MEDALLION FINANCIAL CORP, 497, 1996-05-23

MEDALLION FINANCIAL CORP
497, 1996-05-23

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<PAGE>

5,000,000 SHARES

[LOGO] MEDALLION
FINANCIAL CORP.

COMMON STOCK

All of the shares of Common Stock, $.01 par value (the "Common Stock"),
offered hereby (the "Offering") are being sold by Medallion Financial Corp.
(the "Company").

The Company is a specialty finance company with a leading position in the
origination and servicing of loans financing the purchase of taxicab
medallions and related assets. The Company also originates and services
commercial installment loans financing small businesses in other targeted
industries. In addition, the Company operates a taxicab rooftop advertising
business. See "Business." The Company was organized to expand the specialty
finance and taxicab rooftop advertising businesses conducted by several
companies which will be acquired simultaneously with the closing of the
Offering. See "The Company." For a description of conflicts of interest
involved in one of the acquisitions, see "Certain Transactions."
Prior to the Offering there has been no public market for the Common Stock.
The Common Stock has been approved for quotation on the Nasdaq National Market
under the symbol "TAXI." For a discussion of the factors considered in
determining the initial public offering price, see "Underwriting." The Company
is a closed-end, non-diversified management investment company that has
elected to be treated as a business development company under the Investment
Company Act of 1940, as amended.

This Prospectus sets forth the information about the Company that a
prospective investor should know before purchasing Common Stock. Prospective
investors are advised to read this Prospectus and retain it for future
reference.

SEE "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS PROSPECTUS FOR INFORMATION
THAT PROSPECTIVE INVESTORS SHOULD CONSIDER IN CONNECTION WITH THEIR INVESTMENT
DECISION, INCLUDING INFORMATION RELATING TO THE DILUTION THAT SUCH INVESTORS
WILL INCUR.

---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO PUBLIC SALES LOAD(1) COMPANY(2)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................. $11.00 $0.77 $10.23
- -------------------------------------------------------------------------------------
Total(3).................................. $55,000,000 $3,850,000 $51,150,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Excludes financial advisory fees payable by the Company. The Company has
agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Certain Transactions" and "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $1,850,000.
(3) The Company has granted a 30-day option to the Underwriters to purchase up
to an aggregate of 750,000 additional shares of Common Stock at the Price
to Public less Sales Load, solely to cover over-allotments, if any. If all
of such shares are purchased, the total Price to Public, Sales Load and
Proceeds to Company will be $63,250,000, $4,427,500 and $58,822,500,
respectively. See "Underwriting."

The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters, and subject to various prior
conditions, including the right to reject orders in whole or in part. It is
expected that delivery of share certificates will be made against payment
therefor at the offices of Furman Selz LLC in New York, New York on or about
May 29, 1996.

FURMAN SELZ

J.C. BRADFORD & CO.

EVEREN SECURITIES, INC.

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

The date of this Prospectus is May 23, 1996
<PAGE>

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

----------------
<PAGE>

PROSPECTUS SUMMARY

Medallion Financial Corp. ("Medallion Financial") was recently organized to
acquire and expand the specialty finance businesses conducted by Tri-Magna
Corporation ("Tri-Magna"), Edwards Capital Company ("Edwards") and
Transportation Capital Corp. ("TCC" and, collectively with Tri-Magna and
Edwards, the "Founding Companies") as well as the taxicab rooftop advertising
business conducted by Tri-Magna. Tri-Magna has conducted its specialty finance
and taxicab rooftop advertising businesses through its wholly owned
subsidiaries, Medallion Funding Corp. ("MFC") and Medallion Media, Inc.
("Media"), respectively, and references herein to Tri-Magna include such
subsidiaries unless the context indicates otherwise. Simultaneously with, and
as a condition to, the closing of the Offering, Medallion Financial will
acquire each of the Founding Companies (the "Acquisitions"). See "Business --
Formation Transactions." In connection with the Acquisitions, Medallion
Financial has obtained an exemptive order under the Investment Company Act of
1940, as amended (the "1940 Act"), from the Securities and Exchange Commission
(the "Commission"). See "Additional Information."

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

UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES HEREIN TO THE
"COMPANY" INCLUDE MEDALLION FINANCIAL CORP. AND THE FOUNDING COMPANIES
COLLECTIVELY AS IF THEIR OPERATIONS HAD BEEN CONDUCTED ON A COMBINED BASIS
PRIOR TO THE OFFERING, AND REFERENCES HEREIN TO "MEDALLION FINANCIAL" SHALL
MEAN MEDALLION FINANCIAL CORP. ALONE.

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

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION AND
DATA IN THIS PROSPECTUS (I) HAVE BEEN ADJUSTED TO GIVE EFFECT TO THE
ACQUISITIONS, (II) ASSUME A 12,500 FOR ONE STOCK SPLIT AND AN AMENDMENT AND
RESTATEMENT OF THE CERTIFICATE OF INCORPORATION OF MEDALLION FINANCIAL (THE
"CERTIFICATE") WHICH ARE EXPECTED TO BE EFFECTED PRIOR TO THE COMPLETION OF THE
OFFERING AND (III) ASSUME THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED.

THE COMPANY

The Company is a specialty finance company with a leading position in the
origination and servicing of loans financing the purchase of taxicab medallions
and related assets ("Medallion Loans"). The Company also originates and
services commercial installment loans financing small businesses in other
targeted industries ("Commercial Installment Loans"). In addition, the Company
operates a taxicab rooftop advertising business. See "Business."

Management of the Company has successfully operated Tri-Magna, an investment
company registered under the 1940 Act, since it began its medallion lending
operations in 1979. Tri-Magna is the largest of the three Founding Companies
being acquired by Medallion Financial in connection with the Offering. Alvin
Murstein, a founder and the Chairman and Chief Executive Officer of the Company
and of Tri-Magna, has over 40 years of experience in the ownership, management
and financing of taxicab fleets, taxicab medallions and corporate car services.
While loans in Tri-Magna's portfolio have been from time to time in arrears or
default, Tri-Magna has never experienced a loss of principal on any of the $296
million in aggregate principal amount of Medallion Loans it has originated. See
"Management" and "Business --Medallion Lending."

Medallion Loans comprised approximately 79% of the Company's $149 million
loan portfolio at December 31, 1995 on a pro forma basis. Since 1979 the
Company has originated, on a combined basis, approximately $511 million in
Medallion Loans in New York City, Boston, Chicago, Cambridge, Newark,
Philadelphia and Hartford. Substantially all of the Company's Medallion Loans
are originated at fixed rates of interest in excess of the prime rate of
interest charged by major commercial banks (the "Prime Rate"). Approximately
94% in principal amount of the Medallion Loans are collateralized by first
security interests in New York City taxicab

3
<PAGE>

medallions and related assets. The Company estimates that the average loan-to-
value ratio of all of the Company's Medallion Loans was 54% at December 31,
1995, which the Company believes is representative of its historical average
loan to value ratio. In addition, the Company has recourse against the direct
and indirect owners of the medallion through personal guarantees. Although
personal guarantees increase the commitment of borrowers to repay their loans,
there can be no assurance that the assets available under personal guarantees
would, if required, be sufficient to satisfy the obligations secured by such
guarantees. The New York City Taxi and Limousine Commission (the "TLC")
estimates that the total value of all New York City medallions and related
assets exceeds $2.3 billion and the Company estimates that the total value of
all taxicab medallions and related assets in the United States exceeds $5
billion. The Company believes that it will continue to develop growth
opportunities by further penetrating the highly fragmented medallion financing
markets and by acquiring additional medallion financing businesses and
portfolios. See "Business -- Medallion Lending."

Commercial Installment Loans comprised approximately 21% of the Company's
loan portfolio at December 31, 1995 on a pro forma basis. From the inception of
this business in 1987 through December 31, 1995, Tri-Magna has originated
approximately 1,056 Commercial Installment Loans in an aggregate principal
amount of approximately $69 million. Tri-Magna's Commercial Installment Loan
activity has increased in recent years, with the number and principal amount of
Commercial Installment Loans originated by Tri-Magna in 1994 being 87% and 40%
greater, respectively, than in 1993. The Company's Commercial Installment Loans
generally are secured by equipment and made at fixed rates of interest
averaging approximately 500 to 700 basis points over the prevailing Prime Rate.
Approximately 78% of the Company's Commercial Installment Loan portfolio at
December 31, 1995 was comprised of loans secured by either retail dry cleaning
equipment or coin operated laundromat equipment. In addition, as with Medallion
Loans, the Company requires the principals of borrowers to personally guarantee
loans. The Company has focused its lending efforts on the retail dry cleaning
and coin operated laundromat industries because they have offered the Company
high rates of interest and a strong collateral position. The Company's
aggregate realized loss of principal on loans secured by retail dry cleaning
and coin operated laundromat equipment originated to date is $52,000 or 0.11%
of the approximately $49 million in principal amount of such loans. The Company
plans to expand its Commercial Installment Loan activities to include a more
diverse borrower base, a larger geographic area and other targeted industries.
See "Business --Commercial Installment Loans."

The Company also provides taxicab rooftop advertising and had 1,670 installed
taxicab rooftop advertising displays ("Displays") at December 31, 1995. The
Company's taxicab rooftop advertising business began operations in November
1994. The Company believes that there is a significant opportunity for a
provider of taxicab rooftop advertising that operates in several major
metropolitan markets because many large advertisers prefer to advertise
nationally. The Company is well positioned to take advantage of this
opportunity because it believes it is one of the largest providers of such
advertising in the nation. The Company currently provides such advertising in
New York City, Philadelphia, Miami and Boston. The Company also intends to
expand to other major metropolitan areas and has recently entered the Atlanta
and Los Angeles markets. The Company believes that there are growth
opportunities within its existing markets because only approximately 25% of New
York City taxicabs have rooftop advertising and a much smaller percentage of
the taxicabs in other major metropolitan areas nationwide have rooftop
advertising. In addition, the Company believes that its growth will be
facilitated by its reputation and relationships within the taxicab industry and
because the Company's arrangement with the taxicab owners provides them with
incremental income. See "Business -- Taxicab Rooftop Advertising."

The Company funds its operations through credit facilities with bank
syndicates and, to a lesser degree, through the issuance of fixed-rate, long-
term subordinated debentures that are issued to, or guaranteed by, the U.S.
Small Business Administration (the "SBA"). SBA financing offers attractive
interest rates, for example currently as low as 4.00% for Specialized Small
Business Investment Companies ("SSBICs"), but the availability of such
financing is limited. Accordingly, as the Company grows, it intends to continue
to reduce its reliance on SBA funding, while still maintaining the flexibility
to borrow under SBA programs to finance a

4
<PAGE>

portion of its loan portfolio when it is advantageous to do so. At December 31,
1995, $90 million of the Company's debt consisted of bank debt which was at a
weighted average effective rate of interest of 7.45%, or 105 basis points below
the Prime Rate and 183 basis points above 90 day LIBOR as of such date. The
balance of the Company's debt, $32 million, consisted of subordinated SBA
debentures, with fixed rates of interest with a weighted average rate of 7.44%.
After the Offering, the Company intends to negotiate an increase in the size of
its bank credit facilities from its current $96 million aggregate level. The
Company believes that this increase will not affect the interest rate currently
charged under its credit facilities. See "Business -- Sources of Funds."

The Company is a closed-end, non-diversified management investment company
under the 1940 Act. The investment objectives of the Company are to provide a
high level of distributable income, consistent with preservation of capital, as
well as long-term growth of net asset value. The Company is managed by its
executive officers under the supervision of its Board of Directors and has
retained FMC Advisers, Inc. ("FMC") as an investment adviser. The principals of
FMC have served as directors and executive officers of Tri-Magna and MFC since
inception of these businesses. They will cease to hold their offices with Tri-
Magna and MFC effective upon the closing of the Acquisitions. See "Investment
Objectives, Policies and Restrictions -- The Investment Adviser" and "Certain
Transactions." The Company has elected to be treated as a business development
company under the 1940 Act. See "Regulation." In addition, it plans to elect to
be treated for tax purposes as a regulated investment company (a "RIC") under
the Internal Revenue Code of 1986, as amended (the "Code"). As a RIC, the
Company will not be subject to U.S. federal income tax on any investment
company taxable income (which includes, among other things, dividends and
interest reduced by deductible expenses) that it distributes to its
stockholders if at least 90% of its investment company taxable income for that
taxable year is distributed. The Company intends to pay quarterly cash
dividends to comply with this requirement. Stockholders can elect to reinvest
distributions. See "Dividend Reinvestment Plan." The Company's specialty
finance subsidiaries, MFC, TCC and Edwards (collectively the "RIC
Subsidiaries"), also plan to elect to be treated as RICs and will distribute at
least 90% of their respective investment company taxable income to the Company.
See "Federal Income Tax Considerations."

The consideration to be paid by the Company for the Founding Companies was
determined through arm's-length negotiations between Medallion Financial and
representatives of each Founding Company. The factors considered by the parties
in determining the consideration to be paid included, among others, the history
of and prospects for the business in which the particular Founding Company
operates, the Founding Company's past and present operations, loan portfolio
quality, past and present revenue and earnings and the trends in such revenue
and earnings, expert opinion, revenue and earnings prospects and stock prices
of comparable finance companies and out-of-home advertising companies. Each
Founding Company was represented by independent counsel in the negotiation of
the terms and conditions of the Acquisitions.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the 5,000,000 shares
Company(1)....................
Common Stock to be outstanding
after the Offering(1)......... 7,500,000 shares
Nasdaq National Market TAXI
Symbol........................
Use of proceeds................ To pay the purchase price for the Founding
Companies and to repay indebtedness.
Distributions.................. The Company intends to pay quarterly dividends
and to distribute to its stockholders at least
90% of its investment company taxable income
annually.
</TABLE>
- ----------
(1) Does not include 750,000 shares of Common Stock issuable pursuant to the
over-allotment option granted to the Underwriters.

5
<PAGE>

RISK FACTORS

Investment in shares of the Common Stock involves certain risks relating to
the structure, operations and regulation of the Company that should be
considered by prospective purchasers of the Common Stock. The following summary
of Risk Factors is qualified in its entirety by the more detailed information
appearing under the heading "Risk Factors" in this Prospectus. Principal risk
factors include:

Industry and Geographic Concentration. A substantial portion of the Company's
revenue is derived from operations in New York City and these operations are
substantially focused in the area of financing New York City taxicab medallions
and related assets. There can be no assurance that an economic downturn in New
York City in general, or in the New York City taxicab industry in particular,
would not have an adverse impact on the Company. See "Risk Factors -- Industry
and Geographic Concentration" and "-- Taxicab Industry Regulation."

Interest Rate Spread. The Company's net interest income is largely dependent
upon achieving a positive interest rate spread and other factors. See "Risk
Factors -- Interest Rate Spread; Prepayment Risk."

Leverage. The Company's use of leverage poses certain risks for holders of
the Common Stock, including the possibility of higher volatility of both the
net asset value of the Company and the market price of the Common Stock and,
therefore, an increase in the speculative character of the Common Stock. See
"Risk Factors-- Leverage."

Absence of Combined Operating History. The Founding Companies have been
operating as separate independent entities with separate management teams.
Medallion Financial was recently organized and there can be no assurance that
it will be able to successfully integrate these businesses and effectively
implement the Company's strategy to expand operations. See "Risk Factors --
Absence of Combined Operating History."

No Prior Market for Common Stock. There has been no prior public market for
the Common Stock and no assurance can be given that an active trading market
will develop after the Offering. See "Risk Factors -- No Prior Public Market
for the Common Stock; Determination of the Public Offering Price."

Immediate and Substantial Dilution. Immediately upon the closing of the
Offering, the purchasers of the Common Stock will experience dilution in the
net tangible book value of their shares of $4.88 per share. See "Dilution". In
addition, such purchasers will incur further dilution to the extent the Company
issues options under its compensation plans and such options are exercised at a
time when the exercise price is less than the market price for the Common
Stock. See "Management--1996 Stock Option Plan," and "--Non-Employee Directors
Stock Option Plan."

Reliance on Management. The success of the Company will be largely dependent
upon the efforts of senior management. The death, incapacity or loss of the
services of any of such individuals could have an adverse effect on the
Company. See "Risk Factors--Reliance on Management."

Control by Existing Stockholders and Shares Eligible for Future Sale. After
the Offering, two officers who are also directors of the Company, together with
entities affiliated with them, will beneficially own approximately 35%, or 2.6
million of the 7.5 million shares of Common Stock outstanding. All of these
shares are restricted securities under Rule 144 of the Securities Act of 1933,
as amended (the "Securities Act") and will become eligible for sale, subject to
the Rule 144 resale restrictions on October 23, 1997. All of such shares are
also subject to lock-up agreements with the Underwriters and may not be sold
for a period of two years from the date of this Prospectus without the prior
written consent of Furman Selz LLC. Such consent will not, however, affect the
resale restrictions under Rule 144. See "Risk Factors--Control by Existing
Stockholders" and "-- Shares Eligible for Future Sale."

6
<PAGE>

FEES AND EXPENSES

The purpose of the following table is to assist prospective investors in
understanding the various costs and expenses that an investor in the Company
will bear directly or indirectly.

FEE TABLE (1)

<TABLE>
<S> <C>
STOCKHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price)............... 7.00%(2)
Dividend Reinvestment Plan Fees.............................. None (3)
ANNUAL EXPENSES (as a percentage of net assets attributable to
Common Stock)(4)
Management Fees.............................................. 0.46 (5)
Operating Expenses........................................... 7.37 (6)
Interest Payments on Borrowed Funds.......................... 16.23 (7)
Other Expenses............................................... 0.85
-----
Total Annual Expenses.......................................... 24.91%
=====
</TABLE>
- ----------
(1) Based on estimated amounts for the current fiscal year.
(2) The sales load, which is a one-time fee paid by the Company to the
Underwriters in connection with the Offering, is the only sales load paid
in connection with the Offering. See "Underwriting."
(3) The expenses of the Dividend Reinvestment Plan are included in stock record
expenses, a component of "Other Expenses." The participants in the Dividend
Reinvestment Plan will bear a pro rata share of brokerage commissions
incurred with respect to open market purchases. See "Distributions" and
"Dividend Reinvestment Plan." The Company has no cash purchase plan.
(4) Assumes a net asset value of $49.3 million, which will be the Company's
estimated stockholders' equity upon completion of the Offering. Operating
expenses, interest payments on borrowed funds and other expenses are
calculated on a pro forma basis based on the year ended December 31, 1995.
(5) Management expenses consist of fees paid to the Company's investment
adviser, FMC. See "Investment Objectives, Policies and Restrictions -- The
Investment Adviser" and "Certain Transactions."
(6) Operating expenses consist primarily of compensation and employee benefits,
data processing, advertising, travel and other marketing expenses,
occupancy costs and other similar expenses. See "Management."
(7) Interest payments on borrowed funds consist primarily of interest payable
under credit agreements with banks and on subordinated SBA debentures. See
"Business -- Sources of Funds."

EXAMPLE

The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Company. These amounts assume no increase or
decrease in leverage and are based upon payment by an investor of a 7% sales
load (the underwriting discount paid by the Company in connection with the
Offering) and payment by the Company of operating expenses at the levels set
forth in the table above.

An investor would pay the following expenses on a $1,000 investment, assuming
(i) a 5% annual return and (ii) reinvestment of all dividends and distributions
at net asset value:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
$279 $579 $772 $1,004
</TABLE>

This example as well as the information set forth in the table above should
not be considered a representation of the future expenses of the Company.
Actual expenses may be greater or less than those shown. Moreover, while the
example assumes (as required by the Commission) a 5% annual return, the
Company's performance will vary and may result in a return greater or less than
5%. In addition, while the example assumes reinvestment of all dividends and
distributions at net asset value, participants in the Dividend Reinvestment
Plan will receive shares purchased by the Dividend Reinvestment Plan Agent at
the market price in effect at the time, which may be at, above or below net
asset value. See "Distributions" and "Dividend Reinvestment Plan."

7
<PAGE>

SUMMARY FINANCIAL DATA
PRO FORMA
(SEE PRO FORMA FINANCIAL STATEMENTS FOR ADJUSTMENTS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
--------------------------------------------- ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS
DATA
Investment income....... $3,846 $3,901 $3,915 $4,028 $15,690
Interest expense........ 2,043 1,997 1,945 2,018 8,003
------ ------ ------ ------ -------
Net interest income..... 1,803 1,904 1,970 2,010 7,687
Equity in earnings of
unconsolidated subsidi-
ary(1)................. 31 56 19 20 126
Other income............ 228 198 199 264 889
Accretion of negative
goodwill............... 193 193 193 193 772
Operating expenses...... (988) (952) (978) (938) (3,856)
Amortization of good-
will................... (105) (105) (105) (105) (420)
------ ------ ------ ------ -------
Net investment income... 1,162 1,294 1,298 1,444 5,198
Realized gain (loss) on
investments, net....... (4) (8) (11) 34 11
Change in unrealized de-
preciation of invest-
ments(2)............... 6 43 129 17 195
------ ------ ------ ------ -------
Net increase in net
assets resulting from
operations(3).......... $1,164 $1,329 $1,416 $1,495 $ 5,404
====== ====== ====== ====== =======
Pro forma net increase
in net assets resulting
from operations per
share(3)............... $ 0.15 $ 0.18 $ 0.19 $ 0.20 $ 0.72
====== ====== ====== ====== =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Return on assets(4)................................................ 3.39%
Return on equity(5)................................................ 10.96
Average yield, e.o.p.(6)........................................... 10.69
Average cost of funds, e.o.p.(7)................................... 7.44
Spread, e.o.p.(8).................................................. 3.25
Other income ratio(9).............................................. 0.60
Operating expense ratio(10)........................................ 2.42
Medallion Loans as a percentage of investments..................... 79
Commercial Installment Loans as a percentage of investments........ 21
Investments to assets.............................................. 93
Equity to assets................................................... 31
Debt to equity..................................................... 211
SBA debt to total debt............................................. 30
BALANCE SHEET DATA (IN THOUSANDS)
Investments
Medallion Loans................................................... $117,489
Commercial Installment Loans...................................... 31,490
Unrealized depreciation of investments(11)......................... --
--------
Investments, net of unrealized depreciation of investments......... 148,979
Total assets....................................................... 159,440
Notes payable and demand notes..................................... 72,713
Subordinated SBA debentures........................................ 31,426
Total liabilities.................................................. 110,138
Total stockholders' equity......................................... 49,302
</TABLE>
- ---------
(1) Equity in earnings of unconsolidated subsidiary represents the net income
for the period earned by the Company from its investment in Media.
(2) Change in unrealized depreciation of investments represents the (increase)
decrease for the period in the unrealized depreciation applied against the
Company's investments to state them at fair value.
(3) Net increase in net assets resulting from operations is the sum of net
investment income, net realized gains or losses on investments and the
change in unrealized gains or losses on investments. Per share data is
based upon 7,500,000 pro forma weighted average shares outstanding and
does not reflect the 750,000 shares of Common Stock issuable under the
Underwriters' over-allotment option.
(4) Return on assets represents net increase in net assets resulting from
operations for the fiscal year ending on the date indicated divided by
total assets at the date indicated.
(5) Return on equity represents net increase in net assets resulting from
operations for the fiscal year ending on the date indicated divided by
total stockholders' equity at the date indicated.
(6) Average yield, e.o.p. represents the end of period weighted average
interest rate on investments at the date indicated.
(7) Average cost of funds, e.o.p. represents the end of period weighted
average interest rate on debt at the date indicated.
(8) Spread, e.o.p. represents average yield, e.o.p. less average cost of
funds, e.o.p.
(9) Other income ratio represents other income for the fiscal year ending on
the date indicated divided by investments at the date indicated.
(10) Operating expense ratio represents operating expenses for the fiscal year
ending on the date indicated divided by total assets at the date
indicated.
(11) Upon completion of the Acquisitions, the Company's loan portfolio will be
recorded on the balance sheet at fair market value as estimated by the
Company in accordance with the 1940 Act and the purchase method of
accounting.

8
<PAGE>

TRI-MAGNA
(MFC, BUT NOT MEDIA, IS CONSOLIDATED WITH TRI-MAGNA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1991(1) 1992(1) 1993 1994 1995
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Investment income........ $ 8,806 $ 7,953 $ 8,333 $ 8,820 $ 9,803
Net interest income...... 4,667 4,444 4,672 4,064 3,769
Net investment income.... 2,534 2,045 1,839 1,624 1,518
Net increase in net
assets resulting from
operations.............. 2,129 1,947 1,671 1,660 1,439
SELECTED FINANCIAL RATIOS AND
OTHER DATA(1)
Return on average
assets(2)............... 3.17% 2.81% 2.12% 1.88% 1.50%
Return on average
equity(3)............... 19.90 17.67 15.29 15.29 12.97
Spread(4)................ 4.77 4.67 4.90 3.20 2.35
Weighted average assets.. $67,238 $69,401 $78,921 $88,414 $96,189
Weighted average
investments(5).......... 65,943 65,673 75,790 86,496 92,433
Weighted average equity.. 10,696 11,019 10,931 10,855 11,094
Weighted average debt.... 48,230 47,160 60,160 67,955 73,063
<CAPTION>
DECEMBER 31,(1)
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a
percentage of
investments............. 73% 81% 81% 72% 68%
Commercial Installment
Loans as a percentage of
investments............. 27 19 19 28 32
Debt to equity(6)........ 218 259 315 356 464
</TABLE>

MEDIA(7)

<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Advertising revenue................................... $227,756 $1,542,013
Cost of services...................................... 83,341 483,721
-------- ----------
Gross margin.......................................... 144,415 1,058,292
Other operating expenses.............................. 126,036 829,293
-------- ----------
Income before taxes................................... 18,379 228,999
Income taxes.......................................... -- 103,043
-------- ----------
Net income............................................ $ 18,379 $ 125,956
======== ==========
</TABLE>

EDWARDS

9
<PAGE>

TCC

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1991(1) 1992(1) 1993 1994 1995
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Investment income....... $ 4,197 $ 3,944 $ 3,110 $ 2,217 $ 1,836
Net interest income..... 1,694 2,406 2,046 1,508 1,386
Net investment income,
adjusted for taxes(9).. 488 1,294 1,760 144 245
Net increase (decrease)
in net assets resulting
from operations........ (2,519) 648 1,923 790 530
SELECTED FINANCIAL
RATIOS AND OTHER
DATA(1)
Return on average
assets(2).............. (7.76)% 2.46% 8.36% 3.90% 2.91%
Return on average common
equity(3).............. (61.83) 14.73 33.84 11.22 6.74
Spread(4)............... 3.23 7.34 7.67 6.26 7.44
Weighted average
assets................. $32,479 $26,338 $23,011 $20,260 $18,183
Weighted average
investments(5)......... 31,854 24,235 18,994 14,442 10,389
Weighted average common
equity................. 4,074 4,398 5,683 7,042 7,859
Weighted average debt... 25,198 17,967 13,133 9,330 7,330
<CAPTION>
DECEMBER 31,(1)
--------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a
percentage of
investments............ 84% 82% 85% 80% 81%
Commercial Installment
Loans as a percentage
of investments......... 16 18 15 20 19
Debt to equity(6)....... 274 192 107 73 64
</TABLE>
- ----------
(1) Unaudited.
(2) Return on average assets is calculated as the net increase in net assets
resulting from operations divided by the weighted average assets for the
period.
(3) Return on average equity is calculated as the net increase in net assets
resulting from operations divided by the weighted average equity for the
period.
(4) Spread is calculated as the difference between average yield and average
cost of funds.
(5) Investments consists of the Company's loan portfolio and excludes cash and
cash equivalents.
(6) Debt to equity is defined as total debt divided by total shareholders
equity and minority interest. In the case of Edwards, debt to partners'
capital is defined as total debt divided by total partners' capital.
(7) Although Tri-Magna owns 100% of Media, under the 1940 Act Media is not
permitted to be consolidated with Tri-Magna because Tri-Magna is an
investment company and Media is not.
(8) Return on average partners' capital is calculated as the net increase in
net assets resulting from operations before extraordinary items divided by
weighted average partners' capital for the period.
(9) Net investment income has been adjusted by combining TCC's income tax
provision (benefit) on investment income, realized losses on investments
and change in unrealized depreciation of investments, in order to present
TCC's financial statements on a comparable basis to the other Founding
Companies.

10
<PAGE>

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors in
evaluating an investment in the shares of Common Stock offered hereby.

INTEREST RATE SPREAD; PREPAYMENT RISK

While the Medallion Loans and Commercial Installment Loans originated by the
Company in most cases bear interest at fixed rates, the Company finances a
substantial portion of such loans by incurring indebtedness with floating
interest rates. As a result, the Company's interest costs have increased in
the past and could increase in the future during periods of rising interest
rates, which may decrease net interest margins and thereby adversely affect
the Company's profitability. Accordingly, the Company, like most financial
services companies, faces the risk of interest rate fluctuations. Although the
Company intends to manage its interest rate risk through asset and liability
management, including the use of interest rate caps and swaps, general rises
in interest rates will tend to reduce the Company's net interest margin in the
short term. In addition, the Company relies on its counterparties to perform
their obligations under such interest rate caps and swaps. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Furthermore, loans made by the Company typically may be prepaid by the
borrower upon payment of certain prepayment charges. A borrower is likely to
exercise prepayment rights at a time when the interest rate payable on the
borrower's loan is high relative to prevailing interest rates. In such a lower
interest rate environment, the Company will have difficulty re-lending such
prepaid funds at comparable rates and, therefore, to the extent that the
Company's cost of funds is not correspondingly reduced, such a decrease in
market interest rates could adversely affect the Company. See "Business --
Medallion Lending" and "-- Commercial Installment Loans."

LEVERAGE

The Company is leveraged as a result of its bank borrowings and subordinated
SBA debentures. Leverage poses certain risks for holders of Common Stock,
including possible higher volatility of both the net asset value of the
Company and the market price of the Common Stock. Since interest is paid to
the Company's creditors before any income is distributed to the Company's
stockholders, fluctuations in the interest payable to such creditors will
affect the yield to holders of the Common Stock. In addition, income earned by
the Company from operations and lending the proceeds of borrowings must exceed
the interest payable with respect to such borrowings in order for there to be
income available for distribution to stockholders. Furthermore, the high rate
of distribution of investment company taxable income required to maintain the
Company's tax status as a RIC limits the funds that can be retained in the
business to cover periods of loss, provide for future growth and pay for
extraordinary items. In addition, in the event of a liquidation of the
Company, the Company's creditors would have claims on the Company's assets
superior to the claims of the holders of the Common Stock. Furthermore,
certain amounts could become payable to the SBA in connection with the
Company's repurchase, at a discount, of preferred stock from the SBA
previously issued by MFC and TCC, which resulted in a realized gain in
retained earnings in the amount of the repurchase discount. Such discounts
will be accreted to paid-in capital on a straight-line basis over 60 months;
however, if MFC or TCC is liquidated or loses its SBA license during the
accretion period, the SBA would have a claim for the remaining unaccreted
amount attributable to the subsidiary liquidating or losing its license. See
"Business -- Sources of Funds -- Preferred Stock Repurchase Agreements."

At December 31, 1995, the Company had $90.4 million outstanding under credit
facilities with bank syndicates aggregating $95.5 million and consisting of
(i) revolving lines of credit totalling $90.0 million, (ii) a $3.2 million
term loan and a $2.0 million term loan and (iii) a $275,000 demand loan of
Media, whose financial statements are not permitted to be consolidated with
the Company's financial statements. Amounts outstanding under the revolving
lines of credit, $3.2 million term loan and demand loan are together secured
by all of the Company's assets and bear interest at the relevant agent bank's
prime rate or, at the Company's option, a rate based on LIBOR. At December 31,
1995, the rates of interest on amounts outstanding under the revolving lines

11
<PAGE>

of credit and the demand loan ranged from 7.00% to 8.50%. The $3.2 million
term loan bears interest at the annual rate of 8.50% and the $2.0 million term
loan bears interest at the annual rate of 7.50%. The revolving lines of credit
mature between June 3, 1996 and September 30, 1996, the $2.0 million term loan
matures on July 31, 1997 and the $3.2 million term loan must be repaid from
the proceeds of the Offering. See "Use of Proceeds" and "Business -- Sources
of Funds."

At December 31, 1995, the Company had borrowed $31.7 million under
subordinated SBA debentures that have fixed rates of interest and
substantially all of which have a ten-year term. These debentures have
maturities ranging from September 1, 1996 to September 1, 2004 and rates of
interest varying from 5.00% to 9.80% per annum.

At December 31, 1995, the weighted average annual rate of interest on all of
the Company's borrowings was 7.44%. Based upon that rate, the Company must
achieve annual returns on investments of at least 4.86% to cover annual
interest payments on the bank and subordinated SBA debentures described above.
The following table illustrates the effect of leverage to a stockholder
assuming the Company's cost of funds at December 31, 1995 as described above
and various annual rates of return, net of expenses. The calculations set
forth in the table are hypothetical and actual returns may be greater or less
than those appearing below:

<TABLE>
<S> <C> <C> <C> <C> <C>
Assumed return on investments (net of
expenses)(1)................................. -10% -5% 0% 5% 10%
Corresponding net income to common
stockholders(1).............................. -48.0% -31.9% -15.7% 0.5% 16.6%
</TABLE>
- ----------
(1) Assumes (i) $159.4 million in average assets, (ii) an average cost of
funds of 7.44%, (iii) $104.1 million in average debt outstanding and (iv)
$49.3 million of average stockholders equity.

AVAILABILITY OF FUNDS

The Company has a continuing need for capital to finance its lending
activities. The Company funds its operations through credit facilities with
bank syndicates and, to a lesser degree, through subordinated SBA debentures.
Reductions in the availability of funds from banks and under SBA programs on
terms favorable to the Company could have a material adverse effect on the
Company. Because the Company intends to distribute to its shareholders at
least 90% of its investment company taxable income, such earnings will not be
available to fund loan originations.

At December 31, 1995, approximately 26% of the Company's $121.8 million of
outstanding indebtedness consisted of subordinated SBA debentures and the
Company intends to continue to seek to finance a portion of its business
through SBA funding programs. Although the Company is not aware of any pending
legislation to eliminate the SBA or to restrict or terminate the specific SBA
programs in which the Company participates, some members of Congress have
called for reform or elimination of various federally funded programs,
including those of the SBA. Discontinuation, elimination or a significant
reduction of or restriction on financing available to the Company from the SBA
would reduce the Company's funding alternatives.

Even if the SBA continues to receive funding and its programs are maintained
in their current form, the financing that the SBA makes available to Small
Business Investment Companies ("SBICs") and SSBICs will remain limited and
many SBICs and SSBICs will continue to compete with the Company for the
limited funds that are available. Although the Company has obtained
substantial financing under SBA programs in the past, there can be no
assurance that the Company will be able to obtain its desired level of SBA
financing in the future. See "Business -- Sources of Funds."

In addition to limits on the aggregate amount of SBA financing available,
such financing is restricted in its application. The SBA has informed the
Company that due to the SBA's concerns regarding the concentration of SSBIC
and SBIC loans in the taxicab industry and the availability of private capital
to finance taxicab related businesses, no additional SBA financing will be
made available to certain SBICs and SSBICs for such loans. As a result, the
Company does not expect to obtain additional SBA financing to originate
additional Medallion Loans. See "Business -- Sources of Funds."

The SBA also restricts the amount of secured bank debt that SBICs and SSBICs
with outstanding SBA financing may incur. As a result, the SBA could preclude
TCC and Edwards from increasing or refinancing their

12
<PAGE>

credit facilities. Combined with limitations on SBA funding, these
restrictions on secured bank debt could restrict further growth of TCC's and
Edwards' loan portfolios.

INDUSTRY AND GEOGRAPHIC CONCENTRATION

Medallion Loans collateralized by New York City taxicab medallions and
related assets comprised a substantial portion of the Company's Medallion Loan
portfolio at December 31, 1995. According to TLC data, over the past 20 years
New York City medallions have appreciated in value an average of 10.5% each
year; however, for sustained periods during that time, medallions declined in
value. Most of the Company's Commercial Installment Loans have been made to
retail dry cleaning and coin operated laundromat businesses in New York City
and a major portion of the Company's taxicab advertising revenue is derived
from New York City taxicabs. There can be no assurance that the Company will
be able to geographically diversify its operations or that an economic
downturn in New York City in general, or in the New York City taxicab, retail
dry cleaning or coin operated laundromat industries in particular, would not
have an adverse impact on the Company. In addition to expanding
geographically, the Company intends to expand its financing operations to
include other industries and financial products and there can be no assurance
that management's experience with its current lending activities will lead to
success with such other industries and products. See "Business."

ABSENCE OF COMBINED OPERATING HISTORY

Medallion Financial was founded recently and has conducted no operations to
date. Medallion Financial has entered into agreements to acquire the Founding
Companies simultaneously with the closing of the Offering. Each of the
Founding Companies has been operating independently of each other with
separate management teams and there can be no assurance that Medallion
Financial will be able to successfully integrate these businesses and
effectively implement the Company's strategy to expand operations. In
addition, there can be no assurance that the expected benefits of
consolidation, such as reduced risk through diversification of the portfolio
and elimination of duplicate facilities and expenses, will materialize. See
"The Company," "Business" and "Management."

COMPETITION

Banks, credit unions and other finance companies, some of which are SSBICs
and SBICs, compete with the Company in the origination of Medallion Loans and
Commercial Installment Loans. Finance subsidiaries of equipment manufacturers
also compete with the Company. Many of these competitors have greater
resources than the Company and certain competitors are subject to less
restrictive regulations than the Company. As a result, there can be no
assurance that the Company will be able to identify and complete financing
transactions that will permit it to compete successfully. The Company's
taxicab rooftop advertising business competes with other taxicab rooftop
advertisers as well as all segments of the out-of-home advertising industry
and other types of advertising media, including cable and network television,
radio, newspapers, magazines and direct mail marketing. Many of these
competitors have greater financial resources than the Company and offer
several forms of advertising as well as production facilities. There can be no
assurance that the Company will compete with these businesses successfully.
See "Business."

CREDIT QUALITY

The Company's loans are not guaranteed by the SBA. The Company's borrower
base consists primarily of small business owners that have limited resources.
There is generally no publicly available information about such small business
owners, and the Company must rely on the diligence of its employees and agents
to obtain information in connection with the Company's credit decisions. In
addition, these small businesses do not have audited financial statements.
Typically, the success of small businesses and their ability to repay the
Company's loans are dependant upon the management talents and efforts of one
person or a small group of persons, and the
death, disability or resignation of one or more of these persons could have an
adverse impact on their business. Moreover, small businesses may be more
vulnerable to economic downturns and often need substantial additional capital
to expand or compete. Such companies may also experience substantial
variations in operating results. Lending to small businesses therefore
involves a high degree of business and financial risk, which can result in

13
<PAGE>

substantial losses and accordingly should be considered speculative. In
addition, expansion of the portfolio and increases in the proportion of the
portfolio consisting of Commercial Installment Loans could have an adverse
impact on the credit quality of the portfolio. See "Business -- Medallion
Lending" and "-- Commercial Installment Loans."

PORTFOLIO VALUATION

Under the 1940 Act, the Company's loan portfolio must be recorded at fair
market value. Unlike certain lending institutions, the Company is not
permitted to establish reserves for loan losses, but adjusts quarterly the
valuation of its portfolio to reflect the Company's estimate of the current
realizable value of the loan portfolio. Since no ready market exists for this
portfolio, fair market value is subject to the good faith determination of the
Company's management and the approval of the Company's Board of Directors. In
determining such value, the directors take into consideration various factors
such as the financial condition of the borrower, the adequacy of the
collateral, and the relationships between current and projected market rates
of interest and portfolio rates of interest and maturities. For example, in a
period of sustained increases in market rates of interest, the Board of
Directors could decrease its valuation of the portfolio because the portfolio
consists primarily of fixed-rate loans. These fair valuation procedures are
designed to approximate the value that would have been established by market
forces and are therefore subject to uncertainties and variations from reported
results. Based on the foregoing criteria, the Company determines net
unrealized depreciation of investments or the amount by which the Company's
estimate of the current realizable value of its portfolio is below its cost
basis. At December 31, 1995, the Company's net unrealized depreciation of
investments was $1.6 million. Based upon current market conditions and current
loan to value ratios, the Company's Board of Directors believes that its net
unrealized depreciation of investments is adequate to reflect the fair market
value of the portfolio. Because of the subjectivity of these estimates, there
can be no assurance that in the event of a foreclosure or in the sale of
portfolio loans, the Company would be able to recover the amounts reflected on
its balance sheet. Further, costs associated with foreclosure proceedings,
such as a 5% New York City transfer tax assessed in connection with every
medallion transfer, may reduce the Company's expected net proceeds. See
"Business -- Medallion Lending -- Loan Portfolio"; "-- Commercial Installment
Loans -- Loan Portfolio"; "-- Delinquency and Collections"; and "-- Loan Loss
Experience."

TAXICAB INDUSTRY REGULATION

Every city in which the Company originates Medallion Loans, and most other
major cities in the United States, limit the supply of taxicab medallions. In
many markets, regulation results in supply restrictions which, in turn,
support the value of medallions; consequently, actions which loosen such
restrictions and result in the issuance of additional medallions into a market
could decrease the value of medallions in that market and, therefore, the
collateral securing the Company's then outstanding Medallion Loans, if any, in
that market. The Company is unable to forecast with any degree of certainty
whether any potential increases in the supply of medallions will occur.
However, in January 1996, the New York City Council passed a law authorizing
the city to sell up to 400 additional taxicab medallions, which would only
represent a 3.4% increase in the 11,787 taxicab medallions presently
outstanding. The first 133 of such medallions were sold in May 1996 with the
balance to be sold over the next three years. See "Business --Medallion
Lending --Industry Overview."

In New York City, and in other markets where the Company originates
Medallion Loans, taxicab fares are generally set by government agencies,
whereas expenses associated with operating taxicabs are largely unregulated.
As a consequence, in the short term, the ability of taxicab operators to
recoup increases in expenses is limited. Escalating expenses, therefore, can
render taxicab operation less profitable and make it more difficult for
borrowers to service loans from the Company and could potentially adversely
affect the value of the Company's collateral. In January 1996, the TLC
approved an increase of approximately 20% in taxicab fares and imposed a
mandatory retirement age for taxicabs. These measures took effect on March 1,
1996. The Company is unable to predict whether ridership or taxicab operator
profitability will be affected by these measures.

14
<PAGE>

GOVERNMENT REGULATION OF TOBACCO ADVERTISING

Currently, substantially all of the Company's taxicab rooftop advertising
revenue is derived from cigarette advertising. President Clinton recently
authorized the Food and Drug Administration (the "FDA") to assert regulatory
jurisdiction over cigarettes and smokeless tobacco products ("tobacco
products") for the purpose of curbing use of these products by individuals
under the age of 18. The FDA has proposed new rules which, among other things,
regulate advertising of tobacco products. The Company believes that certain of
the proposed rules which include provisions prohibiting the placement of
tobacco products advertising within 1,000 feet of playgrounds and primary and
secondary schools only apply to stationary advertising such as billboards and,
thus, would not restrict taxicab rooftop advertising. However, other
restrictions in the proposed rules limiting tobacco products advertising to a
format consisting of black text on a white background may apply to taxicab
rooftop advertising. The Company cannot predict whether or in what form the
proposed rules will be adopted, or whether the proposed rules will be modified
or nullified by legislative or judicial action. In any event, if rules
restricting the advertising of tobacco products are adopted and are ultimately
interpreted to restrict taxicab rooftop advertising, such rules could have an
adverse effect upon the taxicab rooftop advertising business of the Company.

The Liggett Group, Inc. ("Liggett") recently settled two tobacco liability
actions. Under the terms of the settlements, Liggett agreed to comply with
certain of the proposed FDA advertising regulations. Liggett controls only
approximately 2% of the U.S. market for tobacco products and the remainder of
the tobacco industry has yet to demonstrate a willingness to voluntarily
comply with the proposed FDA regulations. However, if the larger tobacco
companies were to elect to voluntarily comply with the proposed FDA
regulations and such regulations were interpreted to include taxicab rooftop
advertising, a substantial component of Media's current revenues could be
adversely impacted.

In response to the proposed FDA advertising regulations, Philip Morris
Companies Inc. has recently proposed to Congress an alternative version of
regulation which would also restrict certain types of advertising, including
taxicab rooftop advertising, of tobacco products. The Company cannot predict
whether or in what form the Philip Morris proposal will be adopted.

From time to time there have been legislative initiatives requiring
advertisers which carry tobacco products to also display anti-smoking
messages. In 1994, the U.S. Court of Appeals for the Second Circuit upheld a
district court ruling which prevented the application of a New York City
ordinance requiring, in certain circumstances, that Displays carry anti-
smoking messages. There can be no assurance that there will not be further
such initiatives or that they will be nullified by judicial action.

PASS-THROUGH TAX TREATMENT

Risks Associated with Distribution Requirements and Leverage

The Company, together with the RIC Subsidiaries, intends to qualify and
elect to be treated as a RIC under Subchapter M of the Code. In any year in
which these companies so qualify under Subchapter M, they generally will not
be subject to federal income tax on investment company taxable income (which
includes, among other things, dividends and interest reduced by deductible
expenses) distributed to their stockholders. To so qualify, these companies
must meet certain income, distribution and diversification requirements. See
"Federal Income Tax Considerations." However, because these companies use
leverage, they are subject to certain asset coverage ratio requirements set
forth in the 1940 Act. These asset coverage requirements could, under certain
circumstances, prohibit these companies from making distributions that are
necessary to maintain Subchapter M status. In addition, the asset coverage and
distribution requirements impose significant cash flow management restrictions
on the Company and limit the Company's ability to retain earnings to cover
periods of negative income, provide for future growth and pay for
extraordinary items, such as the repayment of principal of debt incurred by
the Company. See "Federal Income Tax Considerations." Qualification as a RIC
under Subchapter M is made on an annual basis and, although it is the
Company's policy to qualify as a RIC, no assurance can be given that Medallion
Financial or the RIC Subsidiaries will continue to qualify for such

15
<PAGE>

treatment. If these companies were to elect not to be treated as RICs under
Subchapter M, or were to fail to qualify because the 1940 Act asset coverage
requirements or the payment of extraordinary items precluded distributions
necessary to maintain Subchapter M status or for any other reason, their
respective incomes would become fully taxable and a substantial reduction in
the amount of income available for distribution to Medallion Financial and its
stockholders would result. See "Federal Income Tax Considerations" and
"Regulation."

The Small Business Investment Act of 1958 (the "SBIA") and regulations
thereunder ("SBA Regulations") restrict distributions by an SSBIC or an SBIC.
Consequently, an SSBIC or SBIC which is also a RIC could be prohibited by SBA
Regulations from making the distributions necessary to qualify as a RIC. Under
such circumstances, in order to comply with the SBA Regulations and the RIC
distribution requirements, the applicable SSBIC or SBIC must request and
receive a waiver of the SBA's restrictions. While the current policy of the
Office of SBIC Operations is to grant such waivers if the SSBIC or SBIC makes
certain offsetting adjustments to its paid-in capital and surplus accounts,
there can be no assurance that this will continue to be the policy or that the
relevant SSBIC or SBIC will have adequate capital to make the required
adjustments. In the absence of a waiver, compliance with the SBA Regulations
may result in loss of RIC status and a consequent imposition of an entity-
level tax.

