USL CAPITAL CORP/, 10-K, 1996-03-22

USL CAPITAL CORP/
10-K, 1996-03-22
FINANCE LESSORS

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

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

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, 1995.

COMMISSION FILE NUMBER 1-4976

(LOGO)

USL CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware

(STATE OF INCORPORATION)

733 Front Street
San Francisco, California

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
94-1360891

(I.R.S. EMPLOYER IDENTIFICATION NO.)

94111
(ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 627-9000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS
-------------------
8 3/4% Senior Notes due 2001

NAME OF EACH EXCHANGE ON WHICH REGISTERED
-----------------------------------------
American Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. NA
--

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

As of March 1, 1996, the Registrant had outstanding 10 shares of Common
Stock, all of which were owned by Ford Holdings, Inc.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
J(1)(a) AND (b), AND IS THEREFORE FILING THIS FORM 10-K WITH REDUCED DISCLOSURE
FORMAT.

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TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
PART I
PAGE
-----
Item 1. Business..................................................................... 3
Item 2. Properties................................................................... 12
Item 3. Legal Proceedings............................................................ 12
Item 4. Submission of Matters to a Vote of Security Holders*
PART II
Item 5. Market for the Company's Common Stock and Related Stockholder Matters........ 12
Item 6. Selected Financial Data*.....................................................
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 13
Item 8. Financial Statements and Supplementary Data.................................. 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................................... 14
PART III
Item 10. Directors, Executive Officers, Promoters, and Control Persons of the Company*
Item 11. Executive Compensation*
Item 12. Security Ownership of Certain Beneficial Owners and Management*
Item 13. Certain Relationships and Related Transactions*
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............. 15
Signatures.............................................................................. 17
Exhibits Index.......................................................................... 38
</TABLE>

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* Not required under General Instruction J to Form 10-K.

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<PAGE> 3

USL CAPITAL CORPORATION

FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995

PART I

ITEM 1. BUSINESS

USL Capital Corporation ("Company") is a diversified commercial financing
company. The Registrant provides a wide range of financing services, primarily
in the United States, through six core business units, including:

- Business Equipment Financing -- leasing and financing of office and
other business and commercial equipment directly with customers and
through vendor programs;

- Transportation and Industrial Financing -- leasing and financing of
large-balance transportation equipment (principally commercial
aircraft) and industrial and energy facilities;

- Fleet Services -- leasing and managing of commercial automobile, van,
and truck fleets;

- Municipal and Corporate Financing -- financing of essential-use
equipment for state and local governments and housing bonds, and
investing in publicly-traded and privately-placed preferred stocks and
senior and subordinated debt of public and private companies;

- Real Estate Financing -- mortgage financing of income-producing real
estate, including apartments, office buildings, shopping centers, and
warehouses; and

- Rail Services -- full-service leasing of railroad equipment to
industrial shippers and railroads.

The Company, a Delaware corporation, has been a wholly-owned subsidiary of
Ford Holdings, Inc. ("Ford Holdings") since October 1, 1989, on which date all
of the Company's capital stock was transferred by Ford Motor Company ("Ford") to
Ford Holdings, a then newly formed Delaware corporation. All of the outstanding
common stock of Ford Holdings is owned directly or indirectly by Ford. The
Company was originally organized as a California corporation in October 1956,
and was purchased by Ford in November 1987. The Company changed its name to USL
Capital Corporation (from United States Leasing International, Inc.) on November
12, 1993.

The Company's principal executive offices are located at 733 Front Street,
San Francisco, California 94111. The telephone number of such offices is (415)
627-9000.

3
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KEY DATA

The following table sets forth certain data with respect to the Company's
business for the years ended on, and as of, the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Summary financial data (millions)
Revenue........................................................ $ 679 $ 596 $ 564
Income before taxes............................................ 196 160 122
Net income..................................................... 135 109 77
Additions to earning assets.................................... 2,326 1,543 2,045
Total earning assets........................................... 6,121 5,043 4,607
Business unit earning assets (% of total)
Business Equipment Financing................................... 23% 27% 32%
Transportation and Industrial Financing........................ 26 25 24
Fleet Services................................................. 11 11 10
Municipal and Corporate Financing.............................. 20 18 16
Real Estate Financing.......................................... 8 9 9
Rail Services.................................................. 12 10 9
------ ------ ------
Total.................................................. 100% 100% 100%
====== ====== ======
</TABLE>

BUSINESS UNITS

The Company operates exclusively in the commercial finance segment of the
financial services industry. The Company serves its commercial customers though
six business units, each of which is described in detail below.

Business Equipment Financing

Through its Business Equipment Financing unit, the Company finances, under
finance leases, conditional sale agreements, operating leases, and
collateralized loans, the acquisition and use of equipment for business,
professional, industrial, and governmental users throughout the United States.
The types of equipment financed include data processing equipment, office
equipment, office furnishings, telecommunications, transportation,
manufacturing, and other kinds of equipment. This financing is sometimes offered
in conjunction with the manufacturer of the equipment, but in other cases is
provided directly to the end user of the equipment. Financing transactions
generally cover equipment having an aggregate cost between $250,000 and $10
million, with an average transaction size of approximately $900,000. These
financing services are marketed through 29 offices located throughout the United
States.

The Business Equipment Financing unit does not manufacture or sell under
its own label any of the equipment which it leases. It only purchases equipment
which a particular lessee has committed to lease, and does not take order
positions or make purchases in advance of such a binding agreement by a lessee
to lease the equipment. All lessees are obligated to maintain the equipment and
reimburse the Company for any taxes paid thereon. Any casualty losses of
equipment are covered either by insurance carried by the lessee as required
under the lease or by lessee self-insurance when the Company deems the lessee's
credit to be satisfactory. Upon the expiration of leases, the Company either
renews the leases with the lessees, sells the leased equipment to the lessees,
or remarkets the equipment.

The Company also acquires from manufacturers pools of leases and their
underlying equipment. The manufacturers may retain an economic interest in the
successful operation of each pool and, in exchange, the manufacturers maintain
the equipment, remarket it after the expiration of the initial term of the
leases, and manage the relationship with the lessees. In other transactions, the
lessee is obligated to maintain the

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equipment and the Company manages the relationship with the lessees, bills and
collects, and remarkets the equipment.

The Company also acquires equipment and related leases originated by other
lessors and, to a lesser extent, by brokers, although the purchase of
broker-originated business has declined significantly over the past few years.
On the majority of such acquired transactions, the Company bills and collects,
manages the relationships with the lessees, and remarkets the equipment.

The following table sets forth certain data with respect to the Business
Equipment Financing unit for the years ended on, and as of, the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets.................................... $ 544 $ 422 $ 622
Total earning assets........................................... 1,427 1,376 1,466
Type of earning assets (% of total)
Finance leases................................................. 77% 81% 83%
Operating leases............................................... 17 15 13
Other.......................................................... 6 4 4
------ ------ ------
Total.................................................. 100% 100% 100%
====== ====== ======
</TABLE>

Transportation and Industrial Financing

Through its Transportation and Industrial Financing unit, the Company
principally owns, leases, finances, and remarkets commercial aircraft, and
leases and finances transportation, energy, and industrial equipment and
facilities. Aircraft, other equipment, and facilities are leased and financed
under single-investor finance leases, leveraged leases, operating leases,
collateralized loans, and various partnership structures. Under all leases the
lessee is responsible for all taxes, maintenance, and insurance. The majority of
the assets of this business is acquired through investment bankers and advisors
who have been hired by lessees, and the balance through direct lessee contact.

The Company owns a 23% interest in, and through a wholly-owned subsidiary
is the general partner of, Airlease Ltd., a California limited partnership
("Airlease Ltd."). Airlease Ltd. assets were $103 million at December 31, 1995,
compared with $108 million at December 31, 1994. The limited partnership units
are listed on the New York Stock Exchange. Airlease Ltd. engages in the
ownership and leasing of commercial aircraft to airlines, a freight carrier, and
a charter carrier.

At December 31, 1995, the Company's aggregate commercial aircraft earning
assets in the T&I unit (including its interest in those aircraft owned by
Airlease Ltd.) were $1,135 million. Of this amount, 64% were leased to or
financed for commercial airlines, with the remainder leased primarily to a
freight carrier and aircraft manufacturers. Approximately 99% of the aggregate
commercial aircraft owned or financed by the Company (measured by their book
value) were in compliance with Stage III noise regulations (the most stringent
level) of the Aviation Safety and Capacity Act of 1990.

This business unit also manages a portfolio of leveraged leases,
single-investor leases, and loans in which Ford Credit holds a beneficial
interest. These managed leases cover commercial aircraft, railcars and
locomotives, electric power generation and other facilities, marine vessels, and
other types of business assets. The business unit also acts as agent for Trust
Company for USL, Inc. ("Trust Company"), a wholly-owned subsidiary of the
Company. Trust Company is owner trustee for a portfolio of leveraged leases the
Company arranged for outside institutional investors prior to 1985. As the
remarketing agent for these institutional investors, the Company participates in
the residual proceeds from the disposition of the equipment at the termination
of some of these leases. Trust Company is also an owner trustee for certain
aircraft leases in which Airlease Ltd. holds a beneficial interest.

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The following table sets forth certain data with respect to the
Transportation and Industrial Financing unit for the years ended on, and as of,
the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets.................................... $ 438 $ 176 $ 321
Total earning assets........................................... 1,605 1,243 1,097
Type of earning assets (% of total)
Stage III aircraft............................................. 70% 79% 81%
Stage II aircraft.............................................. * 1 1
Other transportation equipment................................. 6 8 11
Facilities..................................................... 14 12 7
Other.......................................................... 10 -- --
------ ------ ------
Total.................................................. 100% 100% 100%
====== ====== ======
</TABLE>

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* Less than 0.5%

Fleet Services

Through its Fleet Services unit, the Company is engaged in the leasing of
automotive, van, and light and heavy-duty truck fleets for commercial purposes.
Fleet Services also provides management services for a substantial portion of
its leased vehicles and for certain of the vehicles owned by its customers.
These leasing and management services are marketed to commercial customers
through 34 offices located throughout the United States. Fleet Services also
provides fleet management services for subsidiaries and affiliates of American
Telephone and Telegraph Company under a service agreement.

At December 31, 1995, Fleet Services had an aggregate of approximately
79,700 vehicles in fleets which it leased and managed or managed only, as
compared with approximately 76,100 vehicles at December 31, 1994. At December
31, 1995, Fleet Services also provided services for approximately 16,400
additional vehicles under the service agreement with American Telephone and
Telegraph Company, as compared with approximately 14,800 additional vehicles at
December 31, 1994.

Certain of Fleet Services' vehicles are leased under "open-end finance"
leases in which the Company bears no risk (other than the lessee's credit) on
the resale price of the vehicles at the expiration of the lease. The majority of
the vehicles are leased under "modified open-end" leases in which the resale
price of the leased vehicle at lease expiration is partially guaranteed by the
lessee. The Company's full recovery of the vehicle's cost under a "modified
open-end" lease thus partially depends on the resale proceeds which, however,
are expected to substantially exceed the portion of the cost not guaranteed by
the lessee for which the Company is at risk. Other vehicles are leased under
"closed-end" leases, in which the Company's full recovery of the vehicle's cost
from rental and resale proceeds is dependent upon the Company's realization of
anticipated residual value. Additionally, certain of the closed-end leases
(covering approximately 3% of all leased vehicles at December 31, 1995) contain
maintenance provisions which require that the Company bear the maintenance
expense for the leased vehicle in consideration of a higher lease rate.

6
<PAGE> 7

The following table sets forth certain data with respect to the Fleet
Services unit for the years ended on, and as of, the dates indicated.

- ---------------
* Assets were securitized through 1995, the balance of which was approximately
$47 million at December 31, 1995. This amount is not included in total earning
assets. See Borrowing and Other Sources of Funds on page 12.

Under substantially all leases, the lessee is obligated to provide
insurance against public liability and property damage, to reimburse the Company
for all taxes relating to the vehicles or the lease and, except in leases with a
maintenance provision, to maintain, at the lessee's expense, the vehicles in
good operating condition.

Management services are mechanized and provide monthly analyses of each
vehicle in service, allowing customers' fleet operating costs to be closely
controlled. Programs are tailored to meet special customer needs, and many
options are offered including, for example, guaranteed maintenance programs,
assistance in selection of vehicles, and analysis of insurance coverage.

Municipal and Corporate Financing

Through its Municipal and Corporate Financing unit, the Company arranges
and carries on its books municipal financings of essential-use equipment for
state and local governments. This unit also invests in publicly-traded and
privately-placed preferred stocks, principally of utilities, and senior and
subordinated debt of public and private companies, primarily manufacturing
companies. After due diligence by the Company, these securities are purchased
through investment banks and other intermediaries, either at the initial
offering or on the open market. Approximately 62% of these corporate securities
are currently rated at investment grade.

The following table sets forth certain data with respect to the Municipal
and Corporate Financing unit for the years ended on, and as of, the dates
indicated.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994 1993
------ ---- ----
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets....................................... $ 513 $255 $429
Total earning assets.............................................. 1,216 893 743
Type of earning assets (% of total)
Municipal
Finance leases................................................. 4% 8% 9%
Corporate
Preferred stock................................................ 60 65 65
Debt........................................................... 36 27 26
------- ----- -----
Total..................................................... 100% 100% 100%
======= ===== =====
</TABLE>

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<PAGE> 8

Real Estate Financing

Through five regional business development offices in its Real Estate
Financing unit, the Company provides first mortgage financing of
income-producing real estate including apartments, office buildings, shopping
centers, and warehouses. This real estate is geographically diversified
throughout the United States. No financing is provided for motels, hotels, raw
land, or specialty properties. Substantially all transactions are financings of
three to five years, and none is a construction loan. The loans provide funds
for acquisitions or refinancings, or are "bridge" financings between
construction and permanent loans. This unit also manages transactions funded by
and carried on the books of Ford Credit. At December 31, 1995, the Company had
commitments to fund additional first mortgage loans of approximately $16
million. At such date, it also held title to four foreclosed properties with an
aggregate book value of $37 million.

