IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP, 424B4, 1997-10-17

IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP
424B4, 1997-10-17
REAL ESTATE INVESTMENT TRUSTS

Previous: ECHOSTAR DBS CORP, POS AM, 1997-10-17

Next: DRIL-QUIP INC, S-1/A, 1997-10-17

<PAGE>

FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-32683

30,000,000 SHARES

[LOGO OF IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.]

COMMON STOCK
----------
Imperial Credit Commercial Mortgage Investment Corp. ("ICCMIC" and, together
with its subsidiaries, the "Company") was organized as a Maryland corporation
on July 31, 1997. ICCMIC will elect to be taxed as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended (the
"Code"). Imperial Credit Commercial Asset Management Corporation (the
"Manager"), a wholly-owned subsidiary of Imperial Credit Industries, Inc.
("Imperial Credit"), will manage the day-to-day operations of the Company,
subject to the supervision of ICCMIC's Board of Directors.
Of the shares offered hereby, 2,970,000 shares will be sold to Imperial
Credit at the initial public offering price net of any underwriting discounts
or commissions. After such sale Imperial Credit will own 9.9% of ICCMIC's
common stock, par value $0.0001 per share (the "Common Stock"), assuming that
the Underwriters do not exercise their over-allotment option.
The initial public offering price of the Common Stock is $15 per share. Prior
to the offering of Common Stock hereby (the "Offering"), there has been no
market for the Common Stock. The initial public offering price has been
determined by negotiation between the Company and the Underwriters. See
"Underwriting." The Company's Common Stock has been approved for listing on the
Nasdaq National Market, subject to official notice of issuance, under the
symbol "ICMI."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR MATERIAL RISKS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK INCLUDING, AMONG OTHERS:

. The Company and the Manager have common officers and directors, which may
present conflicts of interest in the Company's dealings with the Manager
and its affiliates, including the Company's purchase of assets from the
Manager's affiliates;
. The yield on the Company's investments in mortgage loans and mortgage-
backed securities, particularly interest only and principal only mortgage-
backed securities such as those that comprise a portion of the Initial
Investments, may be affected adversely by changes in prevailing interest
rates, rates of prepayment and credit losses;
. The Company intends to leverage its investments, in an amount that is not
expressly limited and that will be determined by the Manager and,
ultimately, ICCMIC'S Board of Directors, which could lead to reduced or
negative cash flow and reduced liquidity;
. Only approximately $163 million (in purchase price, approximately 39% of
the net proceeds of the Offering) of the Company's assets have been
identified, and the Company will face significant competition in acquiring
additional assets, which may affect adversely the Company's ability to
achieve its investment objectives;
. The Company may invest in distressed real estate, including real properties
with known material environmental problems, which may not generate
sufficient revenues to meet operating expenses and debt service obligations
and may expose the Company to liability substantially in excess of the
Company's investment therein;
. To avoid being taxed as a regular corporation, the Company must satisfy
certain requirements relating to its assets and income, which may restrict
the Company's investment opportunities, and the Company must distribute at
least 95% of its taxable income each year, which could result in the
Company needing to sell assets or borrow money in order to satisfy this
requirement; and
. The Company may invest in REMIC Residual Interests and Non-REMIC Residual
Interests, which may generate taxable income in excess of cash receipts.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share . . . . . . . . . . . . . . . . $15.00 $1.05 $13.95
- ---------------------------------------------------------------------------------------------------------
Total(3)(4) . . . . . . . . . . . . . . . $446,356,500.00 $27,856,500.00 $418,500,000.00
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses in connection with the Offering, estimated at
$1,500,000, which will be payable by the Company.
(3) The Company has granted the several Underwriters a 30-day option to
purchase up to 4,500,000 additional shares of Common Stock to cover over-
allotments. If all such shares of Common Stock are purchased, the total
Price to Public, Underwriting Discount and Proceeds to Company, before
expenses of this Offering, will be $513,856,500.00, $32,581,500.00 and
$481,275,000.00, respectively. See "Underwriting."
(4) The total Price to Public and the total Proceeds to Company include the
proceeds of the sale of up to 2,970,000 shares of Common Stock to Imperial
Credit and 500,000 shares of Common Stock to certain directors, officers
and employees of the Company, the Manager and Imperial Credit and members
of their respective immediate families, in each case net of the
Underwriting Discount.
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made in New York,
New York on or about October 22, 1997.