Risks Associated with Diversification Requirements

The Company intends to pursue an expansion strategy in its taxicab rooftop
advertising business and believes that there are growth opportunities in this
market. However, the asset diversification requirements under the Code could
restrict such expansion. These requirements provide, in part, that not more
than 25% of the value of a RIC's total assets may be invested in the
securities (other than U.S. Government securities or securities of other RICs)
of any one issuer or two or more issuers controlled by such RIC which are
engaged in similar or related trades or businesses. Unlike Medallion
Financial's investments in the RIC Subsidiaries, which will not be subject to
this diversification test so long as these subsidiaries are RICs, Medallion
Financial's investment in Media will be subject to this test. The test is
initially calculated at the time the assets are acquired. At the time of the
Acquisitions, Media will represent less than 25% of Medallion Financial's
assets and the diversification test will be satisfied. Subsequent growth of
Media, if internally generated, will not retrigger the test even if Media
represents in excess of 25% of Medallion Financial's assets. However, under
the Code, the test must be reapplied in the event that Medallion Financial
makes a subsequent investment in Media, lends to it or acquires another
taxicab rooftop advertising business. If such aggregate asset value represents
more than 25% of Medallion Financial's total assets at that time, Medallion
Financial would fail the diversification test. If that were to occur Medallion
Financial would lose RIC status with the consequences described above.
Accordingly, the Company's maintenance of RIC status could limit the Company's
ability to expand its taxicab rooftop advertising business. It will be the
Company's policy to expand its advertising business through internally
generated growth and to only consider acquisitions if, giving effect to the
acquisition, the Code's diversification requirements would be met.

NO PRIOR PUBLIC MARKET FOR THE COMMON STOCK; DETERMINATION OF THE PUBLIC
OFFERING PRICE

There has been no prior public market for the Common Stock. Consequently,
the initial public offering price was determined through negotiations among
the Company and the representatives of the Underwriters. See "Underwriting"
for factors considered in determining the initial public offering price. The
negotiated initial public offering price may not be indicative of net asset
value or the market price for the Common Stock following the Offering. The
Common Stock has been approved for quotation on the Nasdaq National Market
under the symbol "TAXI." However, there can be no assurance that an active
trading market will develop subsequent to the Offering or, if developed, that
it will be sustained. See "Underwriting."

DEPENDENCE ON CASH FLOW FROM SUBSIDIARIES

Medallion Financial is a holding company and will derive most of its
operating income and cash flow from its subsidiaries. As a result, Medallion
Financial will rely entirely upon distributions from its subsidiaries to

16
<PAGE>

generate the funds necessary to make dividend payments and other distributions
to its stockholders. Funds are expected to be provided to Medallion Financial
by its subsidiaries through dividends and payments on intercompany
indebtedness, but there can be no assurance that such subsidiaries will be in
a position to make such dividend or debt payments. See "The Company" and
"Business."

IMMEDIATE AND SUBSTANTIAL DILUTION

Immediately upon the closing of the Offering, the purchasers of the Common
Stock will experience dilution in the net tangible book value of their shares
of $4.88 per share. See "Dilution." In addition, such purchasers will incur
further dilution to the extent the Company issues options under the Medallion
Financial Corp. 1996 Stock Option Plan (the "1996 Plan") and the Medallion
Financial Corp. 1996 Non-Employee Directors Stock Option Plan (the "Director
Plan") and such options are exercised at a time when the exercise price is
less than the market price for the Common Stock. See "Management--1996 Stock
Option Plan" and "--Non-Employee Directors Stock Option Plan."

RELIANCE ON MANAGEMENT

The success of the Company will be largely dependent upon the efforts of
senior management. The death, incapacity or loss of the services of any of
such individuals could have an adverse effect on the Company and there can be
no assurance that other qualified officers could be hired. See "Management."

CERTAIN ANTI-TAKEOVER PROVISIONS

Prior to the completion of the Offering, the Company will adopt the
Certificate and Restated By-Laws (the "By-Laws"). Certain provisions of the
Certificate and the By-Laws may have the effect of discouraging a third party
from making an acquisition proposal for the Company and thereby inhibit a
change in control of the Company in circumstances that could give the holders
of the Common Stock the opportunity to realize a premium over the then
prevailing market price of the Common Stock. Such provisions may also
adversely affect the market price for the Common Stock. In addition, the
classification of the Company's Board of Directors into three classes may have
the effect of delaying a change in control of the Company. See "Description of
Capital Stock -- Delaware Law and Certain Provisions of the Certificate of
Incorporation and the By-Laws."

CONTROL BY EXISTING STOCKHOLDERS

After the Offering, two officers who are also directors of the Company,
together with entities affiliated with them, will beneficially own
approximately 35% of the Common Stock outstanding (approximately 31% of the
Common Stock outstanding assuming exercise of the Underwriters' over-allotment
option in full). Because of their Common Stock ownership, these stockholders,
if they were to act together, could control the election of all members of the
Company's Board of Directors and determine most corporate actions after the
Offering. See "Principal Stockholders."

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market, or the perception that such sales could occur, could adversely affect
market prices prevailing from time to time. In addition, several of the
Company's principal stockholders and entities affiliated with them hold a
significant portion of the Company's outstanding Common Stock and a decision
by one or more of these stockholders to sell their shares could adversely
affect the market price of the Common Stock. Upon completion of the Offering,
the Company will have outstanding 7,500,000 shares of Common Stock (8,250,000
if the Underwriters' over-allotment option is exercised in full). Of these
shares, the 5,000,000 shares offered hereby (5,750,000 if the Underwriters'
over-allotment option is exercised in full) will be freely tradable without
restriction or registration under the Securities Act except to the extent
purchased by affiliates of the Company.

17
<PAGE>

The remaining 2,500,000 shares (the "Restricted Shares") were issued and
sold by the Company in private transactions in reliance upon exemptions from
registration under the Securities Act and are restricted securities under Rule
144 of the Securities Act and may not be sold without registration except in
compliance with Rule 144 or an exemption from registration under the
Securities Act. These shares were sold at the Company's inception on October
23, 1995 at their fair value at the time of $2,000 or, after giving effect to
a 12,500 for one stock split expected to be effected prior to completion of
the Offering, less than one cent per share. All of the Restricted Shares are
subject to lock-up agreements as described below (the "Lock-up Agreements").
In addition, all of the Restricted Shares will not be eligible for sale
pursuant to Rule 144 until the expiration of the two-year holding period from
the date such Restricted Shares were acquired. Accordingly, 2,500,000
Restricted Shares will become eligible for sale subject to Rule 144 resale
restrictions, including volume limitations, on October 23, 1997. The
Commission has proposed amendments to Rule 144 that would, if adopted,
retroactively reduce the two-year holding period to one year.

Pursuant to Lock-up Agreements entered into by certain of the Company's
directors and officers and certain other stockholders, all of the Restricted
Shares are subject to certain resale restrictions in addition to those imposed
under Rule 144. Each party to these Lock-up Agreements has agreed that he will
not, directly or indirectly, offer for sale, sell, contract to sell, grant an
option to purchase or otherwise dispose of any shares of the Common Stock,
except for shares escrowed by the Alvin Murstein Second Family Trust and the
Andrew Murstein Family Trust (collectively the "Murstein Trusts") for the
benefit of FMC and gifts to family members or charitable institutions, for a
period of two years from the date of this Prospectus, without the prior
written consent of Furman Selz LLC. Such consent will not, however, affect the
resale restrictions under Rule 144. In addition, the Company and all of the
Company's other officers and directors have agreed that for a period of 180
days following the date of this Prospectus, they will not, without the prior
written consent of Furman Selz LLC, directly or indirectly, offer for sale,
sell, contract to sell, or grant an option to purchase or otherwise dispose of
any shares of the Common Stock, except, in the case of the Company, options
granted under the 1996 Plan or the Director Plan or shares issued pursuant to
the exercise of outstanding options. See "Underwriting."

In addition, it is anticipated that upon the closing of the Offering, three
executive officers of the Company will be granted stock options exercisable
for 181,820 shares of Common Stock. The exercise price for such shares will be
equal to the public offering price set forth on the cover page of this
Prospectus. These options will become exercisable in five equal annual
installments commencing one year after the date of this Prospectus, except in
the case of Mr. Kowalsky whose options shall become exercisable in twelve
equal quarterly installments. Including shares reserved for issuance in
connection with such options, the Company will reserve a total of 750,000
additional shares of Common Stock for issuance with respect to the grant of
options under the 1996 Plan.

Following the completion of the Offering, the Company currently expects to
file a registration statement under the Securities Act to register shares for
issuance under the 1996 Plan and the Director Plan. Shares issued upon
exercise of outstanding stock options after the effective date of such
registration statement generally will be tradable without restriction under
the Securities Act. See "Shares Eligible for Future Sale."

18
<PAGE>

THE COMPANY

The Company, giving effect to the Acquisitions, is a specialty finance
company with a leading position in the origination and servicing of Medallion
Loans. The Company also originates and services Commercial Installment Loans.
In addition, the Company operates a taxicab rooftop advertising business. The
investment objectives of the Company are to provide a high level of current
income, consistent with preservation of capital, as well as long-term growth
of net asset value. The Company intends to pay quarterly cash dividends.

The Company is a closed-end, non-diversified management investment company
and has elected to be treated as a business development company under the 1940
Act. See "Regulation." In addition, it plans to elect to be treated for tax
purposes as a RIC under the Code. As a RIC, the Company will not be subject to
U.S. federal income tax on any investment company taxable income (which
includes, among other things, dividends and interest reduced by deductible
expenses) that it distributes to its stockholders for its taxable year if at
least 90% of its investment company taxable income for that taxable year is
distributed. See "Federal Income Tax Considerations."

The Company was incorporated in Delaware in 1995 to acquire and expand the
specialty finance and taxicab rooftop advertising businesses of the Founding
Companies. The closing of the Offering is contingent upon the completion of
the acquisition of each of the Founding Companies. For a description of the
transactions pursuant to which these businesses will be acquired, see
"Business -- Formation Transactions" and "Certain Transactions." The Pro Forma
Summary and Selected Financial Data of the Company included in this Prospectus
for the year ended December 31, 1995 and each quarter in the year ended
December 31, 1995 are derived from the financial position and results of
operations of each of the Founding Companies, collectively, and are presented
as if the Acquisitions and the Offering had been effected as of January 1,
1995 or December 31, 1995, as applicable. In addition, Pro Forma Combined
Financial Statements for the Company for the year ended December 31, 1995, Pro
Forma Combined Statements of Operations for each quarter in the year ended
December 31, 1995 and Financial Statements and Notes thereto for each of the
Founding Companies for the years ended December 31, 1993, 1994 and 1995 as
well as Historical Selected Financial Data for each of the Founding Companies
for the years ended December 31, 1991, 1992, 1993, 1994 and 1995 are included
in this Prospectus.

The aggregate consideration being paid by the Company to acquire the
Founding Companies consists of (i) $38.9 million in cash, (ii) the assumption
of approximately $90.1 million in bank debt and (iii) the assumption of
approximately $31.7 million in subordinated SBA debentures. The aggregate
consideration to be paid for each Founding Company, including assumption of
debt, based on December 31, 1995 amounts, is estimated to be as follows: (a)
Tri-Magna -- $93.7 million; (b) Edwards -- $50.0 million; and (c) TCC -- $17.0
million. The consideration being paid for each Founding Company was determined
by arm's-length negotiations between the Company and such Founding Company.
See "Business -- Formation Transactions," "Use of Proceeds" and "Certain
Transactions."

19
<PAGE>

The following chart illustrates the organization of the Company following
the Acquisitions:

[CHART APPEARS HERE]

Tri-Magna Corporation (MFC and Media). Tri-Magna is a closed-end, management
investment company registered under the 1940 Act and is the sole stockholder
of MFC and Media. Management of the Company has operated Tri-Magna and its
subsidiaries since they were organized. Operating primarily in New York City,
MFC is a well-established medallion lender and has diversified its operations
by developing a division that originates Commercial Installment Loans
financing small businesses outside of the taxicab industry. MFC, the largest
SSBIC in the nation, was incorporated in 1979 and is a closed-end, management
investment company registered under the 1940 Act. Media, which was
incorporated in 1994, provides taxicab rooftop advertising and has initiated a
plan to become a national provider of such advertising. Media currently
provides such advertising in New York City, Philadelphia, Miami and Boston and
has recently entered the Atlanta and Los Angeles markets. Upon consummation of
the Acquisitions, Tri-Magna will be merged into Medallion Financial and MFC
and Media will become wholly owned subsidiaries of Medallion Financial. At
that time, Tri-Magna will constitute approximately 62% of the Company's
assets.

Edwards Capital Company. Operating almost exclusively in New York City,
Edwards is a well-established medallion lender. Unlike MFC and TCC, which are
SSBICs, Edwards is an SBIC and, therefore, is permitted to lend to any small
business concern rather than being restricted to financing small business
concerns that are owned and managed by persons deemed to be socially or
economically disadvantaged. Accordingly, Edwards has a potentially larger
borrower base than the SSBICs and performs its credit analyses based solely on
economic criteria. The Company anticipates that after the Offering, Edwards
will increase its volume of originations of Commercial Installment Loans.
Edwards was organized in 1979 and has been operated as a privately held
limited partnership since 1981. Medallion Financial intends to acquire
substantially all of its assets through a newly formed subsidiary which has
registered as a closed-end, management investment company under the 1940 Act.
Upon consummation of the Acquisitions, Edwards will be registered as a closed-
end, management investment company under the 1940 Act and will constitute
approximately 28% of the Company's assets.

20
<PAGE>

Transportation Capital Corp. TCC is a well-established and geographically
diverse medallion lender with operations in Boston, Cambridge, Chicago and New
York City. The Company anticipates that after the Offering, TCC will increase
its volume of originations of Commercial Installment Loans. TCC is a wholly
owned indirect subsidiary of Leucadia National Corporation ("Leucadia"). TCC
was incorporated in 1979 and is licensed as an SSBIC. Upon consummation of the
Acquisitions, TCC will be a closed-end, management investment company
registered under the 1940 Act, will be a wholly owned subsidiary of Medallion
Financial and will constitute approximately 10% of the Company's assets.

The Company's executive offices are located at 205 East 42nd Street, Suite
2020, New York, New York 10017, and its telephone number is (212) 682-3300.

21
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
N-2 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus, filed as part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock, reference is hereby made to the Registration
Statement, including the exhibits and schedules thereto. Statements contained
in this Prospectus as to the contents of any contract or any other document
are not necessarily complete, and, in each instance, reference is made to the
copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. MFC, TCC and Edwards have each filed or intend to file with the
Commission a Notification of Registration on Form N-8A and intend to file a
Registration Statement on Form N-5 under the 1940 Act prior to September 1996.
For further information with respect to MFC, TCC and Edwards, reference is
hereby made to their respective Registration Statements on Form N-5, including
the exhibits and schedules thereto. The Registration Statement and the
Registration Statements on Form N-5 when filed, including exhibits and
schedules thereto, may be inspected without charge at the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies can also be obtained from the Commission at
prescribed rates.

In connection with the Acquisitions, the Company has obtained an exemptive
order under the 1940 Act (the "Application"). The order grants an exemption
from certain provisions of the 1940 Act and rules thereunder that would
otherwise prohibit the Acquisitions and operation of the Company on a combined
basis. The Application and order may be inspected without charge at the
Commission's Public Reference Section and copies can be obtained from the
Commission at prescribed rates. See "Business -- Formation Transactions."

In connection with Tri-Magna's merger with Medallion Financial, Tri-Magna
will file an application on Form N-8F with the Commission to deregister as an
investment company under the 1940 Act. The application on Form N-8F may be
inspected without charge at the Commission's Public Reference Section and
copies can be obtained from the Commission at prescribed rates. See
"Business--Formation Transactions."

22
<PAGE>

DISTRIBUTIONS

The Company's policy is to make quarterly distributions of its investment
company taxable income and to distribute at least 90% of such income annually.
Initial distributions to stockholders are expected to be declared
approximately 90 days, and paid approximately 120 days, after the completion
of the Offering. Investment company taxable income of the Company includes,
among other things, dividends and interest reduced by deductible expenses. See
"Federal Income Tax Considerations." The Company does not expect to have
capital gains, however, to the extent that it does, it will distribute them
annually. The Company's ability to make dividend payments is restricted by
certain asset coverage requirements under the 1940 Act and is dependent upon
maintenance of its status as a RIC under the Code. See "Regulation" and
"Federal Income Tax Considerations." The Company's ability to make dividend
payments is further restricted by certain financial covenants contained in the
Company's credit agreements, by SBA Regulations and under the terms of the
subordinated SBA debentures. The Company has adopted a dividend reinvestment
plan pursuant to which stockholders can have distributions reinvested in
additional shares of Common Stock. See "Dividend Reinvestment Plan."

Substantially all of the Company's investment company taxable income is
expected to be comprised of cash dividends paid to it by the RIC Subsidiaries.
The RIC Subsidiaries intend to elect to be treated for tax purposes as RICs
under the Code and, therefore, must comply with the same income distribution
requirements that apply to the Company. As RICs, they are not subject to U.S.
federal income tax on any investment company taxable income that they
distribute to their stockholder, the Company, if at least 90% of their
respective investment company taxable income is distributed to the Company.
See "Federal Income Tax Considerations." The policy of each of the RIC
Subsidiaries is to make quarterly distributions to the Company of at least 90%
of their respective investment company taxable income. Substantially all of
the RIC Subsidiaries' net income is investment company taxable income and is
derived from interest paid on Medallion Loans and Commercial Installment
Loans.

Media is not required to pay dividends to the Company. Media, unlike the RIC
Subsidiaries, does not qualify as a RIC under the Code and, therefore, is not
subject to RIC distribution requirements. Media is subject to U.S. federal
income tax as a corporation under the Code and will pay taxes on corporate
income under the standard corporate tax rules. Media may retain all of its
earnings for funding the operation and expansion of its business. Any
dividends that are paid by Media to the Company, however, are expected to be
distributed to stockholders.

23
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the Offering, after deducting the sales
load and other offering expenses payable by the Company (estimated to be
approximately $5.7 million), are estimated to be approximately $49.3 million
based upon the offering price of $11.00 per share (approximately $57.0 million
if the Underwriters' over-allotment option is exercised in full). Of this
amount, $38.9 million will be used to pay the cash purchase price for the
acquisition of the Founding Companies. See "Business -- Formation
Transactions" and "Certain Transactions."

The following table sets forth the aggregate consideration estimated to be
payable for each Founding Company based on December 31, 1995 amounts:

<TABLE>
<CAPTION>
BANK DEBT SBA DEBT
CASH ASSUMED ASSUMED TOTAL
------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Tri-Magna................................ $13,378 $80,295 $ -- $ 93,673
Edwards.................................. 15,197 9,850 24,950 49,997
TCC...................................... 10,349 -- 6,730 17,079
------- ------- ------- --------
Total.................................. $38,924 $90,145 $31,680 $160,749
======= ======= ======= ========
</TABLE>

All cash payments reflected in the preceding table are payable solely out of
the net proceeds of the Offering. Of the $121.8 million in indebtedness
assumed in connection with the Acquisitions, $10.4 million and $7.0 million
will initially be repaid from the proceeds from the Offering and the cash
acquired in the Acquisitions, respectively, within 30 days of the completion
of the Offering. The repayment of indebtedness with cash acquired in the
Acquisitions will require SBA approval and no assurance can be given that such
approval will be obtained. Of the $10.4 million, $3.2 million will be used to
repay indebtedness incurred in connection with the Company's repurchase of
subordinated SBA debentures and preferred stock. The indebtedness to be repaid
from the proceeds of the Offering bears interest at rates ranging from 7.25%
to 8.50%, with a weighted average rate of interest of 7.60%. Such indebtedness
would otherwise mature at various dates through September 30, 1996. The
Company is also assuming a $275,000 demand loan which is an obligation of
Media, an unconsolidated subsidiary of Tri-Magna. See "Business -- Sources of
Funds -- Preferred Stock Repurchase Agreements" and "Investment Objectives,
Policies and Restrictions--The Investment Adviser."

24
<PAGE>

CAPITALIZATION

The following table sets forth the pro forma capitalization of the Company
at December 31, 1995 assuming (i) 2,500,000 shares of Common Stock of the
Company issued prior to the Offering (the "Pre-Offering Issuance") had been
outstanding on that date, (ii) the sale of 5,000,000 shares of Common Stock
offered hereby with estimated net proceeds of $49.3 million and (iii) the
application of the estimated net proceeds in connection with the Acquisitions,
application of the cash acquired in connection therewith and for other uses as
described herein. See "Use of Proceeds" and "Business -- Sources of Funds."
This table should be read in conjunction with the Selected Financial Data
included in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------
PRO FORMA
AS ADJUSTED
MEDALLION FOR APPLICATION
FINANCIAL AS ADJUSTED OF OFFERING
HISTORICAL FOR OFFERING PROCEEDS
---------- ------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Subordinated SBA debentures of
subsidiaries........................ $-- $-- $ 31,426
Notes payable to bank................ -- -- 72,713
---- ------- --------
Total long-term debt............... -- -- 104,139
Stockholders' equity:(1)
Preferred Stock, $.01 par value;
1,000,000 shares authorized; no
shares issued and outstanding....... -- -- --
Common Stock, $.01 par value;
15,000,000 shares authorized;
2,500,000 shares issued and
outstanding historical, 7,500,000
shares as adjusted for Offering,
7,500,000 shares pro forma as
adjusted for application of Offering
proceeds............................ -- 75 75
Additional paid-in capital........... 2 49,225 49,227
---- ------- --------
Total stockholders' equity......... 2 49,300 49,302
---- ------- --------
Total capitalization................... $ 2 $49,300 $153,441
==== ======= ========
</TABLE>
- ----------
(1) Reflects a 12,500 for one stock split and an amendment and restatement of
the Certificate which are expected to be effected prior to the completion
of the Offering.

25
<PAGE>

DILUTION

The pro forma net tangible book value of the Company at December 31, 1995
was negative $3.4 million, or negative $1.36 per share after giving effect to
(i) the Acquisitions and (ii) the Pre-Offering Issuance. "Pro forma net
tangible book value per share" is the pro forma tangible net worth (total pro
forma tangible assets less total pro forma liabilities) of the Company divided
by the number of shares of Common Stock outstanding after giving effect to (i)
the Acquisitions and (ii) the Pre-Offering Issuance. Based upon the initial
offering price per share of $11.00 after giving effect to the sale of the
Common Stock offered hereby (after deducting the sales load and estimated
offering expenses), the pro forma net tangible book value of the Company at
December 31, 1995 would have been $45.9 million, or $6.12 per share,
representing an immediate increase in net tangible book value of $7.48 per
share to existing stockholders and an immediate dilution of $4.88 per share to
the investors purchasing the shares of Common Stock in the Offering ("New
Investors").

The following table illustrates this dilution to New Investors:

<TABLE>
<S> <C> <C>
Initial public offering price per share.............................. $11.00
Pro forma net tangible book value per share before the
Offering..................................................... ($1.36)
Increase per share attributable to the sale of shares to New
Investors.................................................... 7.48
------
Pro forma net tangible book value per share after the
Offering..................................................... 6.12
------
Dilution to New Investors.............................................. $ 4.88
======
</TABLE>

The following table sets forth at the date of this Prospectus the number of
shares of Common Stock acquired from the Company, the total consideration paid
to the Company and the average price per share paid by existing stockholders
(after giving effect to the Acquisitions and the SBA Repurchase) and by the
New Investors.

<TABLE>
<CAPTION>
SHARES ACQUIRED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 2,500,000 33.3% $ 2,000 -- % $ --
New Investors............... 5,000,000 66.7 55,000,000 100.0 11.00
--------- ----- ----------- -----
Total....................... 7,500,000 100.0% $55,002,000 100.0%
========= ===== =========== =====
</TABLE>

26
<PAGE>

SELECTED FINANCIAL DATA

Medallion Financial Corp. was recently organized to acquire and expand the
specialty finance businesses conducted by Tri-Magna, Edwards and TCC as well
as the taxicab rooftop advertising business conducted by Tri-Magna. Medallion
Financial has only recently been organized and, accordingly, has no results of
operations. Simultaneously with, and as a condition to the closing of the
Offering, Medallion Financial will acquire each of the Founding Companies.
Prior to the Acquisitions, each of the Founding Companies had been operating
independently of each other. Accordingly, the following Selected Financial
Data is comprised of two major sections.

The first section, Pro Forma Selected Financial Data, presents selected
unaudited financial data of the Company as if the Founding Companies had been
acquired and the Offering effected, and gives effect to the application of the
proceeds of the Offering and the cash acquired in the Acquisitions as
described in "Use of Proceeds." In addition, the pro forma information is
based on available information and certain assumptions and adjustments set
forth in Notes 1 and 2 to the "Pro Forma Combined Financial Statements." The
pro forma selected balance sheet data were prepared as if the Offering and the
Acquisitions had occurred on December 31, 1995. The pro forma selected
statement of operations data were prepared as if the Offering and the
Acquisitions had occurred on January 1, 1995. The pro forma data are not
necessarily indicative of the future financial position or results of
operations of the Company.

The second section of the following discussion presents the Historical
Selected Financial Data of each of the Founding Companies. The Historical
Selected Financial Data for the fiscal years ended December 31, 1995, 1994 and
1993 have been derived from audited financial statements appearing elsewhere
in this Prospectus. The Historical Selected Financial Data for Edwards and TCC
have been reclassified to permit a presentation that is consistent with the
investment company status they will acquire upon completion of the
Acquisitions and the Offering. The Historical Selected Financial Data for the
fiscal years ended December 31, 1991 and 1992 for Edwards have been derived
from its audited financial statements not included in this Prospectus. The
Historical Selected Financial Data for the fiscal years ended December 31,
1991 and 1992 for Tri-Magna and TCC have been derived from their respective
unaudited financial statements not included in this Prospectus. These
unaudited financial statements have been prepared on the same basis as the
audited financial statements and, in the opinion of management, contain all
adjustments, consisting only of normal recurring accruals, necessary for a
fair presentation of the financial position and results of operations of the
Founding Companies for the period presented.

The Selected Financial Data provided herein should be read in conjunction
with the financial statements of Tri-Magna, Edwards and TCC, including the
Notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in this Prospectus.

27
<PAGE>

PRO FORMA SELECTED FINANCIAL DATA
(SEE PRO FORMA FINANCIAL STATEMENTS FOR ADJUSTMENTS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
--------------------------------------------- ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
--------- -------- ------------- ------------ ------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Investment income....... $3,846 $3,901 $3,915 $4,028 $15,690
Interest expense........ 2,043 1,997 1,945 2,018 8,003
------ ------ ------ ------ -------
Net interest income..... 1,803 1,904 1,970 2,010 7,687
Equity in earnings of
unconsolidated subsidi-
ary(1)................. 31 56 19 20 126
Other income............ 228 198 199 264 889
Accretion of negative
goodwill............... 193 193 193 193 772
Operating expenses...... (988) (952) (978) (938) (3,856)
Amortization of good-
will................... (105) (105) (105) (105) (420)
------ ------ ------ ------ -------
Net investment income... 1,162 1,294 1,298 1,444 5,198
Realized gain (loss) on
investments, net....... (4) (8) (11) 34 11
Change in unrealized de-
preciation of invest-
ments(2)............... 6 43 129 17 195
------ ------ ------ ------ -------
Net increase in net
assets resulting from
operations(3).......... $1,164 $1,329 $1,416 $1,495 $ 5,404
====== ====== ====== ====== =======
Pro forma net increase
in net assets resulting
from operations per
share(3)............... $ 0.15 $ 0.18 $ 0.19 $ 0.20 $ 0.72
====== ====== ====== ====== =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
<S> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA
Return on assets(4)............................................. 3.39%
Return on equity(5)............................................. 10.96
Average yield, e.o.p.(6)........................................ 10.69
Average cost of funds, e.o.p.(7)................................ 7.44
Spread, e.o.p.(8)............................................... 3.25
Other income ratio(9)........................................... 0.60
Operating expense ratio(10)..................................... 2.42
Medallion Loans as a percentage of investments.................. 78.9
Commercial Installment Loans as a percentage of investments..... 21.1
Investments to assets........................................... 93.4
Equity to assets................................................ 30.9
Debt to equity.................................................. 211
SBA debt to total debt.......................................... 30.1
<CAPTION>
DECEMBER 31,
1995
--------------
BALANCE SHEET DATA (IN THOUSANDS)
<S> <C>
Investments
Medallion Loans................................................ $117,489
Commercial Installment Loans................................... 31,490
Unrealized depreciation of investments(11)...................... --
--------
Investments, net of unrealized depreciation of investments...... 148,979
Total assets.................................................... 159,440
Notes payable and demand notes.................................. 72,713
Subordinated SBA debentures..................................... 31,426
Total liabilities............................................... 110,138
Total stockholders' equity...................................... 49,302
</TABLE>
- ---------
(1) Equity in earnings of unconsolidated subsidiary represents the net income
for the period earned by the Company from its investment in Media.
(2) Change in unrealized depreciation of investments represents the
(increase) decrease for the period in the unrealized depreciation applied
against the Company's investments to state them at fair value.
(3) Net increase in net assets resulting from operations is the sum of net
investment income, net realized gains or losses on investments and the
change in unrealized gains or losses on investments. Per share data is
based upon 7,500,000 pro forma weighted average shares outstanding and
does not reflect 750,000 shares issuable under the Underwriters' over-
allotment option.
(4) Return on assets represents net increase in net assets resulting from
operations for the fiscal year ending on the date indicated divided by
total assets at the date indicated.
(5) Return on equity represents net increase in net assets resulting from
operations for the fiscal year ending on the date indicated divided by
total stockholders' equity at the date indicated.
(6) Average yield, e.o.p. represents the end of period weighted average
interest rate on investments at the date indicated.
(7) Average cost of funds, e.o.p. represents the end of period weighted
average interest rate on debt at the date indicated.
(8) Spread, e.o.p. represents average yield, e.o.p. less average cost of
funds, e.o.p..
(9) Other income ratio represents other income for the fiscal year ending on
the date indicated divided by investments at the date indicated.
(10) Operating expense ratio represents operating expenses for the fiscal year
ending on the date indicated divided by total assets at the date
indicated.
(11) Upon completion of the Acquisitions, the Company's loan portfolio will be
recorded on the balance sheet at fair market value as estimated by the
Company in accordance with the 1940 Act and the purchase method of
accounting.

28
<PAGE>

HISTORICAL SELECTED FINANCIAL DATA

TRI-MAGNA
(MFC, BUT NOT MEDIA, IS CONSOLIDATED WITH TRI-MAGNA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Investment income............ $ 8,806 $ 7,953 $ 8,333 $ 8,820 $ 9,803
Interest expense............. 4,139 3,509 3,661 4,756 6,034
------- ------- ------- ------- -------
Net interest income.......... 4,667 4,444 4,672 4,064 3,769
Equity in earnings of
unconsolidated
subsidiary(1)............... -- -- -- 18 126
Other income................. 393 632 541 519 446
Total non-interest expense... 2,249 2,754 3,097 2,700 2,615
Dividends paid on minority
interest.................... 277 277 277 277 208
------- ------- ------- ------- -------
Net investment income........ 2,534 2,045 1,839 1,624 1,518
Realized gain (loss) on in-
vestments, net.............. (205) (223) (115) (22) 61
Change in unrealized
depreciation of
investments(2).............. (200) 125 (53) 58 (140)
------- ------- ------- ------- -------
Net increase in net assets
resulting from operations... $ 2,129 $ 1,947 $ 1,671 $ 1,660 $ 1,439
======= ======= ======= ======= =======
SELECTED FINANCIAL RATIOS AND
OTHER DATA(3)
Return on average assets(4).. 3.17% 2.81% 2.12% 1.88% 1.50%
Return on average equity(5).. 19.90 17.67 15.29 15.29 12.97
Interest rate spread
Average yield(6)............ 13.35 12.11 10.99 10.20 10.61
Average cost of funds(7).... 8.58 7.44 6.09 7.00 8.26
Spread(8)................... 4.77 4.67 4.90 3.20 2.35
Other income to average as-
sets........................ 0.58 0.91 0.69 0.59 0.47
Non-interest expense to aver-
age assets.................. 3.34 3.97 3.92 3.05 2.73
Weighted average assets...... $67,238 $69,401 $78,921 $88,414 $96,189
Weighted average invest-
ments(9).................... 65,943 65,673 75,790 86,496 92,433
Weighted average equity...... 10,696 11,019 10,931 10,855 11,094
Weighted average debt........ 48,230 47,160 60,160 67,955 73,063
<CAPTION>
DECEMBER 31,(3)
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a
percentage of investments... 73.0% 81.0% 81.0% 72.4% 68.4%
Commercial Installment Loans
as a percentage of
investments................. 27.0 19.0 19.0 27.6 31.6
Investments to assets........ 94.6 93.8 96.4 96.7 96.3
Equity to assets............. 16.9 15.0 12.9 11.8 17.4
Debt to equity(10)........... 218 259 315 356 464
SBA debt to total debt....... 28.3 23.8 19.8 17.5 --
<CAPTION>
DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Investments
Medallion Loans............. $45,642 $56,460 $66,437 $65,424 $66,338
Commercial Installment
Loans...................... 16,922 13,325 15,577 24,918 30,619
Unrealized depreciation of
investments(11)............. (900) (775) (828) (770) (910)
------- ------- ------- ------- -------
Investments, net of
unrealized depreciation of
investments................. 61,664 69,010 81,186 89,572 96,047
Total assets................. 65,199 73,603 84,239 92,590 99,788
Notes payable................ 31,700 40,000 50,700 59,025 80,295
Subordinated SBA debentures.. 12,500 12,500 12,500 12,500 --
Total liabilities............ 44,954 53,341 64,171 72,480 82,474
Minority interest............ 9,234 9,234 9,234 9,234 --
Total shareholders' equity... 11,011 11,027 10,834 10,876 17,314
</TABLE>

29
<PAGE>

MEDIA(1)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Advertising revenue................................... $227,756 $1,542,013
Cost of services...................................... 83,341 483,721
-------- ----------
Gross margin.......................................... 144,415 1,058,292
Other operating expenses.............................. 126,036 829,293
-------- ----------
Income before taxes................................... 18,379 228,999
Income taxes.......................................... -- 103,043
-------- ----------
Net income............................................ $ 18,379 $ 125,956
======== ==========
</TABLE>
- ----------
(1) Equity in earnings of unconsolidated subsidiary represents the net income
for the period earned by Tri-Magna from its investment in Media. Although
Tri-Magna owns 100% of Media, under the 1940 Act Media is not permitted
to be consolidated with Tri-Magna because Tri-Magna is an investment
company and Media is not.
(2) Change in unrealized depreciation of investments represents the
(increase) decrease for the period in the unrealized depreciation applied
against Tri-Magna's investments to state them at fair value.
(3) Unaudited.
(4) Return on average assets is calculated as the net increase in net assets
resulting from operations divided by the weighted average assets for the
period.
(5) Return on average equity is calculated as the net increase in net assets
resulting from operations divided by the weighted average equity for the
period.
(6) Average yield is calculated as gross investment income for the period
divided by the weighted average investments for the period.
(7) Average cost of funds is calculated as interest expense for the period
divided by the weighted average debt for the period.
(8) Spread is calculated as the difference between average yield and average
cost of funds.
(9) Investments consists of the Tri-Magna's loan portfolio and excludes cash
and cash equivalents and Tri-Magna's investment in Media.
(10) Debt to equity is defined as total debt divided by total shareholders
equity and minority interest.
(11) Upon completion of the Acquisitions, Tri-Magna's loan portfolio will be
recorded on the balance sheet at fair market value as estimated by Tri-
Magna in accordance with the 1940 Act and the purchase method of
accounting.

30
<PAGE>

EDWARDS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Investment income............. $ 5,535 $ 5,444 $ 4,955 $ 4,334 $ 4,317
Interest expense.............. 3,258 2,873 2,741 2,765 2,748
------- ------- ------- ------- -------
Net interest income........... 2,277 2,571 2,214 1,569 1,569
Other income.................. 322 412 476 620 443
Total non-interest expense.... 965 1,512 1,022 1,108 885
Income tax expense............ 30 73 51 21 40
------- ------- ------- ------- -------
Net investment income......... 1,604 1,398 1,617 1,060 1,087
Realized gain (loss) on
investments, net............. (639) (13) -- -- --
------- ------- ------- ------- -------
Net increase in net assets
resulting from operations
before extraordinary items... 965 1,385 1,617 1,060 1,087
Extraordinary items(1)........ -- -- -- (526) --
------- ------- ------- ------- -------
Net increase in net assets
resulting from operations.... $ 965 $ 1,385 $ 1,617 $ 534 $ 1,087
======= ======= ======= ======= =======
SELECTED FINANCIAL RATIOS AND OTHER
DATA(2)
Return on average assets(3)... 2.27% 3.19% 3.60% 2.35% 2.42%
Return on average partners'
capital(4)................... 12.22 16.47 17.51 11.69 12.29
Interest rate spread
Average yield(5)............. 13.75 13.10 11.51 10.06 9.92
Average cost of funds(6)..... 9.41 8.14 7.97 7.97 7.96
Spread(7).................... 4.34 4.96 3.54 2.09 1.96
Other income to average as-
sets......................... 0.76 0.95 1.06 1.38 0.99
Non-interest expense to
average assets............... 2.27 3.48 2.27 2.46 1.98
Weighted average assets....... $42,501 $43,465 $44,953 $45,025 $44,829
Weighted average invest-
ments(8)..................... 40,260 41,567 43,047 43,074 43,508
Weighted average partners'
capital...................... 7,900 8,409 9,235 9,064 8,846
Weighted average debt......... 34,630 35,275 34,385 34,690 34,535
<CAPTION>
DECEMBER 31,(2)
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Medallion Loans as a
percentage of investments.... 98.0% 98.3% 98.3% 98.3% 98.6%
Commercial Installment Loans
as a percentage of
investments.................. 2.0 1.7 1.7 1.7 1.4
Investments to assets......... 95.0 96.7 97.0 97.5 97.1
Partners' capital to assets... 18.6 20.1 21.0 19.2 20.2
Debt to partners' capital(9).. 427 382 365 408 382
SBA debt to total debt........ 63.6 73.2 71.6 71.4 71.7
</TABLE>

31
<PAGE>

EDWARDS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Investments
Medallion Loans.............. $39,564 $42,301 $43,383 $42,740 $43,177
Commercial Installment
Loans....................... 867 719 758 747 622
Unrealized depreciation of
investments(10).............. (50) (50) (43) (20) (20)
------- ------- ------- ------- -------
Investments, net of unrealized
depreciation of investments.. 40,381 42,970 44,098 43,467 43,779
Total assets.................. 42,501 44,430 45,476 44,574 45,084
Notes payable and demand
notes........................ 12,250 9,125 9,900 10,000 9,850
Subordinated SBA debentures... 21,450 24,950 24,950 24,950 24,950
Total liabilities............. 34,601 35,511 35,926 35,998 35,967
Total partners' capital....... 7,900 8,919 9,551 8,576 9,117
</TABLE>
- ----------
(1) Edwards incurred a prepayment premium of $526,000 in connection with its
refinancing of $4.6 million and $5.1 million of subordinated SBA
debentures on June 29, 1994 and September 28, 1994, respectively.
(2) Unaudited.
(3) Return on average assets is calculated as the net increase in net assets
resulting from operations before extraordinary items divided by the
weighted average assets for the period.
(4) Return on average partners' capital is calculated as the net increase in
net assets resulting from operations before extraordinary items divided
by the weighted average partners' capital for the period.
(5) Average yield is calculated as gross investment income for the period
divided by the weighted average investments for the period.
(6) Average cost of funds is calculated as interest expense for the period
divided by the weighted average debt for the period.
(7) Spread is calculated as the difference between average yield and average
cost of funds.
(8) Investments consists of Edwards' loan portfolio and excludes cash and
cash equivalents.
(9) Debt to partners' capital is defined as total debt divided by total
partners' capital.
(10) Upon completion of the Acquisitions, Edwards' loan portfolio will be
recorded on the balance sheet at fair market value as estimated by
Edwards in accordance with the 1940 Act and the purchase method of
accounting.

32
<PAGE>

TCC

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Investment income................ $ 4,197 $ 3,944 $ 3,110 $ 2,217 $ 1,836
Interest expense................. 2,503 1,538 1,064 709 450
------- ------- ------- ------- -------
Net interest income.............. 1,694 2,406 2,046 1,508 1,386
Total non-interest expense....... 1,206 1,038 1,269 711 760
Income tax expense (benefit)(1).. -- 74 (983) 653 381
------- ------- ------- ------- -------
Net investment income, adjusted
for taxes(2).................... 488 1,294 1,760 144 245
Realized gain (loss) on
investments..................... (1,302) (646) (69) (144) (50)
Change in unrealized depreciation
of investments(3)............... (1,705) -- 232 790 335
------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from
operations...................... $(2,519) $ 648 $ 1,923 $ 790 $ 530
======= ======= ======= ======= =======
SELECTED FINANCIAL RATIOS AND
OTHER DATA(4)
Return on average assets(5)...... (7.76)% 2.46% 8.36% 3.90% 2.91%
Return on average common
equity(6)....................... (61.83) 14.73 33.84 11.22 6.74
Interest rate spread
Average yield(7)................ 13.16 15.90 15.77 13.86 13.58
Average cost of funds(8)........ 9.93 8.56 8.10 7.60 6.14
Spread(9)....................... 3.23 7.34 7.67 6.26 7.44
Non-interest expense to average
assets.......................... 3.71 3.94 5.51 3.51 4.18
Weighted average assets.......... $32,479 $26,338 $23,011 $20,260 $18,183
Weighted average
investments(10)................. 31,854 24,235 18,994 14,442 10,389
Weighted average common equity... 4,074 4,398 5,683 7,042 7,859
Weighted average debt............ 25,198 17,967 13,133 9,330 7,330
<CAPTION>
DECEMBER 31,(4)
--------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a percentage
of investments.................. 83.8% 81.6% 85.4% 80.1% 81.5%
Commercial Installment Loans as a
percentage of investments....... 16.2 18.4 14.6 19.9 18.5
Loans to assets.................. 91.7 74.4 75.6 52.8 52.6
Equity to assets................. 26.4 33.2 46.5 57.1 60.2
Debt to equity(11)............... 274 192 107 73 64
SBA debt to total debt........... 30.7 73.4 100.0 100.0 100
<CAPTION>
DECEMBER 31,
--------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Investments
Medallion Loans................. $23,368 $16,471 $15,433 $ 8,796 $ 7,988
Commercial Installment Loans.... 4,513 3,721 2,641 2,185 1,808
Unrealized depreciation of
investments(12)................. (2,000) (2,000) (1,768) (978) (642)
------- ------- ------- ------- -------
Investments, net of unrealized
depreciation of investments..... 25,881 18,192 16,306 10,003 9,154
Cash and cash equivalents........ 1,847 5,790 3,911 8,199 7,781
Total assets..................... 28,223 24,453 21,569 18,951 17,416
Notes payable and demand notes... 14,132 4,132 -- -- --
SBA debentures................... 6,265 11,405 10,730 7,930 6,730
Total liabilities................ 20,766 16,348 11,541 8,129 6,937
Total shareholders' equity....... 7,457 8,105 10,028 10,822 10,479
</TABLE>
- ----------
(1) Income tax expense (benefit) includes income tax provision (benefit) on
investment income, realized losses on investments and change in
unrealized depreciation of investments. See note (2).
(2) Net investment income has been adjusted by combining TCC's income tax
provision (benefit) in order to present TCC's financial statements on a
comparable basis to the other Founding Companies.
(3) Change in unrealized depreciation of investments represents the
(increase) decrease for the period in the unrealized depreciation applied
against TCC's investments to state them at fair value.
(4) Unaudited.
(5) Return on average assets is calculated as the net increase (decrease) in
net assets resulting from operations divided by the weighted average
assets for the period.
(6) Return on average common equity is calculated as the net increase in net
assets resulting from operations divided by the weighted average equity
for the period.
(7) Average yield is calculated as gross investment income excluding interest
income on cash and cash equivalents for the period divided by the
weighted average investments for the period.
(8) Average cost of funds is calculated as interest expense for the period
divided by the weighted average debt for the period.
(9) Spread is calculated as the difference between average yield and average
cost of funds.
(10) Investments consists of TCC's loan portfolio and excludes cash and cash
equivalents.
(11) Debt to equity is defined as total debt divided by total shareholders
equity and minority interests.
(12) Upon completion of the Acquisitions, TCC's loan portfolio will be
recorded on the balance sheet at fair market value as estimated by TCC in
accordance with the 1940 Act and the purchase method of accounting.

33
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

GENERAL

This discussion is intended to assist investors in their analysis of the
financial condition and results of operations of the Company. The information
contained in this section should be read in conjunction with the Pro Forma
Summary Financial Data and the Pro Forma and Historical Selected Financial
Data and the Financial Statements and Notes thereto appearing in this
Prospectus.

The Company's principal activity is the origination and servicing of
Medallion Loans and Commercial Installment Loans. The earnings of the Company
depend primarily on its level of net interest income, which is the difference
between interest earned on interest-earning assets consisting primarily of
Medallion Loans and Commercial Installment Loans, and the interest paid on
interest-bearing liabilities consisting primarily of credit facilities with
bank syndicates and subordinated debentures issued to or guaranteed by the
SBA. Net interest income is a function of the net interest rate spread, which
is the difference between the average yield earned on interest-earning assets
and the average interest rate paid on interest-bearing liabilities, as well as
the average balance of interest-earning assets as compared to interest-bearing
liabilities. Net interest income is affected by economic, regulatory and
competitive factors that influence interest rates, loan demand and the
availability of funding to finance the Company's lending activities. The
Company, like other financial institutions, is subject to interest rate risk
to the degree that its interest-earning assets reprice on a different basis
than its interest-bearing liabilities.

The Company's investment income is driven by the yield on Medallion Loans
and Commercial Installment Loans. The extent to which the yield of the
Company's Medallion Loan originations exceeds the Prime Rate has been in a
long-term decline. However, since December 1994 the average yield of both the
Medallion Loan and Commercial Installment Loan portfolios has slightly
increased. On a pro forma basis, weighted average portfolio yield at December
31, 1995 was 10.69% for the entire portfolio and 9.90% for the Medallion Loan
portfolio. The increase in average yield is partially the result of
stabilization in market interest rates for Medallion Loans, which began in
July 1994. Since December 1994, the average portfolio yield has increased as
older, lower interest rate loans in the portfolio have matured or been prepaid
and newer, higher interest rate loans have constituted a greater proportion of
the portfolio. From inception of its business through December 31, 1995, the
period between the origination and final payment of all Medallion Loans
originated by Tri-Magna has been estimated by the Company to be 29 months. The
Company believes that this time period varies to some extent as a function of
changes in interest rates because borrowers are more likely to exercise
prepayment rights in a decreasing interest rate environment when the interest
rate payable on the borrower's loan is high relative to prevailing interest
rates and are less likely to prepay in a rising interest rate environment.

The Company has also increased the average yield of the portfolio by
shifting the portfolio mix toward a higher percentage of Commercial
Installment Loans, which historically have had a yield of approximately 350
basis points higher than the Company's Medallion Loans and 500 to 700 basis
points higher than the prevailing Prime Rate. On a pro forma basis, Commercial
Installment Loans had a weighted average yield of 13.53% and represented 21%
of the total portfolio or $31.5 million at December 31, 1995. The Company
intends to continue to increase the percentage of Commercial Installment Loans
in the total portfolio.

The Company's interest expense is driven by the interest rate payable on the
Company's LIBOR-based short-term credit facilities with bank syndicates and,
to a lesser degree, fixed-rate, long-term subordinated debentures issued to or
guaranteed by the SBA. Recently, the Company has reduced its reliance on SBA
financing and increased the relative proportion of bank debt to total
liabilities. SBA financing can offer very attractive rates, but such financing
is restricted in its application and its availability is uncertain. In
addition, SBA

34
<PAGE>

financing subjects its recipients to limits on the amount of secured bank debt
they may incur. Accordingly, the Company plans to continue to limit its use of
SBA funding and will seek such funding only when advantageous, such as when
SBA financing rates are particularly attractive, and to fund loans that
qualify under the SBIA and SBA Regulations, through subsidiaries already
subject to SBA restrictions. The Company believes that its transition to
financing its operations primarily with short-term LIBOR-based bank debt has
generally decreased its interest expense thus far, but has also increased the
Company's exposure to the risk of increases in market interest rates. The
Company also expects that net interest income should increase because bank
debt is more available than SBA financing and will thus permit an increase in
the size of the loan portfolio. On a pro forma basis, at December 31, 1995,
short-term LIBOR-based debt constituted 67.9% of total debt.