The following table sets forth certain data with respect to the Real Estate
Financing unit for the years ended on, and as of, the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets......................................... $200 $135 $144
Total earning assets................................................ 486 472 437
Type of earning assets (% of total)
Apartments.......................................................... 32% 46% 53%
Offices............................................................. 55 35 25
Shopping centers.................................................... 7 13 16
Medical............................................................. 4 4 4
Industrial.......................................................... 2 2 2
----- ----- -----
Total....................................................... 100% 100% 100%
===== ===== =====
Location of property (% of earning assets)
Southwest........................................................... 37% 23% 37%
East................................................................ 10 21 26
West................................................................ 37 40 28
Midwest............................................................. 16 16 9
----- ----- -----
Total....................................................... 100% 100% 100%
===== ===== =====
</TABLE>

Rail Services

Through its Rail Services unit, the Company leases to industrial shippers
and railroads approximately 25,900 railcars. Approximately 95% of all of these
cars are owned by the Company or leased to it under long-term leases. Rail
Services manages approximately 1,375 cars for others, principally Ford
affiliates. Of the cars in the Company's fleet at December 31, 1995, 24% were
leased out to the Company's customers for remaining terms of less than one year,
55% for remaining terms of between one and five years, and 21% for remaining
terms of over five years. The Company maintains and repairs approximately 60% of
its owned and leased fleet at its expense. As provided in the rules of the
American Association of Railroads, if a car is damaged or destroyed on the line
of any particular railroad, that railroad is obligated either to repair the car
or, if the car is destroyed, pay the car owner an amount which reflects the
car's type and age. The Rail Services unit also orders new equipment for future
delivery, in advance of leasing such equipment to customers.

8
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The following table sets forth certain data with respect to the Rail
Services unit for the years ended on, and as of, the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Summary financial data (millions)
Additions to earning assets......................................... $220 $147 $143
Total earning assets................................................ 712 507 422
Type of earning assets (% of total)
Hopper cars......................................................... 57% 54% 41%
Tank cars........................................................... 4 6 17
Flat cars........................................................... 8 11 14
Intermodal cars..................................................... 8 11 9
Gondolas cars....................................................... 8 8 8
Box cars............................................................ 9 6 6
Other............................................................... 6 4 5
----- ----- -----
Total....................................................... 100% 100% 100%
===== ===== =====
</TABLE>

FINANCING ARRANGED AND MANAGED FOR FORD MOTOR CREDIT COMPANY

The Company manages certain commercial leasing and financing transactions
carried on the books of Ford Credit. In addition, the Municipal and Corporate
Financing and Transportation and Industrial Financing units arrange a variety of
transactions which are funded by and carried on the books of Ford Credit. Ford
Credit reimburses the Company for the Company's operating costs related to
arranging and managing all transactions funded by Ford Credit.

GENERAL

Credit Loss Experience

The management of credit exposure is an important element of the Company's
business. The Company reviews the credit of all prospective customers and
manages concentration exposures by customer, collateral type, and geographic
distribution. It establishes appropriate loss allowances based on the credit
characteristics and the loss experience for each type of business and also
establishes additional reserves for specific transactions if it believes this
action is warranted. Delinquent receivables are reviewed by management monthly
and are generally written down to expected realizable value when, in the opinion
of management, they become uncollectible or when they become more than 180 days
past due. Collection activities continue on accounts written off when management
believes such action is warranted.

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<PAGE> 10

The table below shows certain information on the Company's allowance for
doubtful accounts for the years indicated.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Allowance for doubtful accounts (millions)
Beginning balance.............................................. $ 58 $ 55 $ 40
Additions...................................................... 6 8 25
Deductions..................................................... (4) (5) (10)
------- ------- -------
Ending balance................................................. $ 60 $ 58 $ 55
======= ======= =======
Percent of earning assets........................................ 1.0% 1.2% 1.2%
Total balances of accounts receivable over 90 days past due at
year end (millions)............................................ $ 23 $ 37 $ 44
Percent of earning assets........................................ 0.4% 0.7% 1.0%
Total earning assets (millions)
Investment in finance leases -- net............................ $2,549 $2,435 $2,364
Investment in operating leases -- net.......................... 904 712 695
Investment in leveraged leases -- net.......................... 438 266 191
Notes receivable............................................... 1,040 825 721
Investment in securities....................................... 1,065 700 563
Inventory held for sale or lease............................... 108 87 55
Investments in associated companies............................ 17 18 18
------- ------- -------
Total.................................................. $6,121 $5,043 $4,607
======= ======= =======
</TABLE>

Additions to the allowance for doubtful accounts for 1995 decreased by $2
million from 1994 reflecting continued improvement in the Company's portfolio.

Additions to the allowance for doubtful accounts for 1994 decreased by $17
million from 1993, primarily as a result of decreased write-offs as well as
management's evaluation of the adequacy of the loss reserve. The decline of
write-offs (deductions) in 1994 of $5 million from 1993, resulted primarily from
improved collection activities in the Business Equipment Financing unit.

Total balances of accounts receivable over 90 days past due at year-end
1995 decreased $14 million over 1994 year end, primarily because of the improved
collections on aged accounts, the restructuring of a $16 million note
collateralized by an aircraft, and the completion of foreclosure on an office
complex, which was collateral for a $9 million note. Both notes were delinquent
at December 31, 1994. These changes were offset in part by delinquencies on a
note in the amount of $10 million collateralized by an office/retail complex in
California, and on a subordinated note in the amount of $10 million. Foreclosure
on the California office complex is expected in the first quarter of 1996.

Residual Policy

The establishment and realization of residual values on finance and
leveraged leases and of salvage values on operating leases are important
elements of the Company's business. In general, finance and leveraged leases are
non-cancelable leases in which the net lease payments over the term amortize the
investment in the leased equipment down to the estimated value of equipment at
lease expiration. Operating leases are usually of a shorter term and the lease
payments by themselves are not sufficient to cover all costs and expenses. Full
recovery of equipment cost is dependent upon selling or re-leasing the
equipment.

Residual values are established upon acquisition of the equipment based
upon the estimated value of the equipment at the time the Company expects to
dispose of the equipment under finance and leveraged leases and at the end of
the equipment's expected useful life under operating leases. Periodically, in
accordance with SFAS 13, the Company reviews its residual values, and if it
determines there has been an other than

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<PAGE> 11

temporary impairment in value adjustments are made which result in an immediate
charge to earnings and/or a reduction in earnings over the remaining term of the
lease.

FINANCE AND LEVERAGED LEASES. The following table shows, for each
respective year, for the Company's businesses: (a) the aggregate sales proceeds
and renewal proceeds from sales of equipment subject to finance and leveraged
leases, and (b) these proceeds as a percentage of the adjusted residual value of
the equipment.

<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1995 1994 1993
----- ------ -----
<S> <C> <C> <C>
Business Equipment Financing
Amount (millions)................................................ $ 27 $ 24 $ 19
Percent.......................................................... 172% 154% 161%
Transportation and Industrial Financing
Amount (millions)................................................ $ 11* $ 4 $ 11*
Percent.......................................................... 3,371%* 260% 7,073%*
Rail Services
Amount (millions)................................................ $ -- $ 5 --
Percent.......................................................... -- 109% --
Total
Amount (millions)................................................ $ 38 $ 33 $ 30
Percent.......................................................... 238% 152% 252%
</TABLE>

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

* These amounts include proceeds received under residual sharing agreements
arranged between 1970 and 1981. The residuals were carried on the Company's
books at a nominal amount.

OPERATING LEASES. The following table shows, for each respective year, for
the Company's businesses: (a) the aggregate proceeds (including renewal proceeds
beyond the original expected useful life period) from sales of equipment subject
to operating leases, and (b) these proceeds as a percentage of the net book
value of the equipment sold.

<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Business Equipment Financing
Amount (millions)................................................... $ 6 $ 5 $ 6
Percent............................................................. 115% 128% 116%
Fleet Services
Amount (millions)................................................... $ 19 $ 16 $ 13
Percent............................................................. 123% 121% 116%
Rail Services
Amount (millions)................................................... $ 10 $ 41 $ 3
Percent............................................................. 240% 111% 137%
Other
Amount (millions)................................................... $ -- $ 1 $ 1
Percent............................................................. -- 261% 990%
Total
Amount (millions)................................................... $ 35 $ 63 $ 23
Percent............................................................. 142% 115% 125%
</TABLE>

Employees

The Company had 634 full time employees at December 31, 1995.

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<PAGE> 12

Competition

In all of its financing programs, the Company competes with other leasing
and finance companies, banks, lease brokers, and investment banking firms who
arrange for the financing and leasing of equipment, and manufacturers and
vendors who sell, finance and, lease their own products to customers.

Borrowing and Other Sources of Funds

The funds required to operate the Company's business are generated
internally from loan and lease payments and equipment sales, and externally from
medium-term debt, commercial paper, securitization, and bank borrowings.

The Company raises short-term debt financing through its established
commercial paper program and raises long-term debt in the public market through
periodic offerings of medium-term notes and underwritten debt offerings. The
Company has committed bank lines of $1.7 billion with 28 banks, consisting of
$1,235 million under five-year credit agreements expiring in 2000 and $465
million under one-year agreements. There were no borrowings outstanding on these
bank lines at December 31, 1995. Neither Ford nor Ford Holdings guarantees the
debt of the Company, although the Company's existing credit lines require that
Ford maintain at least a 75% direct or indirect ownership interest in the
Company. As noted in the discussion below in Item 7 concerning Recent
Developments, Ford is considering the sale of all or part of the Company. At
present, the Company's profitability is not significantly related to the
business outlook for Ford, and this situation is not expected to change in the
future.

In 1991 the Company securitized and sold approximately $212 million of its
vehicle leases by transferring such leases, without recourse to the Company, to
a wholly-owned subsidiary, which, in turn, sold the leases to an unrelated
cooperative corporation. The assets of the wholly-owned subsidiary are available
first and foremost to satisfy the claims of its creditors. Beginning in June
1994, the Company discontinued securitizing additional leases under this
arrangement to replace the run-off of principal of the leases initially
securitized. See Note 2 of Notes to Consolidated Financial Statements on page
25.

ITEM 2. PROPERTIES

The Company owns no significant real property and leases all of its
offices. See Note 10 of Notes to Consolidated Financial Statements on page 31
for information as to rental obligations.

ITEM 3. LEGAL PROCEEDINGS

There are no pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Company is a party or to
which its property is subject, nor are any such proceedings known to be
contemplated by governmental authorities or others.

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

The information called for by this item has been omitted pursuant to
General Instruction J(2)(c).

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS

All outstanding shares of the Company's Common Stock are owned by Ford
Holdings, and therefore there is no market for such shares. The Company declared
a $100 million and a $40 million dividend, effective December 31, 1994 and 1995,
respectively, which were distributed to Ford Holdings in January 1995 and 1996.
Ford Holdings made a $40 million capital contribution to the Company in 1993.
The Company and Ford Holdings will, from time to time, determine the appropriate
capitalization for the Company, which will, in part, affect any future payment
of dividends to Ford Holdings or capital contributions to the Company.

12
<PAGE> 13

ITEM 6. SELECTED FINANCIAL DATA

The information called for by this item has been omitted pursuant to
General Instruction J(2)(a).

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

Pursuant to General Instruction J(2)(a), the following narrative analysis
of the results of operations is presented in lieu of Management's Discussion and
Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS

REVENUES, EXPENSES, AND OPERATING PROFIT

<TABLE>
<CAPTION>
YEARS ENDED 1995 VS. 1994
DECEMBER 31 INCREASE/(DECREASE)
--------------------- -------------------
(IN THOUSANDS) 1995 1994 AMOUNT PERCENT
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues........................................... $678,926 $596,065 $82,861 14%
-------- -------- -------
Expenses
Sales, administrative and general................ 65,300 62,275 3,025 5
Interest......................................... 276,915 220,759 56,156 25
Depreciation--operating leases................... 116,752 121,555 (4,803) (4)
Other............................................ 24,220 31,690 (7,470) (24)
-------- -------- -------
Total expenses........................... 483,187 436,279 46,908 11
-------- -------- -------
Operating Profit................................... $195,739 $159,786 $35,953 23%
======== ======== ======= ===
</TABLE>

Revenues

Revenues increased $83 million, or 14% in 1995 compared with 1994,
primarily as a result of a 14% increase in average earning assets. The increase
also resulted from a $19 million increase in the gain on asset sales, primarily
in the Business Equipment Finance and the Transportation and Industrial
Financing business units.

Expenses

Sales, administrative, and general expenses increased $3 million, or 5%, in
1995, as a result of a new advertising campaign, higher expenses to support the
growing portfolio of earning assets, and normal inflationary increases.

Interest expense increased $56 million, or 25%, in 1995, reflecting an
increase in average borrowings from $3.57 billion in 1994 to $4.08 billion in
1995 to finance earning assets. In addition, there was an increase in borrowing
rates, which averaged 6.7% in 1995 compared with 6.1% in 1994.