FRIEDMAN, BILLINGS, RAMSEY & CO., INC. JEFFERIES & COMPANY, INC.

The date of this Prospectus is October 16, 1997.
<PAGE>

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZATION, THE PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") (of
which this Prospectus forms a part) under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Common Stock offered
pursuant to the Prospectus. This Prospectus contains summaries of the material
terms of the documents referred to herein and therein, but does not contain
all of the information set forth in the Registration Statement pursuant to the
rules and regulations of the Commission. For further information, reference is
made to such Registration Statement and the exhibits thereto. Such
Registration Statement and exhibits as well as reports and other information
filed by ICCMIC can be inspected without charge and copied at prescribed rates
at the public reference facilities maintained by the Commission at the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and at its Regional Offices located as follows: Chicago Regional
Office, Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661-2511; and New York Regional Office, Seven World Trade Center,
Suite 1300, New York, New York 10048. The Commission maintains a Web site that
contains reports, proxy, and information statements and other information
regarding registrants that file electronically with the Commission. The Web
site is located at http://www.sec.gov.

Statements contained in this Prospectus as to the contents of any contract
or other document that is filed as an exhibit to the Registration Statement
are not necessarily complete, and each such statement is qualified in its
entirety by reference to the full text of such contract or document.

The Company will be required to file reports and other information with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). In addition to applicable legal requirements, if any, holders
of Common Stock will receive annual reports containing information regarding
the business and performance of the Company, including audited financial
statements with a report thereon by the Company's independent certified public
accountants, and quarterly reports containing unaudited financial information
for each of the first three quarters of each fiscal year.