The Company's cost of funds is primarily driven by (i) the average maturity
of debt issued by the Company, (ii) the premium to LIBOR paid by the Company
on its LIBOR-based debt, and (iii) the ratio of LIBOR-based debt to SBA
financing. The Company incurs LIBOR-based debt for terms generally ranging
from 30 to 180 days. The Company's subordinated debentures issued to or
guaranteed by the SBA typically have terms of ten years. The Company's cost of
funds reflects fluctuations in LIBOR to a greater degree than in the past
because LIBOR-based debt has come to represent a greater proportion of the
Company's debt. The Company measures its cost of funds as its aggregate
interest expense for all of its interest-bearing liabilities divided by the
face amount of such liabilities. The Company analyzes its cost of funds in
relation to the average of the monthly 90- and 180-day LIBOR (the "LIBOR
Benchmark"). At December 31, 1995, the Company's average cost of funds, e.o.p.
was 7.44%, or 187 basis points over the LIBOR Benchmark of 5.57%.

In connection with its Medallion Loan finance business, the Company also
conducts a taxicab rooftop advertising business which began operations in
November 1994. Media's revenue is affected by the number of Displays that it
owns and the occupancy rate of those Displays. At December 31, 1995, Media had
1,670 installed Displays. The Company expects that Media will continue to
expand its operations. Although Media is a wholly-owned subsidiary of the
Company, its results of operations are not consolidated with the Company
because Commission regulations prohibit the consolidation of non-investment
companies, such as Media, with investment companies, such as Medallion
Financial.

Factors which affect the Company's net assets include net realized gain/loss
on investments and change in net unrealized depreciation of investments. Net
realized gain/loss on investments is the difference between the proceeds
derived upon foreclosure of a loan and the cost basis of such loan. Change in
net unrealized depreciation of investments is the amount, if any, by which the
Company's estimate of the fair market value of its loan portfolio is below the
cost basis of the loan portfolio. Under the 1940 Act, the SBIA and SBA
Regulations, the Company's loan portfolio must be recorded at fair market
value or "marked to market." Unlike certain lending institutions, the Company
is not permitted to establish reserves for loan losses, but adjusts quarterly
the valuation of its loan portfolio to reflect the Company's estimate of the
current realizable value of the loan portfolio. Since no ready market exists
for the Company's loans, fair market value is subject to the good faith
determination of the Company. In determining such value, the Company takes
into consideration factors such as the financial condition of its borrowers,
the adequacy of its collateral and the relationships between current and
projected market rates of interest and portfolio rates of interest and
maturities. Any change in the fair value of portfolio loans as determined by
the Company is reflected in net unrealized depreciation of investments and
affects net increase in net assets resulting from operations but has no impact
on net investment income or distributable income. Upon completion of the
Acquisitions, the Company's loan portfolio will be recorded on the balance
sheet at fair market value as estimated by the Company in accordance with the
1940 Act and the purchase method of accounting.

The Company has only recently been organized and, accordingly, has no
results of operations. Simultaneously with, and as a condition to the closing
of the Offering, the Company will acquire each of the Founding Companies.
Prior to the Acquisitions, each of the Founding Companies had been operating
independently of each other, with management of the Company successfully
operating Tri-Magna since it began

35
<PAGE>

its medallion lending operations in 1979. Tri-Magna is the largest of the
three Founding Companies and is an investment company registered under the
1940 Act.

The preceding discussion under the caption "General" has been presented on a
combined basis. The following discussion, under the caption "Pro Forma Results
of Operations," presents the results of operations of the Company had the
Founding Companies been acquired and the Offering effected on January 1, 1995.
In addition, the pro forma information is based on available information and
certain assumptions and adjustments set forth in Notes 1 and 2 to the "Pro
Forma Combined Financial Statements." The Pro Forma Data are not necessarily
comparable to or indicative of future performance. The historical financial
condition and results of operations of each of Tri-Magna, Edwards and TCC are
then discussed. Discussions of asset/liability management and liquidity and
capital resources of the Company on a combined basis then follow.

PRO FORMA RESULTS OF OPERATIONS

Performance Summary. Investment income increased in each of the last three
quarters of 1995 due to improved average yield, e.o.p. and the increased size
of the loan portfolio. Although interest expense rose in the fourth quarter
due to increased debt outstanding and increased commitment fees, interest
expense declined in the second and third quarters. As a result of these
favorable factors in investment income and interest expense, net interest
income, net investment income and net increase in net assets resulting from
operations all increased in each of the last three quarters of 1995. Although
the long term trend of year to year declines in net increase in net assets
resulting from operations continued through 1995, the Company believes that
the quarter to quarter increases in 1995 pro forma quarterly results indicate
the beginning of a change in this trend and that this change will be enhanced
through the consolidation of the Founding Companies.

Investment Income. Investment income increased in each of the last three
quarters of 1995 due to improved average yield, e.o.p. and the increased size
of the loan portfolio. On a pro forma basis, average yield, e.o.p. as of
December 31, 1995 was 10.69%. The increase in average yield, e.o.p. was caused
by both (i) a shift in the portfolio mix toward a higher percentage of
Commercial Installment Loans which represented approximately 21% of the loan
portfolio on a pro forma basis at December 31, 1995 and historically have been
originated at a yield of approximately 350 basis points higher than Medallion
Loans and 500 to 700 basis points higher than the prevailing Prime Rate and
(ii) a slight increase in the average yield on Medallion Loans.

Interest Expense. The Company's average cost of funds, e.o.p. was 7.44% at
December 31, 1995. This reflected a LIBOR Benchmark decline of 93 basis points
during 1995. Interest expense declined in the second and the third quarters of
1995 as a result of (i) the decline in the LIBOR Benchmark, and (ii) a 38
basis point decrease in the spread over LIBOR charged by the Company's banks.
In the fourth quarter, however, interest expense rose due to increased
outstanding debt and the commitment fees paid to banks to establish a larger
credit facility.

Net Interest Income. Net interest income increased 5.6% from the first
quarter to the second quarter of 1995, 3.5% from the second quarter to the
third quarter of 1995, and 2.0% from the third quarter to the fourth quarter
of 1995. The Company's spread, e.o.p. was 3.25% at December 31, 1995.

Equity in Earnings of Unconsolidated Subsidiary. For the year ended December
31, 1995, Media generated advertising revenue of $1.5 million and incurred
Display rental costs of $484,000, resulting in a gross margin of $1.0 million
or 68.6% of advertising revenue. For the year ended December 31, 1995, Media
generated $126,000 in net income which is recorded as equity in earnings of
unconsolidated subsidiary on the Company's pro forma combined statement of
operations and represented 2.4% of the Company's net investment income on a
pro forma basis.

Other Income. The Company derived $889,000 in other income, or 0.60% of
investments for the year ended December 31, 1995, consisting of prepayment
fees, servicing income, and, to a lesser extent, late charges. Prepayment fees
are heavily influenced by the level and volatility of interest rates and
competition.

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Accretion of Negative Goodwill. Accretion of negative goodwill relates to
$2.9 million of negative goodwill generated in the acquisition of Tri-Magna.

Operating Expenses. The Company had operating expenses of $3.9 million for
the year ended December 31, 1995. Approximately $1.7 million or 43.6% of
operating expenses was related to salaries and benefits. Additionally,
$716,000 and $1.4 million were due to professional fees and other operating
expenses, respectively. The operating expense ratio was 2.40% at December 31,
1995. The Company believes that it will further reduce operating expenses by
consolidating the operations of the Founding Companies. Furthermore, the
Company expects that operating expenses as a percentage of average assets will
decline as the loan portfolio increases due to economies of scale.

Amortization of Goodwill. The amortization of goodwill of $420,000 for the
year ended December 31, 1995 relates to $6.3 million of goodwill generated in
the acquisitions of Edwards and TCC. Goodwill is the amount by which the cost
of acquired businesses exceeds the fair value of the net assets acquired.

Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. The Company experienced a net realized gain on
investments of $11,000 and a decrease in unrealized depreciation of $195,000
or 0.13% of the loan portfolio.

Net Investment Income. Net investment income increased 11.4% from the first
quarter to the second quarter, 0.3% from the second quarter to the third
quarter, and 11.2% from the third quarter to the fourth quarter due to
improved portfolio yields and the increased size of the loan portfolio.

Net Increase in Net Assets Resulting from Operations. Net increase in net
assets resulting from operations increased 14.2% from the first quarter to the
second quarter, 6.5% from the second quarter to the third quarter, and 5.6%
from the third quarter to the fourth quarter. Return on assets and return on
equity were 3.39% and 10.96%, respectively, at December 31, 1995.

TRI-MAGNA HISTORICAL RESULTS OF OPERATIONS

Comparison of the Historical Years Ended December 31, 1994 and December 31,
1995

Net Interest Income. Net interest income decreased $295,000 or 7.3% from
$4.1 million for the year ended December 31, 1994 to $3.8 million for the year
ended December 31, 1995. The interest rate spread of 3.20% for the year ended
December 31, 1994 decreased 85 basis points to 2.35% for the year ended
December 31, 1995. This decrease reflected a 126 basis point increase in the
average cost of funds offset by a 41 basis point increase in the average yield
of the portfolio during the period. Tri-Magna's investment income increased
$983,000 or 11.1% from $8.8 million for the year ended December 31, 1994 to
$9.8 million for the year ended December 31, 1995. The increase in investment
income was the result of portfolio growth of $5.9 million or 6.8% from an
average of $86.5 million for the year ended December 31, 1994 to an average of
$92.4 million for the year ended December 31, 1995. The increase in investment
income was also the result of an increase in the average yield of the
portfolio which increased 41 basis points from 10.20% for the year ended
December 31, 1994 to 10.61% for the year ended December 31, 1995. Commercial
Installment Loans represented approximately 27.6% of the gross loan portfolio
at December 31, 1994 and 31.6% at December 31, 1995.

The increase in average yield was caused by both (i) a shift in the
portfolio mix toward a higher percentage of Commercial Installment Loans which
historically have had a yield of approximately 350 basis points higher than
Medallion Loans and (ii) an increase in the average interest rate on Medallion
Loans.

Tri-Magna's interest expense increased $1.2 million, or 26.9%, from $4.8
million for the year ended December 31, 1994 to $6.0 million for the year
ended December 31, 1995. The increase was in part the result of increased
average net borrowings of $5.1 million or 7.5% from $68.0 million for the year
ended December 31,

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<PAGE>

1994 to $73.1 million for the year ended December 31, 1995. The increased
borrowings were incurred to fund portfolio growth. Interest expense also
increased as the result of a 124 basis point increase in the average cost of
funds during the period from an average of 7.00% for the year ended December
31, 1994 to 8.26% for the year ended December 31, 1995. Tri-Magna's 126 basis
point increase in average cost of funds was driven by a 118 basis point
increase in the LIBOR Benchmark and an 8 basis point increase in the
difference between cost of funds and the LIBOR Benchmark. At December 31, 1994
and 1995, short-term LIBOR-based debt constituted 78.7% and 91.0%,
respectively, of total liabilities. Tri-Magna negotiated an increase in the
amount available under its credit facilities from $65.0 million to $85.0
million to repay $12.5 million in subordinated SBA debentures, repurchase
preferred stock from the SBA and fund portfolio growth.

Equity in Earnings of Unconsolidated Subsidiary. For the year ended December
31, 1995, Media generated advertising revenue of $1.5 million and incurred
Display rental costs of $484,000, resulting in a gross margin of $1.0 million
or 68.6% of advertising revenue. For the year ended December 31, 1995, Media
generated $126,000 in net income which is recorded as equity in earnings of
unconsolidated subsidiary on Tri-Magna's statement of operations and
represented 8.3% of Tri-Magna's net investment income. Media began active
operations in November 1994; accordingly, there were no corresponding
operating data for the year ended December 31, 1994. At December 31, 1995,
Media had 1,670 Displays.

Other Income. Tri-Magna's other income decreased $73,000 or 14.1% from
$519,000 for the year ended December 31, 1994 to $446,000 for the year ended
December 31, 1995. This decrease was primarily caused by the receipt of fewer
prepayment fees due to an increase in market rates for Medallion Loans
resulting in decreased refinancing activity.

Non-interest Expense. Tri-Magna's non-interest expense decreased $85,000 or
3.1% from $2.7 million for the year ended December 31, 1994 to $2.6 million
for the year ended December 31, 1995. The decrease was primarily due to
reduction in profit sharing payments.

Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. For the year ended December 31, 1995, Tri-Magna
had a realized gain on investments of $61,000 as compared to a $22,000 loss on
investments for the year ended December 31, 1994. Tri-Magna's change in net
unrealized depreciation of investments increased $198,000 or 341.4% from
$58,000 at December 31, 1994 to negative $140,000 at September 30, 1995 due to
the potential loan loss exposure associated with the increased proportion of
Commercial Installment Loans in the loan portfolio and overall portfolio
growth.

Comparison of the Historical Years Ended December 31, 1993 and December 31,
1994

Net Interest Income. Net interest income decreased $608,000 or 12.9% from
$4.7 million for the year ended December 31, 1993 to $4.1 million for the year
ended December 31, 1994. The interest rate spread of 4.90% for the year ended
December 31, 1993 decreased 170 basis points to 3.20% for the year ended
December 31, 1994. This decrease reflected a 79 basis point decrease in the
average yield of the loan portfolio and a 91 basis point increase in the
average cost of funds over the year. Tri-Magna's investment income increased
$487,000 or 5.9% from $8.3 million for the year ended December 31, 1993 to
$8.8 million for the year ended December 31, 1994. The increase in investment
income was the result of portfolio growth of $10.7 million or 14.1% from an
average of $75.8 million for the year ended December 31, 1993 to an average of
$86.5 million for the year ended December 31, 1994. Loan portfolio growth was
offset by a decrease in the average yield of the portfolio of 79 basis points
from 10.99% for the year ended December 31, 1993 to 10.20% for the year ended
December 31, 1994. The decrease in average yield of the portfolio represented
the continuation of a long-term trend which has been primarily caused by
competition in the Medallion Loan origination market.

Tri-Magna's interest expense increased $1.1 million or 29.7% from $3.7
million for the year ended December 31, 1993 to $4.8 million for the year
ended December 31, 1994. The increase was the result of increased average net
borrowings of $7.8 million or 13.0% from $60.2 million for the year ended
December 31, 1993 to $68.0 million for the year ended December 31, 1994. The
increased borrowings were incurred to fund

38
<PAGE>

loan portfolio growth. Interest expense also increased as the result of a 91
basis point increase in the average cost of funds during the period from an
average of 6.09% for the year ended December 31, 1993 to 7.00% for the year
ended December 31, 1994. Tri-Magna's 91 basis point increase in average cost
of funds was driven by a 331 basis point increase in the LIBOR Benchmark
offset by a 240 basis point decrease in the difference between cost of funds
and the LIBOR Benchmark. The decrease in the difference between cost of funds
and the LIBOR Benchmark was primarily the result of a decrease in the average
maturity of Tri-Magna's LIBOR debt and an increase in the ratio of LIBOR-based
debt to SBA financing. LIBOR-based borrowings represented approximately 78.7%
of Tri-Magna's total liabilities at December 31, 1994 and 75.9% at December
31, 1993.

Equity in Earnings of Unconsolidated Subsidiary. For the period ended
December 31, 1994, Media generated advertising revenue of $228,000 and
incurred Display rental costs of $83,000, resulting in a gross margin of
$144,000 or 63.2% of advertising revenue. For the period ended December 31,
1994, Media generated $18,000 in net income which is recorded as equity in
earnings of unconsolidated subsidiary on Tri-Magna's statement of operations
and represented 1.1% of Tri-Magna's net investment income. Media began active
operations in November 1994; accordingly, there were no corresponding
operating data for the year ended December 31, 1993.

Other Income. Tri-Magna's other income decreased $22,000 or 4.1% from
$541,000 for the year ended December 31, 1993 to $519,000 for the year ended
December 31, 1994.

Non-interest Expense. Tri-Magna's non-interest expense decreased $397,000 or
12.8% from $3.1 million for the year ended December 31, 1993 to $2.7 million
for the year ended December 31, 1994. The decrease was due to a decrease in
salaries and benefits related to a reduction of senior executive bonuses and
profit sharing plan contributions.

Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. For the year ended December 31, 1994, Tri-Magna
had a net realized loss on investments of $22,000 compared to a net realized
loss on investments of $115,000 for the year ended December 31, 1993. The 1993
net loss on investments reflected the write-off of the last radio car loans in
Tri-Magna's portfolio. Tri-Magna no longer originates radio car loans. Tri-
Magna's change in net unrealized depreciation of investments decreased
$111,000 or 209.4% from negative $53,000 at December 31, 1993 to $58,000 at
December 31, 1994, due to the reduced potential loan loss exposure associated
with the write-off of the last radio car loans.

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<PAGE>

EDWARDS HISTORICAL RESULTS OF OPERATIONS

Comparison of the Historical Years Ended December 31, 1994 and December 31,
1995

Net Interest Income. Net interest income remained essentially unchanged at
$1.6 million for the years ended December 31, 1995 and December 31, 1994. The
interest rate spread of 2.09% for the year ended December 31, 1994 decreased
13 basis points to 1.96% for the year ended December 31, 1995. The decrease
reflected a 14 basis point decrease in the average yield of the loan portfolio
and a 1 basis point decrease in the average cost of funds during the period.
Edwards' investment income decreased $17,000 or 0.4% to $4.3 million for the
year ended December 31, 1995. The decrease in investment income was the result
of the decrease in the average yield of the portfolio which decreased 14 basis
points from 10.06% for the year ended December 31, 1994 to 9.92% for the year
ended December 31, 1995. The decrease in investment income was offset by
portfolio growth of $434,000 or 1.0% from an average of $43.1 million for the
year ended December 31, 1994 to an average of $43.5 million for the year ended
December 31, 1995.

Edwards' interest expense decreased $17,000 or 0.6% to $2.7 million for the
year ended December 31, 1995. The decrease in interest expense reflected a 1
basis point decrease in the average cost of funds during the period from an
average of 7.97% for the year ended December 31, 1994 to 7.96% for the year
ended December 31, 1995. The decrease was a result of the refinancings in June
1994 of $4.6 million and September 1994 of $5.1 million of subordinated SBA
debentures at a lower interest rate and a decrease in average net borrowing of
$155,000 or 0.5% from $34.7 million for the year ended December 31, 1994 to
$34.5 million for the year ended December 31, 1995. The foregoing were offset
by an increase in interest rates on bank debt. Edwards' 1 basis point decrease
in average cost of funds was driven by a 118 basis point increase in the LIBOR
Benchmark and a 119 basis point decrease in the difference between cost of
funds and the LIBOR Benchmark. The decrease in the difference between cost of
funds and the LIBOR Benchmark was primarily the result of a reduction in the
weighted average interest rate paid on subordinated SBA debentures caused by
the refinancing of $9.7 million of such debentures. Subordinated SBA
debentures represented 69.4% of total liabilities at December 31, 1994 and
remained almost unchanged at December 31, 1995. The balance of total
liabilities is represented primarily by LIBOR-based credit facilities with
banks.

Other Income. Edwards' other income decreased $177,000 or 28.5% from
$620,000 for the year ended December 31, 1994 to $443,000 for the year ended
December 31, 1995. This decrease was primarily the result of decreased income
from servicing Medallion Loan participations. Gross loans serviced by Edwards
for third parties declined by $4.5 million from $44.3 million at December 31,
1994 to $39.8 million at December 31, 1995. Edwards typically receives
servicing fees which average 51 basis points of the principal amount of each
loan participation that it services. Other income also decreased because of a
reduction in the receipt of prepayment fees and late charges.

Non-interest Expense. Edwards' non-interest expense decreased $223,000 or
20.1% from $1.1 million for the year ended December 31, 1994 to $885,000 for
the year ended December 31, 1995. The reduction was primarily related to
decreased professional fees which were higher in 1994 primarily because of
costs associated with refinancing subordinated debentures.

Net Realized Gain/Loss on Investments. During the year ended December 31,
1994 and 1995 Edwards did not incur any realized gains or losses on
investments because Edwards' portfolio consists almost entirely of Medallion
Loans.

Extraordinary Item. Edwards incurred a prepayment premium of $526,000 in
connection with its refinancing of $4.6 million and $5.1 million of
subordinated SBA debentures on June 29, 1994 and September 28, 1994,
respectively.

Comparison of the Historical Years Ended December 31, 1993 and December 31,
1994

Net Interest Income. Net interest income decreased $645,000, or 29.3% from
$2.2 million for the year ended December 31, 1993 to $1.6 million for the year
ended December 31, 1994. The interest rate spread of

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<PAGE>

3.54% for the year ended December 31, 1993 decreased 145 basis points to 2.09%
for the year ended December 31, 1994, due entirely to a decrease in average
yield of the portfolio. The decrease reflected a 145 basis point decrease in
the average yield of the portfolio and no change in the average cost of funds
during the period. Edwards' investment income decreased $620,000 or 12.4% from
$4.9 million for the year ended December 31, 1993 to $4.3 million for the year
ended December 31, 1994. The decrease in investment income was the result of a
decrease in the average yield of the portfolio which decreased 145 basis
points from 11.51% for the year ended December 31, 1993 to 10.06% for the year
ended December 31, 1994. The decrease in average yield of the portfolio
represented the continuation of a long-term trend which was primarily caused
by general decreases in interest rates and competition in the Medallion Loan
origination market.

Edwards' interest expense increased $24,000 or 0.9% to $2.8 million for the
year ended December 31, 1994. The increase was the result of an increase in
interest rates on bank debt offset by the refinancing of $5.1 million of
subordinated debentures in September 1994 and $4.6 million of subordinated SBA
debentures in June 1994 at lower interest rates. In addition, Edwards incurred
increased average net borrowings of $305,000 or 0.9% from $34.4 million for
the year ended December 31, 1993 to $34.7 million for the year ended December
31, 1994. The average cost of funds during 1993 and 1994 remained unchanged at
7.97%. Stability in Edwards' average cost of funds was the result of a 331
basis point increase in the LIBOR Benchmark and a 331 basis point decrease in
the difference between cost of funds and the LIBOR Benchmark. The decrease in
the difference between cost of funds and the LIBOR Benchmark was primarily the
result of a reduction in the weighted average interest rate paid on
subordinated SBA debentures caused by the partial year effect of the
refinancing of $9.7 million of such debentures. Subordinated SBA debentures
represented 69.4% of total liabilities at December 31, 1993 and remained
almost unchanged at December 31, 1994. The balance of total liabilities is
primarily represented by LIBOR-based credit facilities with banks.

Other Income. Edwards' other income increased $144,000 or 30.3% from
$476,000 for the year ended December 31, 1993 to $620,000 for the year ended
December 31, 1994. This increase was the result of increased income from
servicing Medallion Loan participations. Gross loans serviced by Edwards for
third parties increased $9.3 million from $35.0 million at December 31, 1993
to $44.3 million at December 31, 1994. Edwards typically receives servicing
fees which average 51 basis points of the principal amount of each loan
participation that it services. Other income also increased because of an
increase in the receipt of prepayment fees and late charges.

Non-interest Expense. Edwards non-interest expense increased $86,000 or 8.6%
from $1.0 million for the year ended December 31, 1993 to $1.1 million for the
year ended December 31, 1994. The increase is primarily related to increased
professional fees which were higher in 1994 because of costs associated with
the refinancing of subordinated debentures.

Net Realized Gain/Loss on Investments. During the year ended December 31,
1994, Edwards did not incur any realized gains or losses on investments
because Edwards' portfolio consists almost entirely of Medallion Loans.

TCC HISTORICAL RESULTS OF OPERATIONS

Comparison of the Historical Years Ended December 31, 1994 and December 31,
1995

Net Interest Income. Net interest income decreased $122,000 or 8.1% from
$1.5 million for the year ended December 31, 1994 to $1.4 million for the year
ended December 31, 1995. The decrease was primarily due to loan portfolio
contraction in the amount of $1.2 million undertaken in connection with a
change in investment

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<PAGE>

policy instituted by Leucadia in 1993. Under this change in policy TCC
substantially reduced Medallion Loan originations in New York City where
competition had decreased yields, and emphasized originations in Boston,
Cambridge, Chicago and Newark where yields were higher. The interest rate
spread of 6.26% for the year ended December 31, 1994 increased 118 basis
points to 7.44% for the year ended December 31, 1995. This spread increase
reflected primarily a reduction in higher interest rate subordinated SBA
debentures, resulting in a 146 basis point decrease in the average cost of
funds for the period offset by a 28 basis point decrease in the average yield
of the portfolio. TCC finances its portfolio with fixed-rate subordinated SBA
debentures rather than LIBOR-based bank debt. TCC's investment income
decreased $381,000 or 17.2% from $2.2 million for the year ended December 31,
1994 to $1.8 million for the year ended December 31, 1995. The decrease in
investment income was the result of a $591,000 or 29.5% decrease in interest
earned on the loan portfolio which contracted $4.0 million or 27.8% from an
average of $14.4 million for the year ended December 31, 1994 to an average of
$10.4 million for the year ended December 31, 1995. In addition, the average
yield of the portfolio decreased 28 basis points from 13.86% for the year
ended December 31, 1994 to 13.58% for the year ended December 31, 1995. The
decrease in interest earned on the loan portfolio was offset by a $210,000 or
97.7% increase in interest income earned on treasury bills from $215,000 at
December 31, 1994 to $425,000 at December 31, 1995 attributable to an increase
in the weighted average interest rate on treasury bills which increased 156
basis points from 3.96% at December 31, 1994 to 5.52% at December 31, 1995.

TCC's interest expense decreased $259,000 or 36.5% from $709,000 for the
year ended December 31, 1994 to $450,000 for the year ended December 31, 1995.
The decrease was in part the result of a decrease in average net borrowing of
$2.0 million or 21.4% from $9.3 million for the year ended December 31, 1994
to $7.3 million for the year ended December 31, 1995. This decrease was caused
by the repayment of subordinated SBA debentures in the amount of $1.2 million.
TCC repaid subordinated SBA debentures with higher average interest rates than
the debentures remaining outstanding; accordingly, interest expense also
decreased as the result of a 146 basis point decrease in the average cost of
subordinated SBA debentures outstanding from an average of 7.60% at December
31, 1994 to 6.14% at December 31, 1995.

Non-interest Expense. TCC's non-interest expense increased $49,000 or 6.9%
from $711,000 for the year ended December 31, 1994 to $760,000 for the year
ended December 31, 1995. The increase was primarily due to a $124,000 increase
in pension expense. In 1994, pension expense was reduced due to the merger of
the defined benefit pension plans of TCC and Leucadia. The increase in pension
expense was offset by a $75,000 reduction in operating expenses relating to a
reduction in rent and salaries associated with the contraction of the loan
portfolio.

Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. TCC realized a loss on investments of $50,000 for
the year ended December 31, 1995, and a $144,000 loss on investments for the
year ended December 31, 1994. TCC's change in unrealized depreciation of
investments decreased $455,000 or 57.6% from $790,000 at December 31, 1994 to
$335,000 at December 31, 1995 due to the reduction of potential loan loss
exposure corresponding to the contraction of the loan portfolio.

Comparison of the Historical Years Ended December 31, 1993 and December 31,
1994

Net Interest Income. Net interest income decreased $538,000 or 26.9% from
$2.0 million for the year ended December 31, 1993 to $1.5 million for the year
ended December 31, 1994. These effects were in large part a result of
Leucadia's change in investment policy. The interest rate spread of 7.67% for
the year ended December 31, 1993 decreased 141 basis points to 6.26% for the
year ended December 31, 1994. This decrease reflected a 191 basis point
decrease in the average yield of the portfolio offset by a 50 basis point
decrease in the average cost of funds for the year. TCC finances its portfolio
with fixed-rate subordinated SBA debentures rather than LIBOR-based bank debt.
TCC's investment income contracted $893,000 or 28.8% from $3.1 million for the
year ended December 31, 1993 to $2.2 million for the year ended December 31,
1994. The decrease in investment income was the result of a $994,000 or 33.2%
decrease in interest earned on the loan portfolio which contracted $4.6
million or 24.2% from an average of $19.0 million for the year ended December
31, 1993 to an average of $14.4 million for the year ended December 31, 1994.
In addition, the average yield of the portfolio

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<PAGE>

decreased 191 basis points from 15.77% for the year ended December 31, 1993 to
13.86% for the year ended December 31, 1994 reflecting the repayment of higher
rate loans and the resulting increased proportion of lower rate loans in the
portfolio. The decrease in interest earned on the loan portfolio was offset by
a $101,000 or 88.6% increase in interest income on treasury bills from
$114,000 at December 31, 1993 to $215,000 at December 31, 1994 attributable to
an increase in the weighted average interest rate earned on treasury bills
which increased 113 basis points from 2.83% at December 31, 1993 to 3.96% at
December 31, 1994.

TCC's interest expense decreased $355,000 or 32.3% from $1.1 million for the
year ended December 31, 1993 to $709,000 for the year ended December 31, 1994.
The decrease was in part the result of a decrease in average net borrowing of
$3.8 million or 29.0% from $13.1 million for the year ended December 31, 1993
to $9.3 million for the year ended December 31, 1994. This decrease was caused
by the repayment of subordinated SBA debentures in the amount of $2.8 million.
TCC repaid subordinated SBA debentures with higher average interest rates than
the debentures remaining outstanding; accordingly, interest expense also
decreased as the result of a 50 basis point decrease in the average cost of
subordinated SBA debentures outstanding from an average of 8.10% at December
31, 1993 to 7.60% at December 31, 1994.

Non-interest Expense. TCC's non-interest expense decreased $558,000 or 42.9%
from $1.3 million for the year ended December 31, 1993 to $711,000 for the
year ended December 31, 1994. The decrease was primarily due to a $363,000
reduction in legal and accounting fees which were higher in 1993 principally
due to costs related to non-recurring litigation and filings with the
Commission, a $113,000 reduction in pension expense related to the merger of
TCC's defined benefit plan into Leucadia's defined benefit plan and a $57,000
reduction in rent expense.

Income Tax Expense. A $1.6 million increase in provision for income taxes
for the year ended December 31, 1994 was primarily due to the effect of the
change in tax status of TCC beginning in July 1, 1993 from a non-taxable RIC
to a taxable corporation.

Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. TCC realized a loss on investments of $69,000 for
the year ended December 31, 1993, and a $144,000 loss on investments for the
year ended December 31, 1994. TCC's change in unrealized depreciation of
investments increased $558,000 or 240.5% from $232,000 at December 31, 1993 to
$790,000 at December 31, 1994 due to the reduction of potential loan loss
exposure corresponding to the contraction of the loan portfolio.

ASSET/LIABILITY MANAGEMENT

Interest Rate Sensitivity. Financial institutions such as the Company are
subject to interest rate risk to the extent their interest-earning assets
(consisting of Medallion Loans and Commercial Installment Loans) reprice on a
different basis over time in comparison to their interest-bearing liabilities
(consisting primarily of credit facilities with bank syndicates and
subordinated SBA debentures).

A relative measure of interest rate risk can be derived from the Company's
interest rate sensitivity gap. The interest rate sensitivity gap represents
the difference between interest-earning assets and interest-bearing
liabilities which mature and/or reprice within specified intervals of time.
The gap is considered to be positive when repriceable assets exceed
repriceable liabilities and negative when the inverse situation exists. A
relative measure of interest rate sensitivity is provided by the cumulative
difference between interest sensitive assets and interest sensitive
liabilities for a given time interval expressed as a percentage of total
assets.

The following schedule of principal payments sets forth at December 31, 1995
the amount of interest-earning assets and interest-bearing liabilities
maturing or repricing within the time periods indicated. The principal amount
of Medallion Loans and Commercial Installment Loans are assigned to the time
frames in which such principal amounts are contractually obligated to be paid.
The Company has not reflected an assumed annual prepayment rate for Medallion
Loans or Commercial Installment Loans in this table.

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The Company's interest rate sensitive assets were $159.5 million and
interest rate sensitive liabilities were $121.8 million at December 31, 1995.
The one year cumulative interest rate gap was negative $63.8 million, or 40.0%
of interest rate sensitive assets.

SCHEDULE OF PRINCIPAL PAYMENTS AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
MORE THAN 1 MORE THAN 2 MORE THAN 3 MORE THAN 5
LESS THAN AND LESS THAN AND LESS THAN AND LESS THAN AND LESS THAN
1 YEAR 2 YEARS 3 YEARS 5 YEARS 10 YEARS TOTAL
--------- ------------- ------------- ------------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Medallion Loans and
Commercial Installment
Loans................. $ 17,709 $ 23,324 $ 26,740 $53,875 $28,904 $150,552
Cash and cash equiva-
lents 8,960 -- -- -- -- 8,960
-------- -------- -------- ------- ------- --------
Total.................. 26,669 23,324 26,740 53,875 28,904 159,512
-------- -------- -------- ------- ------- ========
Liabilities
Revolving line of cred-
it.................... 84,913 -- -- -- -- 84,913
Term loan.............. 3,232 2,000 -- -- -- 5,232
Subordinated SBA deben-
tures................. 2,290 1,500 3,000 -- 24,890 31,680
-------- -------- -------- ------- ------- --------
Total.................. 90,435 3,500 3,000 -- 24,890 $121,825
-------- -------- -------- ------- ------- ========
Interest rate gap....... $(63,766) $ 19,824 $ 23,740 $53,875 $ 4,014
======== ======== ======== ======= =======
Cumulative interest rate
gap.................... $(63,766) $(43,942) $(20,202) $33,673 $37,687
</TABLE>

Having interest-bearing liabilities that mature or reprice more frequently
on average than assets may be beneficial in times of declining interest rates,
although such an asset/liability structure may result in declining net
earnings during periods of rising interest rates. Conversely, having interest-
earning assets that mature or reprice more frequently on average than
liabilities may be beneficial in times of rising interest rates, although this
asset/liability structure may result in declining net earnings during periods
of falling interest rates. The mismatch between maturities and interest rate
sensitivities of the Company's interest-earning assets and interest-bearing
liabilities results in interest rate risk. Abrupt increases in market rates of
interest may have an adverse impact on the Company's earnings.

The effect of changes in market rates of interest is mitigated by regular
turnover of the portfolio. From inception of its business through December 31,
1995, the period between the origination and final payment of all Medallion
Loans originated by Tri-Magna is estimated by the Company to have been 29
months on a weighted average basis. Accordingly, the Company anticipates that
approximately 40% of the portfolio will mature or be prepaid each year. The
Company believes that the average life of its loan portfolio varies to some
extent as a function of changes in interest rates because borrowers are more
likely to exercise prepayment rights in a decreasing interest rate environment
when the interest rate payable on the borrower's loan is high relative to
prevailing interest rates and are less likely to prepay in a rising interest
rate environment.

The Company seeks to manage the exposure of the balance of the portfolio to
increases in market interest rates by entering into interest rate cap
agreements to hedge a portion of its variable-rate debt against increases in
interest rates and by incurring fixed-rate debt. The Company has entered into
interest rate cap agreements to limit the Company's interest rate exposure to
7.5% on $20.0 million of its LIBOR-based debt through April 7, 1997 and to
7.0% on an additional $20.0 million of its LIBOR-based debt through November
16, 1997. The preceding schedule of principal payments table does not account
for the effect of the Company's interest rate cap agreements. The Company will
seek to manage interest rate risk by evaluating and purchasing, if
appropriate, additional derivatives, originating adjustable-rate loans and
revising, if appropriate, its overall level of asset and liability matching.
Nevertheless, the Company accepts varying degrees of interest rate risk
depending on market conditions and believes that the resulting asset/liability
interest rate mismatch results in opportunities for higher net interest
income.

44
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's sources of liquidity are credit facilities with bank
syndicates, fixed rate, long-term subordinated SBA debentures that are issued
to or guaranteed by the SBA and loan amortization and prepayments. As a RIC,
the Company distributes at least 90% of its investment company taxable income;
consequently, the Company primarily relies upon external sources of funds to
finance growth. At December 31, 1995, 74% of the Company's $121.8 million of
debt consisted of bank debt, substantially all of which was at variable
effective rates of interest averaging below the Prime Rate and 26% consisted
of subordinated SBA debentures with fixed rates of interest with a weighted
average rate of 7.44%. The Company is eligible to seek SBA funding but plans
to continue to limit its use of SBA funding and will seek such funding only
when advantageous, such as when SBA financing rates are particularly
attractive, or to fund loans that qualify under SBA regulations through
Edwards and TCC which are already subject to SBA restrictions. In the event
that the Company seeks SBA funding, no assurance can be given that such
funding will be obtained. See "Risk Factors -- Availability of Funds." In
addition to SBA funding, an additional $5.1 million of debt was available at
December 31, 1995 at variable effective rates of interest averaging below the
Prime Rate under the Company's $95.2 million bank credit facilities. After the
Offering the Company intends to negotiate an increase in the amount available
under such facilities.

The following table illustrates each of the Founding Companies' sources of
available funds and amounts outstanding under credit facilities at December
31, 1995. The Company has only set forth funding sources which are expected to
be available to the indicated companies after the Offering and the
Acquisitions. This table does not include Media's $275,000 demand loan. In
addition to the following amounts, $10.4 million is expected to be available
to the Company from the proceeds of the Offering. See "Use of Proceeds."

<TABLE>
<CAPTION>
TRI-MAGNA MFC EDWARDS TCC TOTAL
--------- ------- ---------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equiva-
lents.................... $ 31 $ 1,146 $ -- $7,781 $ 8,958
Revolving lines of cred-
it....................... 2,000 78,000 10,000 90,000
Amounts available....... 87 4,850 150 5,087
Amounts outstanding..... 1,913 73,150 9,850 84,913
Average interest rate.. 7.59% 7.40% 7.34%
Maturity............... 8/96 9/96 6/96-9/96
Term loans................ 3,232 2,000 5,232
Interest rate........... 8.50% 7.50%
Maturity................ 5/96 7/97
SBA debentures............ 24,950 6,730 31,680
Average interest rate... 8.00% 5.38%
Maturity................ 9/96-9/04 6/02
Total cash and remaining
amounts available under
credit facilities........ 118 5,996 150 7,781 14,045
Total debt outstanding.... $5,145 $75,150 $34,800 $6,730 $121,825
</TABLE>

Loan amortization and prepayments also provide a source of funding for the
Company. Prepayments on loans are influenced significantly by general interest
rates, economic conditions and competition. Medallion Loan prepayments
accelerated throughout virtually all of 1993 and the first three months of
1994 because of the generally lower level of interest rates which prompted
significant Medallion Loan refinancing activity. However, these prepayments
have slowed since early 1994 because of increases in the level of interest
rates which have caused a decrease in Medallion Loan refinancing activity.

MFC and TCC have repurchased all of their previously issued preferred stock
from the SBA for an aggregate price of $4.4 million, representing a discount
of 65.0% from the original aggregate issuance price of $12.6 million. MFC's
repurchase of preferred stock as well as its repayment of all of its
outstanding subordinated

45
<PAGE>

debentures has resulted in the termination of SBA limits on the amount of
secured bank debt MFC can incur and a realized gain in retained earnings in
the amount of the repurchase discount which will be accreted to paid-in
capital on a straight-line basis over 60 months. After the termination of such
limit, MFC negotiated a $15.0 million increase in its revolving line of
credit.

The Company has limited its use of SBA funding and will seek such funding
only when advantageous. Over the past two years the Company has expanded its
loan portfolio, reduced its level of SBA financing and increased its level of
bank funding. At December 31, 1995, SBA financing represented 26.0% of total
debt as compared to 39.7% at December 31, 1994. The Company's bank financing
increased to $90.1 million at December 31, 1995 from $69.0 million at December
31, 1994. While bank funding often carries higher interest rates than SBA
funding, the Company believes that such higher rates will be offset by the
increased volume of funding and loan originations which should result in
increased net interest margin.

Media was initially capitalized with equity investments and now funds its
operations primarily through internal cash flow. Media is not a RIC and,
therefore, is able to retain earnings to finance growth.

The Company believes that the net proceeds of this Offering remaining after
application of such proceeds to the purchase of the Founding Companies,
application of the cash acquired in connection with the Acquisitions,
anticipated borrowings from the SBA and under its bank credit facilities and
cash flow from operations (after distributions to stockholders) will be
adequate to fund the continuing growth of the Company's loan portfolio and
advertising business through at least the end of 1996. In addition, in order
to provide the funds necessary for the Company's expansion strategy, the
Company expects to incur, from time to time, additional short- and long-term
bank and (to the extent permitted) SBA leverage, and to issue, in public or
private transactions, its equity and debt securities. The availability and
terms of any such securities will depend upon market, regulatory and other
conditions. There can be no assurance that such additional financing will be
available on terms acceptable to the Company.

46
<PAGE>

BUSINESS

GENERAL

The Company, giving effect to the Acquisitions, operates a specialty finance
business and its principal focus is the origination and servicing of Medallion
Loans. As an adjunct to its finance business, the Company also operates a
taxicab rooftop advertising business. The Company has been engaged in taxicab
medallion lending since 1979 and has developed a leading position in the
industry. The Company also originates and services Commercial Installment
Loans secured by retail dry cleaning and coin operated laundromat equipment.
It entered into this business in 1987 in order to diversify its lending
activity. The Company originates and services Commercial Installment Loans to
other targeted industries and intends to use the expertise it has developed in
its areas of concentration to further expand the range of financial products
it offers as well as the industries and geographic areas it services.

The Company believes its taxicab rooftop advertising business is one of the
largest providers in the nation of this segment of the out-of-home advertising
industry. At December 31, 1995, the Company had 1,670 installed taxicab
rooftop advertising displays. The Company sells advertising space to
advertising agencies and companies promoting products. Currently, the Company
provides such advertising in New York City, Philadelphia, Miami and Boston.
The Company also intends to expand to other major metropolitan areas and has
recently entered the Atlanta and Los Angeles markets.

BUSINESS STRATEGY

Prior to the Offering, each of the Founding Companies that was engaged in
specialty financing operated under regulatory and capital constraints imposed
under the SBIA and SBA Regulations. Certain SBA Regulations precluded these
companies from offering flexible terms often requested by customers and, in
the case of MFC and TCC, restricted their lending activities as SSBICs to
borrowers that are socially or economically disadvantaged ("Disadvantaged
Borrowers") and small business concerns that are at least 50% owned and
managed by Disadvantaged Borrowers. In addition, the size of Tri-Magna's loan
portfolio was significantly limited because the SBA restricted the amount of
bank debt that Tri-Magna could incur. See "Regulation."

As a result of the Offering and the Acquisitions, Medallion Financial will
have greater flexibility and resources to operate its specialty finance
business and its lending activities will be subject to fewer restrictions than
was the case for each of the Founding Companies operating separately.
Medallion Financial will, however, continue to focus loan originations on
specific industries and perform credit reviews and analyses as it has
historically. Specifically, the Offering and the Acquisitions will permit the
Medallion Financial to:

(i) significantly increase its debt to equity ratio to a level that is
more consistent with industry standards for finance companies;

(ii) originate loans to borrowers that are not Disadvantaged Borrowers
and, as a result, broaden its base of borrowers;

(iii) originate loans to borrowers whose intended use of proceeds is not
restricted to investment in their businesses (e.g., refinancing a
Medallion Loan where the proceeds are used to purchase a home or
finance an unrelated business);

(iv) originate loans with terms of less than four years; and

(v) explore the potential to securitize its loan portfolio and sell the
loans into the secondary market.

The Founding Companies have regularly received requests for products both
with some of these characteristics and from non-Disadvantaged Borrowers, but
in many cases have had to reject such requests due to restrictions imposed
under SBA Regulations.

47
<PAGE>

In addition to engaging in operations which are not subject to SBA
restrictions, the Company intends to initiate other strategies to expand its
lending activities as follows:

(i) develop larger Medallion Loan and Commercial Installment Loan
origination operations in cities in which it now has a presence, such
as Boston, Chicago, Cambridge, Newark, Philadelphia and Hartford as
well as continue to expand its operations in New York City, the
largest taxi medallion lending market in the U.S.;

(ii) originate larger loans, decrease the amount of loan participations
that the Company sells to third parties, and consider the repurchase
of participations that the Company previously sold to third parties;

(iii) take advantage of opportunities to acquire other medallion lenders
and portfolios of Medallion Loans as they may arise; and

(iv) continue to expand its portfolio of loans secured by retail dry
cleaning and coin operated laundromat equipment and consider lending
to other targeted industries.

The Company also intends to expand its taxicab rooftop advertising business,
which has grown rapidly over the past year. The Company believes that a
significant market opportunity exists because (i) providing taxicab rooftop
advertising is a largely unpenetrated segment of the out-of-home advertising
market and (ii) many customers that advertise nationally prefer a single
provider that can deliver the effectiveness of taxicab rooftop advertising
simultaneously in several major metropolitan markets. In addition, the Company
believes that only approximately 25% of New York City taxicabs have rooftop
advertising and a much smaller percentage of the taxicabs operating in other
major metropolitan areas nationwide have rooftop advertising.

The Company's strategy to expand its taxicab rooftop advertising business is
to penetrate each of its targeted geographic markets further by securing
additional exclusive, long-term contracts with individual and taxicab fleet
owners, expanding Display servicing and maintenance operations, adding to its
national advertising accounts, exploring opportunities to provide taxicab
interior audio and visual advertising and acquiring other taxicab rooftop
advertising businesses. In addition, the Company will seek to maximize
utilization rates by increasing the proportion of long-term advertising
contracts in its inventory. The Company currently provides advertising in New
York City, Philadelphia, Miami and Boston. The Company also intends to expand
to other major metropolitan areas and has recently entered the Atlanta and Los
Angeles markets.

GROSS LOAN PORTFOLIO SUMMARY DATA

The following table classifies, on a combined basis, the Company's loans
outstanding as of December 31, 1995:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE MATURITY BALANCE
TYPE OF LOAN OF LOANS INTEREST RATE DATE OUTSTANDING
------------ -------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
New York City Medallion Loans... 1,063 9.65% 1/96-12/15 $110,222,301
Other Medallion Loans........... 230 13.54 1/96-2/02 7,280,835
----- ------------
All Medallion Loans........... 1,293 9.90 1/96-12/15 117,503,136
Dry cleaners and laundromats.... 509 13.79 1/96-9/05 25,631,766
Other........................... 97 12.63 1/96-10/02 7,417,033
----- ------------
Total....................... 1,899 10.69% 1/96-12/15 $150,551,935
===== ============
</TABLE>

MEDALLION LENDING

Industry Overview

The New York City Market. A New York City taxicab medallion represents the
only license to operate a taxicab and accept street hails in New York City. As
reported by the TLC, individual (owner-driver) medallions

48
<PAGE>

currently sell for approximately $177,000 and corporate medallions currently
sell for approximately $208,000. According to TLC data, over the past 20
years, medallions have appreciated in value an average of 10.5% each year. The
TLC estimates that in 1993 New York City taxicabs transported approximately
226 million people and collected in excess of $1 billion in gross revenue.
Taxicabs play a prominent role in intra-Manhattan travel. According to the
TLC, taxicabs transported 154% more passengers than Manhattan buses in 1993.
In addition, taxicabs provided 34% of all intra-Manhattan passenger trips
taken in 1993 by subway, bus, livery car or taxicab. Between 1977 and 1993,
taxicab ridership for intra-Manhattan travel increased by 42%, while citywide
bus ridership declined by 40%. The Company believes that much of the
popularity of taxicabs can be attributed to the difficulty and expense
Manhattan residents encounter in maintaining a private automobile in
Manhattan.