Depreciation expense on operating lease equipment decreased $5 million, or
4%, in 1995, although the average investment in the cost of operating lease
equipment increased 9% or $89 million. The reduction in depreciation expense is
the result of the increasingly larger percentage of the operating lease
portfolio in railcars, which have longer useful lives and depreciate more slowly
than other operating lease equipment. In addition, the useful life of certain
railcars was extended at the end of 1994, which reduced depreciation expense in
1995 approximately $3 million.

Other expenses decreased $7 million, or 24%, in 1995, due in part to a
decrease in the provision for losses (see page 9 for discussion of credit loss
experience). In addition, there was a decrease in operating lease expenses of
approximately $5 million, primarily as a result of reduced maintenance expense
incurred by the Rail Services business unit. Special maintenance costs were
incurred in 1994 for mandated inspections.

13
<PAGE> 14

Operating Profit

Operating profit improved $36 million, or 23%, compared with 1994. The
improvement in operating results reflects the impact of higher earning assets
and lower operating costs.

Taxes on Income

Income taxes were 31.0% on income before taxes in 1995 compared with 31.8%
in 1994. See Note 9 of Notes to Consolidated Financial Statements on page 30 for
the principal reasons for differences from the normal statutory rates.

New Accounting Standards

In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan." This standard was partially amended by the
issuance, in October 1994, of SFAS 118, "Accounting by Creditors for Impairment
of a Loan--Income Recognition and Disclosures." These standards require that
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate, or at the fair value of
the underlying collateral if the loan is collateral based, or based on the
loan's observable market price. The Company adopted these standards effective
January 1, 1995, and the effect was not material.

In March 1995, the FASB issued SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This standard
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. The
standard also requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell. The Company has adopted the standard effective
January 1, 1996, and the effect is not expected to be material.

Recent Developments

As previously reported by Ford, Ford is investigating and considering the
sale of all or part of the Company.

Effective December 31, 1995, Ford Holdings became an indirect wholly-owned
subsidiary of Ford as a result of a cash-out merger involving Ford Holdings
pursuant to which its outstanding voting preferred stock was cancelled.
Effective January 1, 1996, Ford Holdings and the Company have been included in
Ford's consolidated group for federal income tax purposes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by this Item are
listed in Item 14 of Part IV on page 15, are set forth in detail at the end of
this report, and are filed as part hereof.

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

None.

PART III

The information called for by Items 10, 11, 12, and 13 has been omitted
pursuant to General Instruction J(2)(c).

14
<PAGE> 15

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The consolidated financial statements of the Company are included in
this report at the pages indicated.

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Management's Responsibility for Financial Statements...................... 18
Report of Independent Accountants......................................... 19
Consolidated Statements of Income for the years ended December 31, 1995,
1994, and 1993.......................................................... 20
Consolidated Balance Sheets at December 31, 1995 and 1994................. 21
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994, and 1993.................................................... 22
Consolidated Statements of Changes in Shareholder's Equity for the years
ended December 31, 1995, 1994, and 1993................................. 23
Notes to Consolidated Financial Statements................................ 24
</TABLE>

(a) 2. Financial Statement Schedules

<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
Schedule II --Valuation and Qualifying Accounts........................ 37
</TABLE>

Financial statements and schedules other than those listed above are
omitted because the required information is included in the financial
statements or the notes thereto or because of the absence of
conditions under which they are required.

(a) 3. Exhibits required by Item 601 of Regulation S-K:

<TABLE>
<S> <C>
(3)A. Copy of the Certificate of Incorporation of United States Leasing
International, Inc., a Delaware Corporation filed with the Secretary of
State of the State of Delaware on August 15, 1986, and filed as Exhibit
3(A) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993, is incorporated herein by this reference.
B. Copy of the Agreement of Merger pursuant to which United States Leasing
International, Inc., a California corporation, merged into United States
Leasing International, Inc., a Delaware corporation, filed with the
Secretary of State of the State of Delaware on October 27, 1986, and filed
as Exhibit 3(B) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, is incorporated hereby by this reference.
C. Copy of the Certificate of Amendment of Certificate of Incorporation of
United States Leasing International, Inc., pursuant to which United States
Leasing International, Inc. changed its name to USL Capital Corporation
filed with the Secretary of State of the State of Delaware on November 12,
1993, and filed as Exhibit 3(C) to the Company's Annual Report on Form
10-K for the year ended December 31, 1993, is incorporated herein by this
reference.
D. Copy of Bylaws, as amended, through April 28, 1994.
(4)A. Copy of Indenture dated as of January 15, 1986, between the Company and
The Chase Manhattan Bank (National Association), Trustee, including forms
of Debt Security and Medium Term Note, filed as Exhibit (4)A to the
Company's Annual Report on Form 10-K for the year ended December 31, 1991,
is incorporated herein by this reference.
</TABLE>

15
<PAGE> 16

<TABLE>
<S> <C>
B. Copy of Supplemental Indenture dated as of October 27, 1986, between the
Company and The Chase Manhattan Bank (National Association), Trustee,
filed as Exhibit (4)B to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, is incorporated herein by this reference.
C. Copy of Second Supplemental Indenture dated as of December 1, 1988, to
Indenture dated as of January 15, 1986, between the Company and The Chase
Manhattan Bank (National Association), Trustee, filed as Exhibit (4)C to
the Company's Annual Report on Form 10-K for the year ended December 31,
1993, is incorporated herein by this reference.
D. Copy of Indenture dated as of July 1, 1991, between the Company and The
First National Bank of Chicago, Trustee, including forms of Debt Security
and Medium Term Note, filed on July 15, 1991, as Exhibits 4.1, 4.2, and
4.3, respectively, to the Company's Registration Statement on Form S-3
(File No. 33-4165) is incorporated herein by this reference.
E. Copy of the Indenture dated as of November 15, 1994, between the Company
and The Chase Manhattan Bank (National Association), Trustee, including
forms of Debt Security and Medium Term Note, filed on December 13, 1994,
as Exhibits 4.1, 4.2 and 4.3, respectively, to the Company's Registration
Statement on Form S-3 (File No. 33-56839) is incorporated herein by this
reference.
(10)A. Copy of Asset Purchase Agreement among USLI Fleet Financing, Inc., Asset
Securitization Cooperative Corporation, Canadian Imperial Bank of Commerce
and United States Leasing International, Inc., dated as of December 23,
1991, filed as Exhibit 10(A) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991, is incorporated herein by this
reference.
B. Copy of Purchase Agreement between United States Leasing International,
Inc. and USLI Fleet Financing, Inc., dated as of December 23, 1991, filed
as Exhibit 10(B) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991, is incorporated herein by this reference.
C. Copies of the First and Second Amendments to Asset Purchase Agreement
among USLI Fleet Financing, Inc., Asset Securitization Cooperative
Corporation, Canadian Imperial Bank of Commerce and United States Leasing
International, Inc., dated as of December 23, 1991, filed as Exhibit (10)C
to the Company's Annual Report on Form 10-K for the year ended December
31, 1993, is incorporated herein by this reference.
D. First Amendment to Purchase Agreement between United States Leasing
International, Inc. and USLI Fleet Financing, Inc., dated as of December
23, 1991, filed as Exhibit (10)D to the Company's Annual Report on Form
10-K for the year ended December 31, 1993, is incorporated herein by this
reference.
(12) Computation of Ratio of Earnings to Fixed Charges.
(23) Consent of Independent Public Accountants (with respect to the Company's
current Registration Statement on Form S-3).
</TABLE>

The Company agrees to furnish to the Commission upon request a copy of
each instrument with respect to issues of long-term debt of the Company,
the authorized principal amount of which does not exceed 10% of the
total assets of the Company.

(b) Report on Form 8-K.

The Registrant filed the following report on Form 8-K during the
quarter ended December 31, 1995:

On or about October 17, 1995, the Registrant filed a Form 8-K
reporting the filing by Ford of a news release on October 12, 1995,
regarding the investigation by Ford of the whole or partial sale of
the Registrant, and the filing by Ford Holdings of a news release
disclosing its intention to exchange for cash its publicly held
preferred stock.

16
<PAGE> 17

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON
MARCH 22, 1996.

USL CAPITAL CORPORATION
(Registrant)

By: /s/ JAMES G. DUFF
-----------------------------
James G. Duff,
Chairman and Chief Executive
Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE COMPANY
AND IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ----------------
<S> <C> <C>
(a) Principal Executive Officer

/s/ JAMES G. DUFF
--------------------------------------- Chairman and Chief Executive March 22, 1996
James G. Duff Officer

(b) Principal Financial Officer:

/s/ JOSEPH J. MAHONEY
-------------------------------------- Senior Vice President and March 22, 1996
Joseph J. Mahoney Chief Financial Officer

/s/ ROBERT A. KEYES, JR.
-------------------------------------- Vice President, Corporate March 22, 1996
Robert A. Keyes, Jr. Controller

(d) Directors:

/s/ JAMES G. DUFF March 22, 1996
-------------------------------------
James G. Duff

/s/ JOSEPH J. MAHONEY March 22, 1996
-------------------------------------
Joseph J. Mahoney

/s/ KENNETH WHIPPLE March 22, 1996
-------------------------------------
Kenneth Whipple
</TABLE>

17
<PAGE> 18

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

Management is responsible for the preparation of the Company's financial
statements and the other financial information in this report. This
responsibility includes maintaining the integrity and objectivity of the
financial records and the presentation of the Company's financial statements in
accordance with generally accepted accounting principles.

The Company maintains an internal control structure designed to provide,
among other things, reasonable assurance that its records include the
transactions of its operations in all material respects and to provide
protection against significant misuse or loss of Company assets. The internal
control structure is supported by careful selection and training of financial
management personnel, by written procedures that communicate the details of the
control structure to the Company's activities, by a staff of internal auditors
of Ford Motor Company who employ thorough auditing programs, and by the
Company's staff of operating control specialists who conduct reviews of
adherence to the Company's procedures and policies.

The Company's financial statements have been audited by Coopers & Lybrand
L.L.P., independent certified public accountants. Their audit was conducted in
accordance with generally accepted auditing standards which include a review of
the Company's internal control structure to the extent deemed necessary for the
purposes of their audit. The Report of Independent Accountants appears on the
following page.

The Board of Directors is responsible for overseeing management's
fulfillment of its responsibilities in the preparation of financial statements
and the financial control of operations. The Company's independent accountants
have full and free access to the Board to discuss their audit work, the
Company's internal controls, and financial reporting matters.

/s/ James G. Duff
- ------------------------------------
James G. Duff
Chairman and Chief Executive Officer

/s/ Joseph J. Mahoney
- ------------------------------------
Joseph J. Mahoney
Senior Vice President
and Chief Financial Officer

18
<PAGE> 19

LETTERHEAD OF COOPERS & LYBRAND L.L.P.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors,
USL Capital Corporation:

We have audited the consolidated financial statements and the financial
statement schedules of USL Capital Corporation and subsidiaries listed in Part
IV Item 14(a)1. and 2. of this Form 10-K. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of USL Capital
Corporation and subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.

/s/ Coopers & Lybrand L.L.P.

San Francisco, California
January 26, 1996

19
<PAGE> 20

USL CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
REVENUES................................................... $678,926 $596,065 $564,472
-------- -------- --------
EXPENSES
Sales, administrative and general........................ 65,300 62,275 70,352
Interest................................................. 276,915 220,759 189,942
Depreciation -- operating leases......................... 116,752 121,555 131,100
Other.................................................... 24,220 31,690 50,907
-------- -------- --------
Total expenses................................... 483,187 436,279 442,301
-------- -------- --------
Income before taxes on income............................ 195,739 159,786 122,171
Taxes on income.......................................... 60,744 50,773 45,119
-------- -------- --------
NET INCOME............................................... $134,995 $109,013 $ 77,052
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

20
<PAGE> 21

USL CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and cash equivalents.......................................... $ 11,474 $ 16,226
Investment in finance leases -- net................................ 2,548,944 2,435,429
Notes receivable................................................... 1,039,597 824,619
Investment in operating leases -- net.............................. 904,391 711,602
Investment in leveraged leases..................................... 438,504 266,392
Investment in securities........................................... 1,064,841 700,355
Inventory held for sale or lease................................... 107,514 86,816
Other receivables.................................................. 21,759 18,335
Investment in associated companies................................. 17,215 17,838
Office equipment at cost less accumulated depreciation:
$16,236 and $13,519 at December 31, 1995 and 1994,
respectively.................................................. 8,741 8,772
Other assets....................................................... 20,231 20,439
Goodwill less accumulated amortization:
$47,864 and $42,020 at December 31, 1995 and 1994,
respectively.................................................. 177,551 183,395
---------- ----------
Total assets............................................. $6,360,762 $5,290,218
========== ==========
LIABILITIES
Short-term notes payable........................................... $1,417,754 $1,337,601
Accounts payable................................................... 83,849 58,078
Payable to Ford and affiliates..................................... 109,557 134,763
Accrued liabilities and lease deposits............................. 205,186 113,847
Deferred taxes on income........................................... 534,925 424,301
Long-term debt..................................................... 3,171,637 2,478,547
---------- ----------
Total liabilities........................................ 5,522,908 4,547,137
---------- ----------
Commitments (Note 10 and Note 14).................................. -- --
SHAREHOLDER'S EQUITY
Common stock, $1 par value, authorized: 10,000 shares; outstanding:
10 shares........................................................ * *
Additional capital................................................. 521,425 521,425
Net unrealized (loss) on available-for-sale securities............. (3,782) (3,560)
Retained earnings.................................................. 320,211 225,216
---------- ----------
Total shareholder's equity............................... 837,854 743,081
---------- ----------
Total liabilities and shareholder's equity............... $6,360,762 $5,290,218
========== ==========
</TABLE>

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

* Less than $1,000

See notes to consolidated financial statements.