Table of Contents located on inside front cover of this Prospectus
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY..................... 1
ORGANIZATION AND RELATIONSHIPS......... 9
RISK FACTORS........................... 10
Conflicts of Interest in the Business
of the Company May Result in
Decisions of the Company That Do Not
Fully Reflect the Interests of the
Stockholders of the Company.......... 10
Benefits to Insiders; Common Officers
and Directors....................... 10
Manager May Advise Others............ 10
Independent Directors Will Not
Participate in Day-to-Day
Operations.......................... 10
Purchase of Assets from Imperial
Credit and its Affiliates........... 11
Risks Related to Investments in
Mortgage Loans....................... 11
Multifamily and Commercial Loans
Involve a Greater Risk of Loss than
Single Family Loans................. 11
Volatility of Values of Mortgaged
Properties May Affect Adversely the
Company's Mortgage Loans............ 11
Construction and Mezzanine Loans
Involve Greater Risks of Loss Than
Loans Secured by Income Producing
Properties.......................... 12
Distressed Mortgage Loans May Have
Greater Default Risks Than
Performing Loans.................... 12
Geographic Concentration of the
Company's Assets in California May
Make the Company's Performance
Subject to Economic Conditions in
California.......................... 12
Delinquency and Loss Ratios May Be
Affected by Performance of Third-
Party Servicers..................... 12
Limited Recourse Loans May Limit the
Company's Recovery to the Value of
the Mortgaged Property.............. 13
One Action Rules May Limit the
Company's Rights Following
Defaults............................ 13
Risks Related to Investments in MBS
Interests............................ 13
Subordinated MBS Interests are
Subject to Greater Credit Risks Than
More Senior Classes................. 13
Yields on Subordinated MBS Interests,
IOs and POs May Be Affected
Adversely By Interest Rate Changes.. 14
REMIC Residual Interests and Other
MBS Interests May Generate Taxable
Income in Excess of Cash Received... 15
Risks Related to Investments in Real
Property............................. 15
Conditions Beyond Company's Control
May Affect Adversely the Value of
Real Property....................... 15
The Company's Insurance Will Not
Cover All Losses.................... 15
Property Taxes Decrease Returns on
Real Estate......................... 15
Compliance with Americans with
Disabilities Act and Other Changes
in Governmental Rules and
Regulations May Be Costly........... 16
Properties with Hidden Environmental
Problems May Increase Costs and
Create Liabilities for the Company.. 16
Real Properties with Known
Environmental Problems May Create
Liability for the Company........... 16
Foreign Real Properties are Subject
to Currency Conversion Risks,
Foreign Tax Laws and Uncertainty of
Foreign Laws........................ 16
Economic and Business Risks........... 17
Interest Rate Changes May Affect
Adversely the Value of the Company's
Investments......................... 17
The Company's Performance May Be
Affected Adversely If Its Hedging
Strategy Is Not Successful.......... 17
Leverage Can Reduce Income Available
for Distribution and Cause Losses... 18
Maturity Mismatch Between Asset
Maturities and Borrowing Maturities
May Affect Adversely the Company's
Net Income.......................... 18
Interest Rate Mismatch Between Asset
Yields and Borrowing Rates May
Affect Adversely the Company's Net
Income.............................. 18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company May Not Be Able to Borrow
Money on Favorable Terms............ 19
Adverse Changes in General Economic
Conditions Can Affect Adversely the
Company's Business.................. 19
Significant Competition May Affect
Adversely the Company's Ability to
Acquire Assets at Favorable Spreads
Relative to Borrowing Costs......... 19
Appropriate Investments May Not Be
Available and Full Investment of Net
Proceeds May Be Delayed............. 19
Investments May Be Illiquid and Their
Value May Decrease.................. 20
Legal and Tax Risks................... 20
Adverse Consequences of Failure to
Maintain REIT Status May Include
ICCMIC Being Subject to Taxation as
a Regular Corporation............... 20
Investment in the Common Stock of the
Company by Certain Plans May Give
Rise to a Prohibited Transaction
Under ERISA and the Code............ 22
Ownership Limitation May Restrict
Business Combination Opportunities.. 22
Preferred Stock May Prevent Change in
Control............................. 22
Maryland Anti-Takeover Statutes May
Restrict Business Combination
Opportunities....................... 22
Board of Directors May Change Certain
Policies Without Stockholder
Consent............................. 22
Loss of Investment Company Act
Exemption Would Affect the Company
Adversely........................... 22
The Company's Responsibility to
Indemnify the Manager and Officers
and Directors of the Company May
Result in Liability for the Actions
of the Manager and Officers and
Directors of the Company............ 23
Changes in the Regulation of the
Manager's Affiliates May Affect
Adversely the Manager's Ability to
Carry Out Management Functions...... 23
Other Risks........................... 23
Uncertainty as to the Company's
Ability Successfully to Implement
Its Operating Policies and
Strategies Resulting From Its Lack
of Operating History................ 23
The Company's Success May Depend on
the Services of External
Management.......................... 24
A Failure by SPB to Comply with a
Certain Memorandum of Understanding
May Have Certain Material Adverse
Effects on the Company.............. 24
The Failure to Develop a Market for
Common Stock May Result in a
Decrease in its Market Price........ 24
Increases in Interest Rates May
Affect Adversely the Yield of the
Common Stock........................ 24
Future Offerings of Capital Stock May
Result in Dilution of the Book Value
or Earnings per Share of the
Outstanding Common Stock............ 24
OPERATING POLICIES AND OBJECTIVES...... 25
Strategy.............................. 25
Relationship with Imperial Credit..... 26
The SPB Memorandum of Understanding... 27
Purchase of Initial Investments and
Right of First Offer for Additional
Investments.......................... 28
