinary item                       25.1          52.7          3.1          (54.0)          26.9
Provision for income taxes                           4.6             -          1.4              -            6.0
                                                 ----------------------------------------------------------------

Income(loss) before extraordinary item              20.5          52.7          1.7          (54.0)          20.9

Extraordinary item - net gain from
     extinguishment of bond debt                     1.1          (0.4)           -              -            0.7
                                                 ----------------------------------------------------------------
Net income(loss)                                 $  21.6    $     52.3     $    1.7       $  (54.0)     $    21.6
                                                 ================================================================
</TABLE>
<PAGE>

                        United Defense Industries, Inc.

             Notes to Consolidated Financial Statements (continued)

                        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>
<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.

__________________
/1/ Includes the Company and its predecessors.
<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, 101/st/ 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 13/th/ 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 9/th/ 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 ($)/1/  Award(s)       Options    Payouts    sation
       Position        Year      ($)       ($)                      ($)/2/         (#)        ($)       ($)/3/
----------------       ----    -------   -------   ------------- ----------    ----------   -------   ---------
<S>                    <C>     <C>       <C>       <C>           <C>           <C>          <C>       <C>
Thomas W. Rabaut       2000    407,917   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
                               ------------------

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

<S>                <C>                   <C>                   <C>                   <C>                    <C>
   $ 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
</TABLE>

<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           Options                           Options *
     ----         -----------     --------   -----------------------------------------------------------
<S>               <C>             <C>        <C>                         <C>
                                              Exercisable   Unexercisable    Exercisable   Unexercisable
                                              -----------   -------------    -----------   -------------
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:

<TABLE>
<CAPTION>
                                                                          Percentage of All
               Beneficial Owner/(1)/                Number of Shares        Outstanding
                                                                              Shares
     <S>                                                <C>               <C>
     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%
</TABLE>

___________________
(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.  See below.
     (d)  Financial Statement Schedules.
               None required.


                                 EXHIBIT INDEX


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

      +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 8 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
<PAGE>

   ++++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.
   ++++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.
<PAGE>

   **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 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.
<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                   March 1, 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                     March 1, 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                 March 1, 2001
---------------------------
    William E. Conway, Jr.

/s/ Frank C. Carlucci              Director of UDI                              March 1, 2001
---------------------------
    Frank C. Carlucci

/s/ Peter J. Clare                 Director of UDI                              March 1, 2001
---------------------------
    Peter J. Clare

/s/ Allan M. Holt                  Director of UDI and Chairman                 March 1, 2001
---------------------------
    Allan M. Holt                  of Iron Horse Investors, L.L.C.


/s/ Robert M. Kimmitt              Director of UDI                              March 1, 2001
---------------------------
    Robert M. Kimmitt

/s/ John M. Shalikashvili          Director of UDI                              March 1, 2001
---------------------------
    John M. Shalikashvili

/s/ J. H. Binford Peay, III        Director of UDI                              March 1, 2001
---------------------------
    J. H. Binford Peay, III

/s/ David V. Kolovat               Director of UDLP                             March 1, 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                             March 1, 2001
---------------------------
    Robert N. Sankovich            Holdings Corp. (for UDLP
                                   Holdings Corp. itself  and as
                                   the corporate general partner
                                   of United Defense, L.P.)
</TABLE>