21
<PAGE> 22

USL CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash flow from operating activities:
Income from operations............................ $ 134,995 $ 109,013 $ 77,052
Noncash expenses, revenues, losses, and gains
included in income:
Depreciation and amortization.................. 147,317 150,562 154,322
Deferred taxes on income....................... 110,766 112,075 105,330
Provision for losses........................... 5,679 8,296 24,752
Accrued interest income on notes receivable
added to the principal balance............... (7,168) (1,601) --
Net increase/(decrease) in advances from Ford
and affiliates............................... 34,794 (44,727) 4,462
Increase/(decrease) in accounts payable........ 25,771 (7,565) (17,082)
Increase/(decrease) in accrued liabilities and
lease deposits............................... 91,337 (6,567) 16,162
(Increase) in other receivables................ (3,424) (39) (14,691)
Other.......................................... 345 519 1,357
------------ ---------- ------------
Net cash flow from operating activities... 540,412 319,966 351,664
------------ ---------- ------------
Cash flows from investing activities:
Recovery of equipment costs and residual
interests...................................... 667,531 675,645 622,364
Proceeds from sale of finance receivables......... -- 67,581 103,006
Cost of equipment acquired for lease.............. (1,295,057) (1,045,007) (1,446,217)
Notes receivable investments...................... (588,391) (329,394) (317,969)
Collections on notes receivable investments....... 385,784 190,731 121,238
Purchase of held-to-maturity securities........... (69,620) (108,302) --
Maturity of held-to-maturity securities........... 55,497 29,986 --
Purchase of available-for-sale securities......... (195,238) (58,210) --
Sale and maturity of available-for-sale
securities..................................... 18,666 7,181 --
Purchase of investment securities................. -- -- (280,812)
Sale of investment securities..................... -- -- 40,123
Increase in deferred initial direct costs......... (15,331) (11,114) (10,867)
Office equipment purchased........................ (2,837) (4,150) (5,118)
Purchase of other equity securities -- not subject
to SFAS 115.................................... (177,797) -- --
Other............................................. (1,615) (8,015) (1,969)
------------ ---------- ------------
Net cash used by investing activities..... (1,218,408) (593,068) (1,176,221)
------------ ---------- ------------
Cash flows from financing activities:
Proceeds from long-term borrowings................ 1,048,186 290,932 1,125,145
Long-term debt repaid............................. (355,095) (360,636) (260,778)
Net increase/(decrease) in short-term
borrowings..................................... 80,153 352,324 (78,103)
(Dividend to)/capital contribution from Ford
Holdings....................................... (100,000) -- 40,000
------------ ---------- ------------
Net cash provided by financing
activities.............................. 673,244 282,620 826,264
------------ ---------- ------------
Increase/(decrease) in cash and cash equivalents.... (4,752) 9,518 1,707
Cash and cash equivalents at beginning of period.... 16,226 6,708 5,001
------------ ---------- ------------
Cash and cash equivalents at end of period.......... $ 11,474 $ 16,226 $ 6,708
============ ========== ============
Supplemental schedule of cash flow information:
lnterest paid..................................... $ 276,125 $ 227,572 $ 356,829
Income taxes paid................................. 581 50 250
Supplemental schedule of noncash investing and
financing activities:
Accrued interest on notes receivable added to
principal...................................... $ 7,168 $ 1,601 $ --
Lease equipment and notes receivable transferred
to inventory held for sale or lease............ 12,316 23,163 --
Fair market value adjustment on available-for-sale
securities..................................... (364) (5,839) --
</TABLE>

See notes to consolidated financial statements.

22
<PAGE> 23

USL CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
NET UNREALIZED
(LOSS) ON TOTAL
COMMON ADDITIONAL AVAILABLE-FOR-SALE RETAINED SHAREHOLDER'S
STOCK CAPITAL SECURITIES EARNINGS EQUITY
-------- ---------- ------------------ --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993.......... $ * $ 481,425 $ 139,151 $ 620,576
Capital contributions............. 40,000 40,000
Net income........................ 77,052 77,052
-------- -------- --------- ---------
Balance at December 31, 1993........ * 521,425 216,203 737,628
Dividend.......................... (100,000) (100,000)
Unrealized (loss)
At January 1, 1994............. $ (979) (979)
Change, net of taxes........... (2,581) (2,581)
Net income........................ 109,013 109,013
-------- -------- -------- --------- ---------
Balance at December 31, 1994........ * 521,425 (3,560) 225,216 743,081
Dividend.......................... (40,000) (40,000)
Change, net of taxes.............. (222) (222)
Net income........................ 134,995 134,995
-------- -------- -------- --------- ---------
Balance at December 31, 1995........ $ * $ 521,425 $ (3,782) $ 320,211 $ 837,854
======== ======== ======== ========= =========
</TABLE>

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

* Less than $1,000

See notes to consolidated financial statements.

23
<PAGE> 24

USL CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES

Consolidation -- The consolidated financial statements include USL Capital
Corporation ("Company") and all of its majority-owned subsidiaries. Investments
in partnerships and 50%-or-less owned associated companies are accounted for on
the equity method. All material intercompany balances and transactions are
eliminated. Certain amounts have been reclassified to conform to the 1995
presentation.

Nature of Operations -- The Company provides leasing and financing to
commercial and governmental entities, principally in the United States,
including office and business equipment, large-balance transportation equipment,
industrial and energy facilities, and commercial automobile fleets, as well as
mortgage financing of income-producing real estate, full-service leasing to
industrial shippers and railroads, municipal financing of essential-use
equipment, and investment in publicly traded and privately placed preferred
stocks and senior and subordinated debt of public and private companies. The
Company provides financing in the form of finance leases, operating leases,
leveraged leases, notes receivable, and corporate securities.

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

Cash and Cash Equivalents -- Cash and cash equivalents consist of highly
liquid investments with a maturity of three months or less at the time of
purchase. Outstanding checks ($29,073,000 at December 31, 1995, and $25,859,000
at December 31, 1994) are reclassified to Accounts Payable. For Cash and Cash
Equivalents, the carrying amount is stated at fair value.

Finance Leases -- At lease commencement, the Company records the lease
receivable, estimated residual value of the leased equipment, and unearned lease
income. Initial direct costs are deferred as part of the investment and
amortized over the lease term. Unearned lease income is recognized as revenue
over the lease term so as to approximate a level rate of return on the net
investment. Residual values, which are reviewed periodically, represent the
estimated amount to be received at lease termination from the disposition of
leased equipment.

Operating Leases -- Lease contracts that do not meet the criteria of
finance leases are accounted for as operating leases. Rental equipment is
recorded at cost and depreciated over its useful life or lease term to an
estimated salvage or residual value (10 to 30 years for railroad cars and 3 to
10 years for other equipment), primarily on a straight-line basis.

Leveraged Leases -- Leveraged lease assets acquired by the Company are
financed primarily through nonrecourse loans from third-party debt participants.
These loans are collateralized by the lessee's rental obligations and the leased
property. Unearned income is recognized over the lease term at a constant
after-tax rate of return on the net investment in the lease in those periods in
which the net investment is positive. Unguaranteed estimated residual values are
principally based on independent appraisals of the estimated values of the
assets remaining at the expiration of the lease.

Investment in Securities -- The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" effective January 1, 1994. The cumulative effect of
this change in accounting principle was not material. Investments in securities
consist principally of debt securities (preferred stock, corporate and Municipal
bonds) which are reported as held-to-maturity and recorded at amortized cost,
net of a provision for losses that is sufficient to cover estimated
uncollectibles, because the Company has the ability and intent to hold such
securities until maturity. Securities classified as available-for-sale are
recorded net of the unrealized holding gain/loss which

24
<PAGE> 25

NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

is excluded from earnings and reported as a separate component of Shareholder's
Equity, net of related deferred taxes. Equity securities that are bought and
held principally for the purpose of selling in the near term are classified as
trading securities and reported at fair value, with unrealized gains and losses
included in earnings. Equity securities which do not have readily determinable
fair values, principally investments in low income housing partnerships, are
recorded at cost. Prior to the adoption of SFAS 115, investments in securities
were recorded at amortized cost because the Company had the ability to hold such
securities until maturity and had this intention. See Notes 6 and 15 for
additional information on the fair value of securities.

Goodwill -- Goodwill is principally from the acquisition by Ford, which is
being amortized on the straight-line method over 40 years (1995, $5,643,000;
1994, $5,643,000; 1993, $5,643,000).

Taxes on Income and Tax Credits -- Since the transfer of ownership of the
Company by Ford to Ford Holdings in 1989, the Company has been included in the
consolidated federal income tax return of Ford Holdings and continues to be
included in the combined state income tax returns of Ford, except in those
states where the Company is required to file separate returns. Income taxes,
including the federal alternative minimum tax, if any, are allocated by Ford
Holdings based on the Company's effect on taxes paid by the group. Effective
January 1, 1996, the Company will be included in the Ford consolidated group for
federal income tax purposes. See Item 7 Recent Developments on page 14. Deferred
income tax liabilities give effect to temporary differences between financial
statement and tax return amounts based upon enacted tax rates in effect for the
future periods when such differences are expected to reverse.

Derivatives -- Derivatives consist principally of interest rate swap and
interest rate cap agreements used to manage the Company's interest rate risk.
Interest differentials paid or received under interest rate swap agreements are
recognized as an adjustment to interest expense over the life of the agreements.
Premiums paid for interest rate caps are included with long-term debt and are
amortized to interest expense on a straight-line basis over the terms of the
related agreements.

NOTE 2 -- INVESTMENT IN FINANCE LEASES

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
(IN THOUSANDS)

Receivable in installments........................ $ 3,321,818 $ 3,276,655
Residual value.................................... 338,787 303,416
Allowance for doubtful accounts................... (25,960) (27,805)
Unearned lease income............................. (1,104,614) (1,137,730)
Deferred initial direct costs..................... 18,913 20,893
----------- -----------
Net investment.................................... $ 2,548,944 $ 2,435,429
=========== ===========
</TABLE>

Finance lease receivables at December 31, 1995, are due in installments as
follows (in thousands): 1996, $886,343; 1997, $620,935; 1998, $311,287; 1999,
$223,486; 2000, $149,333; and, thereafter, $1,130,434. Receivables of $9.5
million serve as collateral to long-term debt.

Finance leases include open-end transactions in the Fleet Services business
unit in which the lessee pays the Company for any shortfall from a stated
terminal amount for vehicles or receives any amount in excess of the terminal
value. On most of these transactions, Fleet Services retains an exposure to the
lowest dollar amounts of the vehicles' value, of which half is guaranteed by a
third party. Because of the high value of the vehicles underlying these
transactions, full recovery of the value is expected to be covered by the
lessees' guarantees. As such, all amounts are included above in receivable in
installments.

In December 1991, U.S. Fleet Financing, Inc. ("USFF"), a wholly owned
subsidiary of the Company, sold a portfolio of finance leases for proceeds of
$211.5 million. During 1992, 1993, and 1994, additional leases were sold for
proceeds of $79.9 million, $103.0 million, and $67.6 million, respectively, to
replace the run-off of principal in the leases initially securitized. Beginning
in June 1994, the Company discontinued securitizing

25
<PAGE> 26

NOTE 2 -- INVESTMENT IN FINANCE LEASES (CONTINUED)

additional leases. The sale agreement provides recourse to the assets of USFF,
totalling $17.7 million at December 31, 1995, for any uncollectible receivables
in the portfolio. USFF is a separate entity from its parent company, USL Capital
Corporation, and its assets will be available first and foremost to satisfy the
claims of its creditors. An allowance of $212,000 has been provided on the books
of USFF for estimated losses on the sold receivables. The agreement provides
that the Company will service the lease receivables for the purchaser. At
December 31, 1995, $47.3 million of net investment in the leases serviced by the
Company was outstanding.

In April 1992, the Company sold a portfolio of municipal finance leases for
proceeds of $95.1 million. The sale agreement provides the buyers with limited
recourse against the Company, $1.1 million at December 31, 1995, for any
uncollectible receivables in the portfolio. The agreement provides that the
Company will service the lease receivables for the purchaser. At December 31,
1995, $3.3 million of net investment in the leases serviced by the Company was
outstanding.

NOTE 3 -- INVESTMENT IN OPERATING LEASES

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
(IN THOUSANDS)
Equipment cost:
Automotive....................................... $ 112,736 $ 131,363
EDP, peripheral and word processing.............. 83,402 105,310
Copiers.......................................... 201,774 187,120
Rail............................................. 639,261 476,255
Aircraft......................................... 62,209 51,668
Office furniture................................. 29,518 23,006
Manufacturing and industrial equipment........... 109,987 55,229
Other............................................ 53,678 46,997
---------- ----------
Total equipment cost............................. 1,292,565 1,076,948
Accumulated depreciation........................... (391,102) (369,760)
Rentals receivable................................. 7,713 8,839
Allowance for doubtful accounts.................... (4,785) (4,425)
---------- ----------
Net investment..................................... $ 904,391 $ 711,602
========== ==========
</TABLE>

Initial lease terms of rental equipment range from one month to 15 years.
Future minimum rentals on operating leases at December 31, 1995, are due in
installments as follows (in thousands): 1996, $210,775; 1997, $143,308; 1998,
$93,352; 1999, $58,498; 2000, $23,250; and, thereafter, $33,975.