The Company's Guidelines.............. 28
The Company's Assets.................. 30
Portfolio Management.................. 39
MANAGEMENT OF OPERATIONS............... 41
Imperial Credit Industries, Inc....... 41
The Manager........................... 41
Directors of the Manager.............. 41
Executive Officers Who Are Not
Directors............................ 41
The Management Agreement.............. 43
Management Fees....................... 45
Costs and Expenses.................... 46
Tabular Presentation of Amounts
Payable to the Manager............... 46
1997 Stock Option Plan................ 47
Limits of Responsibility.............. 48
Certain Relationships; Conflicts of
Interest............................. 49
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY............................ 51
Directors and Executive Officers...... 51
Directors of ICCMIC................... 51
DISTRIBUTION POLICY.................... 54
YIELD CONSIDERATIONS RELATED TO THE
COMPANY'S INVESTMENTS................. 54
Mortgage Loans........................ 54
MBS Interests......................... 55
IOs, Inverse IOs and Sub IOs.......... 56
POs................................... 57
Real Property......................... 57
INITIAL INVESTMENTS.................... 58
General............................... 58
The Initial Mortgage Loans............ 58
Indices............................... 69
Underwriting Guidelines............... 76
Initial MBS Interests................. 77
JPM Series 1997-SPTL-C1, Classes E, F,
G, H, NR and X....................... 77
Certain Characteristics of the JPM
Mortgage Loans....................... 79
SPTL, Series 1996-C1, Classes E, F,
NR, A1X, D1X and NRX................. 84
Certain Characteristics of the SPTL
Mortgage Loans....................... 87
YIELD CONSIDERATIONS RELATED TO THE
INITIAL MBS INTERESTS ................ 93
General............................... 93
Initial Subordinated Interests........ 93
Modeling Assumptions.................. 93
Yield on the Interest Only
Certificates......................... 102
SERVICING OF MORTGAGE LOANS............ 105
SPB's Servicing Experience............ 105
Special Servicing .................... 108
Responsibilities of Master Servicer... 108
Responsibilities of Special Servicer.. 108
CAPITALIZATION......................... 110
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
LIQUIDITY AND CAPITAL RESOURCES....... 110
DESCRIPTION OF CAPITAL STOCK........... 111
General............................... 111
Common Stock.......................... 111
Preferred Stock....................... 111
Restrictions on Transfer.............. 112
Dividend Reinvestment Plan............ 114
Reports to Stockholders............... 114
Transfer Agent and Registrar.......... 114
Listing of the Common Stock........... 114
CERTAIN PROVISIONS OF MARYLAND LAW AND
OF ICCMIC'S CHARTER AND BYLAWS........ 115
Board of Directors.................... 115
Amendment............................. 115
Business Combinations................. 115
Control Share Acquisitions............ 116
Operations............................ 116
Advance Notice of Director Nominations
and New Business..................... 116
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Possible Anti-Takeover Effect of
Certain Provisions of Maryland Law
and of the Charter and Bylaws........ 117
COMMON STOCK AVAILABLE FOR FUTURE
SALE.................................. 117
FEDERAL INCOME TAX CONSIDERATIONS...... 118
Taxation of the Company............... 118
Requirements for Qualification........ 119
Failure to Qualify.................... 126
Taxation of Taxable U.S.
Stockholders......................... 126
Taxation of Stockholders on the
Disposition of the Common Stock...... 128
Capital Gains and Losses.............. 128
Information Reporting Requirements and
Backup Withholding................... 129
Taxation of Tax-Exempt Stockholders... 129
Taxation of Non-U.S. Stockholders..... 130
State and Local Taxes................. 131
Sale of the Company's Property........ 132
Investment in Foreign Assets.......... 132
New Tax Legislation................... 132
ERISA CONSIDERATIONS................... 133
Employee Benefit Plans, Tax-Qualified
Retirement Plans and IRAs............ 134
Status of ICCMIC under ERISA.......... 135
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
AND REAL PROPERTY INVESTMENTS......... 137
General............................... 137
Types of Mortgage Instruments......... 137
Interests in Real Property............ 137
Leases and Rents...................... 138
Condemnation and Insurance............ 138
Foreclosure........................... 138
California Real Property Laws......... 141
Ground Lease Risks.................... 141
Default Interest and Limitations on
Prepayments.......................... 142
Due on Sale and Due on Encumbrance.... 142
Subordinate Financing................. 142
Acceleration on Default............... 142
Certain Laws and Regulations; Types of
Mortgaged Property................... 142
Applicability of Usury Laws........... 143
Bankruptcy Laws....................... 143
Forfeitures in Drug and RICO
Proceedings.......................... 144
Environmental Risks................... 144
Americans With Disabilities Act....... 146
Soldiers' and Sailors' Civil Relief
Act of 1940.......................... 146
USE OF PROCEEDS........................ 147
UNDERWRITING........................... 148
LEGAL MATTERS.......................... 150
EXPERTS................................ 150
ADDITIONAL INFORMATION................. 150
The Company........................... 150
Imperial Credit....................... 151
GLOSSARY OF TERMS...................... 152
INDEPENDENT AUDITORS' REPORT........... F-1
</TABLE>
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus. Unless otherwise indicated,
the information contained in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised. Unless the context otherwise requires,
all references in this Prospectus to the (i) "Company" shall mean Imperial
Credit Commercial Mortgage Investment Corp. ("ICCMIC") and its subsidiaries,
including Imperial Credit Commercial Mortgage Securitization Corp. ("ICCMSC");
and (ii) "Common Stock" shall mean ICCMIC's shares of common stock, par value
$.0001 per share. Capitalized terms used but not defined herein shall have the
meanings set forth in the Glossary beginning on page 151.