The number of taxicab medallions is limited by law and until recently no new
medallions had been issued since 1937. However, in January 1996, the New York
City Council passed a law authorizing the city to sell up to 400 additional
taxicab medallions. The first 133 of such medallions were sold in May 1996
with the balance to be sold over the next three years. See "Risk Factors --
Taxicab Industry Regulation." As a result of the limited supply of
medallions, an active market for medallions has developed. TLC estimates
indicate that the total value of all New York City medallions exceeds $2.3
billion. The law limiting the number of medallions also stipulates that the
ownership for the 11,787 medallions outstanding prior to May 1996 shall remain
divided into 4,969 owner-driver or individual medallions and 6,818 fleet or
corporate medallions. Corporate medallions are more valuable because they can
be aggregated by businesses and leased to drivers.

Based upon TLC statistics, the Company estimates that from 1989 through 1993
the number of taxicab medallions sold each year ranged from approximately 500
to 850, divided roughly equally between corporate and individual medallions.
The purchase of a taxicab medallion is frequently financed with a loan and, in
addition, there is an active refinancing market for such loans. Assuming that
approximately 75% of the purchase price of corporate medallions and
approximately 75% of the purchase price of individual medallions are typically
financed, the dollar volume of New York City financing of medallion sales
would range from $72 million to $124 million a year. The Company believes that
the dollar volume of the refinancing market exceeds the dollar volume of
financing of medallion sales.

A prospective medallion owner must qualify under the medallion ownership
standards set and enforced by the TLC. These standards prohibit individuals
with criminal records from owning medallions, require that the funds used to
purchase medallions be derived from legitimate sources and mandate that
taxicab vehicles and meters meet TLC specifications. In addition, before the
TLC will approve a medallion transfer, the TLC requires a waiver from the
seller's insurer stating that there are no outstanding claims for personal
injuries in excess of insurance coverage. After the sale is approved, the
owner's taxicab is subject to quarterly TLC inspections.

The Boston and Cambridge Markets. The Company estimates that Boston
medallions currently sell for approximately $98,000. The number of Boston
medallions had been limited by law since 1930 to 1,525 medallions. In 1993,
however, the Massachusetts legislature authorized the Boston Hackney Carriage
Bureau, which regulates the issuance of new medallions, to issue 300
additional medallions, but the Bureau has only issued 40 additional medallions
which are restricted to "wheelchair accessible" taxicabs. The Company
estimates that the total value of all Boston medallions and related assets is
approximately $157 million. In addition, the Company estimates Cambridge
medallions currently sell for approximately $80,000. The number of Cambridge
medallions has been limited to 248 since 1945 by a Cambridge city ordinance;
accordingly, the Company estimates that the total value of all Cambridge
medallions and related assets is approximately $25 million.

The Chicago Market. Based on the Company's experience, Chicago medallions
currently sell for approximately $37,000. Pursuant to a 1988 municipal
ordinance, the number of outstanding medallions, which currently is capped at
5,500, has increased steadily from 4,600 in 1988 and will be increased to
5,700 in 1997. The ordinance has also required two major taxicab companies to
forfeit 1,300 medallions from 1988 through 1997. The newly issued and
forfeited medallions have been reissued for nominal consideration to new
owners by the city through a lottery. The Company estimates that the total
value of all Chicago medallions and related assets is approximately $250
million.

49
<PAGE>

Market Position

The Company has originated and serviced Medallion Loans since 1979 and has
established a leading position in this industry. The Company's management has
a long history of owning, managing and financing taxicab fleets, taxicab
medallions and corporate car services. Medallion Loans collateralized by New
York City taxicab medallions and related assets comprised 94% of the value of
the Company's Medallion Loan portfolio at December 31, 1995. The balance
consisted of Medallion Loans collateralized by Boston, Chicago, Cambridge,
Newark, Philadelphia and Hartford taxicab medallions. The Company believes
that there are significant growth opportunities in these and other
metropolitan markets nationwide.

Most New York City medallion transfers are handled through approximately 35
medallion brokers who are licensed by the TLC. In addition to brokering
medallions, these brokers also arrange TLC documentation, insurance, vehicles
and meters as well as financing. The Company has excellent relations with many
of the most active of these brokers and regularly receives referrals from
them. However, the Company receives most of its referrals from a small number
of brokers. The Company does not pay referral fees.

Loan Portfolio

Medallion Loans comprised approximately 79% of the Company's loan portfolio
at December 31, 1995 on a pro forma basis. On that date, the Company had 1,293
Medallion Loans outstanding ranging from $645 to $720,000 in principal amount
outstanding with an average principal amount outstanding of $91,000.
Substantially all of the Company's Medallion Loans are made at fixed rates of
interest in excess of the Prime Rate. These loans generally require equal
monthly payments covering accrued interest and amortization of principal over
a ten-year schedule subject to a balloon payment of all outstanding principal
after four years. Borrowers may prepay Medallion Loans upon payment of a fee
of 90 days' interest. The Company generally retains the Medallion Loans it
originates. From inception of its business through December 31, 1995, the
period between the origination and final payment of all Medallion Loans
originated by Tri-Magna has been estimated by the Company to be 29 months on a
weighted average basis. The Company believes that this weighted average time
period varies to some extent as a function of changes in interest rates
because borrowers are more likely to exercise prepayment rights in a
decreasing interest rate environment when the interest rate payable on the
borrower's loan is high relative to prevailing interest rates and are less
likely to repay in a rising interest rate environment. At December 31, 1995,
substantially all of the Company's Medallion Loans were secured by first
security interests in taxicab medallions and related assets. The Company
originates Medallion Loans at an approximate average loan-to-value ratio of
70%. The Company estimates that the average loan to value ratio of all of the
Company's Medallion Loans at December 31, 1995 was 54%, which the Company
believes is representative of its historical average loan to value ratio. The
Company has recourse against the direct and indirect owners of the medallion
through personal guarantees. Although personal guarantees increase the
commitment of borrowers to repay their loans, there can be no assurance that
the assets available under personal guarantees would, if required, be
sufficient to satisfy the obligations secured by such guarantees.

The Company believes that its Medallion Loan portfolio is of high credit
quality because medallions have generally increased in value and are easy to
repossess and resell in an active market. While loans in Tri-Magna's portfolio
have been from time to time in arrears or default, Tri-Magna has never
experienced a loss of principal on any of the $296 million in aggregate
principal amount of Medallion Loans it has originated since 1979. The Company
has lost little principal or interest on Medallion Loans in their entirety. In
the event of defaults by borrowers, the medallions collateralizing such loans
have been seized and, when such loans have not been brought current, readily
sold in the active market for medallions at prices at or in excess of the
amounts due.

COMMERCIAL INSTALLMENT LOANS

Overview

Tri-Magna began Commercial Installment Loan operations in 1987 to diversify
its loan portfolio which, prior to that time, consisted almost entirely of
Medallion Loans. Tri-Magna has chosen to concentrate these

50
<PAGE>

operations on originating loans secured by retail dry cleaning and coin
operated laundromat equipment because of certain characteristics similar to
medallion lending that make these industries attractive candidates for
profitable lending. These factors include the following (i) relatively high
fixed rates of interest ranging from approximately 500 to 700 basis points
over the prevailing Prime Rate at the time of origination, (ii) low historical
repossession rates, (iii) vendor recourse, (iv) significant equity investments
by borrowers, (v) an active market for repossessed equipment, (vi) a small
average loan size of $53,000 and (vii) collateral service life that is
frequently twice as long as the term of the loans. The Company estimates that
there are approximately 4,000 retail dry cleaners and approximately 3,000
laundromats in the New York City metropolitan area. Specialization in these
industries has permitted relatively low administrative costs because
documentation and terms of credit are standardized. Moreover, the consistency
among the loans has facilitated simplified credit review and portfolio
analysis. In addition, the Company believes that other niche industries with
similar characteristics will provide additional loan portfolio growth
opportunities.

Loan Portfolio

Commercial Installment Loans comprised 21% of the Company's loan portfolio
at December 31, 1995 on a pro forma basis. These loans finance either the
purchase of the equipment and related assets necessary to open a new business
or the purchase or improvement of an existing business. The Company has
originated Commercial Installment Loans in principal amounts ranging from
$5,000 to $500,000. These loans are generally retained by the Company and
typically have maturities ranging from one to seven years. At December 31,
1995, there were 606 Commercial Installment Loans outstanding with a balance
of $31.5 million on a pro forma basis. Loans to dry cleaners and laundromats
represented 78% of the aggregate principal amount of Commercial Installment
Loans outstanding at December 31, 1995. The remaining Commercial Installment
Loans are spread among other industries including food service, private pay
phone and radio broadcast.

The principal amount of the Company's originations of Commercial Installment
Loans has increased during the three years ended December 31, 1995. The
Company originated 350 Commercial Installment Loans in 1995 in the aggregate
principal amount of $24.7 million. The Company originated 339 Commercial
Installment Loans in 1994 in the aggregate principal amount of $24.1 million,
compared to 181 Commercial Installment Loans in the aggregate principal amount
of $17.2 million originated in 1993.

From 1987 through December 31, 1995, Tri-Magna originated 1,056 Commercial
Installment Loans in the aggregate principal amount of $69.0 million, of which
$18.3 million were to retail dry cleaners and $31.1 million were to coin
operated laundromats. The balance of Tri-Magna's Commercial Installment Loans
were secured by real estate, food service equipment, radio broadcast licenses
and other equipment.

Commercial Installment Loans made by the Company typically require equal
monthly payments covering accrued interest and amortization of principal over
a four- to five-year term and generally can be prepaid with a fee of 90 days'
interest. At December 31, 1995, the Company's Commercial Installment Loans had
a weighted average interest rate of 13.53%. The term of, and interest rate
charged on, the Company's loans outstanding at the time of the Offering are
subject to SBA Regulations. See "Regulation." Under SBA Regulations, the
maximum rate of interest permitted on loans originated by the Company during
December 1995 was 15%; however, effective January 31, 1996, the maximum rate
was raised to 19%. Unlike Medallion Loans, for which competition precludes the
Company from charging the maximum rate of interest permitted under SBA
Regulations, the Company is able to charge the maximum rate on certain
Commercial Installment Loans and anticipates that after the Offering,
Medallion Financial will be able to charge in excess of the maximum rate. The
weighted average rate of interest on Commercial Installment Loans exceeded the
weighted average rate of interest on Medallion Loans by 363 basis points at
December 31, 1995. The Company believes that the increased yield on Commercial
Installment Loans compensate for their higher risk relative to Medallion Loans
and further illustrate the benefits of diversification.

51
<PAGE>

The Company generally originates Commercial Installment Loans at an
approximate average loan to value ratio of 80% and estimates that the average
loan to value ratio of all of the Company's Commercial Installment Loans at
December 31, 1995 was approximately 60%. Substantially all of the Company's
Commercial Installment Loans are collateralized by first security interests in
the assets being financed by the borrower. At December 31, 1995, 78% of the
aggregate principal outstanding in the Company's Commercial Installment Loan
portfolio was secured by first security interests in retail dry cleaning and
coin operated laundromat equipment and the balance, 22%, was secured by real
estate, food service equipment, radio broadcast licenses and other equipment.
In addition, the Company requires the principals of borrowers to personally
guarantee loans. Additional security is provided by equipment vendors, and at
December 31, 1995, approximately 40% of the aggregate principal amount of
Commercial Installment Loans outstanding was secured by full recourse
guarantees from equipment vendors and approximately 5% was secured by partial
recourse guarantees from equipment vendors. The Company's aggregate realized
loss of principal on loans secured by retail dry cleaning and coin operated
laundromat equipment originated to date is $52,000 or 0.11% of the
approximately $49.4 million in principal amount of such loans originated to
date.

MARKETING, ORIGINATION AND LOAN APPROVAL PROCESS

The Company employs five loan officers that originate Medallion Loans and
Commercial Installment Loans. The Company's loan officers regularly receive
referrals from medallion brokers and make use of an extensive referral network
in the retail dry cleaning and coin operated laundromat industry. Equipment
vendors are the single most important source of Commercial Installment Loan
referrals and the Company attributes its excellent relations with these
vendors in part to its success in financing the purchase of retail dry
cleaning and coin operated laundromat equipment.

Each loan application is individually reviewed through analysis of a number
of factors, including loan-to-value ratios, a review of the borrower's credit
history, public records, personal interviews, trade references and personal
inspection of the premises and TLC approval, if applicable. The Company also
requires each applicant to provide personal and corporate tax returns and
premises leases or property deeds. The Company's Credit Committee establishes
loan origination criteria. Loans that conform to such criteria may be
processed by a loan officer and non-conforming loans must be approved by three
of the four members of the Company's Credit Committee.

GROSS LOANS RECEIVABLE

The following table sets forth the Company's gross loans receivable:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans Receivable
Tri-Magna.............. $ 62,564 48% $ 69,785 53% $ 82,014 57% $ 90,343 62% $96,956 64%
Edwards................ 40,431 31 43,020 32 44,141 30 43,487 30 43,799 29
TCC.................... 27,881 21 20,192 15 18,074 13 10,981 8 9,797 7
-------- --- -------- --- -------- --- -------- --- -------- ---
Total.................. $130,876 100% $132,997 100% $144,229 100% $144,811 100% $150,552 100%
======== === ======== === ======== === ======== === ======== ===
</TABLE>

During the year ended December 31, 1995, the Company originated 798 loans in
the aggregate principal amount of $52.7 million. For that period, the
Company's realized losses of principal were less than 0.01% of its loan
portfolio. During the year ended December 31, 1994, the Company originated
loans in the aggregate principal amount of $61.4 million. For that year, the
Company's realized losses of principal were approximately 0.11% of its loan
portfolio. See Pro Forma Selected Financial Data of the Company for additional
information concerning the Company's loan portfolios.

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<PAGE>

LOAN ACTIVITY

The following table sets forth the Company's loans originated, renewed and
repaid on a combined basis for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Loans originated............................................ $ 61,357 $ 52,714
Loan repayments (including renewals)........................ (60,610) (46,983)
Decrease in unrealized depreciation......................... 871 195
Loans (written off) recovered, net.......................... (166) 11
-------- --------
Increase (decrease) in loans receivable--net................ 1,452 5,937
Loans receivable-net (beginning of period).................. 141,590 143,042
-------- --------
Loans receivable-net (end of period)........................ $143,042 $148,979
======== ========
</TABLE>

DELINQUENCY AND LOAN LOSS EXPERIENCE

While operating Tri-Magna, management of the Company developed the following
collection practices which it intends to continue to follow in operating the
Company. When a borrower fails to make a required monthly payment, the
borrower is notified by mail after approximately 10 days, and a collection
officer generally contacts the borrower if the payment remains unpaid after 10
additional days. The Company generally follows a practice of discontinuing the
accrual of interest income on loans which are in arrears as to interest
payments for a period in excess of 90 days. The Company delivers a default
notice and begins foreclosure and liquidation proceedings when management
determines that pursuit of these remedies is the most appropriate course of
action in the circumstances.

At December 31, 1995, the Company had 69 loans with an aggregate principal
balance of $6.4 million, or 4.3% of the portfolio, for which accrued interest
and principal payments of $512,000 were delinquent for 90 days or more,
compared to 70 loans with an aggregate principal balance of $4.6 million, or
3.2% of the portfolio, for which accrued interest and principal payments of
$601,000 were delinquent for 90 days or more at December 31, 1994. Although
the aggregate principal balance of delinquent loans increased from 3.2% of the
portfolio at December 31, 1994 to 4.3% at December 31, 1995, the amount of
accrued interest and principal which was delinquent decreased $89,000 from
$601,000 at December 31, 1994 to $512,000 at December 31, 1995. Of the 69
loans which were delinquent at December 31, 1995, 36, in the aggregate
principal amount of $5.0 million, were Medallion Loans. The Company considers
a loan to be delinquent if the borrower fails to make payments for 10 days or
more; however, the Company may agree with a borrower that cannot make payments
in accordance with the original loan agreement to modify the payment terms of
the loan. Based upon the Company's assessment of its collateral position, the
Company anticipates that a substantial portion of the principal amount of its
delinquent loans would be collected upon foreclosure of such loans, if
necessary. There can be no assurance, however, that the collateral securing
such loans will be adequate in the event of foreclosure.

The Company monitors delinquent loans for possible exposure to loss. In its
analysis, the Company reviews various factors, including the value of the
collateral securing the loan and the borrower's prior payment history. Based
upon these factors and the Company's analysis of the yield and maturity of
loans in the portfolio relative to current and projected market interest
rates, the Company determines net unrealized depreciation of investments or
the amount by which the Company's estimate of the current realizable value of
its portfolio is below the cost basis thereof.

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<PAGE>

The following table sets forth the Company's unrealized depreciation of
investments and the loan loss experience on a combined, rather than pro forma,
basis:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year........................... $ 2,639 $ 1,768
Change in unrealized depreciation of investments..... (415) (145)
Realized loan losses................................. (200) (62)
Recoveries........................................... 33 12
Interest income received............................. (289) --
----------- -----------
Balance, end of year................................. $ 1,768 $ 1,573
=========== ===========
</TABLE>

TAXICAB ROOFTOP ADVERTISING

Media provides taxicab rooftop advertising which is a relatively undeveloped
segment of the out-of-home advertising industry. Out-of-home advertising
includes (i) traditional outdoor advertising, such as billboards and posters,
(ii) transit advertising, such as taxicabs, buses, bus shelters, subway,
commuter train and airport advertising and (iii) in-store point of sale
advertising. The Company entered this business in November 1994 with the
organization of Media as a subsidiary of Tri-Magna and since that time the
business has grown rapidly. The Company intends to continue to expand this
business through internally generated growth and to consider acquisitions of
taxicab rooftop advertising businesses.

The Company currently provides taxicab rooftop advertising in New York City,
Philadelphia, Miami and Boston. The Company has only recently established
operations in Atlanta and Los Angeles and intends to expand in the Atlanta
market prior to the 1996 Summer Olympic Games. The Company's goal is to become
the leading national provider of taxicab rooftop advertising by establishing a
presence in several major U.S. metropolitan markets. In furtherance of this
goal, the Company has recently hired a National Sales Director with 27 years
of management experience in the outdoor advertising industry. The Company
believes that no provider currently operates nationwide. On December 31, 1995,
the Company had 1,670 installed Displays. For the year ended December 31,
1995, Media accounted for 4.4% of the Company's net investment income on a
combined, rather than pro forma, basis.

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<PAGE>

The following bar graph indicates the number of Displays installed at the
end of each fiscal quarter indicated:

Each Display is attached to the rooftop of a taxicab by the Company and the
Company also performs all ongoing Display maintenance and repair. The Display
remains the property of the Company. The Display serves as a platform or frame
for advertising copy which is preprinted on vinyl sheets with adhesive backing
and provided by the advertiser. The advertising copy adheres to the Display
and is illuminated whenever the taxicab is in operation. The vinyl sheet is
durable and is generally left on the Display for up to 90 days. The
advertising copy is replaced at the advertiser's discretion and cost when
advertising campaigns change. The standard size of the vinyl advertising copy,
14 inches high and 48 inches long, was designed to be proportionally similar
to "bulletins" or "billboards" to permit advertisers to conveniently translate
billboard copy to Display copy.

Generally, the Company enters into agreements with taxicab associations,
fleets or individuals to lease taxicab rooftop space for five-year terms.
Typically, under these agreements, the Company is only required to make lease
payments upon receipt of payment from the relevant advertiser; accordingly,
unoccupied Displays, which generate no revenue for the Company, remain on
taxicab rooftops rent-free. The Company markets the Displays to companies
promoting products, advertising agencies and outdoor advertising buying
agencies. Advertising contracts generally vary from 30 days to one year and
provide for monthly payments of rent by the advertiser. The Company's
advertising accounts have included HBO; R. J. Reynolds Tobacco Company; CBS,
Inc.; NEC; NYNEX Corporation; Metro-Goldwyn-Mayer Inc. and Brown & Williamson
Tobacco Corporation.

The Company believes the inherent in-motion nature of taxicabs and their
concentration and distribution throughout densely populated metropolitan areas
enhance their effectiveness as an advertising medium. Displays can be placed
throughout an area, effectively covering the population and providing
continuous exposure. Moreover, taxicab rooftop advertising is not zoned out of
any of the areas in New York City, such as Park Avenue and Central Park, where
stationary advertising is generally prohibited. Unlike other forms of transit
advertising in New York City such as buses, bus shelters and subway and
commuter train stations, which are prohibited from advertising tobacco
products, taxicabs are not restricted by New York City from advertising

55
<PAGE>

tobacco products. In addition, the Company believes that taxicab rooftop
advertising compares favorably with other forms of outdoor advertising, which
in general have among the lowest cost-per-thousand impressions or "CPM", a
standard measurement of effectiveness among media, of all advertising media.

Currently, substantially all of the Company's taxicab rooftop advertising
revenue is derived from tobacco products advertising. The FDA has proposed new
rules, which, among other things, regulate advertising of tobacco products.
The Company cannot predict whether the proposed rules restricting tobacco
products advertising will be adopted, or whether the proposed rules will, if
adopted, restrict taxicab rooftop advertising. The Company believes, however,
it could replace revenue lost due to government regulations if rules
restricting the advertising of tobacco products are adopted and restrict
taxicab rooftop advertising. See "Risk Factors -- Government Regulation of
Tobacco Advertising".

SOURCES OF FUNDS

Overview

The Company funds its operations through credit facilities with bank
syndicates and, to a lesser degree, through fixed rate, long-term subordinated
debentures issued to or guaranteed by the SBA. The determination of funding
sources is established by the Company's management, based upon analysis of the
respective financial and other costs and burdens associated with funding
sources. SBA financing offers very attractive rates, for example currently as
low as 4.0%, but such financing is restricted in its application and its
availability is uncertain. In addition, SBA financing subjects its recipients
to limits on the amount of secured bank debt they may incur. Accordingly, the
Company plans to limit its use of SBA funding and will seek such funding only
when advantageous, such as to fund loans that qualify under SBA Regulations
through subsidiaries already subject to SBA restrictions. At December 31,
1995, $90.1 million of the Company's debt consisted of bank debt,
substantially all of which was at variable effective rates of interest
averaging below the Prime Rate and $31.7 million consisted of subordinated SBA
debentures, with fixed rates of interest with a weighted average rate of
7.44%. An additional $5.1 million of debt was available at December 31, 1995
at variable effective rates of interest averaging below the Prime Rate under
the Company's $95.2 million in bank credit facilities. After the Offering, the
Company intends to negotiate an increase in the amount available under such
facilities. The Company believes that this increase will not affect the
interest rate currently charged under its credit facilities. A table appearing
under the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" illustrates each
of the Founding Companies' sources of available funds at December 31, 1995.

The Company funds its fixed rate loans with variable rate bank debt and
fixed rate subordinated SBA debentures. The mismatch between maturities and
interest-rate sensitivities of these balance sheet items results in interest
rate risk. See "Risk Factors -- Interest Rate Spread; Prepayment Risk." The
Company seeks to manage its exposure to increases in market rates of interest
to an acceptable level by (i) purchasing interest rate caps to hedge a portion
of its variable rate debt against increases in interest rates, (ii) incurring
fixed-rate debt and (iii) originating adjustable rate loans. Nevertheless, the
Company accepts varying degrees of interest rate risk depending on market
conditions and believes that the resulting asset/liability interest rate
mismatch results in opportunities for higher net interest income. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Asset/Liability Management."

Tri-Magna Funding

Tri-Magna has a $2.0 million revolving line of credit with a bank syndicate.
At December 31, 1995, $1.9 million was outstanding under this facility,
bearing interest at 7.59%. Tri-Magna also has outstanding a $3.2 million term
loan which will be repaid with the proceeds from the Offering. The term loan
bears interest at 8.50%. The Company expects that the revolving line of credit
will be transferred to Medallion Financial after the Offering.

56
<PAGE>

Edwards Funding

Edwards has a $12.5 million revolving line of credit with a bank syndicate.
Under an agreement with the SBA, Edwards was restricted from borrowing more
than $10.0 million in bank debt without the prior approval of the SBA. In
January 1996, this amount was increased to $11.5 million.

As an SBIC, Edwards is eligible to obtain low cost financing from the SBA
through the issuance of subordinated SBA debentures and has outstanding such
debentures in the principal amount of $25.0 million. Following the Offering,
Edwards intends to seek to issue additional subordinated SBA debentures. SBA
Regulations limit the amount of subordinated SBA debentures or "leverage"
SBICs may issue. Generally, under SBA Regulations, the maximum principal
amount of subordinated SBA debentures Edwards is permitted to issue is equal
to 300% of its private or non-SBA paid-in capital and paid-in surplus
("Leveragable Capital"). SBA Regulations generally also limit the aggregate
amount of leverage SBICs and SSBICs under common control, such as Edwards, MFC
and TCC, have outstanding to no more than $90 million. Accordingly, Edwards,
MFC and TCC collectively may not issue subordinated SBA debentures and
preferred stock in an aggregate amount that exceeds $90 million and at
December 31, 1995, the aggregate amount outstanding was $31.7 million. The
interest rates payable on outstanding subordinated SBA debentures at December
31, 1995 ranged from 5.00% to 9.80% with a weighted average of 7.44%.

At December 31, 1995, Edwards had Leveragable Capital of $8.4 million and
had issued $25.0 million in principal amount of subordinated SBA debentures
that carry fixed rates of interest and have ten-year terms. These debentures
have maturities ranging from September 1, 1996 to September 1, 2004 and rates
of interest varying from 7.15% to 9.80% per annum. Subject to the limitations
discussed above, Edwards was eligible on December 31, 1995, to issue $250,000
in aggregate principal amount of additional subordinated SBA debentures.

MFC Funding

MFC intends to rely on its bank credit facilities rather than on SBA
financing to fund its operations. MFC has a credit facility with a bank
syndicate consisting of a $78.0 million revolving line of credit and a $2.0
million term loan. Amounts outstanding under the revolving line of credit bear
interest at the agent bank's prime rate or, at MFC's option, a rate based on
LIBOR. At December 31, 1995, the average interest rate was 7.40% which was 110
basis points below the Prime Rate and 178 basis points above 90-day LIBOR as
of such date. The revolving line of credit is secured by all of MFC's assets
and matures on September 30, 1996. As of December 31, 1995, there was an
outstanding balance of $73.2 million under the revolving line of credit. The
term loan bears interest at the rate of 7.50% and matures on July 31, 1997.

SBA financing is limited and so long as an SBIC or SSBIC has SBA financing
outstanding, the SBA restricts the amount of secured bank debt such SBIC or
SSBIC may have outstanding. As a result of these SBA limitations, debt
financing from all sources is effectively limited. To eliminate this funding
cap, MFC has repurchased all of its outstanding subordinated SBA debentures
and preferred stock and thereby terminated SBA limitations on the amount of
secured bank debt MFC can incur. The Company believes that MFC will be able to
obtain more funding from banks than it was able to obtain from the SBA and
banks under SBA limitations, and that this will permit MFC to more effectively
expand its operations. See "Business -- Sources of Funds -- Preferred Stock
Repurchase Agreements."

Media Funding

Media has a $275,000 demand loan from a bank. The loan is secured and bears
interest at the rate of 10.25%.

TCC Funding

As an SSBIC, TCC is eligible to obtain low cost financing from the SBA
through the issuance of subordinated SBA debentures and the issuance of non-
voting cumulative preferred stock to, or guaranteed by, the SBA. TCC has $6.7
million of subordinated SBA debentures outstanding and presently has no
preferred stock outstanding.

57
<PAGE>

Following the Offering, TCC intends to seek to issue preferred stock and
additional subordinated SBA debentures. SBA Regulations limit the amount of
subordinated SBA debentures and preferred stock or "leverage" SSBICs may
issue. Generally, under SBA Regulations, the maximum principal amount of
subsidized subordinated SBA debentures and preferred stock TCC is permitted to
issue is the lesser of (i) an amount equal to 300% of its Leveragable Capital,
or (ii) $35.0 million. All 300% of this leverage is permitted to consist of
subordinated SBA debentures, while no more than 100% is permitted to consist
of preferred stock. The $90 million limit on the aggregate amount of leverage
permitted for SBICs and SSBICs under common control referred to above also
applies. The cumulative dividend currently payable on shares of preferred
stock issued by SSBICs to the SBA is 4.00% and at December 31, 1995 the
weighted average interest rate payable on subordinated SBA debentures was
5.38%. As a result of an SBA subsidy program available to SSBICs, the
effective interest rate on such debentures is 3.00% below the stated interest
rate for the first five years such debentures are outstanding.

At December 31, 1995, TCC had Leveragable Capital of $7.7 million and had
issued $6.7 million in principal amount of subordinated SBA debentures that
have fixed rates of interest, ten-year terms and may be prepaid after five
years without penalty. Of these subordinated SBA debentures, $1.1 million in
principal amount have been repaid. The debentures have rates of interest
varying from 5.00% to 7.38% per annum and mature on June 1, 2002. Future
issuances of subordinated SBA debentures by TCC, including any refinancing or
rollover of currently outstanding subordinated SBA debentures, are also
limited by the SBA to the aggregate amount of TCC's outstanding non-Medallion
Loans and the aggregate amount of non-Medallion Loans originated in connection
with such financing. At December 31, 1995, TCC had $1.8 million in principal
amount of non-Medallion Loans outstanding. Subject to the foregoing
limitations, TCC was eligible on December 31, 1995, to issue $16.4 million in
aggregate amount of additional subordinated SBA debentures and preferred
stock.

Preferred Stock Repurchase Agreements

MFC and TCC have repurchased all of their previously issued preferred stock
from the SBA for an aggregate price of $4.4 million, representing a discount
of 65% from the original aggregate issuance price of $12.6 million. The
repurchase price discount of $8.2 million reflects the below market 3%
dividend rate and the fact that the preferred stock was not subject to
mandatory redemption at any time. The repurchase has resulted in the
termination of SBA limits on the amount of secured bank debt MFC can incur and
a realized gain in retained earnings in the amount of the repurchase discount
which will be accreted to paid-in capital on a straight-line basis over 60
months, commencing August 12, 1994. However, if MFC or TCC is liquidated or
loses its SBA license during the accretion period, the SBA will receive the
remaining unaccreted amount of the realized gain attributable to the
subsidiary liquidating or losing its license. At December 31, 1995, the
aggregate remaining unaccreted amount of the realized gain for MFC and TCC was
$6.2 million.

COMPETITION

Banks, credit unions and finance companies, some of which are SSBICs and
SBICs, compete with the Company in originating Medallion Loans and Commercial
Installment Loans. Finance subsidiaries of equipment manufacturers also
compete with the Company. Many of these competitors have greater resources
than the Company and certain competitors are subject to less restrictive
regulations than the Company. As a result, there can be no assurance that the
Company will be able to identify and complete the financing transactions that
will permit it to compete successfully. The Company's taxicab rooftop
advertising business competes with other taxicab rooftop advertisers as well
as all segments of the out-of-home advertising industry and other types of
advertising media, including cable and network television, radio, newspapers,
magazines and direct mail marketing. Many of these competitors have greater
financial resources than the Company and offer several forms of advertising as
well as production facilities.

FORMATION TRANSACTIONS

Simultaneously with the closing of the Offering, Medallion Financial will
acquire the Founding Companies, and the Offering is contingent upon the
successful acquisition of each of the Founding Companies. In connection with
the Acquisitions, the Company has obtained an exemptive order under the 1940
Act from the

58
<PAGE>

Commission. See "Additional Information." The aggregate consideration to be
paid by Medallion Financial in these transactions consists of (i)
approximately $38.9 million in cash; (ii) the assumption of approximately
$90.1 million in bank debt; and (iii) the assumption of approximately $31.7
million in subordinated SBA debentures. The Company will also assume Media's
$275,000 demand loan. See "Certain Transactions" and "Use of Proceeds." The
consideration to be paid for the Founding Companies was determined through
arm's-length negotiations between Medallion Financial and representatives of
each Founding Company. The factors considered by the parties in determining
the consideration to be paid included, among others, the history of and
prospects for the business in which the particular Founding Company operates,
the Founding Company's past and present operations, loan portfolio quality,
past and present revenue and earnings and the trends in such revenue and
earnings, expert opinion, revenue and earnings prospects and stock prices of
comparable finance companies and out-of-home advertising companies. Each
Founding Company was represented by independent counsel in the negotiation of
the terms and conditions of the Acquisitions.

The consummation of each Acquisition is subject to customary closing
conditions. These conditions include the continuing accuracy on the closing
date of the Acquisitions of the representations and warranties of the Founding
Companies and Medallion Financial, the performance of all covenants included
in the agreements relating to the Acquisitions, the nonexistence of any
material adverse change in the results of operations, financial condition or
business of the Founding Companies and stockholder approval in the case of
Tri-Magna and TCC and general and limited partner approval in the case of
Edwards. The acquisitions of Tri-Magna, TCC and Edwards are also contingent
upon SBA approval.

The agreements relating to the Acquisitions may be terminated, under certain
circumstances, prior to the consummation of the Acquisitions. Specifically,
each agreement may be terminated: (i) by mutual consent of the parties; (ii)
by either party if the Acquisitions of Tri-Magna, Edwards and TCC are not
consummated by June 30, 1996, in the case of Tri-Magna and TCC and June 14,
1996, in the case of Edwards; (iii) if a material breach or default under the
agreements occurs and is not cured within 20 days of notice of such breach; or
(iv), in the case of the Tri-Magna acquisition, by the Tri-Magna Board of
Directors if it is required by its fiduciary duties to terminate the Tri-Magna
merger agreement as a result of another acquisition offer or by the Company if
the Tri-Magna board fails to recommend the acquisition to its stockholders.

There can be no assurance that the conditions to the closing of the
Acquisitions will be satisfied, or, if not satisfied, waived or that the
Acquisition agreements will not be terminated. If any of the Acquisitions is
terminated for any reason, Medallion Financial will not consummate the
Offering.

Tri-Magna. Under an agreement with Tri-Magna, Tri-Magna will be merged with
and into Medallion Financial and Tri-Magna's wholly owned subsidiaries, MFC
and Media, will become wholly owned subsidiaries of Medallion Financial. In
connection with the merger, Tri-Magna will file an application on Form N-8F
with the Commission to deregister as an investment company under the 1940 Act.
The aggregate consideration to be paid by Medallion Financial for Tri-Magna is
approximately (i) $13.4 million in cash and (ii) the assumption of $80.3
million in bank debt. The Company will also assume Media's $275,000 demand
loan. See "Certain Transactions" and "Use of Proceeds."

Edwards. Under an agreement with Edwards, a newly organized, wholly owned
subsidiary of Medallion Financial will acquire all of the assets of Edwards.
The aggregate consideration to be paid by Medallion Financial for Edwards is
approximately (i) $15.2 million in cash, (ii) the assumption of approximately
$25.0 million in subordinated SBA debentures and (iii) the assumption of
approximately $9.8 million in bank debt. In connection with this transaction,
Edwards, its general partner and an affiliate of Edwards will enter into non-
competition agreements with Medallion Financial pursuant to which they will
agree not to compete with the Company for three years after the consummation
of this transaction.

TCC. Under an agreement with TCC and certain of its affiliates, Medallion
Financial or a wholly owned subsidiary of Medallion Financial will acquire all
of the issued and outstanding common stock of TCC. Upon

59
<PAGE>

consummation of this transaction, TCC will become a wholly owned subsidiary of
Medallion Financial. The aggregate consideration to be paid by Medallion
Financial for TCC is approximately (i) $10.3 million in cash and (ii) the
assumption of $6.7 million in subordinated SBA debentures. In connection with
this transaction, Leucadia will enter into a non-competition agreement with
Medallion Financial pursuant to which it will agree that it and all of its
affiliates will not compete with the Company for three years after the
consummation of this transaction.

EMPLOYEES

As of December 31, 1995, the Company employed a total of 30 employees. The
Company believes that its relations with all of its employees are good, but
that its future success will depend, in part, on its ability to continue to
recruit, retain and motivate qualified personnel at all levels.

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<PAGE>

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

The Company's investment objectives will be to provide a high level of
current income for its stockholders through quarterly distributions,
consistent with preservation of capital, as well as long term growth of net
asset value. The Company will seek to achieve its investment objectives by
maximizing net interest income and fee income from operations and expanding
operations. There can be no assurance that the Company will achieve its
investment objectives.

The Company's only fundamental policies, that is, policies that cannot be
changed without the approval of the holders of a majority of the Company's
outstanding voting securities, as defined under the 1940 Act, are the
restrictions described in the following seven paragraphs. A "majority of the
Company's outstanding voting securities" as defined under the 1940 Act means
the lesser of (i) 67% of the shares represented at a meeting at which more
than 50% of the outstanding shares are represented or (ii) more than 50% of
the outstanding shares. The other policies and investment restrictions
referred to in this Prospectus, including the Company's investment objectives,
are not fundamental policies of the Company and may be changed by the
Company's Board of Directors without stockholder approval. Unless otherwise
noted, whenever an investment policy or limitation states a maximum percentage
of the Company's assets that may be invested in any security or other asset,
or sets forth a policy regarding quality standards, such standard or
percentage limitation will be determined immediately after and as a result of
the Company's acquisition of such security or other asset. Accordingly, any
subsequent change in values, assets, or other circumstances will not be
considered when determining whether the investment complies with the Company's
investment policies and limitations. The Company's fundamental policies are as
follows:

1. The Company will at all times conduct its business so as to retain its
status as a business development company under the 1940 Act. In order to
retain that status, the Company may not acquire any assets (other than non-
investment assets necessary and appropriate to its operations as a business
development company) if, after giving effect to such acquisition, the value
of its "Qualifying Assets," as such term is described under the caption
"Regulation," amount to less than 70% of the value of its total assets. The
Company believes that the securities it has acquired and it proposes to
acquire in connection with the acquisition of the Founding Companies, as
well as temporary investments it makes with its funds, will generally be
Qualifying Assets.

2. MFC, TCC, Edwards, and any subsidiaries of the Company organized in
the future that are SBA licensees, may issue the maximum principal amount
of subordinated SBA debentures and preferred stock permitted under the SBIA
and SBA Regulations. As SSBICs under common control, the maximum principal
amount of subsidized subordinated debentures and preferred stock MFC and
TCC are permitted to issue is the lesser of (i) an amount equal to 300% of
their Leveragable Capital (generally non-SBA paid-in capital and paid-in
surplus), or (ii) $35 million. All 300% of this leverage is permitted to
consist of subordinated debentures, while no more than 100% is permitted to
consist of preferred stock. As an SBIC, the maximum principal amount of
subordinated debentures Edwards is permitted to issue is equal to 300% of
its Leveragable Capital. In addition, SBA Regulations also limit the
aggregate principal amount of subordinated SBA debentures and preferred
stock or "leverage" SSBICs and SBICs under common control, such as the RIC
Subsidiaries, may have outstanding to no more than $90 million. At December
31, 1995, TCC and Edwards had, in aggregate, $31.7 million in principal
amount of subordinated debentures and no preferred stock outstanding. At
that date, TCC and Edwards had, in aggregate, $16.1 million in Leveragable
Capital and accordingly the maximum aggregate principal amount of
additional SBA leverage TCC and Edwards could issue on that date was $16.8
million. At December 31, 1995, MFC had Leveragable Capital of $14.5 million
but had no subordinated SBA debentures outstanding and has no intention of
issuing any; however, MFC reserves the right to issue subordinated
debentures to the maximum extent permitted under the SBIA or SBA
Regulations.

3. The Company may borrow funds and issue "senior securities" to the
maximum extent permitted under the 1940 Act. As a business development
company, the Company may issue senior securities if,

61
<PAGE>

immediately after such issuance, the senior securities will have an asset
coverage of at least 200%. Under the 1940 Act, subordinated debentures
issued to or guaranteed by the SBA and preferred stock issued to the SBA by
the RIC Subsidiaries may be considered senior securities issued by the
Company requiring asset coverage of 200%; however, pursuant to an exemptive
order of the Commission requested under the Application, such debentures
and preferred stock are exempt from the asset coverage requirements of the
1940 Act.

4. The Company will not (i) underwrite securities issued by others
(except to the extent that it may be considered an "underwriter" within the
meaning of the Securities Act in the disposition of restricted securities),
(ii) purchase or sell real estate or real estate mortgage loans unless
acquired as a result of ownership of securities or other instruments
(except that the Company may purchase and sell real estate or interests in
real estate in connection with the orderly liquidation of investments or
the foreclosure of mortgages held by the Company), (iii) engage in short
sales of securities, (iv) purchase securities on margin (except to the
extent that it may purchase securities with borrowed money), (v) write or
buy put or call options or (vi) engage in the purchase or sale of
commodities or commodity contracts, including futures contracts (except
where necessary in working out distressed loan or investment situations).
The Company and the RIC Subsidiaries may purchase interest rate caps and
swaps covering up to 100% of their variable rate debt. In addition, the
Company may sponsor the securitization of loan portfolios.

5. The Company and the RIC Subsidiaries may originate loans and loans
with equity features. To the extent permitted under SBA Regulations, the
Company may also make loans as permitted (i) under the 1996 Plan, (ii)
under plans providing for options for disinterested directors that might be
adopted by the Company in the future and (iii) to officers and directors
for the purchase of Common Stock. The Company will hold all of the
outstanding common stock of the Founding Companies and may organize
additional subsidiaries in the future. The Company may acquire restricted
securities of small businesses.

6. Each RIC Subsidiary shall not originate loans to, or invest in the
securities of, any entity if, immediately after such loan or investment,
more than 5% of the total assets of the RIC Subsidiary originating such
loan or making such investment (taken at current value) would be loaned to,
or invested in the securities of such entity, or acquire more than 10% of
the outstanding voting securities of any issuer, provided that this
limitation does not apply to obligations issued or guaranteed as to
interest and principal by the U.S. Government or its agencies or
instrumentalities or to repurchase agreements secured by such obligations,
and that up to 25% of each RIC Subsidiary's total assets (at current value)
may be invested without regard to this limitation.

7. The Company and the RIC Subsidiaries shall lend or invest at least 25%
of their total assets (taken at current value) to or in entities primarily
engaged in the taxicab industry and shall not lend or invest more than 25%
of their total assets (taken at current value) to or in entities primarily
engaged in any other single industry, provided that this limitation does
not apply to obligations issued or guaranteed as to interest and principal
by the U.S. Government or its agencies or instrumentalities or to
repurchase agreements secured by such obligations or to bank money-market
instruments.

PORTFOLIO TURNOVER

During the year ended December 31, 1994, the Company originated loans
totalling $61.4 million in aggregate principal amount and experienced
prepayments totalling $60.6 million in aggregate principal amount. During the
year ended December 31, 1995, the Company originated loans totalling $52.7
million in aggregate principal amount and experienced prepayments totalling
$46.9 million in aggregate principal amount. All borrowers have the right to
prepay loans made by the Company at any time. Although the Company experiences
more prepayments when interest rates are falling and fewer prepayments when
interest rates are rising, the Company is unable to predict the level of
prepayments it will experience during any period of time.

62
<PAGE>

THE INVESTMENT ADVISER

The Company is managed by its executive officers under the supervision of
its Board of Directors. In addition, under the terms of a sub-advisory
agreement (the "Sub-Advisory Agreement") between the Company and FMC, the
Company has retained FMC to consult with management upon reasonable request in
the review and refinement of the Company's strategies.

Myron Cohen, Robert Fanger and Michael Miller control FMC and will provide
the advisory services to the Company on behalf of FMC. They have served as
directors and executive officers of Tri-Magna and MFC since inception and,
along with Alvin Murstein, comprised Tri-Magna's Executive Committee. Messrs.
Cohen, Fanger and Miller will cease to hold their offices with Tri-Magna and
MFC effective upon the closing of the Acquisitions. Upon the request of the
officers of the Company, FMC will consult with respect to strategic decisions
concerning originations, credit quality assurance, development of financial
products, leverage, funding, geographic and product diversification, the
repurchase of participations, acquisitions, regulatory compliance and
marketing.

Under the Sub-Advisory Agreement, the Company will pay FMC monthly in
arrears, as compensation for the services to be rendered by it, a fee of
$18,750. Unless earlier terminated as described below, the Sub-Advisory
Agreement will remain in effect until May 1998 and from year to year
thereafter only if approved annually by (i) a majority of the non-interested
directors of the Company and (ii) the Board of Directors, or by a majority of
the outstanding voting securities of the Company, as defined in the 1940 Act.
The Sub-Advisory Agreement may be terminated without penalty on 60 days'
written notice by either party or by vote of a majority of the outstanding
voting securities of the Company, as defined in the 1940 Act, and will
terminate if assigned. Under the Sub-Advisory Agreement, FMC will not be
liable for any loss suffered by the Company, except a loss resulting from
FMC's willful malfeasance, bad faith or gross negligence.

The Murstein Trusts will enter into an escrow agreement with FMC at the
closing of the Offering. Under the escrow agreement, the Murstein Trusts will
deposit into escrow 163,636 shares of Common Stock. Subject to certain
limitations, the Murstein Trusts have agreed to maintain in escrow Common
Stock worth 200% of the advisory fees payable by the Company under the Sub-
Advisory Agreement during the first 48 months of service, thereby assuring FMC
of the payment of $900,000 in advisory fees. In the event that the Company or
its stockholders terminate or do not renew the Sub-Advisory Agreement during
this period for any reason other than (i) breach of the Sub-Advisory Agreement
by FMC or (ii) FMC's willful malfeasance, bad faith or gross negligence, the
escrow agent will assign to FMC Common Stock in escrow equal in value to the
amount of the fees payable over the balance of the 48-month period. If the
value of the Common Stock required to be deposited in escrow is less than the
value of the fees payable, FMC will have no further recourse against the
Murstein Trusts.

63
<PAGE>

MANAGEMENT

The business and affairs of the Company are managed under the direction of
its Board of Directors. The Board of Directors is divided into three classes,
each with a term of three years. Only one class of directors stands for
election in any year. Messrs. Kreitman and Rudnick are in the first class and
stand for election in 1997; Messrs. Cuomo and Andrew Murstein are in the
second class and stand for election in 1998 and Messrs. Alvin Murstein and
Ward are in the third class and stand for election in 1999. The Board of
Directors has two committees, a Compensation Committee comprised of Messrs.
Kreitman, Alvin Murstein and Ward and an Audit Committee comprised of Messrs.
Kreitman, Rudnick and Ward. The directors will each be paid $10,000 a year for
each year they serve and shall each receive $2,000 for each Board meeting
attended and $1,000 for each committee meeting attended and are reimbursed for
expenses relating thereto. The Board of Directors elects the Company's
officers who serve at the pleasure of the Board of Directors.

The Company's directors and officers are as set forth below.

<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD WITH THE COMPANY
---------------- ----- ---------------------------------
<S> <C> <C>
Alvin Murstein*............ 61 Chairman, Chief Executive Officer and Director
Andrew Murstein*........... 31 President and Director
Marie Russo*............... 71 Senior Vice President and Secretary
Daniel F. Baker*........... 32 Treasurer and Chief Financial Officer
Michael Fanger*............ 38 Executive Vice President
Michael J. Kowalsky*....... 50 Executive Vice President
Michael Leible*............ 58 Vice President
Mario M. Cuomo............. 63 Director
Stanley Kreitman........... 62 Director
David L. Rudnick........... 55 Director
Benjamin Ward.............. 69 Director
</TABLE>
- ----------
An asterisk (*) indicates an "interested person" as such term is defined in
(S) 2(a)(19) of the 1940 Act.

Alvin Murstein has been Chairman of the Board of Directors, Chief Executive
Officer and President of Tri-Magna since its founding in 1989 and of MFC since
its founding in 1979. Mr. Murstein has also been Chairman of the Board of
Directors and Chief Executive Officer of Media since its founding in 1994.
Upon completion of the Offering and the Acquisitions, Mr. Murstein will be
Chairman of the Board of Directors and Chief Executive Officer of MFC,
Edwards, TCC and Media. Mr. Murstein received a B.A. and an M.B.A. from New
York University and has been an executive in the taxicab industry for over 40
years. Mr. Murstein has served on the Board of Directors of the Strober
Organization, Inc., a building supply company, since 1988. Alvin Murstein is
the father of Andrew Murstein.