Minimum future rentals do not include contingent rentals that may be
received under certain railcar leases, because of use in excess of specified
amounts. Contingent rentals (in thousands) received were $7,847 in 1995, $9,697
in 1994, and $8,170 in 1993.

26
<PAGE> 27

NOTE 4 -- INVESTMENT IN LEVERAGED LEASES

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Rentals receivable (net of principal and interest
on nonrecourse debt)............................. $ 497,741 $ 276,921
Estimated residual values.......................... 306,002 197,149
Allowance for doubtful accounts.................... (2,857) (2,354)
Unearned income.................................... (363,119) (205,773)
Deferred initial direct costs...................... 737 449
--------- ---------
Investment in leveraged leases..................... 438,504 266,392
Less deferred income taxes arising from leveraged
leases........................................... (122,297) (69,677)
--------- ---------
Net investment..................................... $ 316,207 $ 196,715
========= =========
</TABLE>

A summary of the components of income from leveraged leases was as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Income before taxes on income.................. $ 27,667 $ 18,800
Taxes on income................................ 10,015 7,338
------- -------
Income from leveraged leases................... $ 17,652 $ 11,462
======= =======
</TABLE>

NOTE 5 -- NOTES RECEIVABLE

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Principal...................................... $1,040,696 $828,111
Interest receivable............................ 12,667 9,841
Deferred loan origination costs................ 1,896 1,255
Allowance for doubtful accounts................ (15,662) (14,588)
---------- ----------
Net............................................ $1,039,597 $824,619
========== ==========
</TABLE>

At December 31, 1995, $718.7 million of principal was collateralized by
equipment, real estate, and other assets. Included in notes receivable (in
thousands) at December 31, 1995, was principal of $224,395 with fixed interest
rates and $816,301 with variable interest rates. The weighted average interest
rate at December 31, 1995, was 9.0%. Notes receivable are due in subsequent
years as follows (in thousands): 1996, $78,758; 1997, $65,690; 1998, $97,997;
1999, $170,854; 2000, $286,761; and, thereafter, $340,636.

27
<PAGE> 28

NOTE 6 -- INVESTMENT IN SECURITIES

Investments in securities at December 31, 1995, were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Available-for-Sale Securities
Preferred Stock....................... $ 243,676 $ 4,445 $ 9,099 $ 239,022 $ 239,022
Common Stock.......................... 3,504 0 0 3,504 3,504
Debt Securities....................... 4,672 0 1,549 3,123 3,123
---------- ------- ------- ---------- ----------
Total available-for-sale securities... 251,852 4,445 10,648 245,649 245,649
---------- ------- ------- ---------- ----------
Held-to-Maturity Securities
Redeemable Preferred Stock............ 547,616 13,592 1,805 559,403 547,616
Debt Securities....................... 90,505 2,247 7,022 85,730 90,505
---------- ------- ------- ---------- ----------
Total held-to-maturity securities..... 638,121 15,839 8,827 645,133 638,121
---------- ------- ------- ----------
Allowance for doubtful accounts....... (10,491)
----------
Total held-to-maturity securities
(net).............................. 627,630
----------
Trading Securities...................... 279 49 4 324 324
---------- ------- ------- ---------- ----------
Equity securities not practicable to
fair value............................ 191,238 0 0 191,238 191,238
---------- ------- ------- ---------- ----------
Total Investments in Securities......... $1,081,490 $ 20,333 $ 19,479 $1,082,344 $1,064,841
========== ======= ======= ========== ==========
</TABLE>

Investments in securities at December 31, 1994, were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Available-for-Sale Securities
Preferred Stock....................... $ 69,636 $ 770 $ 6,609 $ 63,797 $ 63,797
Common Stock.......................... 755 0 0 755 755
Debt Securities....................... 5,270 0 0 5,270 5,270
---------- ------- ------- ---------- ----------
Total available-for-sale securities... 75,661 770 6,609 69,822 69,822
---------- ------- ------- ---------- ----------
Held-to-Maturity Securities
Redeemable Preferred Stock............ 536,180 3,922 31,123 508,979 536,180
Debt Securities....................... 86,173 1,073 2,676 84,570 86,173
---------- ------- ------- ---------- ----------
Total held-to-maturity securities..... 622,353 4,995 33,799 593,549 622,353
---------- ------- ------- ----------
Allowance for doubtful accounts....... (9,013)
----------
Total held-to-maturity securities
(net).............................. 613,340
----------
Equity securities not practicable to
fair value............................ 17,193 0 0 17,193 17,193
---------- ------- ------- ---------- ----------
Total Investments in Securities......... $ 715,207 $ 5,765 $ 40,408 $ 680,564 $ 700,355
========== ======= ======= ========== ==========
</TABLE>

28
<PAGE> 29

NOTE 6 -- INVESTMENT IN SECURITIES (CONTINUED)

The amortized cost and fair value of investments in available-for-sale
securities and held-to-maturity securities at December 31, 1995, by contractual
maturity, were as follows:

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------ -----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less......................... $ 2,691 $ 2,691 $ 19,977 $ 16,143
Due after one year through five years........... 6,055 4,530 112,006 116,025
Due after five years through ten years.......... 231,382 226,787 431,406 435,746
Due after ten years............................. 11,724 11,641 74,732 77,219
-------- -------- -------- --------
Total......................................... $ 251,852 $ 245,649 $ 638,121 $ 645,133
======== ======== ======== ========
</TABLE>

Expected maturities of debt securities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without penalty.

Proceeds from the sale of available-for-sale securities were $22.0 million
in 1995 and $5.1 million in 1994, with realized gains of $1.8 million and $0.1
million, respectively. Amortized cost was the basis used in computing the
realized gains. The net unrealized gain/(loss) net of tax included in
shareholder's equity was $(3.8) million and $(3.6) million at December 31, 1995
and 1994, respectively.

The net unrealized gain on trading securities included in earnings (in
thousands) in 1995 was $45.

Proceeds from the sale of investments in debt securities (in thousands)
were $58,251 in 1993, and the resulting gains (in thousands) were $4,888.

NOTE 7 -- SHORT-TERM NOTES PAYABLE

Short-term notes payable consist entirely of commercial paper. Average
interest rates, after giving effect to interest rate exchange agreements, on
commercial paper outstanding at December 31, 1995 and 1994, were 6.1% and 6.2%
respectively. The interest rate exchange agreements, which expire through 2005,
had the effect of fixing interest rates on $259.2 million of debt at December
31, 1995, and $364.2 million of debt at December 31, 1994. The balance
outstanding at December 31, 1995, had an average maturity of 24 days. The
Company has committed credit lines, wherein it may borrow up to $1.7 billion at
floating rates based upon a spread over LIBOR. Of these credit lines, $1.2
billion are under five-year agreements expiring in 2000, and the balance are
under one-year agreements. An annual facility fee of .07% to .125% is paid on
the unused portion of these credit lines. These lines contain certain provisions
related to (a) continuing Ford ownership; (b) limitations on liens; and (c)
limitations on activities and indebtedness of subsidiaries. There were no
borrowings outstanding on these lines at December 31, 1995.

NOTE 8 -- LONG-TERM DEBT

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Collateralized:
7.1% due through 1996............................ $ 9,519
6.3% due through 1995............................ $ 9,719
Senior:
1.8% to 9.9% due through 2011.................... 3,162,118
0.0% to 9.9% due through 2011.................... 2,468,828
---------- ----------
Total.................................... $3,171,637 $2,478,547
========== ==========
</TABLE>

29
<PAGE> 30

NOTE 8 -- LONG-TERM DEBT (CONTINUED)

Payments required on long-term debt are (in thousands): 1996, $623,758;
1997, $652,280; 1998, $375,323; 1999, $218,598; 2000, $232,381; and, thereafter,
$1,069,297. Average interest rates on collateralized and senior debt outstanding
at December 31, 1995, were 7.1% and 6.9%, respectively.

Included in long-term debt (in thousands) at December 31, 1995, were
obligations of $2,104,118 with fixed interest rates and $1,067,519 with variable
interest rates. The Company has entered into agreements to manage exposures to
fluctuations in interest rates, primarily interest rate swap agreements. These
agreements increased the overall weighted average interest rate to 7.0%,
compared with 6.9% excluding these agreements, and effectively decreased the
obligations subject to variable interest rates (in thousands) to $797,519.

NOTE 9 -- TAXES ON INCOME

The Company uses the liability method of accounting for income taxes
pursuant to SFAS No. 109.

The provision for taxes on income included:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred:
United States............................ $ 98,373 $102,546 $ 97,442
State.................................... 12,393 9,529 7,888
-------- -------- --------
Total deferred................... 110,766 112,075 105,330
-------- -------- --------
Current:
United States............................ (49,953) (62,018) (60,636)
State.................................... (286) 528 240
Foreign.................................. 217 188 185
-------- -------- --------
Total current.................... (50,022) (61,302) (60,211)
-------- -------- --------
Total............................ $ 60,744 $ 50,773 $ 45,119
======== ======== ========
</TABLE>

Deferred income taxes reflect the estimated future tax effect of temporary
differences between the amount of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws and regulations. The
components of deferred income tax assets and liabilities were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liability
Leasing transactions............................. $579,790 $433,624
Notes payable.................................... 17,159 45,137
Other............................................ 9,977 9,705
-------- --------
606,926 488,466
-------- --------
Deferred tax asset
Allowance for credit losses...................... 23,322 22,712
Employee benefit plans........................... 9,661 8,887
State net operating loss carry forwards.......... 36,597 30,287
Other............................................ 2,421 2,279
-------- --------
72,001 64,165
-------- --------
Net deferred tax liability......................... $534,925 $424,301
======== ========
</TABLE>

30
<PAGE> 31

NOTE 9 -- TAXES ON INCOME (CONTINUED)

Under the Company's tax sharing agreement with Ford Holdings, state net
operating loss carry forwards will be recovered in future periods as an offset
to future state tax liabilities.

The provision for taxes on income differed from the normal statutory rate
for the following reasons:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Normal U.S. tax rate....................................... 35.0% 35.0% 35.0%
State taxes, less U.S. tax benefit......................... 4.0 4.1 4.4
Goodwill................................................... 1.0 1.2 1.6
Rate adjustment on U.S. deferred taxes..................... -- -- 4.6
Income taxed at reduced rates:
Foreign sales corporations............................... (1.7) (1.9) (2.2)
Dividends received deduction............................. (6.2) (5.8) (5.6)
Government obligations................................... (0.6) (0.9) (0.9)
Section 42 Housing Credits................................. (0.4) -- --
Other -- net............................................... (0.1) 0.1 --
---- ---- ----
Provision for taxes........................................ 31.0% 31.8% 36.9%
===== ===== =====
</TABLE>

The deferred tax assets and liabilities were restated effective January 1,
1993, to reflect the increase of the U.S. corporate tax rate to 35% from 34%,
resulting in additional tax provision in 1993 of $5.6 million.

At December 31, 1995, investment tax credit carry forwards of approximately
$600,000 are available to reduce future federal income tax liabilities and
expire between 1997 and 1999 if not utilized.

Federal income taxes (payable to)/receivable from Ford Holdings (in
thousands) were: $(4,301) at December 31, 1995, and $5,573 at December 31, 1994.

NOTE 10 -- COMMITMENTS

The Company leases office facilities and equipment under operating leases.
The equipment leased by the Company is for sublease to end-user lessees under
operating leases of various terms. New leases are arranged when the equipment is
returned to the Company. Rental expense (in thousands) for all operating leases
was $8,107 in 1995, $9,423 in 1994, and $11,574 in 1993; and sublease income was
$4,770, $5,403, and $6,129, respectively. Future minimum rentals (excluding
executory costs) and related sublease income under operating leases that have
non-cancelable lease terms in excess of one year as of December 31, 1995, were:

<TABLE>
<CAPTION>
OFFICE RENTAL SUBLEASE NET
FACILITIES EQUIPMENT INCOME RENTALS
------- --------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996............................................... $ 2,704 $ 3,766 $ 3,811 $ 2,659
1997............................................... 2,685 3,329 2,696 3,318
1998............................................... 2,569 3,329 1,550 4,348
1999............................................... 1,890 1,789 629 3,050
2000............................................... 1,860 -- 122 1,738
Thereafter......................................... 3,707 -- -- 3,707
------- ------- ------ -------
Total $15,415 $12,213 $ 8,808 $18,820
======= ======= ====== =======
</TABLE>

31
<PAGE> 32

NOTE 11 -- PENSIONS

The Company sponsors a defined contribution retirement plan comprising a
profit sharing part and a deferred compensation matching contribution part which
covers substantially all of its employees. The combined contribution for profit
sharing and deferred compensation match is limited to 10% of a participant's
qualified earnings. Under the profit sharing part, contributions are determined
as 6.9% of each covered participant's qualified earnings, plus an additional
5.7% of earnings above the Social Security maximum taxable amount. Profit
sharing cost represents contributions minus forfeited amounts of terminated
participants. Under the deferred compensation part, contributions (cost) are
determined for eligible participants as 75 cents per dollar of deferred
compensation for the first 3% of compensation plus 25 cents per dollar for the
next 3%, up to 6% of compensation. The total cost of the retirement plan (in
thousands) amounted to $2,118 in 1995, $2,750 in 1994, and $3,500 in 1993.