THE COMPANY

ICCMIC is a Maryland corporation organized on July 31, 1997, which will elect
to be taxed as a REIT under the Code. The Company will be managed and advised
by Imperial Credit Commercial Asset Management Corporation (the "Manager"), a
wholly-owned subsidiary of Imperial Credit Industries, Inc. ("Imperial
Credit"). See "Management of Operations." The Company's investments will
include several categories of real estate related assets.

TERM LOANS AND MBS INTERESTS

The Company intends to invest primarily in performing multifamily and
commercial term loans ("Term Loans") and interests in multifamily and
commercial mortgage-backed securities ("CMBS"). The Company also may invest in
interests in residential mortgage-backed securities ("RMBS" and, together with
CMBS, "MBS"). The Company intends to invest in various classes of MBS ("MBS
Interests"), primarily non-investment grade classes.

One of the Company's primary investment focuses will be the acquisition of
non-investment grade classes of MBS Interests and certain other classes of MBS
Interests. These MBS Interests offer the potential of a higher yield than
relatively more senior classes of MBS Interests, but carry greater credit and
prepayment risk. The Company believes that a managed portfolio of such MBS
Interests can produce attractive returns in a variety of interest rate
environments. However, these investments can present risks. See "Operating
Policies and Objectives--The Company's Assets," "Risk Factors--Risks Related to
Investments in MBS Interests--Yields on Subordinated MBS Interests, IOs and POs
May Be Affected Adversely By Interest Rate Changes" and "--Subordinated MBS
Interests Are Subject to Greater Credit Risks Than More Senior Classes."

In order to invest the net proceeds of the Offering to provide current
returns, the Company intends to invest approximately 39% of the net proceeds of
the Offering in Mortgage Loans and MBS Interests (the "Initial Investments") to
be acquired from Imperial Credit and its wholly-owned subsidiary, Southern
Pacific Bank ("SPB"), formerly known as Southern Pacific Thrift & Loan
Association ("SPTL"). In the future, the Company intends to acquire additional
Mortgage Loans and MBS Interests from Imperial Credit and SPB and from other
unrelated holders of Mortgage Loans and MBS Interests.

SPB will enter into an agreement granting the Company, so long as the
Management Agreement (as hereinafter defined) with the Manager remains in
effect, a right of first offer to purchase, in addition to the Initial
Investments, not less than $150 million annually of multifamily and commercial
Mortgage Loans typical of loans originated by SPB. Although not contractually
committed to do so, the Company intends to purchase pools of Mortgage Loans
offered to it pursuant to the foregoing right of first offer, provided such
purchase would comply with the Company's guidelines and underwriting criteria
as established and modified from time to time. The Company believes that pools
of SPB's Mortgage Loans will be appropriate investments for the Company given
the Company's investment strategy. See "Operating Policies and Objectives--
Purchase of Initial Investments and Right of First Offer."

1
<PAGE>

The Company expects to maintain a relationship with Imperial Credit and SPB
in which the Company will be a ready, willing and able purchaser of not only
pools of Mortgage Loans, but also other assets that may be offered from time to
time by Imperial Credit and SPB. Although no binding commitment will exist on
the part of Imperial Credit, SPB or the Company regarding the sale and purchase
of such assets, the Company expects to be able to purchase such assets from
Imperial Credit and SPB on terms and at prices meeting the Company's investment
criteria. The Company expects that Imperial Credit and SPB will offer to sell
assets to the Company on terms and at prices that will be fair to both parties.
The Independent Directors have approved the acquisition of the Initial
Investments and will review on a quarterly basis all of the Company's
transactions with Imperial Credit and its affiliates occurring after the
Company's purchase of the Initial Investments. See "Initial Investments" and
"Management of Operations--Certain Relationships; Conflicts of Interest."