Andrew Murstein has been Tri-Magna's Director of New Business Development
since 1991. Mr. Murstein has also been a Director of Media since 1994 and was
President of Media from inception through January 1996. Mr. Murstein is Tri-
Magna's liaison with the TLC and the New York City Mayor's office. Upon
completion of the Offering and the Acquisitions, Mr. Murstein will be a
Director of Media and a Director of MFC, Edwards and TCC. Mr. Murstein
received a B.A. in economics, cum laude, from Tufts University and an M.B.A.
in finance from New York University. Mr. Murstein serves on the New York City
Small Business Task Force. Andrew Murstein is the son of Alvin Murstein and
the son-in-law of Mr. Rudnick, and is the third generation of his family to be
active in the taxicab industry.

64
<PAGE>

Marie Russo has been the Vice President of Operations of Tri-Magna since its
founding in 1989 and of MFC since 1986. From 1983 to 1986 she was Controller
of MFC. Upon completion of the Offering and the Acquisitions, Ms. Russo will
be Senior Vice President and Secretary of MFC, Edwards and TCC. Ms. Russo
received a B.S. in accounting from Hunter College.

Daniel F. Baker has been Tri-Magna's Vice President of Finance since 1992.
From 1989 through 1991, Mr. Baker was Controller of Tri-Magna and from 1988
through 1991 he was Controller of MFC. Prior to joining MFC, Mr. Baker was
employed by Arthur Andersen & Co. Upon completion of the Offering and the
Acquisitions, Mr. Baker will be Treasurer and Chief Financial Officer of MFC,
Edwards, TCC and Media. Mr. Baker received a B.S. in accounting from Husson
College.

Michael Fanger has been Tri-Magna's Vice President of Commercial Lending
since its founding in 1989 and of MFC since 1987. Upon completion of the
Offering and the Acquisitions, Mr. Fanger will be President of TCC, Executive
Vice President of MFC and Senior Vice President of Edwards. Prior to joining
MFC, Mr. Fanger was a Vice President, Commercial Lending at Shawmut Bank, NA.
Mr. Fanger received a B.A. from Colby College.

Michael J. Kowalsky has been Edwards' Chief Operating Officer since 1992.
Prior to joining Edwards in 1990, Mr. Kowalsky was a Senior Vice President at
General Cigar Co. Inc., a cigar manufacturing company. Upon completion of the
Offering and the Acquisitions, Mr. Kowalsky will be President of MFC and of
Edwards. Mr. Kowalsky received a B.A. and M.A. in economics from the
University of Kentucky and an M.B.A. from the New York University Graduate
School of Business.

Michael Leible has been Vice President and National Sales Director of Media
since 1994. Prior to joining Media, Mr. Leible was Executive Vice President
and National Sales Manager at Metropolitan Outdoor Advertising, Inc. where he
worked from April 1990 until March 1995. From 1979 through 1989 he was Vice
President--National Sales at Transportation Displays, Inc. ("TDI"). Prior to
joining TDI, Mr. Leible was Vice President--National Sales at Metromedia,
Inc., where he worked from 1967 through 1979.

Mario M. Cuomo served as Governor of the State of New York from January 1983
through 1994. Governor Cuomo has been a partner in the law firm of Willkie
Farr & Gallagher since February 1995. Willkie Farr & Gallagher serves as
counsel to the Underwriters in connection with this Offering. Mr. Cuomo
received a B.A., summa cum laude, from St. John's University and a J.D., magna
cum laude, from St. John's University School of Law.

Stanley Kreitman serves as Vice Chairman of Manhattan Associates, an
investment banking company. Mr. Kreitman served as a Director of Tri-Magna
from 1991 until the completion of the Offering and the Acquisitions. Mr.
Kreitman served as President of the United States Banknote Corporation, a
securities printing company, from 1975 until his retirement in 1994. Mr.
Kreitman is Chairman of the Board of Trustees of the New York Institute of
Technology. Mr. Kreitman received an A.B. from New York University and an
M.B.A. from New York University Graduate School of Business.

David L. Rudnick serves as President of Century Properties, Inc., a national
commercial real estate concern. Mr. Rudnick joined Century Properties, Inc. in
1966. Mr. Rudnick was a director of West Side Federal Savings & Loan
Association. Mr. Rudnick received an A.B. in economics from Harvard University
and an M.B.A. from Columbia University Graduate School of Business. Mr.
Rudnick is Andrew Murstein's father-in-law.

Benjamin Ward served as a Director of Tri-Magna from 1992 until the
completion of the Offering and the Acquisitions. Mr. Ward served as Police
Commissioner of New York City from 1984 until 1989. Mr. Ward received a B.A.
in sociology, magna cum laude, from Brooklyn College and a J.D. from Brooklyn
Law School.

65
<PAGE>

COMPENSATION

The following table sets forth for the fiscal year ending December 31, 1996,
the estimated compensation to be paid to the three most highly compensated
officers of the Company. The Company does not anticipate paying any director
aggregate compensation in excess of $30,000 during fiscal 1996 from Medallion
Financial and the Founding Companies for such individual's service as a
director.

COMPENSATION TABLE

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION FROM
NAME OF PERSON, POSITION THE COMPANY(1)
------------------------ -----------------
<S> <C>
Alvin Murstein, $250,000
Chairman and Chief Executive Officer
Andrew Murstein, $155,000
President
Michael Kowalsky, $150,000
Executive Vice President
</TABLE>
- ----------
(1) Estimates for the fiscal year ending December 31, 1996.

EMPLOYMENT AGREEMENTS

Upon the completion of the Offering, Alvin Murstein and Andrew Murstein will
enter into employment agreements with the Company. The agreements will
automatically renew annually for a five-year term unless either party
terminates the agreement. The agreements contain non-competition covenants in
favor of the Company. Michael Kowalsky has entered into an employment
agreement with the Company which will become effective at such time. This
agreement includes a three-year term and contains non-competition covenants in
favor of the Company.

1996 STOCK OPTION PLAN

The 1996 Plan was adopted by the Board of Directors, including a majority of
the non-interested directors, in 1996. The 1996 Plan authorizes the grant of
incentive stock options within the meaning of Section 422 of the Code and non-
qualified stock options for the purchase of an aggregate of 750,000 shares
(subject to adjustment for stock splits and similar capital changes) of Common
Stock to employees of the Company. As of April 26, 1996, no non-qualified
options to purchase shares of Common Stock and no incentive stock options had
been granted under the 1996 Plan. Accordingly, as of April 26, 1996, 750,000
shares of Common Stock were available for future awards under the 1996 Plan.

It is anticipated that upon the closing of the Offering, Daniel F. Baker,
the Treasurer and Chief Financial Officer, Michael Fanger, an Executive Vice
President and Michael Kowalsky, an Executive Vice President, will be granted
stock options exercisable for 68,182, 68,182 and 45,456 shares of Common
Stock, respectively. These options will begin to become exercisable one year
after the date of this Prospectus in five equal annual installments at an
exercise price per share equal to the public offering price, except in the
case of Mr. Kowalsky's shares which will vest in twelve equal quarterly
installments.

The Board of Directors has appointed the Compensation Committee of the Board
of Directors to administer the 1996 Plan. Awards of options under the 1996
Plan are granted at the discretion of the Compensation Committee, which
determines the eligible persons to whom, and the times at which, awards shall
be granted, the type of award to be granted, and all other related terms,
conditions and provisions of each award granted. In addition, all questions of
interpretation of the 1996 Plan are determined by the Compensation Committee.

66
<PAGE>

NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

In order to attract and retain highly qualified directors, and to ensure
close identification of interests between non-employee directors and the
Company's stockholders, the Board of Directors of the Company adopted and the
stockholders approved the Director Plan, which provides for the automatic
grant of options to directors of the Company who are not employees, officers
or interested persons of the Company (an "Eligible Director"). In accordance
with the provisions of the 1940 Act, the automatic grant of options under the
Director Plan will not occur until after the date of the approval of the plan
by the Commission (the "Approval Date"). There can be no assurance that the
Commission will approve the Plan.

The Director Plan provides that Eligible Directors serving on the Company's
Board of Directors prior to the Approval Date will each automatically receive
on the Approval Date the grant of an option to purchase the number of shares
of Common Stock determined by dividing $100,000 by the fair market value of
the Common Stock on the Approval Date and multiplying the resulting quotient
by a fraction representing the portion of a three-year term that the director
has been elected to serve. With respect to any Eligible Director who is
elected or reelected as a director of the Company after the Approval Date such
director will automatically receive on the date of such election an option to
purchase the number of shares of Common Stock determined by dividing $100,000
by the fair market value of the Common Stock on the date of such election.

The total number of shares which may be granted from time to time under the
Director Plan is 100,000 shares. The Director Plan will be administered by a
committee of the Board of Directors comprised of directors who are not
eligible for grants or awards of options under the Director Plan. Options
granted under the Director Plan will be exercisable at a price equal to the
fair market value of the shares at the time the option is granted. Options
become exercisable with respect to one third of such shares granted on the
date of each annual stockholders meeting following the date on which the
option was granted, so long as the optionee remains an Eligible Director. No
option may be exercised more than five years after the date on which it is
granted. The number of shares available for options, the number of shares
subject to outstanding options and their exercise prices will be adjusted for
changes in outstanding shares such as stock splits and combinations of shares.
Shares purchased upon exercise of options, in whole or in part, must be paid
for in cash or by means of unrestricted shares of Common Stock or any
combination thereof.

Options granted under the Director Plan will not be transferable other than
by the laws of descent and during the optionee's life may be exercised only by
the optionee. All rights to exercise options will terminate after the optionee
ceases to be an Eligible Director for any reason, other than death, three
months following the date such director ceases to be an Eligible Director. If
the optionee dies before expiration of the option, his legal successors may
have the right to exercise the option in whole or in part within one year of
death.

The Director Plan may be terminated at any time by the Board of Directors,
and will terminate ten years after the effective date of the Director Plan.
The Board of Directors may not materially increase the number of shares
authorized under the plan or materially increase the benefits accruing to
participants under the plan without the approval of the stockholders of the
Company.

401(K) PLAN

In 1996, the Company became a participating employer in the Medallion
Funding Corp. 401(k) Investment Plan (the "401(k) Plan") which covers all full
and part-time employees of the Company who have attained the age of 21 and
have a minimum of one-half year of service. Under the 401(k) Plan, an employee
may elect to defer not less than 1% and no more than 15% of the total annual
compensation that would otherwise be paid to the employee, provided, however,
that employees' contributions may not exceed certain maximum amounts
determined under Section 402(g) of the Code. Employee contributions are
invested in various mutual funds, according to the directions of the employee.

67
<PAGE>

PRINCIPAL STOCKHOLDERS

At April 26, 1996, of the 15,000,000 shares of Common Stock authorized,
there were 2,500,000 shares of Common Stock outstanding and two holders of
record. The following table sets forth certain ownership information with
respect to the Common Stock for (i) those persons who directly or indirectly
beneficially own 5% or more of the outstanding Common Stock and (ii) all
officers and directors as a group.

<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP
PERCENTAGE OWNED
---------------------------------------
TYPE OF OWNERSHIP BEFORE AFTER
NAME AND ADDRESS (RECORD/BENEFICIAL/BOTH) SHARES OFFERING OFFERING
- ---------------- ------------------------ ------------- ---------- ----------
<S> <C> <C> <C> <C>
Alvin Murstein Second Both(1) 1,250,000(2) 50% 16.67%(2)
Family Trust...........
205 East 42nd Street,
Suite 2020
New York, NY 10017
Andrew Murstein Family Both(3) 1,250,000 50% 16.67%
Trust..................
205 East 42nd Street,
Suite 2020
New York, NY 10017
All officers and
directors as a group
(11 persons)........... 2,500,000(2) 100% 33.33%(2)
</TABLE>
- ----------
(1) Alvin Murstein is a trustee and beneficiary of the Alvin Murstein Second
Family Trust.
(2) Alvin Murstein will use substantially all of the net proceeds from his
sale of Tri-Magna common stock to the Company to purchase 90,000 shares of
Common Stock of the Company at a price per share equal to the public
offering price of $11.00 per share. After such purchase, he will
beneficially own 1,340,000 or 17.87% of the shares outstanding after the
Offering and all officers and directors as a group will hold 2,590,000 or
34.53% of the shares outstanding after the Offering.
(3) Andrew Murstein is a trustee and beneficiary of the Andrew Murstein Family
Trust.

CERTAIN TRANSACTIONS

Approximately $13.4 million of the net proceeds from the Offering will be
used by the Company to acquire Tri-Magna. Of this amount, approximately $1.7
million, representing 12.7% of the Tri-Magna purchase price, will be paid to
certain stockholders of Tri-Magna who are or will become officers, directors
or 5% stockholders of the Company as follows: Alvin Murstein -- $1.4 million;
Andrew Murstein -- $105,000; Marie Russo -- $24,000; Michael Fanger --
$92,660; Stanley Kreitman -- $10,000 and Benjamin Ward -- $10,000. Alvin
Murstein will use all of the net proceeds from his sale of Tri-Magna common
stock to the Company to purchase shares of Common Stock of the Company at a
price per share equal to the public offering price set forth on the cover page
of this Prospectus. In addition, approximately $2.5 million, representing
18.7% of the Tri-Magna purchase price will be paid to certain stockholders of
Tri-Magna who are also directors and officers of Tri-Magna as follows: Myron
Cohen -- $652,000; Robert Fanger -- $686,000; Richard Giesser -- $253,000;
Barnet Lieberman -- $212,000; Michael Miller -- $663,980 and T. Lincoln
Morison, Jr. -- $10,000. Messrs. Cohen, Fanger, Giesser, Lieberman, Miller and
Morison will not become officers, directors or 5% stockholders of the Company.

The Company and FMC will enter into the Sub-Advisory Agreement upon the
closing of the Offering. Under the Sub-Advisory Agreement, the Company will
pay FMC monthly in arrears, as compensation for the services to be rendered by
FMC, a fee of $18,750. Myron Cohen, Robert Fanger and Michael Miller control
FMC. They have served as directors and executive officers of Tri-Magna and MFC
since inception and, along with Alvin Murstein, comprised Tri-Magna's
Executive Committee. Messrs. Cohen, Fanger and Miller will cease to hold their
offices with Tri-Magna and MFC effective upon the closing of the Acquisitions.
Subject to certain limitations, the Murstein Trusts have agreed to maintain in
escrow Common Stock worth 200% of the advisory fees payable by the Company
under the Sub-Advisory Agreement during the first 48 months of service,
thereby assuring FMC of the payment of

68
<PAGE>

$900,000 in advisory fees. In the event that the Company or its stockholders
terminate or do not renew the Sub-Advisory Agreement during this period for
any reason other than (i) breach of the Sub-Advisory Agreement by FMC or (ii)
FMC's willful malfeasance, bad faith or gross negligence, the escrow agent
will assign to FMC Common Stock in escrow equal in value to the amount of the
fees payable over the balance of the 48-month period. If the value of the
Common Stock required to be deposited in escrow is less than the value of the
fees payable, FMC will have no further recourse against the Murstein Trusts.
See "Investment Objectives, Policies and Restrictions -- The Investment
Adviser."

Since December 1994, EVEREN Securities, Inc., one of the Company's principal
underwriters, has provided financial advisory services to the Company with
respect to the Acquisitions, the structure of the Company, the capital markets
and the Offering. For these services, the Company will pay EVEREN Securities,
Inc. a financial advisory fee of $225,000. See "Underwriting."

DETERMINATION OF NET ASSET VALUE

The net asset value per share of Common Stock will be determined quarterly,
as soon as practicable after and as of the end of each calendar quarter, by
dividing the value of total assets minus liabilities by the total number of
shares of Common Stock outstanding on a fully diluted basis at that date.

A substantial portion of the Company's assets will consist of the loans held
in the portfolios of the RIC Subsidiaries. The RIC Subsidiaries' respective
Boards of Directors will value their respective loans in connection with their
respective determinations of net asset value. The net asset value per share of
each subsidiary's common stock will be determined quarterly, as soon as
practicable after and as of the end of each calendar quarter, by dividing the
value of total assets minus liabilities by the total number of shares
outstanding on a fully diluted basis at that date.

In making its valuation determination, each of the Boards of Directors of
the RIC Subsidiaries will adhere to a valuation policy approved by the SBA and
adopted by such Board of Directors. In calculating the value of the relevant
subsidiary's total assets, loans will be valued at fair value as determined in
good faith by that subsidiary's Board of Directors. In making such
determinations, the Board of Directors will value loans and nonconvertible
debt securities for which there exists no public trading market at cost plus
amortized original issue discount, if any, unless adverse factors lead to a
determination of a lesser value, at which time net unrealized depreciation of
investments would be recognized. Convertible debt securities and warrants are
valued to reflect the worth of the underlying equity security less the
conversion or exercise price. In valuing equity securities for which there
exists no public trading market, investment cost is presumed to represent fair
value except in cases where the valuation policy provides that the Board of
Directors may determine fair value on the basis of (i) financings by
unaffiliated investors, (ii) a history of positive cash flow from operations
for two years using conservative financial measures such as earnings ratios or
cash flow multiples, (iii) the market value of comparable companies which are
publicly traded (discounted for illiquidity) and (iv) other pertinent factors.

A substantial portion of each of the RIC Subsidiaries' assets will consist
of loans carried at fair values determined by such subsidiary's Board of
Directors. Independent public accountants will review and express an opinion
as to the reasonableness of the basis used by such Boards of Directors in
determining the valuation of loans and investments, the adequacy of the
procedures applied by the directors in valuing such loans and investments and
the appropriateness of the underlying documentation. However, determination of
fair values involves subjective judgment not susceptible to substantiation by
auditing procedures. Accordingly, under current standards, the accountants'
opinion on the Financial Statements included in this Prospectus refers to the
uncertainty with respect to the possible effect on such Financial Statements
of such valuations.

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DIVIDEND REINVESTMENT PLAN

Pursuant to the Company's Dividend Reinvestment Plan (the "Reinvestment
Plan"), a stockholder whose shares are registered in his own name can have all
distributions reinvested in additional shares of Common Stock by The First
National Bank of Boston (the "Plan Agent") if the stockholder enrolls in the
Reinvestment Plan by delivering an Authorization Form to the Plan Agent prior
to the corresponding dividend declaration date. The Plan Agent will effect
purchases of Common Stock under the Reinvestment Plan in the open market.
Holders of Common Stock who do not elect to participate in the Reinvestment
Plan will receive all distributions in cash paid by check mailed directly to
the stockholder of record (or if the Common Stock is held in street or other
nominee name, then to the nominee) as of the relevant record date, by the Plan
Agent, as dividend disbursing agent. Stockholders whose shares are held in the
name of a broker or nominee or stockholders transferring such an account to a
new broker or nominee should contact the broker or nominee to determine
whether and how they may participate in the Reinvestment Plan.

The Plan Agent serves as agent for the holders of Common Stock in
administering the Reinvestment Plan. After the Company declares a dividend,
the Plan Agent will, as agent for the participants, receive the cash payment
and use it to buy Common Stock on the Nasdaq National Market or elsewhere for
the participants' accounts. The price of the shares will be the average market
price at which such shares were purchased by the Plan Agent.

Participants in the Reinvestment Plan may withdraw from the Reinvestment
Plan upon written notice to the Plan Agent. Such withdrawal will be effective
immediately if received not less than ten days prior to a dividend record
date; otherwise, it will be effective the day after the related dividend
distribution date. When a participant withdraws from the Reinvestment Plan or
upon termination of the Reinvestment Plan as provided below, certificates for
whole shares of Common Stock credited to his or her account under the
Reinvestment Plan will be issued and a cash payment will be made for any
fractional share of Common Stock credited to such account.

The Plan Agent will maintain each participant's account in the Reinvestment
Plan and will furnish monthly written confirmations of all transactions in
such account, including information needed by the stockholder for personal and
tax records. Common Stock in the account of each Reinvestment Plan participant
will be held by the Plan Agent in non-certificated form in the name of such
participant. Proxy materials relating to stockholders' meetings of the Company
will include those shares purchased as well as shares held pursuant to the
Reinvestment Plan.

In the case of participants whose beneficially owned shares are held in the
name of banks, brokers or other nominees, the Plan Agent will administer the
Reinvestment Plan on the basis of the number of shares of Common Stock
certified from time to time by the record holders as the amount held for the
account of such beneficial owners. Shares of Common Stock may be purchased by
the Plan Agent through any of the Underwriters, acting as broker or, after the
completion of this offering, dealer.

The Plan Agent's fees for the handling or reinvestment of dividends and
other distributions will be paid by the Company. Each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of
distributions. There are no other charges to participants for reinvesting
distributions.

Distributions are taxable whether paid in cash or reinvested in additional
shares, and the reinvestment of distributions pursuant to the Reinvestment
Plan will not relieve participants of any U.S. federal income tax or state
income tax that may be payable or required to be withheld on such
distributions. See "Federal Income Tax Considerations."

Experience under the Reinvestment Plan may indicate that changes are
desirable. Accordingly, the Company reserves the right to amend or terminate
the Reinvestment Plan as applied to any distribution paid subsequent to
written notice of the change sent to all stockholders of the Company at least
90 days before the record date for such distribution.

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The Reinvestment Plan also may be amended or terminated by the Plan Agent by
at least 90 days' written notice to all stockholders of the Company. All
correspondence concerning the Reinvestment Plan should be directed to, and
additional information can be obtained from, the Plan Agent at 160 Royall
Street, Canton, Massachusetts 02021 (telephone 617-575-2000).

FEDERAL INCOME TAX CONSIDERATIONS

GENERAL

The following summary of material federal income tax considerations is based
on current law and does not purport to deal with all aspects of taxation that
may be relevant to particular stockholders in light of their personal
investment or tax circumstances, or to certain types of stockholders
(including insurance companies, financial institutions, non-profit
institutions, ERISA plans and broker-dealers) subject to special treatment
under the federal income tax laws. Each prospective purchaser is advised to
consult his own tax adviser regarding the specific tax consequences to him of
the purchase, ownership and sale of the shares.

The Company plans to make an election to be taxed as a RIC under Sections
851 through 855 of the Code. The Company intends, during this and subsequent
taxable years, to operate in a manner that permits it to satisfy the
requirements for taxation as a RIC under the applicable provisions of the
Code, but no assurance can be given that it will operate in a manner so as to
qualify or remain qualified. The sections of the Code relating to
qualification and operation as a RIC are highly technical and complex. The
following sets forth the material aspects of the Code sections that govern the
federal income tax treatment of a RIC and its stockholders. This summary is
qualified in its entirety by the applicable Code provisions, rules and
regulations thereunder, and administrative and judicial interpretations
thereof.

In brief, if certain detailed conditions of the Code are met, business
development companies, such as the Company, that otherwise would be treated
for federal income tax purposes as corporations are generally not taxed at the
corporate level on their "investment company taxable income" that is currently
distributed to stockholders. This treatment substantially eliminates the
"double taxation" (i.e., taxation at both the corporate and stockholder
levels) that generally results from the use of corporate investment vehicles.
A RIC is, however, generally subject to federal income tax at regular
corporate rates on undistributed investment company taxable income.

Furthermore, in order to avoid a 4% nondeductible federal excise tax on
undistributed income and capital gains, the Company must distribute (or be
deemed to have distributed) by December 31 of each year at least 98% of its
ordinary income for such year, at least 98% of its capital gain net income
(which is the excess of its capital gain over its capital loss and is
generally computed on the basis of the one-year period ending on October 31 of
such year) and any amounts that were not distributed in the previous calendar
year and on which no income tax has been paid.

If the Company fails to qualify as a RIC in any year, it will be subject to
federal income tax as if it were a domestic corporation, and its stockholders
will be taxed in the same manner as stockholders of ordinary corporations. In
this event, the Company could be subject to potentially significant tax
liabilities and the amount of cash available for distribution to its
stockholders could be reduced.

REQUIREMENTS FOR QUALIFICATION

The Code defines the term "RIC" to include a domestic corporation that has
elected to be treated as a business development company under the 1940 Act and
meets certain requirements. These requirements include that (a) the company
derive at least 90% of its gross income for each taxable year from dividends,
interest, interest payments with respect to securities loans and gains from
the sale or other disposition of stocks or securities or foreign currencies,
or other income derived from its business of investing in such stocks,
securities or currencies; (b) the company derives less than 30% of its gross
income for each taxable year from the sale or

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other disposition of any of the following that are held for less than three
months: (i) stock or securities and (ii) certain other financial interests
(the "short-short test"); and (c) the company diversifies its holdings so
that, at the close of each quarter of its taxable year, (i) at least 50% of
the value of its total assets is represented by (A) cash, and cash items
(including receivables), U.S. Government securities and securities of other
RICs, and (B) other securities limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the total assets of the
company and to not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of total assets is invested in
the securities (other than U.S. Government securities or securities of other
RICs) of any one issuer or two or of more issuers controlled by the company
and engaged in the same, similar or related trades or businesses. The
foregoing diversification requirements under the Code could restrict the
Company's expansion of its taxicab rooftop advertising business. See "Risk
Factors -- Possible Loss of Pass-Through Tax Treatment."

Furthermore, in order to qualify as a RIC under the Code, each taxable year,
a company also must distribute to its stockholders at least 90% of (a) its
investment company taxable income and (b) the excess of its tax-exempt
interest income over certain disallowed deductions.

TAXATION OF THE COMPANY

Provided that the Company satisfies the above requirements, neither the
investment company taxable income it distributes to stockholders nor any net
capital gain that is distributed to stockholders should subject the Company to
federal income tax. Investment company taxable income and/or net capital gains
that are retained by the Company should be subject to federal income tax at
regular corporate income tax rates; provided, however, that to the extent that
the Company retains any net long-term capital gains, it may designate them as
"deemed distributions" and pay a tax thereon for the benefit of its
stockholders. The Company currently intends to distribute to its stockholders
for each of its taxable years substantially all of its investment company
taxable income and may or may not distribute any capital gains.

If the Company acquires debt obligations that were originally issued at a
discount, or that bear interest rates that do not call for payments at fixed
rates (or certain "qualified variable rates") at regular intervals over the
life of the obligation, it will be required to include as interest income each
year a portion of the "original issue discount" that accrues over the life of
the obligation regardless of whether it receives the income, and it will be
obligated to make distributions accordingly. In this event, the Company may
borrow funds or sell assets to meet the distribution requirements. However,
under the 1940 Act, the Company will not be permitted to make distributions to
stockholders while senior securities are outstanding unless it meets certain
asset coverage requirements. If the Company is unable to make the required
distributions, it may fail to qualify as a RIC and may be subject to the
nondeductible 4% excise tax. Furthermore, the SBA restricts the distributions
that may be made to an amount equal to undistributed net realized earnings
less the allowance for unrealized loan losses (which in the case of the
Company is included in unrealized depreciation).

TAXATION OF STOCKHOLDERS

As long as the Company qualifies as a RIC, distributions made to its taxable
domestic stockholders out of current or accumulated earnings and profits (and
not designated as capital gain dividends) will be taken into account by them
as ordinary income. Distributions that are designated as capital gain
dividends will be taxed as long-term capital gains (to the extent they do not
exceed the Company's actual net long-term capital gain for the taxable year)
without regard to the period for which the stockholder has held its stock.
Corporate stockholders however, are subject to tax on capital gain dividends
at the same rate as ordinary income. To the extent that the Company makes
distributions in excess of current and accumulated earnings and profits, these
distributions are treated first as a tax-free return of capital to the
stockholder, reducing the tax basis of a stockholder's Common Stock by the
amount of such distribution (but not below zero), with distributions in excess
of the stockholders's tax basis taxable as capital gains (if the Common Stock
is held as a capital asset). In addition, any dividends declared by the
Company in October, November or December of any year and payable to a
stockholder of record on a specific date in any such month shall be treated as
both paid by the Company and received by the

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stockholder on December 31 of such year, provided that the dividend is
actually paid by the Company during January of the following calendar year.
Stockholders may not include in their individual income tax returns any net
operating losses or capital losses of the Company.

If the Company chooses to retain and pay tax on any net capital gain rather
than distribute such gain to its stockholders, the Company will designate such
deemed distribution in a written notice to stockholders prior to the
expiration of 60 days after the close of the taxable year. Each stockholder
would then be treated for federal income tax purposes as if the Company had
distributed to such stockholder on the last day of its taxable year the
stockholder's pro rata share of the net long-term capital gain retained by the
Company and the stockholder had paid its pro rata share of the taxes paid by
the Company and reinvested the remainder in the Company.

In general, any loss upon a sale or exchange of Common Stock by a
stockholder who has held such stock for six months or less (after applying
certain holding period rules) will be treated as long-term capital loss, to
the extent of distributions from the Company required to be treated by such
stockholder as long-term capital gains.

BACKUP WITHHOLDING

The Company will report to its domestic stockholders and to the Internal
Revenue Service the amount of dividends paid during each calendar year and the
amount of tax withheld, if any, with respect thereto. Under backup withholding
rules, a stockholder may be subject to backup withholding at the rate of 31%
with respect to dividends paid unless such stockholder (a) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact, or (b) provides a taxpayer identification number, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A stockholder that
does not provide the Company with its correct taxpayer identification number
may also be subject to penalties imposed by the Internal Revenue Service. Any
amount paid as backup withholding will be creditable against the stockholder's
federal income tax liability.

OTHER TAX CONSIDERATIONS

Reinvestment Plan

Stockholders participating in the Reinvestment Plan will be deemed to have
received the gross amount of any cash distributions which would have been paid
by the Company to such stockholders had they not elected to participate. These
deemed distributions will be treated as actual distributions from the Company
to the participating stockholders and will retain the character and tax effect
applicable to distributions from the Company generally. Participants in the
Reinvestment Plan are subject to federal income tax on the amount of the
deemed distributions to the extent that such distributions represent dividends
or gains, even though they receive no cash. Shares of Common Stock received
under the Reinvestment Plan will have a holding period beginning with the day
after purchase, and a tax basis equal to their cost (which is the gross amount
of the deemed distribution). See "Dividend Reinvestment Plan."

State, Local and Foreign Taxes

The Company and its stockholders may be subject to state, local or foreign
taxation in various jurisdictions, including those in which it or they
transact business or reside. The state, local and foreign tax treatment of the
Company and its stockholders may not conform to the federal income tax
consequences discussed above. Consequently, prospective stockholders should
consult their own tax advisers regarding the effect of state, local and
foreign tax laws on an investment in the Common Stock of the Company.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of 1,000,000 shares of
Preferred Stock, par value $.01 per share and 15,000,000 shares of Common
Stock, par value $.01 per share. Upon completion of the Offering, the Company
will have outstanding 7,500,000 shares of Common Stock (8,250,000 shares of
Common Stock if the Underwriters' over-allotment option is exercised in full)
and no shares of Preferred Stock. As of April 26, 1996, there were no shares
of Preferred Stock outstanding and 2,500,000 shares of Common Stock
outstanding and two record holders.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors.

Subject to the rights of any then outstanding shares of Preferred Stock, the
holders of the Common Stock are entitled to such dividends as may be declared
in the discretion of the Board of Directors out of funds legally available
therefor. See "Distributions." Holders of Common Stock are entitled to share
ratably in the net assets of the Company upon liquidation after payment or
provision for all liabilities and any preferential liquidation rights of any
Preferred Stock then outstanding. The holders of Common Stock have no
preemptive rights to purchase shares of stock of the Company. Shares of Common
Stock are not subject to any redemption provisions and are not convertible
into any other securities of the Company. All outstanding shares of Common
Stock are, and the shares of Common Stock to be issued pursuant to the
Offering will be upon payment therefor, fully paid and non-assessable.

PREFERRED STOCK

Subject to the asset coverage requirements of the 1940 Act, Preferred Stock
may be issued from time to time by the Board of Directors as shares of one or
more classes or series. Subject to the provisions of the Company's Certificate
and limitations prescribed by law, the Board of Directors is expressly
authorized to adopt resolutions to issue the shares, to fix the number of
shares and to change the number of shares constituting any series, and to
provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any class or series of the
Preferred Stock, in each case without any further action or vote by the
stockholders. The Company has no current plans to issue any shares of
Preferred Stock of any class or series.

One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest,
merger or otherwise, and thereby to protect the continuity of the Company's
management. The issuance of shares of the Preferred Stock pursuant to the
Board of Directors' authority described above may adversely affect the rights
of the holders of Common Stock. For example, Preferred Stock issued by the
Company may rank prior to the Common Stock as to dividend rights, liquidation
preference or both, may have full or limited voting rights and may be
convertible into shares of Common Stock. Accordingly, the issuance of shares
of Preferred Stock may discourage bids for the Common Stock or may otherwise
adversely affect the market price of the Common Stock.

LIMITATION ON DIRECTORS' LIABILITIES

Pursuant to the Company's Certificate and under Delaware law, directors of
the Company are not liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty, except for liability in connection with
a breach of duty of loyalty, for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, for dividend
payments or stock repurchases illegal under Delaware law or any transaction in
which a director has derived an improper personal benefit.

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AUTHORIZED AND OUTSTANDING COMMON STOCK

The following table illustrates authorized and outstanding securities of the
Company on April 26, 1996:

AUTHORIZED AND OUTSTANDING SECURITIES

<TABLE>
<CAPTION>
(1) (2) (3) (4)
AMOUNT HELD BY
THE COMPANY OR AMOUNT
TITLE OF CLASS AMOUNT AUTHORIZED FOR ITS ACCOUNT OUTSTANDING(1)
-------------- ----------------- --------------- --------------
<S> <C> <C> <C>
Common Stock................... 15,000,000 -- 2,500,000
Preferred Stock................ 1,000,000 -- --
</TABLE>
- ----------
(1) Assumes a 12,500 for one stock split but does not give effect to the
Offering.

DELAWARE LAW AND CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
THE BY-LAWS

The Company's Certificate and By-Laws include provisions that could make
more difficult the acquisition of the Company by means of a merger, tender
offer, a proxy contest or otherwise. These provisions, as described below, are
expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control
of the Company first to negotiate with the Company. These provisions may also,
however, inhibit a change in control of the Company in circumstances that
could give the holders of the Common Stock the opportunity to realize a
premium over the then prevailing market price of the Common Stock. In
addition, such provisions could adversely affect the market price for the
Common Stock. The Company believes that the benefits of increased protection
of its potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure the Company outweigh the
disadvantages of discouraging such proposals because, among other things,
negotiations with respect to such proposals could result in an improvement of
their terms.

The Certificate and the By-Laws provide that the Board of Directors (the
"Board") will be divided into three classes of directors, with the term of
each class expiring in a different year. See "Management." The By-Laws provide
that the number of directors will be fixed from time to time exclusively by
the Board, but shall consist of not more than 15 nor less than three
directors. A majority of the Board then in office has the sole authority to
fill any vacancies on the Board. The Certificate provides that directors may
be removed only by the affirmative vote of holders of at least 75% of the
voting power of all of the then outstanding shares of stock entitled to vote
generally in the election of directors ("Voting Stock"), voting together as a
single class.

The Certificate provides that stockholder action can be taken only at an
annual or special meeting of stockholders and prohibits stockholder action by
written consent in lieu of a meeting. The Certificate and By-Laws provide that
special meetings of stockholders can be called by the Chairman of the Board of
the Company, pursuant to a resolution approved by a majority of the total
number of directors which the Company would have if there were no vacancies on
the Board, or by the stockholders owning at least 20% of the stock entitled to
vote at the meeting. The business permitted to be conducted at any special
meeting of stockholders is limited to the business brought before the meeting
by the Chairman of the Board, or at the request of a majority of the members
of the Board, or as specified in the stockholders' notice of a meeting.

The By-Laws set forth an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board, of candidates for
election as directors and with regard to business brought before an annual
meeting of stockholders of the Company.

The Certificate and By-Laws contain provisions requiring the affirmative
vote of the holders of at least 75% of the Voting Stock, voting together as a
single class, to amend certain provisions of the Certificate relating
primarily to anti-takeover provisions and to the limitations on director
liability and to amend the By-Laws.

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The Certificate empowers the Board, when considering a tender offer or
merger or acquisition proposal, to take into account factors in addition to
potential economic benefits to stockholders. Such factors may include
(i) comparison of the proposed consideration to be received by stockholders in
relation to the then current market price of the capital stock, the estimated
current value of the Company in a freely negotiated transaction, and the
estimated future value of the Company as an independent entity; (ii) the
impact of such a transaction on the customers and employees of the Company,
and its effect on the communities in which the Company operates; and (iii) the
ability of the Company to fulfill its objectives under applicable statutes and
regulations.

The Certificate prohibits the Company from purchasing any shares of the
Company's stock from any person, entity or group that beneficially owns 5% or
more of the Company's Voting Stock at a price exceeding the average closing
price for the 20 trading days prior to the purchase date, unless a majority of
the Company's disinterested stockholders approve the transaction. This
restriction on purchases by the Company does not apply to any offer to
purchase shares of a class of the Company's stock which is made on the same
terms and conditions to all holders of that class of stock, to any purchase of
stock owned by such a 5% stockholder occurring more than two years after such
stockholder's last acquisition of the Company's stock, to any purchase of the
Company's stock in accordance with the terms of any stock option or employee
benefit plan, or to any purchase at prevailing market prices pursuant to a
stock purchase program.

Section 203 of the Delaware General Corporation Law ("DGCL") is applicable
to corporations organized under the laws of the State of Delaware. Subject to
certain exceptions set forth therein, Section 203 of the DGCL provides that a
corporation shall not engage in any business combination with any "interested
stockholder" for a three-year period following the date that such stockholder
becomes an interested stockholder unless (a) prior to such date, the Board of
Directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (b) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding certain shares) or (c) on or
subsequent to such date, the business combination is approved by the Board of
Directors of the corporation and by the affirmative vote of at least 66 2/3%
of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified therein, an interested stockholder is defined
to mean any person that (i) is the owner of 15% or more of the outstanding
voting stock of the corporation, or (ii) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within three years immediately prior to the
relevant date, and the affiliates and associates of such person referred to in
clause (i) or (ii) of this sentence. Under certain circumstances, Section 203
of the DGCL makes it more difficult for an interested stockholder to effect
various business combinations with a corporation for a three-year period,
although the stockholders may, by adopting an amendment to the corporation's
certificate of incorporation or by-laws, elect not to be governed by this
section, effective twelve months after adoption. The Company's Certificate and
By-Laws do not exclude the Company from the restrictions imposed under Section
203 of the DGCL. It is anticipated that the provisions of Section 203 of the
DGCL may encourage companies interested in acquiring the Company to negotiate
in advance with the Board.

REGULATION

The Company is a closed-end, non-diversified management investment company
that has elected to be treated as a business development company and, as such,
is subject to regulation under the 1940 Act. The 1940 Act contains
prohibitions and restrictions relating to transactions between investment
companies and their affiliates, principal underwriters and affiliates of those
affiliates or underwriters. In addition, the 1940 Act provides that the
Company may not change the nature of its business so as to cease to be, or to
withdraw its election as, a business development company unless so authorized
by the vote of a "majority of the Company's outstanding voting securities," as
defined under the 1940 Act.

The Company is permitted, under specified conditions, to issue multiple
classes of indebtedness and one class of stock (collectively, "senior
securities," as defined under the 1940 Act) senior to the shares of Common

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Stock offered hereby if the Company's asset coverage of such indebtedness and
all senior securities is at least 200% immediately after each such issuance.
Subordinated debentures and preferred stock guaranteed by or issued to the SBA
by the RIC Subsidiaries, are not subject to this asset coverage test. In
addition, while senior securities are outstanding, provision must be made to
prohibit the declaration of any dividend or other distribution to stockholders
(except stock dividends) or the repurchase of such securities or shares unless
the Company meets the applicable asset coverage ratios at the time of the
declaration of the dividend or distribution or repurchase.

Under the 1940 Act, a business development company may not acquire any asset
other than assets of the type listed in Section 55(a) of the 1940 Act
("Qualifying Assets") unless, at the time the acquisition is made, certain
Qualifying Assets represent at least 70% of the value of the company's total
assets. The principal categories of Qualifying Assets relevant to the proposed
business of the Company are the following:

(1) Securities purchased in transactions not involving a public offering
from the issuer of such securities, which issuer is an eligible
portfolio company. An "eligible portfolio company" is defined in the
1940 Act as any issuer which:

(a) is organized under the laws of, and has its principal place of
business in, the United States;

(b) is not an investment company other than an SBIC or SSBIC wholly-
owned by the business development company; and

(2) Securities of any eligible portfolio company which is controlled by
the business development company.

(3) Securities received in exchange for or distributed on or with respect
to securities described in (1) or (2) above, or pursuant to the
exercise of options, warrants or rights relating to such securities.

(4) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of investment.

In addition, a business development company must have been organized (and
have its principal place of business) in the United States for the purpose of
making investments in the types of securities described in (1) or (2) above.
In order to count securities as Qualifying Assets for the purpose of the 70%
test, the business development company must either control the issuer of the
securities or must make available to the issuer of the securities significant
managerial assistance; except that, where the business development company
purchases such securities in conjunction with one or more other persons acting
together, one of the other persons in the group may make available the
required managerial assistance. The Company believes that the common stock of
the Founding Companies held by Medallion Financial will be Qualifying Assets.

Edwards is a small business investment company or "SBIC" and MFC and TCC are
specialized small business investment companies or "SSBICs." The SBIA
authorizes the organization of SBICs as vehicles for providing equity capital,
long term financing and management assistance to small business concerns. A
small business concern, as defined in the SBIA and the SBA Regulations, is a
business that is independently owned and operated and which is not dominant in
its field of operation. The SBIA further authorizes the organization of SSBICs
as vehicles for providing the same forms of assistance to small business
concerns which are at least 50% owned and managed by persons whose
participation in the free enterprise system is hampered because of social or
economic disadvantages. Disadvantaged Borrowers include African Americans,
Asian Sub-Continent Americans, Eskimos, Hispanic Americans, Native Americans,
Vietnam War era veterans and other groups identified by the SBA. A small
business concern must either (i) have a tangible net worth, together with any
affiliates, of $18.0 million or less and an average annual net income after
U.S. federal income taxes for the preceding two years of $6.0 million or less
(average annual net income is computed without the benefit of any carryover
loss) or (ii) satisfy alternative criteria under the SBA Regulations that
focus on the industry in which the business is engaged and the number of
persons employed by the business or its gross revenues. In addition, at the
end of each fiscal year, at least 20% of the total amount of loans made since
April 25, 1994 by each SBIC

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and SSBIC must be made to a subclass of small business concerns that (i) have
a net worth, together with any affiliates, of $6.0 million or less and average
annual net income after U.S. federal income taxes for the preceding two years
of $2.0 million or less (average annual net income is computed without the
benefit of any carryover loss), or (ii) satisfy alternative criteria under SBA
Regulations that focus on the industry in which the business is engaged and
the number of persons employed by the business or its gross revenues. SBA
Regulations also prohibit an SBIC from providing funds to a small business
concern for certain purposes, such as re-lending and reinvestment.

Under current SBA Regulations and subject to local usury laws, the maximum
rate of interest that MFC, TCC or Edwards may charge may not exceed (i) the
higher of 19% and (ii) the sum of (a) the higher of (I) that company's
weighted average cost of qualified borrowings, as determined under SBA
Regulations, or (II) the current subordinated SBA debenture rate, plus (b)
11%, rounded off to the next lower eighth of one percent. The maximum rate of
interest permitted on loans originated by the RIC Subsidiaries during December
31, 1995 was 15% per annum. Effective January 31, 1996, the maximum permitted
rate was increased to 19%. At December 31, 1995, the Company's outstanding
Medallion Loans had a weighted average rate of interest of 9.90% and
outstanding Commercial Installment Loans had a weighted average rate of
interest of 13.53%. See "Business." SBA Regulations also require that each
loan originated by SBICs have a term of between five years and 20 years;
however, loans to Disadvantaged Borrowers may be for a minimum of four years.
SBA Regulations require that each loan originated by an SSBIC have a term of
between four years and 20 years and that 50% of such loans have terms of at
least five years.

The SBA restricts the ability of SBICs and SSBICs to repurchase their
capital stock, to retire their subordinated SBA debentures and to lend money
to their officers, directors and employees or invest in affiliates thereof.
The SBA also prohibits, without prior SBA approval, a "change of control" or
transfers which would result in any person (or group of persons acting in
concert) owning 10% or more of any class of capital stock of an SBIC or SSBIC.
A "change of control" is any event which would result in the transfer of the
power, direct or indirect, to direct the management and policies of an SBIC or
SSBIC, whether through ownership, contractual arrangements or otherwise.

Under SBA Regulations, without prior SBA approval, loans by licensees with
outstanding SBA leverage to any single small business concern may not exceed
20% of an SBIC's Leveragable Capital or 30% of an SSBIC's Leveragable Capital.

SSBICs and SBICs must invest funds that are not being used to make loans in
investments permitted under SBA Regulations. These permitted investments
include direct obligations of, or obligations guaranteed as to principal and
interest by, the government of the United States with a term of 15 months or
less and deposits maturing in one year or less issued by an institution
insured by the FDIC. The percentage of an SSBICs or SBICs assets so invested
will depend on, among other things, loan demand, timing of equity infusions
and SBA funding and availability of funds under credit facilities.

SSBICs and SBICs may purchase voting securities of small business concerns
in accordance with SBA Regulations. SBA Regulations prohibit SSBICs and SBICs
from controlling a small business concern except where necessary to protect an
investment. SBA Regulations presume control when SSBICs and SBICs purchase (i)
50% or more of the voting securities of a small business concern if the small
business concern has less than 50 stockholders or (ii) more than 20% (and in
certain situations up to 25%) of the voting securities of a small business
concern if the small business concern has 50 or more stockholders.

SHARES ELIGIBLE FOR FUTURE SALE

78
<PAGE>

will be available for sale shortly after the Offering because of certain
contractual and legal restrictions on resale. Sales of substantial amounts of
Common Stock in the public market after these restrictions lapse could
adversely affect the prevailing market price and the ability of the Company to
raise equity capital in the future.

Upon completion of the Offering, the Company will have outstanding 7,500,000
shares of Common Stock (8,250,000 if the Underwriter's over-allotment option
is exercised in full). Of these shares, the 5,000,000 shares offered hereby
(5,750,000 if the Underwriters' over-allotment option is exercised in full)
will be freely tradable without restriction or registration under the
Securities Act (except to the extent purchased by affiliates of the Company).

SALES OF RESTRICTED SHARES

The remaining 2,500,000 shares (the "Restricted Shares") were issued and
sold by the Company in private transactions in reliance upon exemptions from
registration under the Securities Act and are restricted securities under Rule
144 of the Securities Act. These shares were issued and sold at the Company's
inception on October 23, 1995 at their fair value at the time of $2,000 or,
after giving effect to a 12,500 for one stock split expected to be effected
prior to completion of the Offering, less than one cent per share. All of the
Restricted Shares are subject to Lock-up Agreements for a period of two years
from the date of this Prospectus as described below. The Restricted Shares
will not be eligible for sale pursuant to Rule 144 until the expiration of the
two-year holding period from the date such Restricted Shares were acquired.
Accordingly they will become eligible for sale subject to the Rule 144 resale
limitations, including the volume restrictions discussed in the following
paragraph, on October 23, 1997. The Commission has proposed amendments to Rule
144 that would, if adopted, retroactively reduce the two-year holding period
to one year.