NOTE 12 -- TRANSACTIONS WITH AFFILIATED COMPANIES

The Company provides administrative services for Ford Credit and other Ford
affiliates, for which the Company is reimbursed. Ford also provides
administrative services to the Company, for which Ford is reimbursed. The
Company believes that these arrangements, which are not covered by any formal
agreement between the Company, Ford Credit, and Ford or its affiliates, are
mutually beneficial. Assessments for services by the Company to Ford Credit and
other affiliates were (in thousands): 1995, $12,458; 1994, $11,746; 1993,
$12,423; and assessments by Ford to the Company were $1,700, $1,900, and $2,280,
respectively.

In 1992, the Company purchased equipment and the remaining payments under
an existing operating lease agreement due from Ford. In December 1992, the lease
with Ford was renewed with upgraded equipment, purchased for $28.2 million, and
classified as a finance lease with an initial lease term of 42 months. The
revenue earned under the finance lease was $0.9 million in 1995, $1.6 million in
1994, and $2.2 million in 1993.

The Company acts as Ford's lease advisor, primarily in the arrangement of
leases of data processing and office equipment for use by Ford, and as such
receives broker fees from the ultimate lessor. Such fees (in thousands) were
$1,910 in 1995, $1,325 in 1994, and $1,591 in 1993. In addition, an agreement
with Ford provided for payment by Ford to the Company of broker fees in 1993 (in
thousands) totaling $955 for the negotiation and arrangement of the sale and
leaseback of equipment.

The Company receives fees for the management of railcars for Ford Credit.
Such fees (in thousands) were $551 in 1995, $515 in 1994, and $294 in 1993.

In 1995 and 1994, the Company declared a dividend, effective December 31,
in the amount of $40 million and $100 million, respectively, which were paid to
Ford Holdings in January 1996 and 1995. The accrued dividend is included in the
Payable to Ford and Affiliates caption on the December 31, 1995 and 1994
Consolidated Balance Sheets. In 1993, Ford Holdings made a capital contribution
to the Company of $40 million.

The Company acts as general partner to a limited partnership in which it
has a 23% equity interest. In accordance with the limited partnership
agreements, the Company receives fees and other compensation for services
provided. Such amounts earned were as follows (in thousands): 1995, $784; 1994,
$800; and 1993, $774. Equity income from the partnership, included in
consolidated revenues, was as follows (in thousands): 1995, $1,564; 1994,
$1,452; and 1993, $1,396.

In 1989, the Company leased office space from Ford Motor Land Development
Corporation, a subsidiary of Ford. The lease, with a term of five years which
expired in July 1994, was classified as an operating lease. Rent expense (in
thousands) amounted to $471 in 1994 and $701 in 1993. A portion of the leased
office space was subleased to several divisions of Ford Motor Company. Sublease
income, which included amounts for leasehold improvements and furniture and
fixtures, (in thousands) amounted to $529 in 1994 and $1,013 in 1993.

In the fourth quarter of 1995, Ford announced that it was reviewing
possible strategic actions, including the partial or complete sale of the
Company. Following this announcement, the Company's Board of Directors reviewed
the Company's compensation plans and programs for employees and management in
light of a

32
<PAGE> 33

NOTE 12 -- TRANSACTIONS WITH AFFILIATED COMPANIES (CONTINUED)
possible change in control of the Company and determined that certain additions
and changes to such plans and programs should be made and that certain further
programs should be adopted. These actions were approved by Ford. The Company
expects to be reimbursed by Ford for any resulting incremental costs.

NOTE 13 -- DERIVATIVE FINANCIAL INSTRUMENTS

The Company has entered into arrangements to manage exposure to
fluctuations in interest rates. It is the objective of the Company to optimize
its borrowing costs while maintaining stable interest rate margins through term
matching assets with debt of similar maturities. These arrangements primarily
include interest rate swap and interest rate cap agreements. Under interest rate
cap agreements, the Company pays a premium for the right to receive interest in
excess of the capped rates. Interest rate swap agreements involve the exchange
of interest obligations on fixed and floating interest rate debt without the
exchange of the underlying principal amounts. The agreements generally mature at
the time the related debt matures. The differential paid or received on interest
rate swap agreements is recognized as an adjustment to interest expense over the
life of the agreements. Notional amounts are used to express the volume of
interest rate swap agreements. The notional amounts do not represent cash flows
and are not subject to risk of loss. In the unlikely event that a counterparty
fails to meet the terms of an interest rate swap agreement, the Company's
exposure is the termination value of the contracts.

The following table summarizes the interest rate contracts that the Company
uses to manage its interest rate risk:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
NOTIONAL TERMINATION NOTIONAL TERMINATION
PRINCIPAL VALUE PRINCIPAL VALUE
--------- ----------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Interest Rate Swaps-Net Receivable Position..... $ 568.4 $ 31.5 $ 890.4 $ 20.7
Interest Rate Swaps-Net Payable Position........ 989.4 (37.2) 1,058.0 (20.1)
Interest Rate Caps.............................. 27.0 0.1 34.8 0.9
</TABLE>

NOTE 14 -- OTHER FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company has issued a financial guarantee in support of a line of credit
entered into by an affiliate of Ford. This affiliate, located in Australia, was
previously a subsidiary of the Company, which retains management responsibility
for its operations. The line of credit expires in 1996. At December 31, 1995,
the financial guarantee issued totaled $3.0 million, and the outstanding balance
subject to such guarantee was $1.5 million. This remaining debt was repaid in
January 1996.

Additionally, under two domestic lease transactions arranged by the Company
for others, the Company guaranteed under certain conditions that the lessor will
receive additional rents of specified amounts after the original lease terms
expire. The expiration dates are between 1996 and 2001. At December 31, 1995,
such guarantees totaled $17 million. The Company has not provided collateral or
other security to support financial instruments with credit risk.

At December 31, 1995, the Company had committed to purchase railcars in the
amount of $74 million, to be included in its operating lease inventory in 1996.

The Company has also entered into several commitment agreements with third
parties contemplating possible first mortgage loans and equipment leases. The
interest rates on the first mortgage loan commitments represent a spread over
average prime or LIBOR and they have various expiration dates through 2000. At
December 31, 1995, such commitments totaled approximately $128 million.

33
<PAGE> 34

NOTE 14 -- OTHER FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED)

The Company has entered into other revolving loan commitments which contain
potential risk of loss. Neither the face amounts of these commitments, their
fair value, nor the potential risk of loss was considered to be significant at
December 31, 1995.

NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 1995, and December 31, 1994. The
fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale.

<TABLE>
<CAPTION>
1995 1994
--------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Notes receivable (Note 5)............. $ 1,039,597 $ 1,049,380 $ 824,619 837,824
Investment in securities (Note 6)..... 1,064,841 1,082,344 700,355 680,564
Short-term notes payable (Note 7)..... (1,417,754) (1,417,754) (1,337,601) (1,337,601)
Long-term debt (Note 8)............... (3,171,637) (3,260,669) (2,478,547) (2,383,014)
Derivatives relating to debt (Note 13)
Interest rate swaps-net rec.
position......................... N/A 31,461 N/A 20,713
Interest rate swaps-net pay.
position......................... N/A (37,163) N/A (20,065)
Interest rate caps.................. N/A 62 N/A 922
Guarantees and commitments (Note
14)................................. N/A 202 N/A 209
</TABLE>

The carrying amounts presented in the table are included in the
consolidated balance sheets under the indicated captions, and are net of any
applicable allowance for doubtful accounts.

The following notes summarize the major methods and assumption used in
estimating the fair values of financial instruments:

NOTES RECEIVABLE are estimated by either discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities, or dealer quotes.

INVESTMENT IN SECURITIES are estimated primarily by market and dealer
quotes. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities. Debt securities are also
valued using the discounted future cash flows based upon current rates of
similar debt instruments traded when a market quote of a similar investment
is not available.

SHORT-TERM NOTES PAYABLE are estimated at their carrying amount
because of the short maturity of these instruments.

LONG-TERM DEBT is estimated by discounting the future cash flows using
rates currently available to the Company for debt with similar terms and
remaining maturities. It is the Company's policy to follow a strategy of
match-funding all financing, and as such, the Company believes that the
change in the fair market value of its debt would be offset by a
corresponding increase in the estimated fair value of its investment in
leases.

DERIVATIVES are estimated as the amount that the Company would receive
or pay to terminate the agreements at the reporting date, taking into
account current market interest rates and corresponding borrowing spreads.

FINANCIAL GUARANTEES are estimated as the amount that the Company
would need to pay an independent third party to assume responsibility for
the guarantees. Based upon an assessment that the

34
<PAGE> 35

NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

probability of performance under each guarantee is remote, the Company
believes that such amounts are insignificant.

LOAN COMMITMENTS are estimated at the amount of the commitment, in
that the financing rates associated with the various commitments float
until funding.

NOTE 16 -- CONCENTRATIONS OF CREDIT RISK

The Company controls its credit risk through credit standards, limits on
exposure, and monitoring the financial condition of other parties. The lease,
note and investment portfolios are well diversified, consisting of more than 35
industries.

A significant portion of the Company's business activity is with customers
and businesses located in California. As of December 31, 1995 and 1994, the
Company's net finance and operating leases, notes receivable and investments in
California totaled approximately $804 million and $627 million, respectively.
There were no other significant regional, industrial or group concentrations at
December 31, 1995, or December 31, 1994.

The Company generally requires the leased asset to serve as collateral for
the lease. The collateral consists principally of autos, computers and
peripherals, office furnishings, copiers, railcars, aircraft, and industrial
facilities. Notes receivable are collateralized by first mortgages on real
estate or equipment. Investments are not collateralized.

NOTE 17 -- POSTRETIREMENT BENEFITS

The Company sponsors defined benefit postretirement health care plans that
provide medical and life insurance coverage to retirees and their dependents.
The cost of retiree and dependent medical coverage is shared between the Company
and the retiree. The life insurance plan is noncontributory. The accounting for
the health care plan anticipates future cost-sharing changes to the written plan
that are consistent with the Company's past practice. The Company defines a
maximum amount (or "cap") that it will contribute toward the health benefits of
each retiree. This cap is re-determined annually and is based on the individual
retiree's number of dependents. The Company has a history of increasing this
cap. Over the last seven years the aggregate increase in the cap approximates
the average increase in the underlying premium costs of the program. This
valuation assumed that in future years the Company will continue to increase the
cap at the average rate of increase of the underlying cost of the retiree
benefit program. However, benefits and eligibility rules may be modified by the
Company from time to time.

35
<PAGE> 36

NOTE 17 -- POSTRETIREMENT BENEFITS (CONTINUED)

The following table sets forth the plans' combined funded status reconciled
with the amount shown in the Company's statement of financial position at
December 31:

ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:

<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Retirees................................................. $(2,255) $(2,484)
Fully eligible plan participants......................... (627) (469)
Other active plan participants........................... (2,736) (2,697)
-------- --------
(5,618) (5,650)
Plan assets at fair value................................ 0 0
-------- --------
Accumulated postretirement benefit obligation in excess
of plan assets...................................... (5,618) (5,650)
Unrecognized net (gain)/loss from past experience
different from that assumed and from changes in
assumptions............................................ (2,397) (1,701)
-------- --------
Accrued postretirement benefit cost...................... $(8,015) $(7,351)
======== ========
</TABLE>

The Company's postretirement plans are underfunded; the accumulated
postretirement benefit obligation and plan assets for the plan at December 31,
1995, (in thousands) are $5,618 and $0, respectively.

NET PERIODIC POSTRETIREMENT BENEFIT COST INCLUDED THE FOLLOWING COMPONENTS:

<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Service cost -- benefits attributed to service during the
period................................................. $ 384 $ 460
Interest cost on accumulated postretirement benefit
obligation............................................. 484 426
Net amortization and deferral............................ (67) (6)
------- -------
Net periodic postretirement benefit cost................. $ 801 $ 880
======= =======
Assumption: Discount rate at year-end.................... 7.25% 8.75%
</TABLE>

For measurement purposes, 7.5% and 5.0% annual rates of increase in the per
capita cost of postretirement medical benefits were assumed for 1995 for the
under age 65 indemnity and HMO and over age 65 indemnity plans, respectively;
the rates were assumed to decrease gradually to 5.0% for 2001 and remain at that
level thereafter. The comparable rates assumed for 1994 were 9% and 7.5% for the
under age 65 indemnity and HMO and over age 65 indemnity plans, respectively.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1995, by $838,000 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $153,000.

36
<PAGE> 37

SCHEDULE II

USL CAPITAL CORPORATION AND SUBSIDIARY COMPANIES

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN C
---------------------
COLUMN E
COLUMN B ADDITIONS --------
------------ CHARGED TO BALANCE
COLUMN A BALANCE --------------------- COLUMN D AT END
- ------------------------------------ AT BEGINNING COST AND OTHER ------------ OF
CLASSIFICATION OF PERIOD EXPENSE ACCOUNTS (DEDUCTIONS) PERIOD
- ------------------------------------ ------------ -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1995
Allowance for Doubtful Accounts..... $ 58,190 $ 5,679 $4,114(1) $59,755
Allowance for Losses(2)............. 905 287(1) 618
Allowance for Residual
Valuation(3)...................... 2,680 2,680(1) 0
YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful Accounts..... $ 54,529 $ 8,296 $4,635(1) $58,190
Allowance for Losses(2)............. 990 85(1) 905
Allowance for Residual
Valuation(3)...................... 0 2,680 2,680
YEAR ENDED DECEMBER 31, 1993
Allowance for Doubtful Accounts..... $ 39,888 $ 24,454 $9,813(1) $54,529
Allowance for Losses(2)............. 359 298 $384(4) 51(1) 990
</TABLE>

- ---------------
(1) Write-offs, net of recoveries.