OTHER ASSETS

The Company will take an opportunistic approach to its investments and,
accordingly, the Company may invest in assets other than Term Loans and MBS
Interests. The Company may invest in or provide loans used to finance the
construction or rehabilitation of multifamily, commercial and other real
property ("Construction Loans") and loans secured by junior liens on real
property ("Mezzanine Loans"). The Company may invest in multifamily and
commercial mortgage loans that are in default ("Nonperforming Mortgage Loans")
or for which default is likely or imminent or for which the borrower is making
monthly payments in accordance with a forbearance plan ("Subperforming Mortgage
Loans" and, together with Nonperforming Mortgage Loans and other distressed
mortgage loans, "Distressed Mortgage Loans"). The Company may invest in
mortgage loans secured by real property located outside the United States. Term
Loans, Construction Loans, Mezzanine Loans, Distressed Mortgage Loans, foreign
mortgage loans and other mortgage loans are referred to collectively as
"Mortgage Loans."

The Company may invest in multifamily, commercial and other real property
("Real Property"), including properties acquired at foreclosure or by deed-in-
lieu of foreclosure ("REO Property") and other underperforming or otherwise
distressed Real Property (all of such underperforming and distressed Real
Property, together with REO Property, is referred to collectively as
"Distressed Real Property"). In addition, the Company may invest in Real
Property located outside the United States. Mortgage Loans, MBS Interests and
Real Property are referred to collectively as "Real Estate Related Assets." The
Company also may invest in assets unrelated to real estate.

LEVERAGE

To create yields commensurate with its investment objectives, the Company
intends to leverage its assets primarily through the issuance of collateralized
mortgage obligations ("CMOs"), reverse repurchase agreements, warehouse lines
of credit and other borrowing arrangements, pledging its assets as collateral
security for its repayment obligations. The Company intends to use the proceeds
from securitizations and other borrowings to invest in additional Mortgage
Loans, MBS Interests and other assets and, in turn, to borrow against such
assets and to repeat this process of borrowing and investing until it has
significantly leveraged its portfolio of assets. A significant portion of the
Company's borrowings are expected to be in the form of reverse repurchase
agreements that are based on the market value of the MBS Interests pledged to
secure the specific borrowings. A decline in the market value of those MBS
Interests could limit the Company's ability to borrow or result in lenders
initiating margin calls, requiring the Company to sell assets under adverse
market conditions in order to maintain liquidity. If these sales were made at
prices lower than the carrying value of the assets, the Company would
experience losses. A substantial portion of the Company's cash flow is expected
to consist of the difference between the interest income generated by its
Mortgage Loans and MBS Interests and the interest expense incurred with respect
to such borrowings, net of hedging and other costs. The Company may hedge all
or a portion of the interest rate risk associated with its borrowings through
the use of interest rate caps and swaps. The Company also may engage in a
variety of interest rate risk management techniques for the purpose of managing
the effective maturity or interest rate of its assets. These techniques also
may be used to attempt to protect against declines in the market value of the
Company's assets resulting from general economic and market

2
<PAGE>

trends. Any such hedging and other interest rate risk management techniques are
subject to risks and may affect adversely the Company's earnings. See "Risk
Factors--Economic and Business Risks--Leverage Can Reduce Income Available for
Distribution." No assurances can be made that the Company's investment and
leverage strategy can be implemented or will be successful.

INITIAL INVESTMENTS

The Company intends initially to invest approximately 39% of the net proceeds
of the Offering in the Initial Investments to be acquired from Imperial Credit
and SPB. See "Initial Investments" on page 58. The Board of Directors of ICCMIC
(the "Board of Directors") (including all of the Independent Directors (as
defined in "Glossary of Terms")) has approved the Company's acquisition of the
Initial Investments.

The Mortgage Loans to be acquired at the closing of this Offering (the
"Closing") consist of approximately $104 million in unpaid principal balance of
Term Loans originated or acquired by SPB (the "Initial Mortgage Loans"). The
MBS Interests to be acquired at Closing are interests in CMBS backed by Term
Loans originated or acquired by SPB. These MBS Interests include various
classes issued pursuant to the J.P. Morgan Commercial Mortgage Finance Corp.,
Commercial Mortgage Pass-Through Certificates, Series 1997-SPTL-C1 transaction,
which closed on June 27, 1997, and the Southern Pacific Thrift & Loan
Association, Commercial Mortgage Pass-Through Certificates, Series 1996-C1
transaction, which closed on September 30, 1996.