Restricted Shares may not be sold unless they are registered under the
Securities Act or are sold pursuant to an applicable exemption from
registration, including pursuant to Rule 144. In general, under Rule 144 as
currently in effect, beginning 90 days after the Offering, a person (or
persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least two years, including affiliates of the Company, would be
entitled to sell in brokers' transactions or to market makers within any
three-month period a number of Restricted Shares that does not exceed the
greater of one percent (1.0%) of the then outstanding shares of the Company's
Common Stock (approximately 75,000 shares, based on the number of shares
outstanding after the Offering assuming no exercise of the Underwriters' over-
allotment option) or the average weekly trading volume of the Common Stock on
the Nasdaq National Market during the four calendar weeks preceding the date
on which notice of the sale is filed with the Commission. Sales under Rule 144
are also subject to certain manner of sale provisions, notice requirements and
the availability of current public information about the Company. No
stockholder of the Company will have held his or her shares for two years
until October 23, 1997.

Restricted Shares held by affiliates of the Company eligible for sale in the
public market under Rule 144 are subject to the foregoing volume limitations
and other restrictions. Affiliates may sell shares not constituting Restricted
Shares only in accordance with the foregoing volume limitations and other Rule
144 restrictions, but without regard to the two-year holding period.

A person who is not an affiliate of the Company at any time during the 90
days preceding a sale, and who has beneficially owned Restricted Shares for at
least three years, would be entitled to sell such Restricted Shares under Rule
144(k) without regard to the availability of current public information,
volume limitations, manner of sale provisions or notice requirements. No
stockholder of the Company will have held Common Stock for three years until
October 23, 1998.

Rule 144A provides a non-exclusive safe harbor exemption from the
registration requirements of the Securities Act for specified resales of
restricted securities to certain institutional investors. Rule 144A allows
unregistered resales of restricted securities to a qualified institutional
buyer, which generally includes an entity, acting for its own account or the
account of other qualified institutional buyers, that in the aggregate owns
and invests on a discretionary basis at least $100 million in securities of
unaffiliated issuers. Rule 144A does not

79
<PAGE>

extend an exemption to the offer or sale of securities that, when issued, were
of the same class as securities listed on a national securities exchange or
quoted in an automated interdealer quotation system. Because the Restricted
Shares, when they were issued, were not of the same class as any listed or
quoted securities, all of such securities are eligible for resale under Rule
144A.

LOCK-UP AGREEMENTS

Pursuant to Lock-up Agreements with Alvin and Andrew Murstein and the
Murstein Trusts, all of the 2,500,000 Restricted Shares are subject to certain
resale restrictions in addition to those imposed under Rule 144. Each party to
these Lock-up Agreements has agreed that he will not, directly or indirectly,
offer for sale, sell, contract to sell, grant an option to purchase or
otherwise dispose of any shares of the Company's Common Stock, except (i)
shares escrowed by the Murstein Trusts for the benefit of FMC or (ii) gifts to
family members or charitable institutions, provided that such family member or
charitable institution agrees to be bound by such Lock-up Agreement, for a
period of two years from the date of this Prospectus without the prior written
consent of Furman Selz LLC. The consent of Furman Selz LLC will not affect the
resale restrictions under Rule 144. In addition, the Company and all of the
Company's other officers and directors have agreed that for a period of 180
days following the date of this Prospectus, they will not, without the prior
written consent of Furman Selz LLC, directly or indirectly, offer for sale,
sell, contract to sell, or grant any option to purchase or otherwise dispose
of any shares of the Common Stock, except, in the case of the Company, options
granted under the 1996 Plan or the Director Plan or shares issued pursuant to
the exercise of outstanding options. See "Underwriting."

OPTIONS

It is anticipated that prior to the closing of the Offering, Daniel F.
Baker, the Treasurer and Chief Financial Officer, Michael Fanger, an Executive
Vice President and Michael Kowalsky, an Executive Vice President, will be
granted stock options exercisable for 68,182, 68,182 and 45,456 shares of
Common Stock respectively. The exercise price per share for such shares will
be equal to the public offering price. These options will become exercisable
in five equal annual installments commencing one year after the date of this
Prospectus, except in the case of Mr. Kowalsky whose options shall become
exercisable in twelve equal quarterly installments. Including the shares
reserved for issuance in connection with that option, the Company will reserve
a total of 750,000 additional shares of Common Stock for issuance with respect
to the future grant of options under the 1996 Plan.

In addition, a total of 100,000 additional shares of Common Stock will be
reserved for issuance with respect to the grant of options under the Director
Plan. It is anticipated that upon Commission approval of the Director Plan,
the Company's four disinterested directors will be granted stock options to
purchase the number of shares of Common Stock determined by dividing $100,000
by the fair market value of the Common Stock on the date the plan is approved
by the Commission and multiplying the resulting quotient by a fraction
representing the portion of a three-year term that the director has been
elected to serve. Disinterested directors elected or reelected in the future
will receive a similar grant upon election or reelection.

Following the completion of the Offering, the Company currently expects to
file a registration statement under the Securities Act to register shares
reserved for issuance under the 1996 Plan and the Director Plan. Shares issued
upon exercise of outstanding stock options after the effective date of such
registration statement generally will be tradable without restriction under
the Securities Act.

80
<PAGE>

UNDERWRITING

Furman Selz LLC, J.C. Bradford & Co. and EVEREN Securities, Inc. are acting
as representatives (the "Representatives") of each of the underwriters named
below (the "Underwriters"). Subject to the terms and conditions set forth in
the underwriting agreement dated as of the date hereof (the "Underwriting
Agreement"), the Underwriters named below have severally agreed to purchase,
and the Company has agreed to sell to them, the aggregate number of shares of
Common Stock set forth opposite their respective names:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Furman Selz LLC................................................. 1,190,000
J.C. Bradford & Co. ............................................ 1,180,000
EVEREN Securities, Inc. ........................................ 1,180,000
Bear, Stearns & Co. Inc. ....................................... 100,000
Dillon, Read & Co. Inc. ........................................ 100,000
Donaldson, Lufkin & Jenrette Securities Corporation............. 100,000
Lehman Brothers Inc. ........................................... 100,000
Morgan Stanley & Co. Incorporated............................... 100,000
Oppenheimer & Co., Inc. ........................................ 100,000
William Blair & Company, L.L.C. ................................ 50,000
The Chicago Corporation......................................... 50,000
Dain Bosworth Incorporated...................................... 50,000
Dominick & Dominick, Incorporated............................... 50,000
Fahnestock & Co. Inc. .......................................... 50,000
First of Michigan Corporation................................... 50,000
Hoak Securities Corp. .......................................... 50,000
Howe Barnes Investments Inc. ................................... 50,000
Ladenburg, Thalmann & Co. Inc. ................................. 50,000
McDonald & Company Securities, Inc. ............................ 50,000
Mesirow Financial, Inc. ........................................ 50,000
Pennsylvania Merchant Group Ltd................................. 50,000
Raymond James & Associates, Inc. ............................... 50,000
The Robinson-Humphrey Company, Inc. ............................ 50,000
Scott & Stringfellow, Inc. ..................................... 50,000
The Seidler Companies Incorporated.............................. 50,000
Wheat First Butcher Singer...................................... 50,000
---------
Total......................................................... 5,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel
and various other conditions. The nature of the Underwriters' obligations is
such that they are committed to purchase all of the above shares if any are
purchased. The Underwriters propose to offer the shares of Common Stock
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $0.46 per share. The Underwriters may allow, and
such dealers may re-allow, a concession not in excess of $0.10 per share to
certain other dealers. After the Offering, the offering price and other
selling terms may be changed by the Representatives.

Prior to the consummation of the Offering, there has been no public market
for the Common Stock. Accordingly, the initial public offering price has been
determined by negotiation between the Company and the Representatives. Among
the factors considered in determining the initial public offering price were
the history of and prospects for the businesses in which the Company operates,
the Company's past and present operations, the Founding Companies' loan
portfolio quality, past and present revenue and earnings and the trends in
such

81
<PAGE>

revenue and earnings, previous valuations of the Company, expert opinion, the
prospects for the Company's revenue and earnings, an assessment of the
Company's management, stock prices of comparable finance companies and out-of-
home advertising companies and the general condition of the securities markets
at the time of the Offering. There can be no assurance that any active trading
market will develop for the Common Stock or as to the price at which the
Common Stock may trade in the public market from time to time subsequent to
the Offering made hereby.

The Company has granted to the Underwriters an option, expiring 30 days from
the date of this Prospectus, to purchase up to 750,000 additional shares of
Common Stock on the same terms as set forth on the cover page of this
Prospectus, solely to cover over-allotments, if any, incurred in the sale of
the shares of Common Stock offered hereby. If the Underwriters exercise the
option, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase such number of additional shares of Common Stock as is
proportionate to such Underwriter's initial commitment to purchase shares from
the Company.

Since December 1994, EVEREN Securities, Inc. has provided financial advisory
services to the Company with respect to the Acquisitions, the structure of the
Company, the capital markets and the Offering. For these services, the Company
will pay EVEREN Securities, Inc. a financial advisory fee of $225,000. See
"Certain Transactions."

Pursuant to Lock-up Agreements, Alvin and Andrew Murstein and the Murstein
Trusts have agreed that they will not, directly or indirectly, offer for sale,
sell, contract to sell, grant an option to purchase or otherwise dispose of
any shares of the Company's Common Stock, except (i) shares escrowed by the
Murstein Trusts for the benefit of FMC or (ii) gifts to family members or
charitable institutions, provided that such family member or charitable
institution agrees to be bound by such Lock-up Agreement, for a period of two
years from the date of this Prospectus, without the prior written consent of
Furman Selz LLC. In addition, the Company and all of the Company's other
officers and directors have agreed that for a period of 180 days from the date
of this Prospectus, they will not, without the prior written consent of Furman
Selz LLC, directly or indirectly, offer for sale, sell, contract to sell, or
grant any option to purchase or otherwise dispose of any shares of Common
Stock, except, in the case of the Company, options granted under the 1996
Plan, the Director Plan or shares issued pursuant to the exercise of
outstanding options.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make in respect thereof.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "TAXI."

The principal address of Furman Selz LLC is 230 Park Avenue, New York, New
York 10169, the principal address of J.C. Bradford & Co. is 330 Commerce
Street, Nashville, Tennessee 37201 and the principal address of EVEREN
Securities, Inc. is 77 West Wacker Drive, Chicago, Illinois 60601.

CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING
AGENT AND REGISTRAR

The First National Bank of Boston, 160 Royall Street, Canton, Massachusetts
02021, serves as the custodian, transfer agent, dividend disbursing agent and
registrar for the Company's Common Stock.

82
<PAGE>

REPORTS TO STOCKHOLDERS

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports containing
unaudited consolidated financial information for the first three quarters of
each fiscal year.

VALIDITY OF SHARES

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Palmer & Dodge LLP, Boston, Massachusetts, and for the
Underwriters by Willkie Farr & Gallagher, New York, New York. Mario M. Cuomo,
a partner in the firm of Willkie Farr & Gallagher, is a director of the
Company.

EXPERTS

The balance sheet of Medallion Financial as of December 31, 1995; the
financial statements of Tri-Magna as of December 31, 1995 and 1994 and for the
years ended December 31, 1995, 1994 and 1993; the financial statements of
Edwards as of December 31, 1995 and for the year ended December 31, 1995, and
the financial statements of TCC as of December 31, 1995, and for the year
ended December 31, 1995, included in this Prospectus have been so included in
reliance on the report of Arthur Andersen LLP, Boston, Massachusetts
independent accountants, given on the authority of that firm as experts in
auditing and accounting. The financial statements of Edwards as of December
31, 1994 and for the years ended December 31, 1994 and 1993 included in this
Prospectus have been so included in reliance on the report of Friedman, Alpren
& Green LLP, New York, New York, independent accountants, given on the
authority of that firm as experts in accounting and auditing. The balance
sheet of TCC, including the financial statement schedules, as of December 31,
1994 and the related statements of operations, shareholders' equity, and cash
flows for each of the two years in the period then ended, included in this
Prospectus, have been included herein in reliance on the report of Coopers &
Lybrand LLP, New York, New York, independent accountants, given on the
authority of that firm as experts in accounting and auditing.

83
<PAGE>

MEDALLION FINANCIAL CORP.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MEDALLION FINANCIAL CORP.
Introduction to Pro Forma Combined Financial Statements.................. F-3
Pro Forma Balance Sheet as of December 31, 1995 (unaudited).............. F-4
Pro Forma Combined Statement of Operations for the year ended
December 31, 1995 (unaudited)........................................... F-5
Pro Forma Combined Statement of Operations for the three months ended
December 31, 1995 (unaudited)........................................... F-6
Pro Forma Combined Statement of Operations for the three months ended
September 30, 1995 (unaudited).......................................... F-7
Pro Forma Combined Statement of Operations for the three months ended
June 30, 1995 (unaudited)............................................... F-8
Pro Forma Combined Statement of Operations for the three months ended
March 31, 1995 (unaudited).............................................. F-9
Notes to the Unaudited Pro Forma Combined Financial Statements........... F-10
MEDALLION FINANCIAL CORP.
Report of Arthur Andersen LLP, Independent Public Accountants............ F-13
Balance Sheet as of December 31, 1995.................................... F-14
Notes to Balance Sheet................................................... F-15
TRI-MAGNA CORPORATION AND SUBSIDIARIES
Report of Arthur Andersen LLP, Independent Public Accountants............ F-18
Consolidated Balance Sheets as of December 31, 1995 and December 31,
1994.................................................................... F-19
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993..................................................... F-20
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993........................................ F-21
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993........................................ F-22
Notes to Consolidated Financial Statements............................... F-23
EDWARDS CAPITAL COMPANY (A LIMITED PARTNERSHIP)
Report of Friedman, Alpren & Green LLP, Independent Public Accountants... F-33
Report of Arthur Andersen LLP, Independent Public Accountants............ F-34
Balance Sheets as of December 31, 1995 and 1994.......................... F-35
Statements of Operations for the years ended December 31, 1995, 1994 and
1993.................................................................... F-36
Statements of Changes in Partners' Capital for the years ended
December 31, 1995, 1994 and 1993........................................ F-37
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.................................................................... F-38
Notes to Financial Statements............................................ F-39
TRANSPORTATION CAPITAL CORP.
Report of Coopers & Lybrand LLP, Independent Public Accountants.......... F-46
Report of Arthur Andersen LLP, Independent Public Accountants............ F-47
Balance Sheets as of December 31, 1995 and 1994.......................... F-48
Statements of Operations for the years ended December 31, 1995, 1994 and
1993.................................................................... F-49
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993........................................ F-50
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.................................................................... F-51
Notes to Financial Statements............................................ F-52
</TABLE>

F-1
<PAGE>

MEDALLION FINANCIAL CORP.

PRO FORMA COMBINED FINANCIAL STATEMENTS

F-2
<PAGE>

MEDALLION FINANCIAL CORP.

INTRODUCTION TO PRO FORMA COMBINED FINANCIAL STATEMENTS -- UNAUDITED

The following unaudited pro forma combined balance sheet as of December 31,
1995 and unaudited pro forma combined statements of operations for the year
ended December 31, 1995 and for each quarter in the year ended December 31,
1995 have been prepared to reflect the Offering, the application of the
proceeds of the Offering (including the acquisitions of Tri-Magna, Edwards and
TCC, which will be acquired by the Company simultaneously with the closing of
the Offering and the application of the cash acquired in connection with the
Acquisitions) and the adjustments described in the accompanying notes. The pro
forma combined financial information is based on the historical financial
statements of Medallion Financial, Tri-Magna, Edwards and TCC and should be
read in conjunction with those financial statements and the notes thereto, as
well as the estimates and assumptions set forth below and in the notes to the
pro forma combined financial statements. The pro forma combined balance sheet
was prepared as if the Offering and the application of the proceeds of the
Offering occurred on December 31, 1995. The pro forma combined statements of
operations were prepared as if the Offering and the application of the
proceeds of the Offering occurred on January 1, 1995.

Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate. Pro
forma purchase price adjustment allocations are based on the preliminary
results of the Company's due diligence, but are subject to change, since the
preliminary estimates of the fair value of assets acquired as a result of the
Acquisitions may change upon completion of the final analysis. The Company
does not expect any such changes to result in a material variation from the
information set forth in the pro forma combined balance sheet. The pro forma
combined financial information is not necessarily indicative of the financial
position or results of operations which actually would have occurred if such
transactions had been consummated on January 1, 1995 or December 31, 1995, as
applicable, nor does it purport to represent the Company's future financial
position or results of operations. Neither expected benefits and cost
reductions anticipated by the Company nor future corporate costs that are not
under contract have been reflected in the accompanying pro forma financial
statements.

F-3
<PAGE>

MEDALLION FINANCIAL CORP.

PRO FORMA COMBINED BALANCE SHEET

DECEMBER 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
ADJUSTMENTS
FOR ACQUISITIONS
ADJUSTMENTS --------------------------------------------
FOR TRI-MAGNA EDWARDS TCC
MEDALLION TRI-MAGNA EDWARDS TCC OFFERING ADJUSTMENTS(G) ADJUSTMENTS(H) ADJUSTMENTS(I)
--------- ----------- ----------- ----------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Medallion
loans.......... $ -- $66,337,669 $43,177,063 $ 7,988,404 $ -- $ -- $ -- $ (13,920)
Commercial
installment
loans.......... -- 30,618,747 621,728 1,808,324 -- (910,000) (20,000) (628,669)
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Gross
investments..... -- 96,956,416 43,798,791 9,796,728 -- (910,000) (20,000) (642,589)
Unrealized
depreciation on
investments.... -- (910,000) (20,000) (642,589) -- 910,000 20,000 642,589
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Net investments.. -- 96,046,416 43,778,791 9,154,139 -- -- -- --
Investment in
subsidiaries.... -- -- -- -- 38,923,961(d) (13,378,000) (15,196,725) (10,349,236)
Investment in
unconsolidated
subsidiary...... -- 145,335 -- -- -- (145,335) -- --
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total
investments..... -- 96,191,751 43,778,791 9,154,139 38,923,961 (13,523,335) (15,196,725) (10,349,236)
49,300,000 (a)
(49,300,000)(b)
Cash and cash
equivalents..... 2,000 1,177,166 115,571 7,780,717 (7,055,861)(c) (334,000) (115,571) --
Accrued interest
receivable...... -- 844,350 396,000 133,722 -- -- -- --
Deferred
financing
costs........... -- -- 353,683 -- -- -- (353,683) --
Fixed assets,
net............. -- 87,925 66,826 16,253 -- (87,925) (66,826) --
Goodwill......... -- -- -- -- -- -- 6,300,000 4,100
Other assets..... 716,217 1,486,974 373,116 72,877 (716,217)(f) (474,688) (262,468) --
Deferred income
taxes........... -- -- -- 257,900 -- -- -- (257,900)
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total assets..... $718,217 $99,788,166 $45,083,987 $17,415,608 $31,151,883 $(14,419,948) $(9,695,273) $(10,603,036)
======== =========== =========== =========== =========== ============ =========== ============
LIABILITIES
Accounts payable
and accrued
expenses........ $716,217 $ 1,290,267 $ 1,167,156 $ 171,888 $ (716,217)(f) $ -- $ (578,442) $ 129,413
Accrued interest
payable......... -- 889,147 -- 35,071 -- -- -- --
Notes payable to
bank and demand
notes .......... -- 80,294,900 9,850,000 -- (17,431,900)(e) -- -- --
SBA debentures
payable......... -- -- 24,950,000 6,730,000 -- -- -- (253,800)
Negative
goodwill........ -- -- -- -- -- 2,893,904 -- --
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total
liabilities..... 716,217 82,474,314 35,967,156 6,936,959 (18,148,117) 2,893,904 (578,442) (124,387)
Stockholders'
equity
Common stock..... 2,000 6,689 -- 13 49,300,000 (a) (6,689) -- (13)
Partners'
capital......... -- -- 9,116,831 -- -- -- (9,116,831) --
Additional paid-
in capital...... -- 10,594,241 -- 7,749,456 -- (10,594,241) -- (7,749,456)
Restricted
capital......... -- 6,002,100 -- 2,199,166 -- (6,002,100) -- (2,199,166)
Accumulated
undistributed
income (loss)... -- 710,822 -- 530,014 -- (710,822) -- (530,014)
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total
stockholders'
equity.......... 2,000 17,313,852 9,116,831 10,478,649 49,300,000 (17,313,852) (9,116,831) (10,478,649)
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total liabilities
and
stockholders'
equity.......... $718,217 $99,788,166 $45,083,987 $17,415,608 $31,151,883 $(14,419,948) $(9,695,273) $(10,603,036)
======== =========== =========== =========== =========== ============ =========== ============
<CAPTION>
PRO FORMA
------------
<S> <C>
ASSETS
Investments
Medallion
loans.......... $117,489,216
Commercial
installment
loans.......... 31,490,130
------------
Gross
investments..... 148,979,346
Unrealized
depreciation on
investments.... --
------------
Net investments.. 148,979,346
Investment in
subsidiaries.... --
Investment in
unconsolidated
subsidiary...... --
------------
Total
investments..... 148,979,346
Cash and cash
equivalents..... 1,570,022
Accrued interest
receivable...... 1,374,072
Deferred
financing
costs........... --
Fixed assets,
net............. 16,253
Goodwill......... 6,304,100
Other assets..... 1,195,811
Deferred income
taxes........... --
------------
Total assets..... $159,439,604
============
LIABILITIES
Accounts payable
and accrued
expenses........ $ 2,180,282
Accrued interest
payable......... 924,218
Notes payable to
bank and demand
notes .......... 72,713,000
SBA debentures
payable......... 31,426,200
Negative
goodwill........ 2,893,904
------------
Total
liabilities..... 110,137,604
Stockholders'
equity
Common stock..... 49,302,000
Partners'
capital......... --
Additional paid-
in capital...... --
Restricted
capital......... --
Accumulated
undistributed
income (loss)... --
------------
Total
stockholders'
equity.......... 49,302,000
------------
Total liabilities
and
stockholders'
equity.......... $159,439,604
============
</TABLE>

See accompanying notes to unaudited pro forma combined balance sheet.

F-4
<PAGE>

MEDALLION FINANCIAL CORP.

PRO FORMA COMBINED

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED
DECEMBER 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- ---------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $9,802,560 $4,316,669 $1,411,116 $15,530,345 $ -- $15,530,345
Interest Income on
Treasury Bills........ -- -- -- 425,318 425,318 (265,900)(l) 159,418
---- ---------- ---------- ---------- ----------- ---------- -----------
Total Investment
Income................ -- 9,802,560 4,316,669 1,836,434 15,955,663 (265,900) 15,689,763
---- ---------- ---------- ---------- ----------- ---------- -----------
Interest Expense
Notes Payable to Bank.. -- 5,253,924 754,404 -- 6,008,328 (448,766)(k) 5,559,562
SBA Debentures......... -- 780,254 1,993,075 450,071 3,223,400 (780,254)(k) 2,443,146
---- ---------- ---------- ---------- ----------- ---------- -----------
Total Interest
Expense............... -- 6,034,178 2,747,479 450,071 9,231,728 (1,229,020) 8,002,708
---- ---------- ---------- ---------- ----------- ---------- -----------
Net Interest Income..... -- 3,768,382 1,569,190 1,386,363 6,723,935 963,120 7,687,055
---- ---------- ---------- ---------- ----------- ---------- -----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 125,956 -- -- 125,956 -- 125,956
Accretion of Negative
Goodwill.............. -- -- -- -- -- 771,708 (j) 771,708
Other Income............ -- 446,209 443,190 -- 889,399 -- 889,399
---- ---------- ---------- ---------- ----------- ---------- -----------
Total Non-Interest
Income................ -- 572,165 443,190 -- 1,015,355 771,708 1,787,063
---- ---------- ---------- ---------- ----------- ---------- -----------
Expenses
Professional Fees...... -- 344,311 204,071 350,178 898,560 (182,346)(o) 716,214
Salaries and Benefits.. -- 1,170,577 387,277 259,986 1,817,840 (330,000)(n) 1,712,840
225,000 (o) --
Other Operating Ex-
penses................ -- 1,099,906 293,948 150,166 1,544,020 (72,056)(p) 1,427,732
(44,232)(q) --
Amortization of Good-
will.................. -- -- -- -- -- 420,000 (j) 420,000
---- ---------- ---------- ---------- ----------- ---------- -----------
Total Expenses......... -- 2,614,794 885,296 760,330 4,260,420 16,366 4,276,786
---- ---------- ---------- ---------- ----------- ---------- -----------
Dividends on Minority
Interest............... -- 207,774 -- -- 207,774 (207,774)(m) --
---- ---------- ---------- ---------- ----------- ---------- -----------
Net Investment Income
before income taxes.... -- 1,517,979 1,127,084 626,033 3,271,096 1,926,236 5,197,332
Income Taxes............ -- -- 40,111 381,224 421,335 (421,335)(r) --
---- ---------- ---------- ---------- ----------- ---------- -----------
Net Investment Income
after income taxes..... -- 1,517,979 1,086,973 244,809 2,849,761 2,347,571 5,197,332
Change in unrealized
depreciation........... -- (140,000) -- 335,261 195,261 -- 195,261
Net realized gain (loss)
on investments......... -- 61,194 -- (50,055) 11,139 -- 11,139
---- ---------- ---------- ---------- ----------- ---------- -----------
Net Increase in Net
Assets resulting from
Operations............. $-- $1,439,173 $1,086,973 $ 530,015 $ 3,056,161 $2,347,571 $ 5,403,732
==== ========== ========== ========== =========== ========== ===========
Pro forma net increase
in net assets resulting
from operations per
share.................. $ 0.72
===========
Pro forma weighted
average shares
outstanding............ 7,500,000
===========
</TABLE>

See accompanying notes to unaudited pro forma combined statement of operations.

F-5
<PAGE>

MEDALLION FINANCIAL CORP.

PRO FORMA COMBINED

STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
DECEMBER 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- -------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $2,610,642 $1,047,174 $338,972 $3,996,788 $ -- $3,996,788
Interest Income on
Treasury
Bills................. -- -- -- 97,177 97,177 (66,475)(l) 30,702
---- ---------- ---------- -------- ---------- --------- ----------
Total Investment
Income................ -- 2,610,642 1,047,174 436,149 4,093,965 (66,475) 4,027,490
---- ---------- ---------- -------- ---------- --------- ----------
Interest Expense
Notes Payable to Bank.. -- 1,603,727 175,914 -- 1,779,641 (351,293)(k) 1,428,348
SBA Debentures......... -- -- 498,269 91,342 589,611 -- 589,611
---- ---------- ---------- -------- ---------- --------- ----------
Total Interest
Expense............... -- 1,603,727 674,183 91,342 2,369,252 (351,293) 2,017,959
---- ---------- ---------- -------- ---------- --------- ----------
Net Interest Income..... -- 1,006,915 372,991 344,807 1,724,713 284,818 2,009,531
---- ---------- ---------- -------- ---------- --------- ----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 20,376 -- -- 20,376 -- 20,376
Accretion of Negative
Goodwill.............. -- -- -- -- -- 192,926 (j) 192,926
Other Income........... -- 131,492 132,068 -- 263,560 -- 263,560
---- ---------- ---------- -------- ---------- --------- ----------
Total Non-Interest
Income................ -- 151,868 132,068 -- 283,936 192,926 476,862
---- ---------- ---------- -------- ---------- --------- ----------
Expenses
Professional Fees...... -- -- 77,716 80,761 158,477 (45,587)(o) 112,890
Salaries and Benefits.. -- 337,867 100,124 58,541 496,532 (82,500)(n) 470,282
56,250 (o) --
Other Operating
Expenses.............. -- 283,517 65,090 35,077 383,684 (18,014)(p) 354,612
(11,058)(q) --
Amortization of
Goodwill.............. -- -- -- -- -- 105,000 (j) 105,000
---- ---------- ---------- -------- ---------- --------- ----------
Total Expenses......... -- 621,384 242,930 174,379 1,038,693 4,091 1,042,784
---- ---------- ---------- -------- ---------- --------- ----------
Dividends on Minority
Interest............... -- -- -- -- -- -- --
---- ---------- ---------- -------- ---------- --------- ----------
Net Investment Income
before
income taxes........... -- 537,399 262,129 170,428 969,956 473,653 1,443,609
Income Taxes............ -- -- 7,000 76,600 83,600 (83,600)(r) --
---- ---------- ---------- -------- ---------- --------- ----------
Net Investment Income
after
income taxes........... -- 537,399 255,129 93,828 886,356 557,253 1,443,609
Change in unrealized
depreciation........... -- (30,000) -- 46,687 16,687 -- 16,687
Net realized gain (loss)
on
investments............ -- 56,804 -- (22,463) 34,341 -- 34,341
---- ---------- ---------- -------- ---------- --------- ----------
Net Increase in Net
Assets
resulting from
Operations............. $-- $ 564,203 $ 255,129 $118,052 $ 937,384 $ 557,253 $1,494,637
==== ========== ========== ======== ========== ========= ==========
Pro forma net increase
in net
assets resulting from
operations per share... $ 0.20
==========
Pro forma weighted
average
shares outstanding..... 7,500,000
==========
</TABLE>

See accompanying notes to unaudited pro forma combined statement of operations.

F-6
<PAGE>

MEDALLION FINANCIAL CORP.

PRO FORMA COMBINED

STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- -------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $2,436,130 $1,104,389 $333,805 $3,874,324 $ -- $3,874,324
Interest Income on
Treasury
Bills................. -- -- -- 107,428 107,428 (66,475)(l) 40,953
---- ---------- ---------- -------- ---------- -------- ----------
Total Investment
Income................ -- 2,436,130 1,104,389 441,233 3,981,752 (66,475) 3,915,277
---- ---------- ---------- -------- ---------- -------- ----------
Interest Expense
Notes Payable to Bank.. -- 1,183,964 178,765 -- 1,362,729 (32,491)(k) 1,330,238
SBA Debentures......... -- 268,959 498,268 116,542 883,769 (268,959)(k) 614,810
---- ---------- ---------- -------- ---------- -------- ----------
Total Interest
Expense............... -- 1,452,923 677,033 116,542 2,246,498 (301,450) 1,945,048
---- ---------- ---------- -------- ---------- -------- ----------
Net Interest Income..... -- 983,207 427,356 324,691 1,735,254 234,975 1,970,229
---- ---------- ---------- -------- ---------- -------- ----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 18,727 -- -- 18,727 -- 18,727
Accretion of Negative
Goodwill.............. -- -- -- -- -- 192,928(j) 192,928
Other Income........... -- 109,143 90,307 -- 199,450 -- 199,450
---- ---------- ---------- -------- ---------- -------- ----------
Total Non-Interest
Income................ -- 127,870 90,307 -- 218,177 192,928 411,105
---- ---------- ---------- -------- ---------- -------- ----------
Expenses
Professional Fees...... -- 160,039 32,567 101,670 294,276 (45,587)(o) 248,689
Salaries and Benefits.. -- 242,983 99,302 61,334 403,619 (82,500)(n) 377,369
56,250 (o) --
Other Operating
Expenses.............. -- 276,744 69,523 34,389 380,656 (18,014)(p) 351,584
(11,058)(q) --
Amortization of
Goodwill.............. -- -- -- -- -- 105,000 (j) 105,000
---- ---------- ---------- -------- ---------- -------- ----------
Total Expenses......... -- 679,766 201,392 197,393 1,078,551 4,091 1,082,642
---- ---------- ---------- -------- ---------- -------- ----------
Dividends on Minority
Interest............... -- 69,264 -- -- 69,264 (69,264)(m) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
before
income taxes........... -- 362,047 316,271 127,298 805,616 493,076 1,298,692
Income Taxes............ -- -- 11,000 166,900 177,900 (177,900)(r) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
after
income taxes........... -- 362,047 305,271 (39,602) 627,716 670,976 1,298,692
Change in unrealized
depreciation........... -- (55,000) -- 183,932 128,932 -- 128,932
Net realized gain (loss)
on
investments............ -- -- -- (11,402) (11,402) -- (11,402)
---- ---------- ---------- -------- ---------- -------- ----------
Net Increase in Net
Assets
resulting from
Operations............. $-- $ 307,047 $ 305,271 $132,928 $ 745,246 $670,976 $1,416,222
==== ========== ========== ======== ========== ======== ==========
Pro forma net increase
in net
assets resulting from
operations per share... $ 0.19
==========
Pro forma weighted
average
shares outstanding..... 7,500,000
==========
</TABLE>

See accompanying notes to unaudited pro forma combined statement of operations.

F-7
<PAGE>

MEDALLION FINANCIAL CORP.

PRO FORMA COMBINED

STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
JUNE 30, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- -------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $2,393,293 $1,092,369 $368,001 $3,853,663 $ -- $3,853,663
Interest Income on
Treasury Bills........ -- -- -- 113,385 113,385 (66,475)(l) 46,910
---- ---------- ---------- -------- ---------- -------- ----------
Total Investment
Income................ -- 2,393,293 1,092,369 481,386 3,967,048 (66,475) 3,900,573
---- ---------- ---------- -------- ---------- -------- ----------
Interest Expense
Notes Payable to Bank.. -- 1,215,104 194,052 -- 1,409,156 (32,491)(k) 1,376,665
SBA Debentures......... -- 262,716 498,269 121,763 882,748 (262,716)(k) 620,032
---- ---------- ---------- -------- ---------- -------- ----------
Total Interest
Expense............... -- 1,477,820 692,321 121,763 2,291,904 (295,207) 1,996,697
---- ---------- ---------- -------- ---------- -------- ----------
Net Interest Income..... -- 915,473 400,048 359,623 1,675,144 228,732 1,903,876
---- ---------- ---------- -------- ---------- -------- ----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 55,809 -- -- 55,809 -- 55,809
Accretion of Negative
Goodwill.............. -- -- -- -- -- 192,927(j) 192,927
Other Income........... -- 89,018 109,125 -- 198,143 -- 198,143
---- ---------- ---------- -------- ---------- -------- ----------
Total Non-Interest
Income................ -- 144,827 109,125 -- 253,952 192,927 446,879
---- ---------- ---------- -------- ---------- -------- ----------
Expenses
Professional Fees...... -- 79,081 36,361 77,929 193,371 (45,586)(o) 147,785
Salaries and Benefits.. -- 267,409 101,479 72,982 441,870 (82,500)(n) 415,620
56,250 (o) --
Other Operating
Expenses.............. -- 294,148 83,778 40,032 417,958 (18,014)(p) 388,886
(11,058)(q) --
Amortization of
Goodwill.............. -- -- -- -- -- 105,000 (k) 105,000
---- ---------- ---------- -------- ---------- -------- ----------
Total Expenses......... -- 640,638 221,618 190,943 1,053,199 4,092 1,057,291
---- ---------- ---------- -------- ---------- -------- ----------
Dividends on Minority
Interest............... -- 69,255 -- -- 69,255 (69,255)(m) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
before income taxes.... -- 350,407 287,555 168,680 806,642 486,822 1,293,464
Income Taxes............ -- -- 12,000 70,700 82,700 (82,700)(r) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
after income taxes..... -- 350,407 275,555 97,980 723,942 569,522 1,293,464
Change in unrealized
depreciation........... -- (35,000) -- 78,675 43,675 -- 43,675
Net realized gain (loss)
on investments......... -- -- -- (7,926) (7,926) -- (7,926)
---- ---------- ---------- -------- ---------- -------- ----------
Net Increase in Net
Assets resulting from
Operations............. $-- $ 315,407 $ 275,555 $168,729 $ 759,691 $569,522 $1,329,213
==== ========== ========== ======== ========== ======== ==========
Pro forma net increase
in net assets resulting
from operations per
share.................. $ 0.18
==========
Pro forma weighted
average shares
outstanding............ 7,500,000
==========
</TABLE>

See accompanying notes to unaudited pro forma combined statement of operations.

F-8
<PAGE>

MEDALLION FINANCIAL CORP.

PRO FORMA COMBINED

STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
MARCH 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- -------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $2,362,495 $1,072,737 $370,338 $3,805,570 $ -- $3,805,570
Interest Income on
Treasury Bills........ -- -- -- 107,328 107,328 (66,475)(l) 40,853
---- ---------- ---------- -------- ---------- -------- ----------
Total Investment
Income................ -- 2,362,495 1,072,737 477,666 3,912,898 (66,475) 3,846,423
---- ---------- ---------- -------- ---------- -------- ----------
Interest Expense
Notes Payable to Bank.. -- 1,251,129 205,673 -- 1,456,802 (32,491)(k) 1,424,311
SBA Debentures......... -- 248,579 498,269 120,424 867,272 (248,579)(k) 618,693
---- ---------- ---------- -------- ---------- -------- ----------
Total Interest
Expense............... -- 1,499,708 703,942 120,424 2,324,074 (281,070) 2,043,004
---- ---------- ---------- -------- ---------- -------- ----------
Net Interest Income.... -- 862,787 368,795 357,242 1,588,824 214,595 1,803,419
---- ---------- ---------- -------- ---------- -------- ----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 31,044 -- -- 31,044 -- 31,044
Accretion of Negative
Goodwill.............. -- -- -- -- -- 192,927(j) 192,927
Other Income........... -- 116,556 111,690 -- 228,246 -- 228,246
---- ---------- ---------- -------- ---------- -------- ----------
Total Non-Interest
Income................ -- 147,600 111,690 -- 259,290 192,927 452,217
---- ---------- ---------- -------- ---------- -------- ----------
Expenses
Professional Fees...... -- 105,191 57,427 89,818 252,436 (45,586)(o) 206,850
Salaries and Benefits.. -- 322,318 86,372 67,129 475,819 (82,500)(n) 449,569
56,250 (o) --
Other Operating
Expenses.............. -- 245,497 75,557 40,668 361,722 (18,014)(p) 332,650
(11,058)(q) --
Amortization of
Goodwill.............. -- -- -- -- -- 105,000 (j) 105,000
---- ---------- ---------- -------- ---------- -------- ----------
Total Expenses........ -- 673,006 219,356 197,615 1,089,977 4,092 1,094,069
---- ---------- ---------- -------- ---------- -------- ----------
Dividends on Minority
Interest.............. -- 69,255 -- -- 69,255 (69,255)(m) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
before income taxes... -- 268,126 261,129 159,627 688,882 472,685 1,161,567
Income Taxes........... -- -- 10,111 67,024 77,135 (77,135)(r) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
after income taxes.... -- 268,126 251,018 92,603 611,747 549,820 1,161,567
Change in unrealized
depreciation.......... -- (20,000) -- 25,967 5,967 -- 5,967
Net realized gain
(loss) on
investments........... -- 4,390 -- (8,264) (3,874) -- (3,874)
---- ---------- ---------- -------- ---------- -------- ----------
Net Increase in Net
Assets resulting from
Operations............ $-- $ 252,516 $ 251,018 $110,306 $ 613,840 $549,820 $1,163,660
==== ========== ========== ======== ========== ======== ==========
Pro forma net increase
in net assets
resulting from
operations per share.. $ 0.15
==========
Pro forma weighted
average shares
outstanding........... 7,500,000
==========
</TABLE>

See accompanying notes to unaudited pro forma combined statement of operations.

F-9
<PAGE>

MEDALLION FINANCIAL CORP.

NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)

1. Unaudited pro forma combined balance sheet adjustments (all dollars in
thousands, except per share amounts)

(a) Adjustment to reflect the expected proceeds raised from the Offering
based on the initial public offering price of $11.00 per share, an
underwriter's discount of 7% ($3,850) and estimated expenses of $1,850 and
the issuance of 5,000,000 shares of common stock for a total of 7,500,000
shares of common stock outstanding.

(b) Adjustment to reflect the use of a portion of the net proceeds of the
Offering to pay the purchase price of the Acquisitions (estimated to be
$13,378 for Tri-Magna; $15,197 for Edwards; $10,349 for TCC) and an
obligation to repay a Tri-Magna loan ($3,232) due upon consummation of the
Offering and to repay a portion of existing debt ($7,144).

(c) Adjustment to reflect the use of a portion of the surplus cash
resulting from the Acquisitions ($7,056) to reduce debt. The ability to use
excess cash from the Acquisitions to reduce bank debt is contingent upon
regulatory approval for the Founding Companies to make loans and advances
to Medallion Financial. If regulatory approval is not received, it is
assumed that the excess cash would be used to fund additional loans. The
effect on pro forma earnings of these two different uses of cash is
insignificant.

(d) Adjustment to reflect the elimination of investments in Tri-Magna,
Edwards and TCC.

(e) Adjustment to reflect the use of a portion of the net proceeds of the
Offering ($10,376), plus surplus cash resulting from the Acquisitions
($7,056), to reduce debt.

(f) Adjustment to reflect the elimination of the accrual of the Company's
deferred offering costs incurred prior to December 31, 1995 in conjunction
with the Offering, net of costs that will be reimbursed in connection with
the Acquisition agreements, as all of the Offering costs have been paid
with a portion of the proceeds from the Offering.

(g) Adjustment to reflect purchase price adjustments, including assumed
distributions to Tri-Magna stockholders, associated with the acquisition of
Tri-Magna. This acquisition is to be accounted for under the purchase
method of accounting. As Tri-Magna was an investment company under the 1940
Act, its historic balance sheet is reflected at fair market value.
Accordingly, no fair market value adjustments are required. Because the
acquisition of Tri-Magna results in the net fair value assigned to the
assets exceeding the acquisition cost, the excess is allocated to
proportionately reduce the values assigned to noncurrent assets with any
remaining value constituting negative goodwill. As a result of this
allocation, Tri-Magna's investment in unconsolidated subsidiary and fixed
assets were written down to zero. The resulting negative goodwill will be
accreted to earnings over approximately 4 years.

(h) Adjustment to reflect purchase price adjustments associated with the
acquisition of certain assets and the assumption of certain liabilities of
Edwards. This acquisition is to be accounted for under the purchase method
of accounting. Edwards' historic balance sheet is reflected at fair market
value. Accordingly, no fair market value adjustments are required. Goodwill
will be amortized over 15 years.

(i) Adjustment to reflect purchase price adjustments associated with the
acquisition of TCC. This acquisition is to be accounted for under the
purchase method of accounting. Goodwill will be amortized to earnings over
15 years. Adjustments have been made to record the fair value of assets
including the write-off of the deferred tax asset which will not be
realized.

F-10
<PAGE>

MEDALLION FINANCIAL CORP.

NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED)

2. Unaudited pro forma combined statement of operations adjustments (all
dollars in thousands)

(j) Adjustments to record the amortization of the goodwill (excess of
cost over the fair value of net assets of business acquired) and accretion
of negative goodwill (excess of fair value of net assets over cost of
business acquired), respectively, recorded in purchase accounting related
to the goodwill resulting from the Edwards and TCC acquisitions and the
negative goodwill arising in the acquisition of Tri-Magna. The goodwill
related to Edwards and TCC is being amortized on a straight line basis over
15 years, and the negative goodwill related to Tri-Magna is being accreted
on a straight line basis over approximately 4 years.

(k) Adjustment to reflect the reduction in subordinated SBA debenture
interest expense resulting from the repayment from the net proceeds of the
Offering and the cash acquired in the acquisitions of all of Tri-Magna's
subordinated SBA debentures held during 1995. An adjustment is also made to
reflect the reduction in bank debt interest expense resulting from the
repayment of a portion of bank debt from the net proceeds of the Offering
and the cash acquired in the acquisitions, bearing interest at a weighted
average rate of 7.60% per annum. The combined repayment of SBA and bank
debt is equal to $14,200. In addition, an adjustment was made for the
interest expense savings on the repayment of a Tri-Magna loan ($3,232) due
upon consummation of the Offering.

(l) Adjustment to reflect the reduction in interest income related to the
payment of $7,056 of excess cash in conjunction with the paydown of bank
debt, bearing interest at an assumed rate of approximately 4.0% per annum,
respectively.

(m) Adjustment to record the elimination of the preferred stock dividend
resulting from Tri-Magna's repurchase of preferred stock. This transaction
occurred on September 29, 1995 and the repurchase was considered by the
Company in its determination of negative goodwill. The buyback was funded
by additional debt ($3,232) which will be repaid with proceeds from the
Offering. The interest expense savings which will result from the repayment
of this debt was considered by the Company as a reduction in interest
expense.

TCC also participated in the SBA preferred stock buyback program on
August 14, 1995. There are no dividends to eliminate, as TCC did not elect
to pay them. Further, no interest income adjustment was reflected related
to the funding of this buyback as the amount was considered nominal.

(n) Adjustment to reflect the reduction in executive compensation and
pension expense, as a result of the elimination of three senior vice
president executive positions at Tri-Magna.

(o) Adjustment to reflect the increase in salaries and benefits expense
due to the investment advisory fees to be paid monthly, in arrears, to FMC
Advisers, Inc. This increase in expense is partially offset by the
reduction in professional fee expense due to the elimination of the
management agreement previously in place with the parent company of TCC.

(p) Adjustment to eliminate certain operating expenses of Edwards. These
expenses will not recur, as the related assets and liabilities were not
acquired by the Company as part of the acquisition of Edwards. These
expenses include the elimination of depreciation and the elimination of
amortization of deferred financing costs.

(q) Adjustment to eliminate certain operating expenses of Tri-Magna in
connection with the accounting for the Company's negative goodwill. These
expenses will not recur, as the related assets were written off by the
Company as part of the acquisition, including the elimination of Tri-
Magna's depreciation.

(r) Adjustment to eliminate income and other corporate tax expenses for
TCC and Edwards. Both companies intend to be treated as regulated
investment companies, and therefore, no taxes will be assessed to them.

F-11
<PAGE>

MEDALLION FINANCIAL CORP.

BALANCE SHEET

F-12
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Medallion Financial Corp.:

We have audited the accompanying balance sheet of Medallion Financial Corp.
(a Delaware Corporation) as of December 31, 1995. This financial statement is
the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Medallion Financial Corp. as of
December 31, 1995, in conformity with generally accepted accounting
principles.

Arthur Andersen LLP

Boston, Massachusetts
February 21, 1996

F-13
<PAGE>

MEDALLION FINANCIAL CORP.

BALANCE SHEET

DECEMBER 31, 1995

ASSETS
<TABLE>
<S> <C>
Cash................................................................. $ 2,000
Deferred Offering Costs.............................................. 716,217
--------
Total assets......................................................... $718,217
--------

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities (Note 2).................... $716,217
--------
Commitments and Contingencies (Note 4)
Shareholders' Equity:
Common stock (3,000 shares of $.01 par value stock authorized --
200 shares outstanding at December 31, 1995) (Note 3)............ 2
Capital in excess of par value (Note 2)............................ 1,998
--------
Total shareholders' equity........................................... 2,000
--------
Total liabilities and shareholders' equity........................... $718,217
========
</TABLE>

The accompanying notes are an integral part of this balance sheet.

F-14
<PAGE>

MEDALLION FINANCIAL CORP.

NOTES TO BALANCE SHEET

DECEMBER 31, 1995

(1) FORMATION OF MEDALLION FINANCIAL CORP.

Medallion Financial Corp. (Medallion) is a closed-end management investment
company organized as a Delaware corporation in 1995. In 1996, Medallion
intends to complete an initial public offering (IPO) of its common stock and
intends to file an election under Section 54 of the Investment Company Act of
1940, as amended (the 1940 Act), to be regulated as a business development
company. In parallel with the IPO, Medallion will merge with Tri-Magna
Corporation and subsidiaries (TMC); acquire substantially all of the assets of
Edwards Capital Company, L.P. (ECC); and acquire all of the outstanding voting
stock of Transportation Capital Corp. (TCC) (collectively, the Acquisitions).
In connection with the Acquisitions, Medallion has filed an application for an
exemptive order under the 1940 Act with the Securities and Exchange
Commission. The Acquisitions and the IPO are contingent upon the receipt of
such exemptive order, as well as approval of the Small Business Administration
(SBA). Medallion will engage directly and/or through its principal
subsidiaries primarily in the business of making loans to small businesses
and, to a lesser degree, in the business of taxicab rooftop advertising.