(2) Principally included in "Inventory held for sale or lease" caption on the
balance sheet.

(3) Included in "Residual value" caption on the balance sheet, the purpose for
which related to certain computer equipment.

(4) Reclassification

37
<PAGE> 38

EXHIBITS INDEX

<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
(3)A. Copy of the Certificate of Incorporation of United States Leasing Interna-
tional, Inc., a Delaware Corporation filed with the Secretary of State of
the State of Delaware on August 15, 1986, and filed as Exhibit 3(A) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1993,
is incorporated herein by this reference................................... *
B. Copy of the Agreement of Merger pursuant to which United States Leasing
International, Inc., a California corporation, merged into United States
Leasing International, Inc., a Delaware corporation filed with the
Secretary of State of the State of Delaware on October 27, 1986, and filed
as Exhibit 3(B) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, is incorporated hereby by this reference.......... *
C. Copy of the Certificate of Amendment of Certificate of Incorporation of
United States Leasing International, Inc., pursuant to which United States
Leasing International, Inc. changed its name to USL Capital Corporation
filed with the Secretary of State of the State of Delaware on November 12,
1993, and filed as Exhibit 3(C) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993, is incorporated herein by this
reference.................................................................. *
D. Copy of Bylaws, as amended, through April 28, 1994......................... 42
(4)A. Copy of Indenture dated as of January 15, 1986, between the Company and
The Chase Manhattan Bank (National Association), Trustee, including forms
of Debt Security and Medium Term Note, filed as Exhibit (4)A to the
Company's Annual Report on Form 10-K for the year ended December 31, 1991,
is incorporated herein by this reference................................... *
B. Copy of Supplemental Indenture dated as of October 27, 1986, between the
Company and The Chase Manhattan Bank (National Association), Trustee, filed
as Exhibit (4)B to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, is incorporated herein by this reference.......... *
C. Copy of Second Supplemental Indenture dated as of December 1, 1988, to
Indenture dated as of January 15, 1986, between the Company and The Chase
Manhattan Bank (National Association), Trustee, filed as Exhibit (4)C to
the Company's Annual Report on Form 10-K for the year ended December 31,
1993, is incorporated herein by this reference............................. *
D. Copy of Indenture dated as of July 1, 1991, between the Company and The
First National Bank of Chicago, Trustee, including forms of Debt Security
and Medium Term Note, filed on July 15, 1991 as Exhibits 4.1, 4.2, and 4.3,
respectively, to the Company's Registration Statement on Form S-3 (File No.
33-4165) is incorporated herein by this reference.......................... *
E. Copy of the Indenture dated as of November 15, 1994, between the Company
and The Chase Manhattan Bank (National Association), Trustee, including
forms of Debt Security and Medium Term Note, filed on December 13, 1994, as
Exhibits 4.1, 4.2 and 4.3, respectively, to the Company's Registration
Statement on Form S-3 (File No. 33-56839) is incorporated herein by this
reference.................................................................. *
(10)A. Copy of Asset Purchase Agreement among USLI Fleet Financing, Inc., Asset
Securitization Cooperative Corporation, Canadian Imperial Bank of Commerce
and United States Leasing International, Inc., dated as of December 23,
1991, filed as Exhibit 10(A) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991, is incorporated herein by this
reference.................................................................. *
</TABLE>

38
<PAGE> 39

<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
B. Copy of Purchase Agreement between United States Leasing International,
Inc. and USLI Fleet Financing, Inc., dated as of December 23, 1991, filed
as Exhibit 10(B) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991, is incorporated herein by this reference.......... *
C. Copies of the First and Second Amendments to Asset Purchase Agreement among
USLI Fleet Financing, Inc., Asset Securitization Cooperative Corporation,
Canadian Imperial Bank of Commerce and United States Leasing International,
Inc., dated as of December 23, 1991, filed as Exhibit (10)C to the
Company's Annual Report on Form 10-K for the year ended December 31, 1993
is incorporated herein by this reference................................... *
D. First Amendment to Purchase Agreement between United States Leasing
International, Inc. and USLI Fleet Financing, Inc., dated as of December
23, 1991, filed as Exhibit (10)D to the Company's Annual Report on Form
10-K for the year ended December 31, 1993, is incorporated herein by this
reference.................................................................. *
(12) Computation of Ratio of Earnings to Fixed Charges.......................... 40
(23) Consent of Independent Public Accountants (with respect to the Company's
current Registration Statement on Form S-3)................................ 41
</TABLE>

- ---------------
* Incorporated by Reference.

<PAGE> 1
EXHIBIT 3(D)

USL CAPITAL CORPORATION
A DELAWARE CORPORATION

BYLAWS

(AMENDED THROUGH APRIL 28, 1995)

ARTICLE I - STOCKHOLDERS

SECTION 1. ANNUAL MEETING.

The annual meeting of the stockholders shall be held on the
fourth Friday of April of each year, at 2:00 p.m. of said day; provided,
however, that should said day fall upon a legal holiday, then the annual
meeting of stockholders shall be held at the same time and place on the next
day thereafter ensuing which is not a legal holiday. At the annual meeting of
stockholders, directors shall be elected, reports of the affairs of the
corporation shall be considered, and any other business may be transacted which
is within the powers of the stockholders.

SECTION 2. SPECIAL MEETINGS.

Special meetings of the stockholders, for any purpose or
purposes prescribed in the notice of the meeting, may be called by the board of
directors and shall be held at such place, on such date, and at such time as
they shall fix.

SECTION 3. NOTICE OF MEETINGS.

Written notice of the place, date, and time of all meetings of
the stockholders shall be given, not less than ten nor more than sixty days
before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
corporation).

- 1 -
<PAGE> 2
When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the place, date
and time thereof are announced at the meeting at which the adjournment is
taken; provided, however, that if the date of any adjourned meeting is more
than thirty days after the date for which the meeting was originally noticed,
or if a new record date is fixed for the adjourned meeting, written notice of
the place, date, and time of the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.

SECTION 4. QUORUM.

At any meeting of the stockholders, the holders of a majority
of the shares of stock of the corporation entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law.

If a quorum shall fail to attend any meeting, the chairman of
the meeting or the holders of a majority of the shares of stock entitled to
vote who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.

The stockholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum.

SECTION 5. ORGANIZATION.

The Chairman of the Board or, in his absence, the Vice
Chairman of the Board, if there is a Vice Chairman, or in his absence, such
person as may be designated by the board of directors or, in the absence of
such designation, as may be chosen by the holders of a

- 2 -
<PAGE> 3
majority of the shares entitled to vote who are present, in person or by proxy,
shall call to order any meeting of the stockholders and act as chairman of the
meeting. In the absence of the Secretary of the corporation, the secretary of
the meeting shall be such person as the chairman appoints.

SECTION 6. CONDUCT OF BUSINESS.

The chairman of any meeting of stockholders shall determine
the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
in order.

SECTION 7. PROXIES AND VOTING.

At any meeting of the stockholders, every stockholder entitled
to vote may vote in person or by proxy authorized by an instrument in writing
filed in accordance with the procedure established for the meeting.

Except as otherwise provided herein or required by law, each
stockholder shall have one vote for every share of stock entitled to vote which
is registered in his name on the record date for the meeting.

All voting, including on the election of directors but
excepting where otherwise required by law, may be by a voice vote; provided,
however, that upon demand therefore by a stockholder entitled to vote or his
proxy, a stock vote shall be taken. Every stock vote shall be take by ballots,
each of which shall state such information as may be required under the
procedure established for the meeting. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the meeting.

All elections shall be determined by a plurality of the votes
cast, and except as otherwise required by law, all other matters shall be
determined by a majority of the votes cast.

- 3 -
<PAGE> 4
SECTION 8. STOCK LIST.

A complete list of stockholders of the corporation entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in his name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or if not so specified, at the place where the
meeting is to be held.

The stock list shall also be kept at the place of the meeting
during the whole time thereof and shall be open to the examination of any
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.

SECTION 9. STOCKHOLDER NOMINATING PROCEDURES.

Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the election of
directors. Any stockholder entitled to vote for the election of directors at a
meeting may nominate persons for election as directors only if written notice
of such stockholder's intent to make such nomination is given, either by
personal delivery or by United States mail, postage prepaid, to the Secretary
of the corporation at its executive office, not later than (i) with respect to
the election to be held at an annual meeting of stockholders, 90 days in
advance of such meeting, and, (ii) with respect to any election to be held at a
special meeting of stockholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to stockholders. Each such notice must set forth: (a) the name
and address of the stockholder

- 4 -
<PAGE> 5
who intends to make the nomination and of the person or persons to be
nominated, (b) a representation that such stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons
specified in the notice, (c) a description of all arrangements or
understandings between such stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder, (d) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission if such nominee had been nominated, or
intended to be nominated by the Board of Directors, and (e) the consent of each
nominee to serve as a director of the corporation if elected. The chairman of
stockholder meeting may refuse to acknowledge the nomination of any person not
made in compliance with the foregoing procedure.

ARTICLE II - BOARD OF DIRECTORS

SECTION 1. NUMBER AND TERM OF OFFICE.

The number of directors which shall constitute the whole Board
shall be not less than three nor more than six, as determined from time to time
by resolution of the board of directors or by the stockholders. The directors
shall be elected annually at the annual meeting of the stockholders for a term
of one year, each to serve until his or her successor is elected and qualified,
except as otherwise provided herein or required by law. No person shall be
nominated or elected as a director for a term to commence after such person
shall have reached his or her 68th birthday. The term of any person who has
served as a director at any time while such person is a full time employee of
the Company or any of or more of its subsidiaries shall expire upon termination
of such person's employment as a full time employee and such person shall

- 5 -
<PAGE> 6
not be nominated for election to serve nor shall such person serve as a
director after such termination of employment.

SECTION 2. VACANCIES.

If the office of any director becomes vacant by reason of
death, resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his successor is elected and
qualified.

SECTION 3. REGULAR MEETINGS.

Regular meetings of the board of directors shall be held at
such place or places, on such date or dates, and at such time or times as shall
have been established by the board of directors and publicized among all
directors. A notice of each regular meeting shall not be required.

SECTION 4. SPECIAL MEETINGS.

Special meetings of the board of directors may be called by
the Chairman of the Board or the President or any two directors and shall be
held at such place, on such date, and at such time as he or they shall fix.
Notice of the place, date, and time of each such special meeting shall be given
each director (who does not waive notice) by mail, telegraph or by other form
of written notice not less than seventy-two hours before the meeting or by
telephone not less than twenty-four hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.

SECTION 5. QUORUM.

At any meeting of the board of directors, a majority of the
total number of the whole board shall constitute a quorum for all purposes. If
a quorum shall fail to attend any

- 6 -
<PAGE> 7
meeting, a majority of those present may adjourn the meeting to another place,
date, or time, without further notice or waiver thereof.

SECTION 6. PARTICIPATION IN MEETINGS BY CONFERENCE
TELEPHONE.

Members of the board of directors, or of any committee
thereof, may participate in a meeting of the board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.

SECTION 7. CONDUCT OF BUSINESS.

At any meeting of the board of directors, business shall be
transacted in such order and manner as the Chairman of the Board may from time
to time determine, and all matters shall be determined by the vote of a
majority of the directors present, except as otherwise provided herein or
required by law. Action may be taken by the board of directors without a
meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board of directors.

SECTION 8. POWERS.

The business and affairs of the corporation shall be managed
by the board of directors and the board of directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as
may be exercised or done by the corporation.

SECTION 9. FEES AND COMPENSATION OF DIRECTORS.

Directors and members of committees of the board may be
allowed a fixed or annual fee and a fee for attendance at meetings to be
determined by resolution of the board of directors for acting as a director or
a member of a committee. Nothing herein contained shall be

- 7 -
<PAGE> 8
construed to preclude any director from serving the corporation in another
capacity as an officer, agent, employee or otherwise, and receiving
compensation therefore.

ARTICLE III - COMMITTEES

SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS,

The board of directors, by a vote of a majority of the whole
board, may from time to time designate committees of the board, with such
powers and duties as it thereby confers, to serve at the pleasure of the board
and shall, for those committees and any others provided for herein, elect a
director or directors to serve as the member or members, designating, if it
desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so
designated may exercise the power and authority of the board of directors to
declare a dividend or to authorize the issuance of stock if the resolution
which designates the committee or a supplemental resolution of the board of
directors shall so provide. In the absence or disqualification of any member of
any committee and any alternate member in his place, the member or members of
the committee present at the meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may by unanimous vote appoint another
member of the board of directors to act at the meeting in the place of the
absent or disqualified member.

SECTION 2. CONDUCT OF BUSINESS.

Each committee may determine the procedural rules for meeting
and conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the members shall
constitute a quorum unless the committee shall consist of one or two members,
in which event one member shall constitute a quorum; and all matters shall be

- 8 -
<PAGE> 9
determined by a majority vote of the members present. Action may be taken by
any committee without a meeting if all members thereof consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of such committee.

ARTICLE IV - OFFICERS

SECTION 1. GENERALLY.