RISK FACTORS

An investment in the Common Stock involves various risks, and prospective
investors should consider carefully the matters discussed under "Risk Factors"
beginning on page 10 prior to making an investment in the Company. Such risks
include, among others, the following:

. The Company will contract with the Manager to advise the Board of
Directors and direct the day-to-day business affairs of the Company.
Thus, the Company's success may depend on the skill and experience of
the Manager's employees. In particular, the Independent Directors will
rely on information provided by the Manager to review transactions of
the Company with Imperial Credit and its affiliates. The Manager is a
newly organized entity with no management history prior to completion of
the Offering.

. Certain directors and officers of the Company will have demands on their
time other than those of the Company.

. The Company, with no operating history prior to the completion of the
Offering, will engage in a business that may become increasingly
competitive in the future.

. Investing in multifamily and commercial Mortgage Loans generally is
riskier than investing in single family residential Mortgage Loans, due
to dependency on successful operation of the underlying properties for
repayment, generally larger loan balances and balloon payments at stated
maturity.

. In periods of declining interest rates, prepayments on Mortgage Loans
and MBS Interests generally increase, and the Company likely will have
to reinvest such funds in lower-yielding investments. Conversely, in
periods of rising interest rates, prepayments on Mortgage Loans and MBS
Interests generally decrease and the value of the Company's fixed-rate
investments generally will decline.

. The Company intends to acquire significant amounts of non-investment
grade classes of MBS Interests. These investments are subject to a
greater risk of loss of principal and non-payment of interest than
investments in whole Mortgage Loans or senior, investment grade
securities.

. The yield on the Company's interest only ("IO"), inverse interest only
("Inverse IO") and subordinated interest only ("Sub IO") classes of MBS
will be affected adversely by faster than anticipated prepayment rates.
Particularly high rates of prepayment could result in a failure of the

3
<PAGE>

Company to recover fully its initial investment in its IOs, Sub IOs and
Inverse IOs. The yield on the Company's principal only ("PO") classes of
MBS will be affected adversely by slower than anticipated prepayment
rates.

. The yield on Inverse IOs, which bear interest at floating rates that
vary inversely with changes to a specified index, will be affected
adversely by higher than anticipated levels of the related index.

. ICCMIC's Charter, Bylaws and investment guidelines do not expressly
limit the amount of indebtedness the Company can incur. The Company
intends to leverage its investments in an amount to be determined by the
Manager and, ultimately, the Board of Directors. If borrowing costs
increase, or if the cash flow generated by the Company's assets
decrease, the Company's use of leverage will increase the likelihood
that the Company will experience reduced or negative cash flow and
reduced liquidity.

. Only approximately $163 million (approximately 39% of the net proceeds
of the Offering) of the Company's assets have been identified and the
Company will face significant competition in acquiring additional
assets, which may affect adversely the Company's ability to acquire
assets that meet its investment objectives.

. The Company's Distressed Real Properties (which may have significant
amounts of unleased space) may not generate sufficient revenues to
provide a return on investment after meeting operating expenses and debt
service obligations. In addition, declining real estate values may
result in losses on the Company's Real Properties.

. Certain of the Company's Real Estate Related Assets may require
significant management resources, may be illiquid and may decrease in
value because of changes in economic conditions.

. The Company may be taxed as a regular corporation if it fails to qualify
as a REIT.

. In order to qualify as a REIT, the Company must satisfy certain
requirements concerning the nature of its assets and income, which may
restrict the Company's ability to invest in various types of assets.

. In order to maintain REIT status, the Company must distribute at least
95% of its taxable income each year.

. The Company's proposed investment in MBS Interests could result in the
Company recognizing interest income (including, but not limited to,
original issue discount) for tax purposes without any corresponding cash
receipts, which could result in the Company needing to sell assets,
borrow money or raise capital in order to have the cash needed to
satisfy the distribution requirement necessary to maintain REIT status.
Specifically, the Company may invest in REMIC Residual Interests and
Non-REMIC Residual Interests (each as defined herein), which may
generate taxable income in excess of cash receipts.