TMC is a closed-end management investment company registered under the 1940
Act and is the sole shareholder of Medallion Funding Corp. (MFC) and Medallion
Taxi Media, Inc. (Media). MFC is a closed-end management investment company
registered under the 1940 Act and is licensed as a specialized small business
investment company (SSBIC) by the SBA. As an adjunct to MFC's taxicab
medallion finance business, Media operates a taxicab rooftop advertising
business. In accordance with the merger agreement between Medallion and TMC
signed on December 21, 1995 (the Merger Agreement), TMC will be acquired by
being merged into Medallion, and as a result, MFC and Media will become wholly
owned subsidiaries of Medallion.

ECC is licensed as a small business investment company (SBIC) by the SBA.
ECC is an unrelated, privately held limited partnership. Upon consummation of
the acquisition of substantially all of ECC's assets through a newly formed
subsidiary of Medallion, the newly formed, wholly owned subsidiary will be
registered as a closed-end management investment company under the 1940 Act.

TCC is licensed as an SSBIC by the SBA. TCC has operated as a wholly owned,
indirect subsidiary of a public company. Medallion will acquire all of the
outstanding voting common stock of TCC. Upon consummation of the acquisitions,
TCC will be a closed-end management investment company registered under the
1940 Act and will be a wholly owned subsidiary of Medallion.

(2) ACCOUNTING TREATMENT

Medallion's acquisitions will be accounted for under the purchase method of
accounting. Under this accounting method, Medallion will record as its cost
the fair value of the acquired assets and liabilities assumed. The difference
between the cost of acquired companies and the sum of the fair values of
tangible and identifiable intangible assets less liabilities assumed will be
recorded as goodwill or negative goodwill.

Deferred offering costs incurred by Medallion in connection with the sale of
shares will be recorded as a reduction of capital upon completion of the
offering. These costs are recorded, net of $200,000 payable by TMC in
accordance with the Merger Agreement.

(3) AUTHORIZED AND OUTSTANDING CAPITAL STOCK

The authorized capital stock of Medallion consists of 3,000 shares of common
stock at $.01 par value. All of the outstanding 200 shares of common stock
were issued in connection with the incorporation of Medallion at a price
reflecting the fair market value of Medallion at inception. It is anticipated
that immediately preceding

F-15
<PAGE>

MEDALLION FINANCIAL CORP.

NOTES TO BALANCE SHEET -- (CONTINUED)

DECEMBER 31, 1995
the IPO, Medallion will amend its charter to increase the number of authorized
shares of common stock and effect a stock split to increase the number of the
outstanding shares of common stock. The exact number of shares to be offered
in the IPO and the exact ratio of the stock split has not been determined and
will depend on the valuation of Medallion by the underwriters and the per
share offering price of the common stock in the IPO.

(4) COMMITMENTS AND CONTINGENCIES

Medallion plans on entering into a sub-advisory agreement (the Sub-Advisory
Agreement) with FMC Advisers, Inc. (FMC) in which FMC will provide investment
advisory services to Medallion.

FMC will regularly consult with management of Medallion with respect to
strategic decisions concerning originations, credit quality assurance,
development of financial products, leverage, funding, geographical and product
diversification, the repurchase of participations, acquisitions, regulatory
compliance and marketing.

Unless terminated earlier as described below, the Sub-Advisory Agreement
will remain in effect for a period of two years following execution and
delivery by the parties. The term will continue from year to year thereafter,
if approved annually by (i) a majority of Medallion's noninterested directors
and (ii) the Board of Directors, or by a majority of Medallion's outstanding
voting securities. The Sub-Advisory Agreement will be terminable without
penalty to Medallion on 60 days' written notice by either party or by vote of
a majority of Medallion's outstanding voting securities, and will terminate if
assigned by FMC.

Two trusts affiliated with two officers, directors and shareholders of
Medallion have agreed to personally assure FMC of payment for the first 48
months of service under the Sub-Advisory Agreement pursuant to an escrow
arrangement under which they will maintain in escrow common stock of Medallion
worth 200% of the advisory fees remaining to be paid by FMC to Medallion
during the first 48 months of service under the Sub-Advisory Agreement.

It is anticipated that in connection with the IPO of the Company's stock (as
discussed in Note 1), the Company will implement a Stock Option Plan and enter
into employment contracts with certain individuals who are employees,
directors and/or shareholders of the Company (see Management section of the
Prospectus).

(5) RELATED PARTY TRANSACTIONS

A director, officer and shareholder of TMC is also a director, officer and
shareholder of Medallion. An employee and shareholder of TMC is also a
director, officer and shareholder of Medallion.

The officers, directors and shareholders of FMC also serve as officers,
directors and shareholders of TMC. In connection with the merger of TMC with
and into Medallion, the officers, directors and shareholders of FMC will
resign as officers and directors of TMC and will sell their shares of TMC to
Medallion.

(6) SUBSEQUENT EVENTS

On February 12, 1996, Medallion entered into a stock purchase agreement with
Transportation Capital Corp. (TCC). Under the agreement, Leucadia (the parent
of TCC) will sell, and Medallion will purchase, all of the outstanding shares
of capital stock of the Company for a purchase price based upon net book
value, as defined in the agreement (approximately $10,000,000).

On February 21, 1996, Medallion entered into an asset purchase agreement
with Edwards Capital Company, a limited partnership (the Partnership). Under
the agreement, the Partnership will sell certain assets to Medallion for a
purchase price of approximately $15,000,000 plus certain liabilities, which
will be assumed by Medallion.

F-16
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

F-17
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of
Tri-Magna Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Tri-Magna
Corporation (a Delaware corporation) and subsidiaries (collectively referred
to as the Company) as of December 31, 1995 and 1994, including the
consolidated summary of investments as of December 31, 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of loans receivable as of September 30, 1995
by correspondence with the borrowers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tri-Magna
Corporation and subsidiaries as of December 31, 1995 and 1994, and the 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.

As explained in Note 2, the consolidated financial statements include loans
receivable valued at $96,046,416 (96% of total assets) and at $89,572,393 (96%
of total assets) as of December 31, 1995 and 1994, respectively, whose values
have been estimated by the Board of Directors in the absence of readily
ascertainable market values. We have reviewed the procedures used by the Board
of Directors in arriving at its estimates of value of such loans and have
inspected underlying documentation, and in the circumstances, we believe that
the procedures are reasonable and the documentation appropriate. However,
because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready
market for the loans existed, and the differences could be material.

Arthur Andersen LLP

Boston, Massachusetts
March 15, 1996

F-18
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Investments (Note 2)................................ $90,342,393 $96,956,416
Less unrealized depreciation on investments (Note
7)................................................. (770,000) (910,000)
----------- -----------
89,572,393 96,046,416
Investment in unconsolidated subsidiary (Note 2).... 19,379 145,335
Cash................................................ 1,268,324 1,177,166
Accrued interest receivable......................... 778,098 844,350
Furniture and fixtures, net......................... 111,543 87,925
Other assets........................................ 839,950 1,486,974
----------- -----------
Total Assets........................................ $92,589,687 $99,788,166
=========== ===========
LIABILITIES
Notes payable to banks and demand notes (Note 3).... $59,025,000 $80,294,900
Accounts payable and accrued expenses............... 253,687 1,290,267
Accrued interest payable............................ 631,817 889,147
Dividends payable (Note 5).......................... 69,255 --
Subordinated debentures payable (Note 4)............ 12,500,000 --
----------- -----------
Total Liabilities................................... 72,479,759 82,474,314
Minority Interest (Note 5)........................... 9,234,000 --
Commitments and Contingencies (Note 10)
Shareholders' Equity
Common stock (1,000,000 shares of $.01 par value
stock authorized,
668,900 shares outstanding at December 31, 1994 and
1995) (Note 6)..................................... 6,689 6,689
Capital in excess of par value (Note 6)............. 11,276,811 10,594,241
Accumulated undistributed (loss) income (Note 6).... (407,572) 710,822
----------- -----------
10,875,928 11,311,752
Restricted capital surplus (Note 5)................. -- 6,002,100
----------- -----------
Total Shareholders' Equity.......................... 10,875,928 17,313,852
----------- -----------
Total Liabilities and Shareholders' Equity.......... $92,589,687 $99,788,166
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-19
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Investment Income
Interest on investments................... $8,333,400 $8,820,273 $9,802,560
---------- ---------- ----------
Total Investment Income................... 8,333,400 8,820,273 9,802,560
---------- ---------- ----------
Interest Expense
Interest on SBA debentures (Note 4)....... 1,046,417 974,105 780,254
Interest on bank debt (Note 3)............ 2,614,859 3,781,910 5,253,924
---------- ---------- ----------
Total Interest Expense.................... 3,661,276 4,756,015 6,034,178
---------- ---------- ----------
Net Interest Income....................... 4,672,124 4,064,258 3,768,382
---------- ---------- ----------
Non-Interest Income
Equity in earnings of unconsolidated
subsidiary (Note 2)...................... -- 18,379 125,956
Other income.............................. 540,778 519,030 446,209
---------- ---------- ----------
Total Non-Interest Income................. 540,778 537,409 572,165
---------- ---------- ----------
Expenses
Administration and advisory fees.......... 27,520 33,905 13,149
Legal and accounting fees................. 391,279 367,484 344,311
Directors' fee (Note 9)................... 22,000 76,500 46,000
Officers' and employees' salaries......... 1,347,666 1,028,627 1,086,569
Employee benefit plans (Note 8)........... 227,000 136,000 70,008
Other operating expenses.................. 1,081,519 1,057,797 1,054,757
---------- ---------- ----------
Total Expenses............................ 3,096,984 2,700,313 2,614,794
---------- ---------- ----------
Dividends paid on minority interest (Note
5)....................................... 277,020 277,020 207,774
---------- ---------- ----------
Net Investment Income..................... 1,838,898 1,624,334 1,517,979
---------- ---------- ----------
Realized and Unrealized Gain (Loss) on
Investments
Realized gain (loss) on investments (Note
7)....................................... (114,507) (21,938) 61,194
Change in unrealized depreciation (Note
7)....................................... (53,000) 58,000 (140,000)
---------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on
Investments.............................. (167,507) 36,062 (78,806)
---------- ---------- ----------
Net Increase in Net Assets resulting from
Operations................................ $1,671,391 $1,660,396 $1,439,173
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-20
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
SHARES OF CAPITAL ACCUMULATED RESTRICTED
COMMON STOCK COMMON STOCK IN EXCESS UNDISTRIBUTED CAPITAL
OUTSTANDING $.01 PAR VALUE OF PAR VALUE INCOME (LOSS) SURPLUS
------------ -------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1992................... 665,900 $6,659 $11,227,341 $ (206,789) $ --
------- ------ ----------- ----------- ----------
Dividends paid,
common................ -- -- -- (1,864,520) --
Distributable net
income................ -- -- -- 1,724,391 --
Change in unrealized
depreciation.......... -- -- -- (53,000) --
------- ------ ----------- ----------- ----------
Balance at December 31,
1993................... 665,900 6,659 11,227,341 (399,918) --
Dividends paid,
common................ -- -- -- (1,668,050) --
Distributable net
income................ -- -- -- 1,602,396 --
Sale of common stock... 3,000 30 49,470 -- --
Change in unrealized
depreciation.......... -- -- -- 58,000 --
------- ------ ----------- ----------- ----------
Balance at December 31,
1994................... 668,900 6,689 11,276,811 (407,572) --
Dividends paid,
common................ -- -- -- (1,003,349) --
Distributable net
income................ -- -- -- 1,579,173 --
SOP 93-2 Cumulative
reclassification
(Note 6).............. -- -- (682,570) 682,570 --
Gain on minority
interest buyback (Note
5).................... -- -- 6,002,100
Change in unrealized
depreciation.......... -- -- -- (140,000) --
------- ------ ----------- ----------- ----------
Balance at December 31,
1995................... 668,900 $6,689 $10,594,241 $ 710,822 $6,002,100
======= ====== =========== =========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-21
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income............................. $ 1,671,391 $ 1,660,396 $ 1,439,173
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization......... 63,237 64,848 43,594
Change in unrealized depreciation..... 53,000 (58,000) 140,000
Realized loss (gain) on investments... 114,507 21,938 (61,194)
Increase in investment in
unconsolidated subsidiary............ -- (19,379) (125,956)
Increase in accrued interest
receivable........................... (12,719) (64,697) (66,252)
Decrease (increase) in other assets... 100,199 (99,434) (794,721)
Increase (decrease) in accounts
payable and accrued expenses......... 77,972 (90,565) 1,036,580
Increase (decrease) in dividends
payable minority interest............ 138,510 (69,255) (69,255)
Increase (decrease) in accrued
interest payable..................... (86,969) 143,725 257,330
----------- ----------- -----------
Net cash provided by operating activ-
ities............................... 2,119,128 1,489,577 1,799,299
Cash Flows from Investing Activities:
Increase in investments............... (30,678,530) (33,103,213) (30,667,520)
Proceeds from investment maturities
and terminations..................... 18,335,808 24,753,080 24,114,690
Proceeds from liquidation of other
assets............................... -- 414,884 144,100
Capital expenditures.................. (13,126) (6,991) (16,378)
----------- ----------- -----------
Net cash used for investing activi-
ties................................ (12,355,848) (7,942,240) (6,425,108)
Cash Flows from Financing Activities:
Proceeds from long-term debt.......... 10,700,000 8,325,000 21,269,900
Payments of SBA debentures............ -- -- (12,500,000)
Buyback of minority interest.......... -- -- (3,231,900)
Sale of common stock.................. -- 49,500 --
Dividends paid on common stock........ (1,864,520) (1,668,050) (1,003,349)
----------- ----------- -----------
Net cash provided by financing activ-
ities............................... 8,835,480 6,706,450 4,534,651
----------- ----------- -----------
Net Increase (Decrease) in Cash........ (1,401,240) 253,787 (91,158)
Cash, beginning of year................ 2,415,777 1,014,537 1,268,324
----------- ----------- -----------
Cash, end of year...................... $ 1,014,537 $ 1,268,324 $ 1,177,166
=========== =========== ===========
Supplemental Information:
Cash paid during the period for
interest (Includes dividends paid on
minority interest) (Note 5).......... $ 3,886,755 $ 4,958,565 $ 6,053,877
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-22
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995

(1) ORGANIZATION

On February 3, 1989, Tri-Magna Corporation, a newly formed Delaware
corporation, (referred to as Tri-Magna or the Parent Company) and its
subsidiary, Medallion Funding Corp. (Medallion) entered into an Agreement and
Plan of Share Exchange (the Share Exchange). Tri-Magna and its wholly-owned
subsidiaries Medallion, F.A.P. Holding Corp. (FAP) and Medallion Taxi Media,
Inc. (Media) are collectively referred to as the Company. Under the Share
Exchange, 100 shares of common stock of the Parent Company were exchanged for
each of the outstanding shares of common stock of Medallion. On May 18, 1989,
the shareholders of Medallion voted in favor of the Share Exchange Plan. This
transaction was accounted for as a pooling of interests.

The Parent Company was formed in January 1989 for the purpose of acquiring
all of the outstanding shares of Medallion common stock pursuant to the Share
Exchange. The Parent Company is a closed-end, diversified management
investment company registered under the Investment Company Act of 1940 (the
1940 Act), and has elected to be treated as a regulated investment company
under the Internal Revenue Code of 1986, as amended.

Medallion was formed in 1979 for the purpose of operating as a Specialized
Small Business Investment Company (SSBIC), licensed, regulated and financed in
part by the U.S. Small Business Administration (SBA). Medallion was granted a
license to operate as a SSBIC by the SBA on June 23, 1980. On February 2,
1982, Medallion registered as a closed-end, nondiversified investment company
under the 1940 Act.

On June 22, 1992, Medallion established a wholly-owned subsidiary, FAP. This
subsidiary was established for the purpose of acquiring and managing property
purchased in foreclosure from Medallion.

On August 23, 1994, Media, a New York corporation was formed. Media is
engaged in the outdoor media advertising business and is a wholly-owned
subsidiary of Tri-Magna.

The accompanying consolidated financial statements include the accounts of
Tri-Magna and Medallion after elimination of all intercompany amounts. (See
Note 2)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies of the Company, which conform with
generally accepted accounting policies and accounting principles and
procedures generally accepted in the investment company industry, include the
following:

Investments

Medallion's investments consist primarily of long-term loans to persons
defined by SBA regulations as being socially or economically disadvantaged, or
to entities that are at least 50% owned by such persons. Approximately 73% and
68% of Medallion's loan portfolio at December 31, 1994, and 1995,
respectively, have arisen in connection with the financing of taxicab
medallions, taxicabs and related assets, substantially all in the metropolitan
New York area. These loans are secured by the medallions, taxicabs and related
assets and are personally guaranteed by the borrowers, or in the case of
corporations, personally guaranteed by the owners. The remaining portion of
Medallion's portfolio represents loans to various commercial enterprises,
including dry cleaners, garages, gas stations and laundromats. These loans are
secured by various equipment and/or real estate and are generally guaranteed
by the owners, and in certain cases, by the equipment dealers. These loans are
made primarily in the metropolitan New York City area.

F-23
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995
Tri-Magna began funding loans in March, 1995. Since then, Tri-Magna has
funded 50 loans totaling $4,272,212; of this amount, Tri-Magna participated
out a total of $2,538,721.

Under the 1940 Act, the Company's long-term loans are considered investments
and are recorded at their fair value. Since no ready market exists for these
loans, fair value is determined by the Board of Directors in good faith. In
determining fair value, the directors take into consideration the financial
condition of the borrower, the adequacy of the collateral, and the
relationships between market rates and portfolio rates. Loans were valued at
cost, less unrealized depreciation of $770,000 and $910,000 at December 31,
1994 and 1995, respectively. The directors have determined that this valuation
approximates fair value.

The principal portion of loans serviced for others by the Company at
December 31, 1994 and 1995 amounted to approximately $3,967,690 and
$15,799,777, respectively.

The Company offsets loan origination fees against related direct loan
origination costs. The net amount is deferred and amortized over the life of
the loan in accordance with the Statement of Financial Accounting Standards
No. 91 (SFAS No. 91), "Accounting for Nonrefundable Fees and Costs Associated
with Originating or Acquiring Loans and Initial Direct Costs of Leases," which
addresses the accounting by creditors for initial fees and costs associated
with the origination of loans. At December 31, 1994 and 1995, the net deferred
asset totaled $83,591 and $293,400, respectively. Amortization expense was
$22,117 and $14,684 for the years ended December 31, 1994 and 1995,
respectively. There was no amortization expense in 1993.

Investment in Unconsolidated Subsidiary

Tri-Magna owns 100% of the outstanding stock of Media. Tri-Magna's
investment in Media is accounted for under the equity method because as a non-
investment company, Media, cannot be consolidated with an investment company,
Tri-Magna. Financial information for Media is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
BALANCE SHEET 1994 1995
------------- -------- --------
<S> <C> <C>
Cash................... $ 6,193 $ --
Accounts receivable.... 211,500 214,238
Equipment, net......... 214,042 559,786
Other.................. 23,625 55,720
-------- --------
Total Assets........... $455,360 $829,744
======== ========
Notes payable.......... $275,000 $275,000
Accrued expenses....... 160,981 409,409
-------- --------
Total Liabilities...... 435,981 684,409
-------- --------
Common stock........... 1,000 1,000
Retained earnings...... 18,379 144,335
-------- --------
Total equity........... 19,379 145,335
-------- --------
Total Liabilities and
Shareholders equity... $455,360 $829,744
======== ========
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
STATEMENT OF OPERATIONS 1994 1995
- ----------------------- ------------ ------------
<S> <C> <C>
Advertising revenue....... $227,756 $1,542,013
Cost of services.......... 83,341 483,721
-------- ----------
Gross margin.............. 144,415 1,058,292
Other operating expenses.. 126,036 829,293
-------- ----------
Income before taxes....... 18,379 228,999
Income taxes.............. -- 103,043
-------- ----------
Net income................ $ 18,379 $ 125,956
======== ==========
</TABLE>

On March 8, 1995, Tri-Magna guaranteed a demand loan for Media. At December
31, 1995, $275,000 was outstanding at an interest rate of 2.00% over prime or
10.50%. The loan matured on March 5, 1996 and was extended at the option of
the bank and acceptance of both Tri-Magna and Media.

F-24
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

Federal Income Taxes

It is the Company's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies, which require the
Company to distribute at least 90% of its investment company taxable income to
its shareholders. Therefore, no provision for federal income tax has been
made.

FAP and Media have elected to be taxed as regular corporations and, for the
year ended December 31, 1995, recorded a provision for income taxes totaling
approximately $103,000. This amount has been reflected in equity in earnings
of unconsolidated subsidiary on the accompanying consolidated statement of
operations.

Income Recognition

When, in the judgment of management, collection of any portion of the
interest or principal amount of a receivable is in doubt, accrual of interest
income is discontinued, and interest is recorded when received. At December
31, 1994 and 1995, nonaccrual loans totaled approximately $1,063,901 and
$1,299,357, respectively, and the related foregone interest income amounted to
approximately $250,439 and $218,853, respectively. Additionally, at December
31, 1994 and 1995, restructured loans totaled approximately $477,469 and
$380,002, of which $90,000 and $0 were included in nonaccrual loans,
respectively. Other income on the accompanying consolidated statements of
operations consists of late fees, prepayment penalties and fee income.

Use of Estimates in the Preparation of Financial Statements

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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.

(3) NOTES PAYABLE TO BANKS

At December 31, 1994 and 1995, the Company had outstanding bank borrowings
under the following agreements:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
DESCRIPTION 1994 1995
- ----------- ----------- -----------
<S> <C> <C>
Revolving Credit Agreement............................. $57,025,000 $73,150,000
Term Loan Agreements................................... 2,000,000 5,231,900
Short-Term Note........................................ -- 1,913,000
----------- -----------
Total.................................................. $59,025,000 $80,294,900
=========== ===========
</TABLE>

Borrowings under these agreements are secured by all assets of the Company.

Revolving Credit Agreement

On March 27, 1992 (and as subsequently amended), the Company entered into a
committed revolving credit agreement (the Revolver) with a group of banks. The
Company extended the Revolver until September 30, 1996 at an aggregate credit
commitment amount of $78,000,000 pursuant to the Renewal and Extension
Agreement dated September 29, 1995. The Revolver may be extended annually
thereafter upon the option of the

F-25
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995
participating banks and acceptance by the Company. Should any participating
bank not extend its committed amount, the Revolver agreement provides that
each bank shall extend a term loan equal to its share of the principal amount
outstanding of the revolving credit note. Maturity of the term note shall be
the earlier of two years or any other date on which it becomes payable in
accordance with the Revolver. Interest and principal payments are to be made
monthly. Interest is calculated monthly at either the bank's prime rate or a
rate based on the adjusted London Interbank Offered Rate of interest (LIBOR)
at the option of the Company. Substantially all promissory notes evidencing
the Company's investments are held by a bank, as collateral agent under the
agreement. Outstanding borrowings under the Revolver were $57,025,000 and
$73,150,000, at December 31, 1994 and 1995, at an average interest rate of
7.81% and 7.40%, respectively. During the years ended December 31, 1994, and
1995, the Company's weighted average borrowings were approximately $54,485,000
and $62,203,800 and the maximum outstanding borrowings were $63,000,000 and
$73,150,000, respectively. The weighted average interest rates on the weighted
average borrowings were 6.73% and 7.64% during the years ended December 31,
1994 and 1995, respectively.

The Company is required to pay an annual facility fee of 1/4% effective
prospectively as of March 28, 1995 on the Revolver aggregate commitment. For
the year ended December 31, 1994 and up through March 27, 1995, the Company
was required to pay an annual facility fee of 3/8%. Additionally, effective
prospectively as of September 29, 1995, the Company is required to pay an
additional annual fee of $62,500.

Term Loan Agreements

At December 31, 1994 and 1995, the Company had borrowed a total of
$2,000,000 under a term loan agreement (Term Loan) with a bank. The $2,000,000
was outstanding at December 31, 1994 and 1995. During fiscal 1995, the fixed
interest rate of 5.88% was increased to 7.5%. Interest payments are due
quarterly. The weighted average interest rate paid on such borrowings was
5.88%, and 6.68%, respectively, during the years ended December 31, 1994 and
1995, respectively. The total term borrowings outstanding at December 31, 1995
under this agreement are due in July 1997.

On September 29, 1995, Tri-Magna entered into a $3,231,900 term loan with a
certain bank maturing on April 1, 1996. Interest is paid monthly at the prime
rate. The loan is secured by all assets of Tri-Magna. The proceeds of this
loan were invested in Medallion as a capital contribution to facilitate the
repurchase of its preferred stock from the SBA. (See Note 5)

Short-Term Note

On December 19, 1994, Tri-Magna entered into a demand promissory note
(Demand Note) with a certain bank. As of December 31, 1994, there were no
outstanding borrowings under the Demand Note. On September 1, 1995 the Demand
Note was converted into a $2,000,000 short-term secured note (Short-Term Note)
which matures on August 31, 1996. Interest is calculated monthly at either the
bank's prime rate or a rate based upon adjusted LIBOR at the option of the
Company. Substantially all promissory notes evidencing Tri-Magna's investments
are pledged to the bank as collateral. The Company is required to pay an
annual facility fee of 1/4% effective prospectively as of September 29, 1995
on the aggregate amount of the note. Outstanding borrowings under the Short-
Term Note were $1,913,000 at December 31, 1995, at an average interest rate of
7.59%. During the year ended December 31, 1995, Tri-Magna's weighted average
borrowings were approximately $1,025,500 and the maximum outstanding
borrowings were $1,913,000. The weighted average interest rate on such
borrowings was 8.49% during the year ended December 31, 1995.

F-26
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

Interest Rate Cap Agreements

On July 15, 1992, the Company entered into two interest rate cap agreements
to reduce the impact of changes in interest rates on its floating long-term
debt. These agreements limit the Company's maximum LIBOR exposure on
$10,000,000 of its revolving credit facility to 6%. The premiums paid in under
these agreements were $69,000 and $69,750, respectively. The premiums were
capitalized and were amortized over the three-year term of the agreements,
with both agreements terminating on July 17, 1995. Amortization related to
these agreements was included in interest expense in the accompanying
consolidated statements of operations.

On April 7, 1995, the Company entered into three interest rate cap
agreements to reduce the impact of changes in interest rates on its floating
rate long-term debt. These agreements limit the Company's maximum LIBOR
exposure on $20,000,000 of its revolving credit facility to 7.5%. The premiums
paid under these agreements were $46,875, $31,000 and $46,687, respectively.
The premiums have been capitalized and are being amortized over the two-year
term of the agreements, which expires on April 7, 1997. The Company is exposed
to credit loss in the event of nonperformance by the counterparties on these
interest rate cap agreements. The Company does not anticipate nonperformance
by any of these parties.

On November 16, 1995, the Company entered into three additional interest
rate cap agreements to reduce the impact of changes in interest rates on its
floating rate long-term debt. These agreements limit the Company's maximum
LIBOR exposure on an additional $20,000,000 of its revolving credit facility
to 7.0%. The premiums paid under these agreements were $13,000, $25,000 and
$12,500, respectively. The premiums have been capitalized and are being
amortized over the two-year terms of the agreements, which expire on
November 16, 1997. The Company is exposed to credit loss in the event of
nonperformance by the counterparties on these interest rate cap agreements.
The Company does not anticipate nonperformance by any of these parties.

(4) INDEBTEDNESS TO THE SMALL BUSINESS ADMINISTRATION

Indebtedness to the Small Business Administration is composed of the
following long-term subordinated debentures at December 31, 1994:

<TABLE>
<S> <C>
9 3/8% interest only, payable semiannually, principal due
January 9, 1996............................................ $ 2,000,000
7 3/8% interest only, payable semiannually, principal due
May 15, 1996............................................... 2,000,000
9 1/8% interest only, payable semiannually, principal due
October 17, 1998........................................... 2,000,000
Demand Note................................................. 1,000,000
Demand Note................................................. 1,500,000
Demand Note................................................. 4,000,000
-----------
$12,500,000
===========
</TABLE>

On January 23, 1991, a $1,000,000 subordinated debenture matured and was
converted to the $1,000,000 demand note. On September 27, 1992, a $1,500,000
subordinated debenture matured and was converted to the $1,500,000 demand
note. On September 19, 1993, a $4,000,000 subordinated debenture matured and
was converted to the $4,000,000 demand note. The interest rate on all three
demand notes was 7.5% at December 31, 1994. All the outstanding debentures
were paid in full on September 29, 1995 and the SBA has removed all
restrictions on third party debt.

F-27
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

(5) MINORITY INTEREST

At December 31, 1994, The Company's minority interest consisted of 3%
cumulative, preferred nonvoting stock of Medallion, with a par value of $1,000
per share, which Medallion had sold to the SBA. The preferred stock dividend
of Medallion is reflected as a dividend on preferred stock in the accompanying
consolidated statements of operations. The Small Business Administration
imposes certain restrictions on transfers of stock and payments of dividends
by its licensees.

On September 29, 1995, Medallion repurchased and retired all of its 3%
preferred stock owned by the SBA at a discount of 65%, under an SBA preferred
stock repurchase agreement. The effective date of the buyback was August 12,
1994. The purchase price of the preferred stock was $3,231,900. The amount of
the discount, $6,002,100, was recorded as an increase in capital in an account
separate from other paid-in capital accounts, as restricted capital surplus
account. Under the repurchase agreement, the SBA retains a liquidating
interest in the amount of the discount on the repurchase, which expires on a
straight line basis over five years or on a later date if an event of default,
as defined in the agreement, has occurred and such default has been cured or
waived. Upon the occurrence of any event of default, the SBA's liquidating
interest will become fixed at the level immediately preceeding the event of
default and will not accrete further until the default is cured or waived. In
the event of Medallion's liquidation, the unexpired portion of the liquidating
interest becomes immediately payable to the SBA.

At December 31, 1995, the unaccreted amount of the SBA's liquidating
interest in the restricted capital surplus was $4,351,523.

(6) SHAREHOLDERS' EQUITY

On July 20, 1994, the Board of Directors of the Company voted to rescind the
issuance of 3,000 shares of common stock approved on April 19, 1994, and
approved the sale of 3,000 shares of common stock at a price of $16.50 per
share. The sale of the stock was completed in November 1994.

On December 21, 1995, the Company entered into a merger agreement with
Medallion Financial Corp. Under the agreement, subject to the approval of the
shareholders, the Company will be merged into Medallion Financial Corp. and
all of the outstanding shares of capital stock of the Company will be
cancelled in exchange for $20.00 per share.

Direct costs associated with the merger agreement with Medallion Financial
Corp. are deferred by the Company. For the year ended December 31, 1995,
direct costs totaled approximately $475,000 and are included in other assets.
These costs will be recognized in the period the merger occurs.

As discussed in Note 5, under the terms of the preferred stock repurchase
agreement with the SBA, a change in ownership of the Company could result in
the unexpired portion of the liquidating interest becoming payable to the SBA.
The transaction with Medallion Financial Corp. is subject to SBA approval. It
is anticipated that such approval will include a waiver of this provision.

In accordance with Statement of Position 93-2, "Determination, Disclosure
and Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies," $682,570 has been reclassified
from capital in excess of par value to accumulated undistributed income on the
accompanying consolidated balance sheets. This reclassification has no impact
on the Company's total shareholders' equity and is designed to present the
Company's capital accounts on a tax basis.

F-28
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

(7) REALIZED LOSSES (GAINS) AND UNREALIZED DEPRECIATION ON INVESTMENTS

A summary of realized losses and unrealized depreciation on investments for
the years ended December 31, 1995, 1994 and 1993 is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
UNREALIZED DEPRECIATION 1995 1994 1993
----------------------- --------- --------- ---------
<S> <C> <C> <C>
Balance at Beginning of Period............... $(770,000) $(828,000) $(775,000)
Change in Unrealized Depreciation............ (140,000) 58,000 (53,000)
--------- --------- ---------
Balance at End of Period..................... $(910,000) $(770,000) $(828,000)
========= ========= =========
</TABLE>

For the years ended December 31, 1995, 1994 and 1993, realized losses
(gains) were $(61,194), $21,938 and $114,507, respectively.

(8) EMPLOYEE BENEFIT PLANS

The Company maintains two defined contribution employee benefit plans, the
Medallion Funding Corp. Pension Plan and the Medallion Funding Corp. Profit-
Sharing Retirement Plan, under which substantially all Tri-Magna and Medallion
employees and officers are covered. The Company's management acts as trustee
of both plans. At year end, the Company has no obligation for postretirement
or postemployment agreements.

Under the noncontributory pension plan, the Company contributes up to 10% of
each participant's annual compensation. Under the profit-sharing plan,
voluntary employee contributions as well as Company contributions are allowed.
The Company's policy is to fund pension costs accrued.

Total employer contributions to both plans are limited to the lesser of 10%
of each participant's compensation or $10,000 for the years ended December 31,
1995 and 1994, and the lesser of 20% of each participant's compensation or
$20,000 for the year ended December 31, 1993.

The expense for employee benefit plans was approximately $70,000, $136,000
and $227,000 for the years ended December 31, 1995, 1994, and 1993,
respectively.

(9) TRANSACTIONS WITH RELATED PARTIES

Certain officers and directors of Medallion are also shareholders of Tri-
Magna. Officers' salaries are set by the Board of Directors. Directors who are
not officers receive a fee of $1,000 per meeting. Directors who are members of
committees receive $500 for each meeting attended. Directors who are members
of the independent committee receive $1,000 for each meeting attended. One
loan receivable has been guaranteed by a related party.

(10) COMMITMENTS AND CONTINGENCIES

At December 31, 1995, the Company's unfunded commitments were approximately
$2,447,800 for 35 loans that will bear interest at rates ranging from 9.0% to
16.0%.

In September 1987, the Company entered into a 10-year lease for its
executive and general offices. The lease calls for an annual rental of
approximately $140,000, subject to certain escalation clauses. During the
years ended December 31, 1995, 1994 and 1993, rental expenses totaled
$194,279, $195,777 and $187,679, respectively, and are included in other
operating expenses.

The Company is a party to various legal proceedings arising from the normal
course of business, none of which, in management's opinion, is expected to
have a material adverse impact on the Company's financial position or results
of operations.

F-29
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

(11) FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
About Fair Value of Financial Instruments," which is effective for the Company
as of the fiscal year ending December 31, 1995, requires disclosure of fair
value information about certain financial instruments, whether assets,
liabilities or off-balance sheet commitments, if practicable. The following
methods and assumptions were used to estimate the fair value of each class of
financial instruments. Where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.

In addition, SFAS 107 excludes certain financial instruments and all non-
financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value
of the Company.

(a) Investments--As described in Note 2, the carrying amount of investments is
the estimated fair value of such investments.

(b) Notes payable to banks and demand notes--Due to the short-term nature of
these instruments, the carrying amount approximates fair value.

(c) Commitments to Extend Credit--The fair value of commitments to extend
credit is estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
present creditworthiness of the counterparties. For fixed rate loan
commitments, fair value also includes a consideration of the difference
between the current levels of interest rates and the committed rates. At
December 31, 1995, the estimated fair value of these off-balance sheet
instruments was not material.

(d) Interest Rate Cap Agreements--The fair value is estimated based on market
prices or dealer quotes. At December 31, 1995, the estimated fair value of
these off-balance sheet instruments was not material.

<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------
CARRYING AMOUNT FAIR VALUE
--------------- -----------
<S> <C> <C>
Financial Assets:
Investments........................................ $96,046,416 $96,046,416
Cash............................................... 1,177,166 1,177,166
Financial Liabilities:
Notes payable to banks and demand notes............ 80,294,900 80,294,900
</TABLE>

(12) SUBSEQUENT EVENTS

On January 22, 1996 the Company declared a dividend on common stock of $0.35
per share, payable on January 29, 1996 to shareholders of record as of January
22, 1996. Medallion also declared a dividend of $80.00 per share on common
stock payable on January 29, 1996 to the Parent Company for purposes of
funding the Company's dividend.

On March 15, 1996 the Board of Directors of Medallion Funding Corp. voted to
terminate the Medallion Funding Corp. Pension Plan to be effective as of March
31, 1996. No benefits will accrue and no contributions will be made by the
Company for service after that date.

F-30
<PAGE>

TRI-MAGNA CORPORATION AND SUBSIDIARIES

CONSOLIDATED SUMMARY OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
NUMBER BALANCE INTEREST RANGE OF
OF LOANS OUTSTANDING RATE MATURITY DATES
-------- ----------- -------- ----------------
<S> <C> <C> <C>
1 $ 77,550 5.000% 3/1/00
1 24,082 7.000 7/1/98
18 3,715,031 8.000 3/1/97-1/1/09
3 298,833 8.250 1/1/98
21 3,279,235 8.500 5/1/96-5/1/00
9 1,331,792 8.750 2/1/97-7/1/99
56 8,152,656 9.000 12/31/95-7/1/04
70 7,111,900 9.250 5/1/96-9/1/10
116 13,814,980 9.500 12/31/95-1/1/06
2 120,696 9.625 8/1/96-8/1/04
24 2,677,911 9.750 7/1/96-12/1/99
150 12,175,743 10.000 12/31/95-12/1/04
33 3,207,015 10.250 12/1/96-9/1/02
1 130,055 10.375 2/1/00
41 4,181,332 10.500 7/1/96-1/1/03
31 2,959,616 10.750 3/1/99-8/1/02
1 65,064 10.900 11/1/99
41 3,930,343 11.000 12/31/95-8/1/03
3 194,996 11.250 6/1/96-10/1/98
4 257,395 11.500 1/1/97-2/1/99
2 162,483 11.750 4/1/96-9/1/99
58 4,260,742 12.000 12/31/95-10/1/03
9 490,107 12.500 12/31/95-7/1/00
3 333,757 12.750 1/1/97-9/1/00
1 72,605 12.950 1/1/99
96 5,426,944 13.000 12/31/95-2/1/04
3 630,453 13.250 6/1/96-2/1/00
20 1,114,053 13.500 1/1/99-7/1/02
2 47,009 13.750 2/1/98-1/1/99
1 13,517 13.870 9/1/96
86 4,316,872 14.000 6/1/96-10/1/02
1 41,995 14.050 1/1/01
1 47,046 14.200 6/1/00
1 8,181 14.250 12/1/98
1 16,166 14.300 5/1/99
15 1,000,341 14.500 12/1/96-4/1/02
1 32,625 14.750 11/1/00
6 194,802 14.840 6/1/99-10/1/00
206 9,123,581 15.000 12/31/95-9/1/02
8 723,762 15.200 3/1/99-2/1/01
8 250,164 15.250 12/31/95-6/1/98
7 134,764 15.500 2/1/96-7/1/99
1 1,419 15.625 2/1/96
1 100,239 15.750 7/1/98
8 289,662 16.000 1/1/96-12/1/00
1 10,712 16.250 3/1/96
2 2,886 16.500 12/31/95-1/1/96
1 47,990 16.750 7/1/98
2 61,914 18.000 9/1/97-11/1/00
---- -----------
Total: 1,178 $96,663,016 10.88
Plus: Loan Origination
Costs, Net................. 293,400
-----------
Total Investments at Cost... 96,956,416
Less -- Unrealized deprecia-
tion
on investments............. (910,000)
-----------
Total Investments at direc-
tors'
valuation.................. $96,046,416
===========
</TABLE>

F-31
<PAGE>

EDWARDS CAPITAL COMPANY

FINANCIAL STATEMENTS

F-32
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of Edwards Capital Company:

We have audited the accompanying balance sheet of Edwards Capital Company (a
limited partnership) as of December 31, 1994, and the related statements of
operations, changes in partners' capital and cash flows for each of the two
years in the period ended December 31, 1994. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Edwards Capital Company as
of December 31, 1994, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.

Friedman, Alpren & Green LLP

New York, New York
January 28, 1995

F-33
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Edwards Capital Company:

We have audited the accompanying balance sheet of Edwards Capital Company (a
New York limited partnership), including the schedule of loans as of December
31, 1995, and the related statements of operations, changes in partners'
capital and cash flows for the year ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit 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 audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Edwards Capital Company as
of December 31, 1995, and the results of its operations and its cash flows for
the year ended December 31, 1995, in conformity with generally accepted
accounting principles.

As explained in Note 1, the financial statements include finance receivables
valued at $43,778,791 (97% of total assets) as of December 31, 1995, the
values of which have been estimated by the General Partner in the absence of
readily ascertainable market values. We have reviewed the procedures used by
the General Partner in arriving at its estimates of value of such loans and
have inspected the underlying documentation, and in the circumstances, we
believe that the procedures are reasonable and the documentation appropriate.
However, because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have been used had
a ready market for the loans existed, and the differences could be material.

Arthur Andersen LLP

Boston, Massachusetts
March 14, 1996

F-34
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

BALANCE SHEETS

ASSETS
<TABLE>
<CAPTION>
DECEMBER
DECEMBER 31, 31,
1994 1995
------------ -----------
<S> <C> <C>
Cash................................................. $ 170,725 $ 115,571
Finance Receivables:
Medallions........................................... 42,739,897 43,177,063
Other, less allowance for doubtful accounts of
$20,000 in 1994 and 1995............................ 726,945 601,728
Accrued Interest Receivable.......................... 329,000 396,000
Deferred Financing Costs, net of accumulated
amortization of $123,507 in 1994 and $176,967 in
1995................................................ 407,143 353,683
Property and Equipment, at cost, net of accumulated
depreciation and amortization of $115,645 in 1994
and $133,937 in 1995................................ 75,349 66,826
Prepaid Expenses and Other Assets.................... 125,468 373,116
----------- -----------
Total Assets......................................... $44,574,527 $45,083,987
=========== ===========

LIABILITIES AND PARTNERS' CAPITAL

Bank Loans Payable................................... $10,000,000 $ 9,850,000
Subordinated Debentures Payable...................... 24,950,000 24,950,000
Accounts Payable and Accrued Expenses................ 1,048,459 1,167,156
----------- -----------
35,998,459 35,967,156
Partners' Capital.................................... 8,576,068 9,116,831
----------- -----------
Total Liabilities and Partners' Capital.............. $44,574,527 $45,083,987
=========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-35
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Interest from finance receivables.......... $4,954,502 $4,334,100 $4,316,669
Other income............................... 476,192 619,716 443,190
---------- ---------- ----------
Total Revenues............................ 5,430,694 4,953,816 4,759,859
---------- ---------- ----------
Operating Expenses:
Interest on subordinated debentures........ 2,230,415 2,136,807 1,993,075
Interest on bank loans..................... 511,008 627,700 754,404
Salaries................................... 385,676 351,715 354,041
Employee benefits.......................... 38,383 35,280 33,236
Payroll and other taxes.................... 29,119 28,576 28,266
Professional fees.......................... 306,732 393,513 204,071
Rent....................................... 39,996 39,996 39,996
Office expense............................. 39,298 45,082 42,762
Computer expense........................... 8,760 48,859 44,642
Telephone.................................. 8,860 9,963 9,685
Entertainment.............................. 23,005 17,378 9,901
Amortization of deferred financing costs... 42,701 79,118 53,460
Processing and collection services......... 69,276 57,950 42,448
Depreciation and amortization.............. 27,471 22,586 18,292
New York City unincorporated business tax.. 50,972 21,289 40,111
Reduction in allowance for doubtful radio
loans..................................... -- (23,415) --
Sundry..................................... 2,010 1,511 4,496
---------- ---------- ----------
Total Operating Expenses.................. 3,813,682 3,893,908 3,672,886
---------- ---------- ----------
Income Before Extraordinary Charge........ 1,617,012 1,059,908 1,086,973
Extraordinary Charge -- Premium on
Prepayment of Subordinated Debentures...... -- 526,287 --
---------- ---------- ----------
Net Income................................ $1,617,012 $ 533,621 $1,086,973
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-36
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
---------- ----------- ----------
<S> <C> <C> <C>
Cumulative Capital Contributions........... $7,200,000 $ 7,200,000 $7,200,000
========== =========== ==========
SBA Permanent Capital...................... $8,400,000 $ 8,400,000 $8,400,000
========== =========== ==========
Balance, Beginning of Period............... $8,918,704 $ 9,550,947 $8,576,068
Net income............................... 1,617,012 533,621 1,086,973
Distributions --
General Partner........................ -- (16,000) --
Limited Partners....................... (984,769) (1,492,500) (546,210)
---------- ----------- ----------
Balance, end of period..................... $9,550,947 $ 8,576,068 $9,116,831
========== =========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-37
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................... $ 1,617,012 $ 533,621 $ 1,086,973
Adjustments to reconcile net income
to net cash provided by operating
activities --
Extraordinary charge................. -- 526,287 --
Amortization of deferred financing
costs............................... 42,701 79,118 53,460
Depreciation and amortization........ 27,471 22,586 18,292
Reduction in allowance for doubtful
radio loans......................... -- (23,415) --
Changes in assets and liabilities --
Accrued interest receivable......... 10,515 (339) (67,000)
Prepaid expenses and other assets... (70,902) 91,806 (247,648)
Accounts payable and accrued ex-
penses............................. (331,582) (21,710) 118,697
Deferred income..................... (29,370) (5,332) --
------------ ------------ -----------
Net cash provided by operating ac-
tivities.......................... 1,265,845 1,202,622 962,774
Cash flows from investing activities:
Origination of new finance receiv-
ables............................... (14,473,522) (15,573,645) (8,348,655)
Repayments of finance receivables.... 13,344,455 16,228,136 8,036,706
Collection of notes receivable....... 126,633 272,546 --
Purchase of property and equipment... (20,202) (5,041) (9,769)
Collection of receivables from radio
groups.............................. 67,858 -- --
------------ ------------ -----------
Net cash (used in) provided by in-
vesting activities................ (954,778) 921,996 (321,718)
Cash flows from financing activities:
Premium on prepayment of subordinated
debentures.......................... -- (526,287) --
Proceeds from bank loans............. 12,800,000 22,425,000 11,925,000
Principal payments of bank loans..... (12,025,000) (22,325,000) (12,075,000)
Deferred financing costs............ -- (254,625) --
Distributions to partners --
General partner...................... -- (16,000) --
Limited partners..................... (984,769) (1,492,500) (546,210)
------------ ------------ -----------
Net cash used in financing activi-
ties.............................. (209,769) (2,189,412) (696,210)
------------ ------------ -----------
Net increase (decrease) in cash....... 101,298 (64,794) (55,154)
Cash, beginning of year............... 134,221 235,519 170,725
------------ ------------ -----------
Cash, end of year..................... $ 235,519 $ 170,725 $ 115,571
============ ============ ===========
Supplemental disclosure of cash flow
information:
Interest paid........................ $ 2,679,856 $ 2,885,512 $ 2,699,890
============ ============ ===========
New York City unincorporated business
tax................................. $ 70,038 $ 27,939 $ 14,058
============ ============ ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-38
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Edwards Capital Company (the Partnership) is organized under the laws of the
State of New York as a Small Business Investment Company, subject to the rules
and regulations of the Federal Small Business Administration (the SBA). The
Partnership's principal activity is the financing of loans collateralized by
New York City taxicab medallions.

The Partnership has one General Partner and six classes of limited partners.
Allocations of income or loss and cash distributions are based on formulas, as
set forth in the Partnership Agreement. The formulas utilize the average prime
rate for the year, net cash receipts, as defined, and the weighted average
capital for each class of partner.

Use of Estimates in the Preparation of Financial Statements

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.

Finance Receivables and the Allowance for Doubtful Accounts

Finance receivables, net of participation sold to others and an allowance
for doubtful accounts, are stated at fair value. The fair value of such loans
is determined in good faith by the General Partner. The allowance for doubtful
accounts is maintained at a level that, in the General Partner's judgment, is
adequate to absorb losses inherent to the portfolio.

Finance receivables collateralized by New York City taxicab medallions are
considered fully collectible, as the value of the collateral is deemed
sufficient to assure full collection in the event of foreclosure. At
December 31, 1995, there is an allowance for doubtful accounts on receivables
collateralized by radio rights, as the value of the collateral on certain
loans is deemed insufficient.

The allowance is reviewed and adjusted periodically by the General Partner
on the basis of available information, including the fair value of the
underlying collateral; individual credit risks; past loss experience; the
volume, composition and growth of the portfolio; and current and projected
financial and economic conditions.