The officers of the corporation shall be a Chairman of the
Board, a President, one or more Vice Presidents (including Executive and Senior
Vice Presidents) and a Secretary. The board of directors, in its discretion,
may designate from among those officers a Chief Executive Officer, a Chief
Operating Officer, and/or a Chief Financial Officer. The corporation may also
have, at the discretion of the board of directors, one or more Vice Chairman of
the Board, General Managers, a Treasurer, one or more Assistant Secretaries,
one or more Assistant Treasurers and such other officers as the board of
directors may deem expedient. Any number of offices may be held by the same
person.

SECTION 2. APPOINTMENT.

The Chairman of the Board, the President, the Vice President
or Vice Presidents (including Executive and Senior Vice Presidents), the
Secretary, the Chief Executive Officer, the Chief Operating Officer and the
Chief Financial Officer shall be appointed by the board of directors. Other
officers may be appointed from time to time by the board of directors or by an
officer to whom the board shall have delegated the power to appoint. Each
officer of the corporation shall serve at the pleasure of the board of
directors subject to the rights, if any, of any officer under any contract of
employment.

SECTION 3. REMOVAL AND RESIGNATION.

Any officer may be removed, either with or without cause, by a
majority of the

- 9 -
<PAGE> 10
directors attending a duly held directors' meeting at which a quorum is present
or, except in the case of an officer chosen by the board of directors, by any
officer upon whom such power of removal has been conferred by the board of
directors. Any officer may resign at any time by giving written notice to the
board of directors, to the President, or to the Secretary of the corporation
without prejudice to the rights, if any, of the corporation under any contract
to which the officer is a party.

SECTION 4. VACANCIES.

A vacancy in any office because of death, resignation, removal
or any other cause may be filled by the board of directors or by an officer to
whom the board of directors shall have delegated the power to appoint.

SECTION 5. CHAIRMAN OF THE BOARD.

The Chairman of the Board shall preside at all meetings of the
board of directors and the stockholders. He shall have such powers and perform
such duties as are incident to his office or as may be properly granted to or
required of him by the board of directors.

SECTION 6. VICE CHAIRMAN OF THE BOARD.

Each Vice Chairman of the Board shall, under the supervision
of the Chairman of the Board, have such powers and perform such duties as may
be properly granted to or required of him by the board of directors or by the
Chairman of the Board. During the absence or disability of the Chairman of the
Board, a Vice Chairman of the Board, in order of rank as fixed by the board of
directors, shall preside at all meetings of the stockholders and of the board
of directors.

SECTION 7. PRESIDENT.

The President shall have such powers and perform such duties
as are incident to

- 10 -
<PAGE> 11
his office or as may be properly granted to or required of him by the board of
directors. In the absence or disability of the Chairman and the Vice Chairman,
the President shall preside at meetings of the board of directors and
stockholders.

SECTION 8. VICE PRESIDENT.

In the absence or the disability of the President, the Vice
Presidents (including Executive and Senior Vice Presidents) in the order of
rank fixed by the board of directors, or if not ranked, the Vice President
designated by the board of directors, shall perform the duties of the President
and when so acting shall have the powers of, and be subject to the restrictions
upon the President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the board of directors.

SECTION 9. CHIEF EXECUTIVE OFFICER.

The board of directors may designate an officer to serve as
Chief Executive Officer. The Chief Executive Officer shall, subject to the
control of the board of directors, have the ultimate supervision, direction and
control of the policies, business affairs and officers of the corporation.

SECTION 10. CHIEF OPERATING OFFICER.

The board of directors may designate an officer to serve as
Chief Operating Officer. The Chief Operating Officer shall, subject to the
control of the Chief Executive Officer, if any has been designated, and if not,
subject to the control of an officer so designated by the board of directors,
have general charge, supervision, and authority over all operations of the
corporation. In the absence or disability of the Chief Executive Officer, the
Chief Operating Officer will assume the powers and responsibilities of the
Chief Executive Officer.

SECTION 11. CHIEF FINANCIAL OFFICER.

- 11 -
<PAGE> 12
The Chief Financial Officer, who may, but need not, be the
Treasurer, shall keep and maintain adequate and correct books and records of
accounts of the corporation, and shall see that all moneys and other valuables
of the corporation are deposited in the name and to the credit of the
corporation with such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as directed by the
board of directors, shall render to the President and directors, whenever they
request it, an account of all of his transactions in his official capacity and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the board of directors.

SECTION 12. SECRETARY.

The Secretary shall keep, at the principal office of the
corporation or such other place as the board of directors may order, a book of
minutes of all meetings of directors and stockholders, with the time and place
held, whether regular or special, and if special, how authorized, the notice
thereof given, the names of those present at directors' meetings, the number of
shares present or represented at stockholders' meetings and the proceedings
thereof. The Secretary shall keep, at the principal office of the corporation,
or at the office of the corporation's transfer agent, or registrar, a record of
its stockholders showing the names of the stockholders and their addresses, the
number and classes of shares held by each, the number and date of cancellation
of every certificate surrendered for cancellation. The Secretary shall give
notice of all meetings of the stockholders and of the board of directors
required by these bylaws to be given and shall keep the seal of the corporation
in safe custody, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors.

SECTION 13. TREASURER AND ASSISTANT TREASURERS.

The Treasurer shall have the custody of the corporate funds
and securities and

- 12 -
<PAGE> 13
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such depositories
as he shall select. He shall disburse the funds of the corporation and shall
issue and sign all checks, drafts, bills of exchange, promissory notes, letters
of credit and other evidences of indebtedness; and shall open safe deposit
boxes of the corporation. The Treasurer shall also designate employees who
shall have authority to sign checks on bank accounts of the corporation.

Checks of the corporation drawn against accounts maintained at
any bank, wherever located, may be signed with applied facsimile signature of
the Treasurer or any other person designated by him. The Secretary is
authorized to file with such banks certified specimens of facsimile signatures
authorized by this bylaw.

If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the corporation.

The Assistant Treasurer, or if there shall be more than one,
the Assistant Treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election), shall
in the absence of the Treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the board of directors
or the Treasurer may from time to time prescribe.

- 13 -
<PAGE> 14
SECTION 14. CONTROLLER.

The Controller (in case the board of directors establishes
such office) shall have supervision and charge of the accounts of the
corporation. He shall be responsible for the maintenance of adequate accounting
records and shall perform such other duties as shall be assigned to him by the
board of directors or the Vice President Finance.

SECTION 15. OTHER OFFICERS.

Officers, other than the Chairman of the Board, President,
Vice Presidents, Secretary and Chief Financial Officer shall have such powers
and perform such duties as may be prescribed by the board of directors.

ARTICLE V - STOCK

SECTION 1. CERTIFICATES OF STOCK.

Each stockholder shall be entitled to a certificate signed by,
or in the name of the corporation by, the Chairman of the Board, the President
or a Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer, certifying the number of shares owned by
him. Any of or all the signatures on the certificate may be facsimile.

SECTION 2. TRANSFERS OF STOCK.

Transfers of stock shall be made only upon the transfer books
of the corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
bylaws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.

SECTION 3. RECORD DATE.

The board of directors may fix a record date, which shall not
be more than sixty

- 14 -
<PAGE> 15
nor less than ten days before the date of any meeting of stockholders, nor more
than sixty days prior to the time for the other action hereinafter described,
as of which there shall be determined the stockholders who are entitled: to
notice of or to vote at any meeting of stockholders or any adjournment thereof;
to express consent to corporate action in writing without a meeting; to receive
payment of any dividend or other distribution or allotment of any rights; or to
exercise any rights with respect to any change, conversion or exchange of stock
or with respect to any other lawful action.

SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.

In the event of the loss, theft or destruction of any
certificate of stock, another may be issued in its place pursuant to such
regulations as the board of directors may establish concerning proof of such
loss, theft or destruction and concerning the giving of a satisfactory bond or
bonds of indemnity.

SECTION 5. REGULATIONS.

The issue, transfer, conversion and registration of
certificates of stock shall be governed by such other regulations as the board
of directors may establish.

ARTICLE VI - NOTICES

SECTION 1. NOTICES.

Except as otherwise specifically provided herein or required
by law, all notices required to be given to any stockholder, director, officer,
employee or agent shall be in writing and may in every instance be effectively
given by hand delivery to the recipient thereof, by depositing such notice in
the mails, postage paid, or by sending such notice by prepaid telegram or
mailgram. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same appears
on the books of the corporation.

- 15 -
<PAGE> 16
The time when such notice is received, if hand delivered, or dispatched, if
delivered through the mails or by telegram or mailgram, shall be the time of
the giving of the notice.

SECTION 2. WAIVERS.

A written waiver of any notice, signed by a stockholder,
director, officer, employee or agent, whether before or after the time of the
event for which notice is to be given, shall be deemed equivalent to the notice
required to be given to such stockholder, director, officer, employee or agent.
Neither the business nor the purpose of any meeting need be specified in such a
waiver.

ARTICLE VII - MISCELLANEOUS

SECTION 1. FACSIMILE SIGNATURES.

In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these bylaws, facsimile signatures of any
officer or officers of the corporation may be used whenever and as authorized
by the board of directors or a committee thereof.

SECTION 2. CORPORATE SEAL.

The board of directors may provide a suitable seal, containing
the name of the corporation, which seal shall be in the charge of the
Secretary. If and when so directed by the board of directors or a committee
thereof, duplicates of the seal may be kept and used by the Treasurer or by an
Assistant Secretary or Assistant Treasurer.

SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.

Each director, each member of any committee designated by the
board of directors, and each officer of the corporation shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account or other records of the corporation, including reports made to
the corporation by any of its officers, by an independent certified

- 16 -
<PAGE> 17
public accountant, or by an appraiser selected with reasonable care.

SECTION 4. CONTRACTS, ETC., HOW EXECUTED.

Contracts, deeds, mortgages, leases, bonds, powers of
attorney, bills of sale, and all documents and papers requiring the signature
of the corporation shall be executed by the Chairman of the Board of the
corporation, the President of the corporation or one of the Vice Presidents. A
Vice President may, by designation in writing, delegate to employees
responsible to him the right to execute contracts for the purchase and sale of
raw materials and finished products and for the purchase of supplies,
equipment, insurance and services, and also to sign on behalf of the
corporation such instruments as may be necessary in connection with the
operation and fulfillment of said contracts. A copy of such delegation shall be
deposited with the Secretary of the corporation.

SECTION 5. VOTING OF SHARES OF OTHER CORPORATIONS.

The Chairman of the Board, the President, any Vice President,
or any other officer or agent specifically authorized by resolution by the
board of directors, or by the Chairman of the Board, the President or any Vice
President, is authorized to vote, represent and exercise on behalf of the
corporation all rights incident to any shares of any other corporation held by
the corporation.

SECTION 6. FISCAL YEAR.

The fiscal year of the corporation shall be as fixed by the
board of directors.

SECTION 7. TIME PERIODS.

In applying any provision of these bylaws which require that
an act be done or not done a specified number of days prior to an event or that
an act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing

- 17 -
<PAGE> 18
of the act shall be excluded, and the day of the event shall be included.

ARTICLE VIII - AMENDMENTS

These bylaws may be amended or repealed by the board of
directors at any meeting or by the stockholders at any meeting.

- 18 -

<PAGE> 1

EXHIBIT 12

USL CAPITAL CORPORATION
AND SUBSIDIARY COMPANIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(UNAUDITED; DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Earnings:
Income before taxes on income per
statement of income............... $195,739 $159,786 $122,171 $ 89,051 $ 86,059
Add (deduct)
Fixed charges..................... 279,617 223,900 193,806 158,444 151,811
Distribution and proceeds in
excess of net income of
associated companies........... 622 520 272 601 292
-------- -------- -------- -------- --------
Income as adjusted.................. $475,978 $384,206 $316,249 $248,096 $238,162
======== ======== ======== ======== ========
Fixed charges:
Interest on indebtedness including
amortization of debt issue costs
and discount or premium thereon... $276,915 $220,759 $189,942 $154,157 $147,027
Interest factor of annual
rentals(1)........................ 2,702 3,141 3,864 4,287 4,784
-------- -------- -------- -------- --------
Fixed charges....................... $279,617 $223,900 $193,806 $158,444 $151,811
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges........................... 1.70 1.72 1.63 1.57 1.57
======== ======== ======== ======== ========
</TABLE>

- ---------------
(1) The interest portion of annual rentals is estimated to be one-third of such
rentals.

<PAGE> 1

EXHIBIT (23)

LETTERHEAD OF COOPERS & LYBRAND L.L.P.

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement
of USL Capital Corporation on Form S-3 (File No. 33-56196) of our report dated
January 26, 1996, on our audits of the consolidated financial statements and
financial statement schedules of USL Capital Corporation as of December 31, 1995
and 1994, and for the years ended December 31, 1995, 1994, and 1993, which
report is included in this Annual Report on Form 10-K.

/s/ Coopers & Lybrand L.L.P.

San Francisco, California
March 22, 1996

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 11,474
<SECURITIES> 1,064,841
<RECEIVABLES> 4,953,195
<ALLOWANCES> 59,755
<INVENTORY> 107,514
<CURRENT-ASSETS> 0
<PP&E> 8,741
<DEPRECIATION> 407,338
<TOTAL-ASSETS> 6,360,762
<CURRENT-LIABILITIES> 0
<BONDS> 4,589,391
0
0
<COMMON> 0
<OTHER-SE> 837,854
<TOTAL-LIABILITY-AND-EQUITY> 6,360,762
<SALES> 678,926
<TOTAL-REVENUES> 678,926
<CGS> 0
<TOTAL-COSTS> 135,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,679
<INTEREST-EXPENSE> 276,915
<INCOME-PRETAX> 195,739
<INCOME-TAX> 60,744
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134,995
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>