Interest is continued to be recognized as income on all finance receivables
that are past due, as to principal and interest, when the value of the
underlying collateral is deemed sufficient to assure full collection of the
principal and associated interest in the event of foreclosure. At December 31,
1995, the value of the underlying collateral on finance receivables was deemed
adequate.

The principal amount of loans serviced for others at December 31, 1994 and
1995 amounted to approximately $34,918,209 and $30,995,006, respectively.

Deferred Financing Costs

Costs incurred in connection with obtaining subordinated debenture financing
have been deferred and are being amortized on the effective interest rate
method over the terms of the loans.

F-39
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed on an
accelerated method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the estimated useful life of the asset or, if
less, the life of the lease.

Origination Fees

Origination fees (included in other income) for loans are deferred and
amortized on a straight-line basis over the terms of the loans. At December
31, 1995, loan origination fees were fully amortized.

Income Taxes

The Partnership is not a taxpaying entity for income tax purposes, and
accordingly, no provision has been made for income taxes. The partners'
allocable shares of the Partnership's taxable income or loss are reportable on
their income tax returns. A provision is made for New York City unincorporated
business tax.

Reclassifications

Certain reclassifications have been made to the prior year financial
statements to conform to the current year's presentation.

(2) FINANCE RECEIVABLES

Finance receivables are interest-bearing loans that are secured by mortgages
collateralized by New York City taxicab medallion rights, taxicabs or radio
group rights, and the personal guarantees of individuals or stockholders of
corporate borrowers.

Maximum original terms of finance receivables at December 31, 1994 and
December 31, 1995 are as follows:

(ROUNDED TO 000'S)

<TABLE>
<CAPTION>
DECEMBER
DECEMBER 31, 31,
1994 1995
------------ -----------
<S> <C> <C>
60 months........................................ $41,118,000 $42,307,000
84 months........................................ 1,657,000 1,027,000
120 months....................................... 692,000 465,000
----------- -----------
$43,467,000 $43,799,000
=========== ===========
</TABLE>

Contractual maturities of finance receivables at December 31, 1994 and 1995
are approximately as follows:

(ROUNDED TO 000'S)

<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------
<S> <C>
1995.................... $ 2,520,000
1996.................... 5,924,000
1997.................... 5,502,000
1998.................... 8,519,000
1999.................... 20,174,000
Thereafter.............. 828,000
-----------
$43,467,000
===========
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
1996.................... $ 2,623,000
1997.................... 4,482,000
1998.................... 7,046,000
1999.................... 15,329,000
2000.................... 11,450,000
Thereafter.............. 2,869,000
-----------
$43,799,000
===========
</TABLE>

F-40
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

Actual maturities may differ, as loans are often paid in advance of their
maturities, and loans with participation sold to others contain subordinate
prepayment provisions. During the years ended December 31, 1994 and 1995,
collections of loans, including prepayments, were approximately $16,228,000
and $8,692,000, respectively.

(3) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1994 and
1995:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Furniture and Equipment....................... $152,931 $162,700
Leasehold Improvements........................ 38,063 38,063
-------- --------
190,994 200,763
Less -- Accumulated Depreciation and Amortiza-
tion......................................... 115,645 133,937
-------- --------
$ 75,349 $ 66,826
======== ========
</TABLE>

(4) BANK LOANS PAYABLE

The Partnership has lines of credit with four banks totaling $12,500,000, of
which $10,000,000 and $9,850,000 were drawn upon at December 31, 1994 and
1995, respectively. Interest is charged at the borrower's option, at either
the lender's prime rate or at a rate based on the adjusted London Interbank
Offered Rate (LIBOR). Under an agreement with the SBA, Edwards was restricted
from borrowing more than $10.0 million in bank debt without the prior approval
of the SBA. In January 1996, this amount was increased to $11.5 million.

The average amount of borrowings for the year ended December 31, 1994 and
1995 was $9,740,000 and $9,585,000, respectively.

The loans are secured by all of the Partnership's assets. Under an
intercreditor agreement, all banks share in the collateral. In addition, all
bank indebtedness is senior to SBA-guaranteed indebtedness pursuant to SBA
rules and regulations.

F-41
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

(5) SUBORDINATED DEBENTURES PAYABLE

Outstanding subordinated debentures, which are guaranteed by the SBA, are as
follows at December 31, 1994 and 1995:

<TABLE>
<CAPTION>
INTEREST
DUE DATE RATE AMOUNT
-------- -------- -----------
<S> <C> <C>
September 1, 1996................................... 8.75% $ 1,200,000
April 1, 1997....................................... 8.95 1,500,000
June 1, 1998........................................ 9.80 3,000,000
September 1, 2002................................... 7.15 3,500,000
September 1, 2002................................... 7.15 6,050,000
June 1, 2004........................................ 7.80 4,600,000
September 1, 2004................................... 8.20 5,100,000
-----------
$24,950,000
===========
</TABLE>

On June 29, 1994 and September 28, 1994, the Partnership refinanced
$4,600,000 and $5,100,000, respectively, of subordinated debentures, bearing
interest rates of 9.615% to 11.505% and 10.35%, respectively, and with
maturity dates of February 1, 1995 to December 1, 1995 and September 1, 1997,
respectively. The newly incurred debt of $4,600,000 and $5,100,000, included
above, bears interest at 7.80% and 8.20%, respectively, and matures on June 1,
2004 and September 1, 2004, respectively. The prepayment premium of $526,287,
paid in connection with these refinancings, is presented as an extraordinary
item in the accompanying statements of operations.

(6) RELATED PARTY TRANSACTIONS

The law firm of Herrick, Feinstein LLP provides legal services to the
Partnership and subleases office space to it under a lease that commenced on
June 1, 1992 and expires on April 30, 1997. The lease requires minimum annual
rental payments of $40,000 and additional rentals based on increases in real
estate taxes and operating expenses over base period amounts. It is cancelable
by the firm upon giving 60 days' notice. Certain principals of the firm are
limited partners of the Partnership and are shareholders of the corporate
General Partner of the Partnership.

Rent expense and legal fees paid and accrued to Herrick, Feinstein LLP for
the years ended December 31, 1993, 1994 and 1995 are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Rent expense................................... $ 39,996 $ 39,996 $ 39,996
Legal fees..................................... 183,295 288,985 92,501
-------- -------- --------
$223,291 $328,981 $132,497
======== ======== ========
</TABLE>

Legal fees of $225,000 were incurred and accrued to Herrick, Feinstein in
connection with the proposed sale of assets by the Partnership to Medallion
Financial Corp. (see Note 8). These costs have been deferred and are included
in prepaid expenses and other assets in the accompanying balance sheet at
December 31, 1995. These costs will be expensed in the period that the sale of
the assets occurs.

(7) COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, there are outstanding commitments and
contingent liabilities that are not reflected in the financial statements.

F-42
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995
At December 31, 1994 and September 30, 1995, the Partnership had an
operating lease for office space which expires on April 30, 1997 (see Note 6).

There are lawsuits pending against the Partnership in the normal course of
business. Based on its review of current litigation and discussions with legal
counsel, management does not expect that the resolution of such matters will
have a material adverse effect on the Partnership's financial condition or
results of operations.

(8) SUBSEQUENT EVENT

On February 21, 1996, the Partnership entered into an asset purchase
agreement with Medallion Financial Corp. Under the agreement, the Partnership
will sell certain assets to Medallion Financial Corp. for a purchase price of
approximately $15,000,000 plus certain liabilities, which will be assumed by
Medallion Financial Corp.

(9) FAIR VALUE OF FINANCIAL INSTRUMENTS

Effective for years ended after December 15, 1995, Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of Financial
Instruments", requires all entities with total assets of less than $150
million in the current statement of financial position to disclose the fair
value of specified financial instruments for which it is practicable to
estimate that value. It was not practicable to estimate the fair value of the
finance receivables, bank loans payable and subordinated debentures payable
because quoted market prices do not exist and estimates could not be made
through other means without incurring excessive costs.

F-43
<PAGE>

EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)

SCHEDULE OF LOANS TO SMALL BUSINESS CONCERNS

DECEMBER 31, 1995

The distribution of loans at December 31, 1995 by rate of interest is as
follows:

<TABLE>
<CAPTION>
NUMBER BALANCE INTEREST
OF LOANS OUTSTANDING RATE
-------- ----------- --------
<S> <C> <C>
1 $ 570,207 7.820%
17 1,132,000 8.250
6 239,000 8.300
8 392,000 8.375
7 515,461 8.440
4 200,000 8.490
14 475,750 8.500
4 161,200 8.600
2 368,000 8.750
1 605,265 8.780
9 507,500 8.875
49 2,729,873 9.000
12 746,361 9.125
15 1,957,713 9.250
2 280,012 9.385
65 6,982,190 9.500
6 447,920 9.600
3 793,091 9.625
52 7,336,160 9.750
2 168,256 9.800
15 1,858,397 9.900
49 6,225,055 10.000
41 5,241,320 10.250
5 600,951 10.375
10 862,401 10.500
2 122,266 10.750
12 862,662 11.000
3 191,531 11.250
2 297,291 11.500
4 256,300 11.750
6 373,899 12.000
1 4,110 12.500
2 125,942 13.250
1 36,910 13.500
1 58,196 13.550
1 14,831 14.000
2 11,874 14.500
2 46,896 15.000
--- -----------
438 43,798,791 9.695%
===
Less Allowance for Doubtful
Accounts on Radio Loans.... (20,000)
-----------
$43,778,791
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-44
<PAGE>

TRANSPORTATION CAPITAL CORP.
FINANCIAL STATEMENTS

Neither TCC nor the entities that were its direct or indirect parents prior
to the closing of the Acquisitions, or any officer or director thereof has
commented upon, has reviewed, has knowledge with respect to, or takes any
responsibility for, any financial statements or other financial or business
information concerning any third party or parties.

F-45
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Transportation Capital Corp.:

We have audited the accompanying balance sheet of Transportation Capital
Corp. (a New York corporation), including the financial statement schedules as
of December 31, 1994, and the related statements of operations, shareholders'
equity and cash flows for each of the two years in the period ended December
31, 1994. 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 audits 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. Our
procedures included confirmation of loans receivable as of December 31, 1994
by correspondence with the borrowers. 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 financial position of Transportation Capital
Corp. as of December 31, 1994, and the results of its operations and cash
flows for each of the two years in the period ended December 31, 1994, 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.

As explained in Note 1, the financial statements include loans receivable
valued at $10,003,050 (53% of total assets) as of December 31, 1994, whose
values have been estimated by the Board of Directors in the absence of readily
ascertainable market values. We have reviewed the procedures used by the Board
of Directors in arriving at their estimates of value of such loans and have
inspected underlying documentation and, in the circumstances, we believe that
the procedures are reasonable and the documentation appropriate. However,
because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready
market for the loans existed, and the differences could be material.

Coopers & Lybrand LLP

New York, New York
October 24, 1995

F-46
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Transportation Capital Corp.:

We have audited the accompanying balance sheet of Transportation Capital
Corp. (a New York corporation) as of December 31, 1995, including the schedule
of investments other than investments in affiliates and schedule of loans as
of December 31, 1995, the related statements of operations, shareholders'
equity and cash flows for the year ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit 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. Our
procedures included the confirmation of loans receivable as of September 30,
1995 by correspondence with the borrowers. 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 audit provides a reasonable basis for our opinion.

As explained in Note 1, the financial statements include loans receivable
valued at $9,154,139 (53% of total assets) as of December 31, 1995, whose
values have been estimated by the Board of Directors in the absence of readily
ascertainable market values. We have reviewed the procedures used by the Board
of Directors in arriving at their estimates of value of such loans and have
inspected underlying documentation, and in the circumstances, we believe that
the procedures are reasonable and the documentation appropriate. However,
because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready
market for the loans existed, and the differences could be material.

Arthur Andersen LLP

Boston, Massachusetts
March 14, 1996

F-47
<PAGE>

TRANSPORTATION CAPITAL CORP.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Loans Receivable.................................... $10,980,900 $ 9,796,728
Allowance for Loan Losses........................... (977,850) (642,589)
----------- -----------
Loans receivable, at fair value.................... 10,003,050 9,154,139
Cash and Cash Equivalents........................... 8,199,210 7,780,717
Accrued Interest Receivable......................... 147,938 133,722
Furniture, Fixtures and Leasehold Improvements, at
cost, less accumulated depreciation of $7,960 and
$12,256............................................ 16,210 16,253
Other Assets........................................ 188,274 72,877
Deferred Income Taxes............................... 396,200 257,900
----------- -----------
Total Assets........................................ $18,950,882 $17,415,608
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Debentures payable to the Small Business Adminis-
tration........................................... $ 7,930,000 $ 6,730,000
Accrued interest payable........................... 73,388 35,071
Accrued expenses................................... 125,511 171,888
----------- -----------
Total Liabilities................................... 8,128,899 6,936,959
----------- -----------
Commitments and Contingencies
Shareholders' Equity:
3% Cumulative preferred stock, $1,000 par value--
Authorized--9,000 shares
Issued and outstanding--3,383 1/3 shares in 1994
and none in 1995.................................. 3,383,333 --
Common stock, $.125 par value--
Authorized--5,000,000 shares
Issued and outstanding--100 shares................. 13 13
Additional paid-in capital.......................... 6,565,289 7,749,456
Restricted contributed capital surplus.............. -- 2,199,166
Accumulated undistributed net investment income..... 5,577,636 5,060,597
Accumulated undistributed net realized loan losses.. (4,116,938) (4,144,594)
Net unrealized depreciation on loans................ (587,350) (385,989)
----------- -----------
Total Shareholders' Equity.......................... 10,821,983 10,478,649
----------- -----------
Total Liabilities and Shareholders' Equity.......... $18,950,882 $17,415,608
=========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-48
<PAGE>

TRANSPORTATION CAPITAL CORP.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Investment Income:
Interest from small business concerns (net
of interest to participants)............. $2,995,747 $2,001,527 $1,411,116
Interest from treasury bills.............. 114,302 215,353 425,318
---------- ---------- ----------
3,110,049 2,216,880 1,836,434
---------- ---------- ----------
Expenses:
Interest.................................. 1,063,563 708,695 450,071
Salaries.................................. 256,833 246,874 227,343
Legal and other professional fees......... 719,248 356,162 350,178
Rent expense.............................. 115,072 58,046 23,999
General and administrative................ 178,746 50,533 158,810
---------- ---------- ----------
2,333,462 1,420,310 1,210,401
---------- ---------- ----------
Investment Income Before Income Taxes...... 776,587 796,570 626,033
Income Tax (Provision) Benefit............. 204,930 (342,948) (269,723)
---------- ---------- ----------
Net Investment Income.................... 981,517 453,622 356,310
---------- ---------- ----------
Realized Loan Losses Before Income Taxes... (68,933) (144,058) (50,055)
Income Tax Benefit......................... 18,138 59,748 22,399
---------- ---------- ----------
Net Realized Loan Losses................. (50,795) (84,310) (27,656)
---------- ---------- ----------
Change in Unrealized Depreciation on Loans
Before Income Taxes....................... 231,867 790,283 335,261
Deferred Income Tax (Provision) Benefit.... 760,200 (369,700) (133,900)
---------- ---------- ----------
Net Change in Unrealized Depreciation on
Loans..................................... 992,067 420,583 201,361
---------- ---------- ----------
Increase in Net Assets from Operations.... $1,922,789 $ 789,895 $ 530,015
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-49
<PAGE>

TRANSPORTATION CAPITAL CORP.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
PREFERRED STOCK COMMON STOCK RESTRICTED UNDISTRIBUTED UNDISTRIBUTED
------------------------ ---------------------- ADDITIONAL CONTRIBUTED NET NET
SHARES SHARES PAID-IN CAPITAL INVESTMENT REALIZED
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL SURPLUS INCOME LOAN LOSSES
----------- ----------- ----------- --------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January
1, 1993........ 3,383 1/3 $ 3,383,333 2,364,723 $ 295,590 $6,265,790 $ -- $4,142,497 $(3,981,833)
Net investment
income......... -- -- -- -- -- -- 981,517 --
Net realized
loan losses.... -- -- -- -- -- -- -- (50,795)
Net change in
unrealized
depreciation on
loans.......... -- -- -- -- -- -- -- --
Issuance of
common stock,
$4.50 per
share.......... -- -- 122,081 15,261 534,107 -- -- --
Distributions on
3% cumulative
preferred
stock.......... -- -- -- -- (64,600) -- -- --
Distributions on
common stock,
$.205 per
share.......... -- -- -- -- (484,768) -- -- --
---------- ----------- ---------- --------- ---------- ---------- ---------- -----------
Balance,
December 31,
1993........... 3,383 1/3 3,383,333 2,486,804 310,851 6,250,529 -- 5,124,014 (4,032,628)
Merger of TCC
Purchase Co.... -- -- (2,486,704) (310,838) 314,760 -- -- --
Net investment
income......... -- -- -- -- -- -- 453,622 --
Net realized
loan losses.... -- -- -- -- -- -- -- (84,310)
Net change in
unrealized
depreciation on
loans.......... -- -- -- -- -- -- -- --
---------- ----------- ---------- --------- ---------- ---------- ---------- -----------
Balance,
December 31,
1994........... 3,383 1/3 3,383,333 100 13 6,565,289 -- 5,577,636 (4,116,938)
Net investment
income......... -- -- -- -- -- -- 356,310 --
Net realized
loan losses.... -- -- -- -- -- -- -- (27,656)
Net change in
unrealized
depreciation on
loans.......... -- -- -- -- -- -- -- --
Capital
contribution... -- -- -- -- 310,818 -- -- --
Capitalization
of accumulated
undistributed
net investment
income......... -- -- -- -- 873,349 -- (873,349) --
Repurchase of 3%
preferred
stock.......... (3,383 1/3) (3,383,333) -- -- -- 2,199,166 -- --
---------- ----------- ---------- --------- ---------- ---------- ---------- -----------
Balance,
December 31,
1995........... -- $ -- 100 $ 13 $7,749,456 $2,199,166 $5,060,597 $(4,144,594)
========== =========== ========== ========= ========== ========== ========== ===========
<CAPTION>
NET
UNREALIZED TOTAL
DEPRECIATION SHAREHOLDERS'
ON LOANS EQUITY
------------- -------------
<S> <C> <C>
Balance, January
1, 1993........ $(2,000,000) $ 8,105,377
Net investment
income......... -- 981,517
Net realized
loan losses.... -- (50,795)
Net change in
unrealized
depreciation on
loans.......... 992,067 992,067
Issuance of
common stock,
$4.50 per
share.......... -- 549,368
Distributions on
3% cumulative
preferred
stock.......... -- (64,600)
Distributions on
common stock,
$.205 per
share.......... -- (484,768)
------------- -------------
Balance,
December 31,
1993........... (1,007,933) 10,028,166
Merger of TCC
Purchase Co.... -- 3,922
Net investment
income......... -- 453,622
Net realized
loan losses.... -- (84,310)
Net change in
unrealized
depreciation on
loans.......... 420,583 420,583
------------- -------------
Balance,
December 31,
1994........... (587,350) 10,821,983
Net investment
income......... -- 356,310
Net realized
loan losses.... -- (27,656)
Net change in
unrealized
depreciation on
loans.......... 201,361 201,361
Capital
contribution... -- 310,818
Capitalization
of accumulated
undistributed
net investment
income......... -- --
Repurchase of 3%
preferred
stock.......... -- (1,184,167)
------------- -------------
Balance,
December 31,
1995........... $ (385,989) $10,478,649
============= =============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-50
<PAGE>

TRANSPORTATION CAPITAL CORP.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Increase in net assets from
operations.......................... $ 1,922,789 $ 789,895 $ 530,015
Adjustments to reconcile increase in
net assets from operations to net
cash provided by (used for)
operating activities --
Change in unrealized depreciation on
loans............................... (231,867) (790,283) (335,261)
Effect of change in tax status....... (1,057,000) -- --
Provision for deferred taxes......... 111,000 549,800 138,300
Depreciation and amortization........ 13,500 14,199 14,570
Realized loan losses................. 68,933 144,058 50,055
Net change in --
Accrued interest receivable......... (20,752) 141,191 14,216
Other assets........................ (196,428) (102,185) 116,687
Accrued interest payable............ (36,290) (148,943) (38,317)
Accrued expenses.................... 35,695 (462,757) 46,377
------------ ------------ -----------
Net cash provided by operating
activities.......................... 609,580 134,975 536,642
------------ ------------ -----------
Cash Flows from Investing Activities:
Principal collected on loans......... 15,501,264 19,628,701 14,820,116
Advances on loans.................... (13,175,044) (12,682,418) (13,697,563)
Furniture, fixtures and office
equipment........................... (8,878) 3,500 (4,339)
------------ ------------ -----------
Net cash provided by investing
activities.......................... 2,317,342 6,949,783 1,118,214
------------ ------------ -----------
Cash Flows from Financing Activities:
Repurchase of preferred stock from
SBA................................. -- -- (1,184,167)
Repayment of debentures payable to
SBA................................. (675,000) (2,800,000) (1,200,000)
Repayment of bank debt............... (4,131,500) -- --
Capital contribution................. -- -- 310,818
Merger of TCC Purchase Co............ -- 3,922 --
Distributions on preferred stock..... (64,600) -- --
Distributions on common stock........ (484,768) -- --
Issuance of common stock............. 549,368 -- --
------------ ------------ -----------
Net cash used for financing
activities.......................... (4,806,500) (2,796,078) (2,073,349)
------------ ------------ -----------
Net Increase (Decrease) in Cash and
Cash Equivalents..................... (1,879,578) 4,288,680 (418,493)
Cash and Cash Equivalents, Beginning
of Year.............................. 5,790,108 3,910,530 8,199,210
------------ ------------ -----------
Cash and Cash Equivalents, End of
Year................................. $ 3,910,530 $ 8,199,210 $ 7,780,717
============ ============ ===========
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the year for --
Interest............................. $ 1,099,851 $ 857,638 $ 488,388
============ ============ ===========
Net income tax payments.............. $ -- $ 132,852 $ 205,322
============ ============ ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-51
<PAGE>

TRANSPORTATION CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1995

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Transportation Capital Corp. (the Company), a New York corporation, is an
indirect wholly owned subsidiary of Leucadia National Corporation (Leucadia)
and is licensed by the Small Business Administration (SBA) to operate as a
specialized small business investment company (SSBIC) under the Small Business
Investment Act of 1958, as amended. The Company was also registered as an
investment company under the Investment Company Act of 1940, as amended (the
Investment Company Act). On January 4, 1994, pursuant to the Company's
application, the Securities and Exchange Commission issued a conditional order
under Section 8(f) of the Investment Company Act declaring that the Company
had ceased to be a registered investment company. Termination of the Company's
registration under the Investment Company Act has not affected the Company's
regulation by the SBA, its status as a SSBIC, or its results of operation or
financial position. On August 30, 1994, TCC Purchase Co., an indirect wholly
owned subsidiary of Leucadia, merged with the Company and concurrently
increased Leucadia's ownership of the Company's common shares from 99% to
100%.

In 1993, the Company changed its year-end from June 30 to December 31. The
1993 statements of operations, changes in shareholders' equity and cash flows
present results for the 12 months ended December 31, 1993.

The 1993 financial statements present captions that are consistent with
those used for 1994 and 1995. In certain cases, they differ from captions
presented in previously issued financial statements as of and for the year
ended June 30, 1993 and as of and for the six months ended December 31, 1993.
Such changes include presenting net realized loan losses and the change in
unrealized depreciation on loans separately in the statement of operations.
Additionally, accumulated undistributed net realized loan losses and net
unrealized depreciation on loans are presented separately in the balance sheet
and the statement of changes in shareholders' equity.

Use of Estimates in the Preparation of Financial Statements

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.

Loans and the Allowance for Loan Losses

Loans, net of participation sold to other lenders and an allowance for
possible losses, are stated at fair value. The fair value of such loans is
determined in good faith by the Board of Directors. The allowance for loan
losses is maintained at a level that, in the Board of Director's judgment, is
adequate to absorb losses inherent in the portfolio.

The allowance is reviewed and adjusted periodically by the Board of
Directors on the basis of available information, including the fair value of
the underlying collateral; individual credit risks; past loss experience; the
volume, composition and growth of the portfolio; and current and projected
economic conditions. Assets acquired in satisfaction of loans are carried at
estimated net realizable value.

A fully collateralized loan is placed on nonearning status once it becomes
180 days past due as to principal and interest. Loans that are not fully
collateralized are placed on nonearning status when they are 90 days past due
as to principal or interest. Interest on nonearning loans is recognized as
income when collected.

F-52
<PAGE>

TRANSPORTATION CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

Realized Loan Losses

Realized loan losses consist of write-offs of loans or assets acquired in
satisfaction of loans, net of recoveries.

Unrealized Depreciation on Loans

All unrealized changes in the value of loans, including the provision for
losses, are included in the caption net change in unrealized depreciation on
loans, which is net of income tax effect. Net unrealized depreciation on loans
at December 31, 1994 and December 31, 1995 is net of deferred income taxes of
$390,500 and $256,600, respectively.

Depreciation and Amortization

Depreciation and amortization of furniture, fixtures, office equipment and
leasehold improvements is computed using straight-line and accelerated methods
at rates adequate to allocate the cost of applicable assets over their
estimated useful lives or, if less, the term of the lease. Depreciation and
amortization amounted to $4,296, $3,925 and $3,226 for the years ended
December 31, 1995, 1994 and 1993, respectively.

Income Taxes

For the period January 1, 1993 through June 30, 1993, the Company qualified
as a regulated investment company (RIC) under the Internal Revenue Code of
1986, as amended. To avoid a federal income tax liability, a RIC is required
to distribute to its shareholders, as dividends, at least 90% of its
investment company taxable income for each fiscal year, as well as meet
certain other requirements. The Company was not taxable during this period.
Upon termination of the Company's registration under the Investment Company
Act, its status as a nontaxable RIC was also terminated retroactive to July 1,
1993. Beginning July 1, 1993, the Company's results of operations are reported
in the consolidated federal income tax return filed by its ultimate parent
company, Leucadia.

The Company and Leucadia have entered into a tax sharing agreement pursuant
to which the Company makes payments to (or receives payments from) Leucadia
consisting of the tax liability that the Company would incur if it filed a
separate federal income tax return.

The Company provides for income taxes using the liability method under
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Under the liability method, deferred income taxes are provided
at the statutory rates for differences between the tax and accounting bases of
substantially all assets and liabilities and for carryforwards. A valuation
allowance is provided if deferred tax assets are not considered more likely
than not to be realized.

Cash and Cash Equivalents

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, cash equivalents and
loan receivables.

The Company considers short-term instruments with original maturities of
three months or less, measured from their acquisition date, to be cash
equivalents. Cash and cash equivalents consist of cash in banks and U.S.
Treasury bills at market value.

Noncash Investing Activities

During the years ended 1995, 1994 and 1993, the Company refinanced loans
amounting to $740,826, $1,041,933 and $7,222,212, respectively.

F-53
<PAGE>

TRANSPORTATION CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

(2) LOANS RECEIVABLE

Nonearning and reduced rate loans outstanding were approximately $224,000
and $88,200 at December 31, 1994 and 1995, respectively. At December 31, 1994
and 1995, there were no commitments to loan additional funds to borrowers
whose loans were classified as nonearning or reduced rate.

Transactions in the allowance for loan losses are summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
---------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning........................ $2,000,000 $1,768,133 $ 977,850
Charge-offs............................... (232,360) (176,975) (61,672)
Recoveries................................ 163,427 32,917 11,617
Interest income deferred (received)....... 289,430 (289,430) --
Reduction in allowance.................... (452,364) (356,795) (285,206)
---------- ---------- ---------
Balance, ending........................... $1,768,133 $ 977,850 $ 642,589
========== ========== =========
</TABLE>

The 1993 provision for deferred interest income is against interest not
previously recognized on 1992 nonearning loans. These loans were subsequently
restructured in 1993 to include the interest in the loan principal, but
management considered their recovery doubtful. The provision was reversed in
1994 upon collection of the restructured loans.

(3) DEBENTURES PAYABLE TO THE SMALL BUSINESS ADMINISTRATION

Debentures payable to the SBA at December 31, 1994 and 1995 consisted of
subordinated debentures with the following maturities and interest rates
(interest is payable semi-annually):

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
-----------------------------
1994 1995 DUE DATE INTEREST RATE
---------- ---------- -------- ----------------
<S> <C> <C> <C>
$1,200,000 $ -- 09/11/95 10.50% per annum
1,090,000 1,090,000 05/07/96 7.375% per annum
5,640,000 5,640,000 06/01/02 5.000% per annum
---------- ---------- through 5/31/97,
8% thereafter
$7,930,000 $6,730,000
========== ==========
</TABLE>

Under the terms of the subordinated debentures, the Company may not
repurchase or retire any of its capital stock, make any distributions to its
shareholders other than dividends out of accumulated undistributed net
investment income (as computed in accordance with SBA regulations) or increase
salaries under certain conditions without the prior written approval of the
SBA.

In 1993, the SBA permitted the Company to make the recorded distributions
from additional paid-in capital on the condition that the Company paid all
current and accrued preferred dividends and that the Company's shareholders
contributed additional capital in the aggregate amount of all dividends paid.
As a result, during the year ended December 31, 1993, the Company's then
largest shareholder acquired from the Company 122,081 newly issued common
shares for an aggregate purchase price of $549,368 ($4.50 per share).

F-54
<PAGE>

TRANSPORTATION CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

(4) SHAREHOLDERS' EQUITY

Effective February 19, 1986, the Company adopted an Employee Incentive Stock
Option Plan (the Plan), that expires on February 18, 1996. Under the Plan, the
Company may grant options to purchase 24,000 shares of common stock at not
less than the fair market value of the shares on the date of grant. There are
no outstanding options issued under the Plan, and the Company does not intend
to issue any.

At December 31, 1994, the Company had 3,383 1/3 shares of preferred stock
issued to the SBA, which bear dividends of 3% per annum. Dividends are not
required to be paid to the SBA on an annual or other periodic basis as long as
cumulative dividends are paid to the SBA before any other payments are made to
investors. Cumulative dividends not declared or paid as of December 31, 1994
were $143,400.

On August 14, 1995, the Company repurchased and retired all of its 3%
preferred stock owned by the SBA at a discount of 65% under an SBA 3%
preferred stock repurchase agreement dated March 22, 1995. The purchase price
of the preferred stock was $1,184,167. The funds paid to the SBA were obtained
from a $310,818 capital contribution from the Company's sole shareholder, LNC
Investments, Inc., and a $873,349 capitalization of accumulated undistributed
net investment income, in accordance with Appendix I to Part 107 of the SBA
rules and regulations. As a result, the accumulated undistributed net
investment income was reduced, and the additional paid-in capital was
increased by $873,349; the net effect was the same as if the Company had made
a distribution to its shareholders, who then reinvested the same amount in the
Company.

The amount of the discount was recorded as an increase in capital in an
account separate from additional paid-in capital, as restricted contributed
capital surplus account. Under the repurchase agreement, the SBA retains a
liquidating interest in the amount of the discount on the repurchase, which
expires on a straight-line basis over five years or on a later date if an
event of default, as defined in the repurchase agreement, has occurred and
such default has been cured or waived. Upon the occurrence of any event of
default, the SBA's liquidating interest will become fixed at the level
immediately preceding the event of default and will not amortize further until
the default is cured or waived.

While the liquidating interest expires over a five-year period, the balance
in the restricted contributed capital surplus account remains unchanged in
accordance with the SBA requirements. The SBA requires this treatment because
the additional equity obtained as a result of the repurchase transaction is
subject to certain restrictions that remain even after the liquidating
interest has been eliminated.

In the event of the Company's liquidation, the unexpired portion of the
liquidating interest becomes immediately payable to the SBA. In addition, the
SBA retains a residual interest in the preferred dividends in arrears at March
22, 1995 in the amount of $152,250, which also expires on a straight-line
basis over five years. In the event of a change in ownership or liquidation of
the Company, unexpired dividends become immediately payable to the SBA.

At December 31, 1995, the unamortized amounts of the SBA's liquidating
interest in the restricted contributed capital surplus was $1,869,291, and the
residual interest in the cumulative dividends not declared or paid was
$129,413.

There are 9,000 shares of redeemable preferred stock authorized, of which
none has been issued. Such shares, which may be issued only to the SBA, would
have a par value of $1,000 per share, bear cumulative annual dividends of 4%
and would be required to be redeemed 15 years after issuance.

F-55
<PAGE>

TRANSPORTATION CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

(5) INCOME TAXES

The provisions (benefits) for income taxes are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
--------- -------- --------
<S> <C> <C> <C>
Net investment income --
Current --
Federal...................................... $ (38,107) $110,233 $181,347
State........................................ 18,977 52,615 83,976
--------- -------- --------
(19,130) 162,848 265,323
--------- -------- --------
Deferred --
Federal...................................... (146,900) 142,500 3,400
State........................................ (38,900) 37,600 1,000
--------- -------- --------
(185,800) 180,100 4,400
--------- -------- --------
$(204,930) $342,948 $269,723
========= ======== ========
Net realized loan losses --
Current --
Federal...................................... $ (17,155) $(43,433) $(14,247)
State........................................ (983) (16,315) (8,152)
--------- -------- --------
$ (18,138) $(59,748) $(22,399)
========= ======== ========
Net change in unrealized depreciation on
loans --
Deferred --
Federal...................................... $(601,100) $298,600 $103,700
State........................................ (159,100) 71,100 30,200
--------- -------- --------
$(760,200) $369,700 $133,900
========= ======== ========
</TABLE>

The following is a reconciliation of income taxes at the expected statutory
federal income tax to the actual income tax provision (benefit):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1994 1995
--------- -------- --------
<S> <C> <C> <C>
Net investment income --
Expected federal income tax...................... $ 264,039 $270,834 $212,851
State income taxes, net of federal income tax
benefit......................................... 968 59,542 56,084
Effect of change in tax status................... (156,500) -- --
Benefit from nontaxable RIC status............... (257,960) -- --
Other............................................ (55,477) 12,572 788
--------- -------- --------
$(204,930) $342,948 $269,723
========= ======== ========
</TABLE>

Included in other in 1993 is the reversal of $57,000, which was accrued as
of December 31, 1992, in anticipation of a change to taxable status at that
date. Ultimately, the Company retained its nontaxable status through June 30,
1993 and reversed the 1992 accrual in 1993.

F-56
<PAGE>

TRANSPORTATION CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
--------- -------- --------
<S> <C> <C> <C>
Net realized loan losses --
Expected federal income tax.................... $ (23,437) $(48,980) $(17,019)
State income taxes, net of federal income tax
benefit....................................... (86) (10,768) (5,380)
Other.......................................... 5,385 -- --
--------- -------- --------
$ (18,138) $(59,748) $(22,399)
========= ======== ========
Net change in unrealized depreciation on
loans --
Expected federal income tax.................... $ 78,835 $268,696 $113,989
State income taxes, net of federal income tax
benefit....................................... 16,900 46,926 19,932
Effect of change in tax status................. (900,500) -- --
Other.......................................... 44,565 54,078 (21)
--------- -------- --------
$(760,200) $369,700 $133,900
========= ======== ========
</TABLE>

The principal components of the deferred tax asset at December 31, 1994 and
1995 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
--------------------------- ---------------------------
FEDERAL STATE TOTAL FEDERAL STATE TOTAL
-------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Allowance for loan loss-
es..................... $302,494 $88,006 $390,500 $198,800 $57,800 $256,600
Interest................ 5,672 1,604 7,276 2,300 600 2,900
Depreciation............ (1,266) (310) (1,576) (1,300) (300) (1,600)
-------- ------- -------- -------- ------- --------
$306,900 $89,300 $396,200 $199,800 $58,100 $257,900
======== ======= ======== ======== ======= ========
</TABLE>

The Company believes it is more likely than not that the recorded deferred
tax asset will be realized; such realization is expected to result principally
from taxable income generated by profitable operations.

(6) TRANSACTIONS WITH AFFILIATES

In May 1994, the Company entered into a one-year management agreement with a
subsidiary of Leucadia pursuant to which the subsidiary agreed to perform
certain general, administrative and accounting functions for an annual fee of
$180,000 with subsequent annual increases to be determined according to
increases in the consumer price index. This agreement shall continue in full
force and effect after the initial one-year term so long as it is approved on
an annual basis by the Company's Board of Directors. This agreement may be
terminated by either party at any time, without the payment of any penalty, on
thirty days' written notice.

Prior to May 1994, the Company reimbursed Leucadia for providing the
services of one of its officers who serves as the Chairman of the Board,
President and Chief Executive Officer of the Company.

Amounts charged to results of operations under these arrangements were
$182,815 during the year ended December 31, 1995 and $180,000 during each of
the years ended December 31, 1994 and 1993.

(7) DIRECTORS' AND OFFICERS' COMPENSATION

Directors' Compensation amounted to $3,000, $6,900 and $25,000 and Officers'
compensation amounted to $182,709, $159,466 and $123,945 during the years
ended December 31, 1995, 1994 and 1993, respectively.

F-57
<PAGE>

TRANSPORTATION CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

(8) PENSION PLAN

The Company maintained a defined benefit pension plan to provide retirement
benefits for those employees who were eligible to participate in the plan.
Benefits accrued under the plan were frozen on July 14, 1990, and all
participating employees became fully vested. On December 31, 1994, the
Company's plan was merged into Leucadia's defined benefit pension plan. As of
the merger date, the Company recorded a net asset of $113,814 and reduced
pension expense. The net asset reflects the overfunding of the Company's plan
as of the merger date, reduced by the projected benefit obligation liability
associated with granting the Company's employees retroactive coverage under
the Leucadia formula for service after July 14, 1990. During the year ended
December 31, 1995, the Company made contributions to Leucadia's plan based on
its allocable share of expenses in the amount of $10,676.

(9) COMMITMENTS AND CONTINGENCIES

In the normal course of business, there are outstanding commitments and
contingent liabilities that are not reflected in the financial statements. At
December 31, 1995, the Company had outstanding loan commitments of $403,000,
which bear interest at rates ranging from 13% to 14%. Management does not
expect any material losses to result from these matters.

At December 31, 1994 and 1995, the Company had operating leases for office
space expiring through July 1997. Future minimum annual rental commitments are
as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
------- -------
<S> <C> <C>
1995............................................................ $20,900 $ --
1996............................................................ 19,800 19,800
1997............................................................ 8,800 8,800
------- -------
$49,500 $28,600
======= =======
</TABLE>

In addition, the Company is subject to additional rent based upon increases
in the Consumer Price Index.

There are various lawsuits pending against the Company. In the opinion of
management, after consultation with counsel, it is remote that losses, if any,
arising from such claims will be material to the financial position or results
of operations of the Company.

(10) FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of fair value information about certain financial
instruments, whether or not recognized on the balance sheet. Where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In addition, SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
purport to represent and should not be considered representative of the
underlying market or franchise value of the Company.

The methods and assumptions used to estimate the fair value of each class of
the financial instruments are described below:

Loans Receivable -- As described in Note 1, the carrying amount of loans
receivable is the estimated fair value of such loans.

F-58
<PAGE>

TRANSPORTATION CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1995

Cash and Cash Equivalents -- For short-term investments, the carrying amount
approximates fair value.

Debentures Payable to SBA -- The fair value of the debentures payable to SBA
is estimated based upon current market interest rates for similar debt.

The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets --
Loans receivable................. $10,003,050 $10,003,050 $9,154,139 $9,154,139
Cash and cash equivalents........ 8,199,210 8,199,210 7,780,717 7,780,717
Financial liabilities --
Debentures payable to SBA........ 7,930,000 7,794,000 6,730,000 7,189,000
</TABLE>

(11) SHAREHOLDER LITIGATION

The Company has settled certain litigation related to past allegations of
violations of SBA regulations and securities laws. Related settlements
required that former officers of the Company pay $677,000 to the Company in
the year ended December 31, 1992 and that the Company pay plaintiffs' legal
fees amounting to $368,788 in the year ended December 31, 1994. Of the amount
paid by the Company, $66,000 was reimbursed by former officers of the Company.

As a result of the allegations, the Division of Enforcement of the
Securities and Exchange Commission (SEC) conducted an informal investigation
into the Company's affairs. In the year ended December 31, 1994, a former
officer of the Company settled federal charges with the SEC, concluding the
SEC's investigation.

(12) SUBSEQUENT EVENT

On February 12, 1996, the Company entered into a stock purchase agreement
with Medallion Financial Corp. Under the agreement, Leucadia will sell, and
Medallion Financial Corp. will purchase, all of the outstanding shares of
capital stock of the Company for a purchase price based upon net book value,
as defined in the agreement (approximately $10,000,000).

As discussed in Note 4, under the terms of the preferred stock repurchase
agreement with the SBA, a change in ownership of the Company would result in
the unexpired portion of the dividends becoming payable to the SBA. The
transaction with Medallion Financial Corp. is subject to SBA approval.

F-59
<PAGE>

TRANSPORTATION CAPITAL CORP.

SCHEDULE OF INVESTMENTS OTHER THAN INVESTMENTS IN AFFILIATES

<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
---------------------------------------------- -------------------------------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL
LOANS BY COLLATERAL TYPE OF LOANS BALANCE FAIR VALUE BOOK VALUE OF LOANS BALANCE FAIR VALUE BOOK VALUE
------------------------ -------- ----------- ----------- ----------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MEDALLIONS:
New York............... 20 $ 1,271,544 $ 1,271,544 $ 1,271,544 17 $ 797,932 $ 797,932 $ 797,932
Boston................. 91 4,383,344 4,357,462 4,357,462 80 3,400,557 3,400,557 3,400,557
Cambridge.............. 37 1,375,401 1,374,401 1,374,401 45 1,984,198 1,971,598 1,971,598
Chicago................ 82 1,549,963 1,537,560 1,537,560 87 1,647,561 1,647,561 1,647,561
Newark................. 17 218,989 186,019 186,019 12 158,157 156,836 156,836
--- ----------- ----------- ----------- --- ---------- ---------- ----------
Total medallions....... 247 8,799,241 8,726,986 8,726,986 241 7,988,405 7,974,484 7,974,484
NEW YORK RADIO CARS..... 49 924,856 387,444 387,444 35 599,694 238,198 238,198
MINUTEMAN RECEIVABLES... 3 1,254,460 886,315 886,315 3 1,217,371 950,199 950,199
OTHERS.................. 2 6,108 6,070 6,070 -- -- -- --
--- ----------- ----------- ----------- --- ---------- ---------- ----------
Subtotal............... 301 10,984,665 10,006,815 10,006,815 279 9,805,470 9,162,881 9,162,881
RECEIVABLE FOR
FORECLOSURE EXPENSES... -- 21,707 21,707 21,707 -- 10,144 10,144 10,144
UNAPPLIED COLLECTIONS... -- (25,472) (25,472) (25,472) -- (18,886) (18,886) (18,886)
--- ----------- ----------- ----------- --- ---------- ---------- ----------
Total loans receivable,
net................... 301 $10,980,900 $10,003,050 $10,003,050 279 $9,796,728 $9,154,139 $9,154,139
=== =========== =========== =========== === ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-60
<PAGE>

TRANSPORTATION CAPITAL CORP.

SCHEDULE OF LOANS TO SMALL BUSINESS CONCERNS

DECEMBER 31, 1994

It is the Company's policy to make loans to persons who qualify under Small
Business Administration regulations as socially or economically disadvantaged
and to entities which are at least 50%-owned by such persons.

Substantially all of the Company's loans are for the purpose of financing
the purchase of New York City, Boston, Cambridge, Chicago and Newark taxi
medallions, taxi cabs, car radio rights, radio cars and related assets (the
Collateral). It is the Company's policy that these loans are collateralized by
a first priority perfected security interest in the collateral.

The distribution of loans at December 31, 1994 by rate of interest is as
follows:

<TABLE>
<CAPTION>
NUMBER BALANCE INTEREST
OF LOANS OUTSTANDING RATE
-------- ----------- --------
<S> <C> <C>
2 $ 135,205 9.50%
3 231,174 10.00
1 108,059 10.50
10 529,752 11.00
63 3,013,981 12.00
2 92,082 12.50
16 505,202 13.00
4 68,126 13.25
63 2,317,243 13.50
8 364,819 13.75
31 1,481,519 14.00
21 560,112 14.25
6 92,796 14.50
5 202,875 14.75
29 638,383 15.00
2 51,821 15.25
6 161,570 15.50
14 173,937 15.75
1 21,656 16.00
1 761 16.25
5 79,102 16.50
7 141,332 16.75
1 13,158 17.00
-----------
301 10,984,665 13.16
RECEIVABLES FOR
FORECLOSURE EXPENSES............................... 21,707
UNAPPLIED COLLECTIONS............................... (25,472)
-----------
$10,980,900
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-61
<PAGE>

TRANSPORTATION CAPITAL CORP.

SCHEDULE OF LOANS TO SMALL BUSINESS CONCERNS

DECEMBER 31, 1995

The distribution of loans at December 31, 1995 by rate of interest is as
follows:

<TABLE>
<CAPTION>
NUMBER BALANCE INTEREST
OF LOANS OUTSTANDING RATE
-------- ----------- --------
<S> <C> <C>
2 $ 115,650 9.50%
3 125,384 10.00
10 361,560 11.00
51 1,231,411 12.00
2 64,923 12.50
48 1,234,511 13.00
4 22,065 13.25
50 1,740,372 13.50
5 210,120 13.75
50 2,516,760 14.00
18 393,213 14.25
6 1,254,777 14.50
1 55,707 14.75
16 217,328 15.00
2 65,072 15.50
4 27,918 15.75
1 13,296 16.00
2 61,934 16.50
3 88,006 16.75
1 5,463 17.00
----------
279 9,805,470 13.46
RECEIVABLES FOR FORECLOSURE EXPENSES................... 10,144
UNAPPLIED COLLECTIONS.................................. (18,886)
----------
$9,796,728
==========
<CAPTION>
PERCENT
--------
<S> <C> <C>
COMPOSITION OF LOAN PORTFOLIO:
New York medallions................................... $ 797,932 8.14
New York radios and others............................ 599,694 6.12
New York minuteman receivables........................ 1,217,371 12.41
Newark medallions..................................... 158,157 1.61
Boston medallions..................................... 3,400,557 34.68
Cambridge medallions.................................. 1,984,198 20.24
Chicago medallions.................................... 1,647,561 16.80
---------- ------
Total composition of loan portfolio.................. $9,805,470 100.00%
========== ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-62
<PAGE>

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

NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY MEDALLION FINANCIAL CORP. OR BY ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER AT ANY TIME IMPLIES THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 11
The Company.............................................................. 19
Additional Information................................................... 22
Distributions............................................................ 23
Use of Proceeds.......................................................... 24
Capitalization........................................................... 25
Dilution................................................................. 26
Selected Financial Data.................................................. 27
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 34
Business................................................................. 47
Investment Objectives, Policies and Restrictions......................... 61
Management............................................................... 64
Principal Stockholders................................................... 68
Certain Transactions..................................................... 68
Determination of Net Asset Value......................................... 69
Dividend Reinvestment Plan............................................... 70
Federal Income Tax Considerations ....................................... 71
Description of Capital Stock............................................. 74
Regulation............................................................... 76
Shares Eligible for Future Sale.......................................... 78
Underwriting............................................................. 81
Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar....... 82
Reports to Stockholders.................................................. 83
Validity of Shares....................................................... 83
Experts.................................................................. 83
Index to Financial Statements............................................ F-1
</TABLE>

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

UNTIL JUNE 18, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

5,000,000 SHARES

[LOGO OF MEDALLION FINANCIAL CORP. APPEARS HERE]

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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

PROSPECTUS

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

FURMAN SELZ

J.C. BRADFORD & CO.

EVEREN SECURITIES, INC.

MAY 23, 1996

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