. To maintain its exemption from regulation under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), the Company,
among other things, must maintain certain percentages of its investments
in assets that qualify for exemption from such regulation, which
requirement may restrict the Company's ability to invest in various
types of assets.

. Ownership of Common Stock by each stockholder is limited to 9.9% of the
outstanding Common Stock, which may deter third parties from seeking to
control or acquire the Company.

. The Company may invest in Real Property, or Mortgage Loans secured by
Real Property, with known environmental problems that may materially
impair the value of the Real Property ("Environmentally Distressed Real
Property") and which may expose the Company to liability in excess of
the Company's investment therein.

4
<PAGE>

. The Company may invest in Real Property, or Mortgage Loans secured by
Real Property, located outside the United States, which may expose the
Company to currency conversion risks, foreign tax laws and the
uncertainty of foreign laws. See "Risk Factors--Risks Related to
Investments in Real Property--Foreign Real Properties are Subject to
Currency Conversion Risks, Foreign Tax Laws and Uncertainty of Foreign
Laws."

. Borrower default, casualty losses and state or foreign law
enforceability issues, as well as other events and circumstances, may
result in losses on the Company's investments.

. Delinquency and loss ratios on the Mortgage Loans will be affected by
the performance of third-party servicers and special servicers.

. The geographic concentration in California of the collateral underlying
the Mortgage Loans and MBS Interests may expose the Company to regional
economic fluctuations.

. Investing in Construction Loans generally is riskier than investing in
Term Loans, due to the dependence on successful completion of a project
for repayment, difficulties in estimating project costs and loan terms
that require little or no amortization, but instead provide for balloon
payments at stated maturity generally tied to anticipated completion of
construction or rehabilitation.

. Investing in Mezzanine Loans generally is riskier than investing in more
senior mortgage loans because a foreclosure by a senior lienholder may
result in the Mezzanine Loan becoming unsecured, and the Company may not
recover the full amount, or indeed any, of its investment in such
Mezzanine Loan.

. The Company intends to issue CMOs collateralized by its Mortgage Loans,
retaining the Mortgage Loans subject to the CMO debt. Any losses on such
Mortgage Loans would be borne by the Company.

. The Company's borrowings are likely to include reverse repurchase
agreements with respect to its MBS Interests. A decline in the market
value of those MBS Interests could limit the Company's ability to borrow
or result in lenders initiating margin calls, requiring the Company to
sell assets under adverse market conditions in order to maintain
liquidity. If such sales are made at prices lower than the carrying
value of the assets, the Company will experience losses.

. The Company's performance may be affected adversely if the Company does
not hedge effectively against interest rate risks and other risks.

THE MANAGER

In managing the business and investment affairs of the Company, the Board of
Directors will be advised by Imperial Credit Commercial Asset Management
Corporation (the "Manager"), a California corporation wholly owned by Imperial
Credit. Imperial Credit was organized in 1986 as a residential mortgage lender.
In 1995, Imperial Credit began to reposition its business from originating and
selling conforming residential mortgage loans to offering higher margin loan
and lease products. Imperial Credit conducts its activities primarily through
various subsidiaries and other entities in which it holds a significant
interest, including, among others, Southern Pacific Bank ("SPB"), Franchise
Mortgage Acceptance Company LLC ("FMAC"), Imperial Business Credit, Inc.
("IBC"), Southern Pacific Funding Corporation ("SPFC") and Auto Marketing
Network, Inc. ("AMN").

Imperial Credit conducts its multifamily and commercial mortgage lending
operations through the Income Property Lending Division ("IPLD") of SPB. IPLD
is the originator of the Term Loans that comprise the Initial Investments. The
focus of IPLD's lending activities is the small loan market (consisting almost
entirely of loans less than $3.0 million) for multifamily and commercial
properties.

Imperial Credit and its affiliates have originated and acquired portfolios of
Real Estate Related Assets and arranged structured finance transactions,
including several transactions during the past year. The Company believes that
Imperial Credit and its affiliates may be a significant source of assets for
the Company. However, the Manager is a newly organized entity with no
management history, and there can be no assurance that the resources and
relationships developed by Imperial Credit will enable the Company and the
Manager to be successful.

5
<PAGE>

MANAGEMENT AGREEMENT

The Company will enter into an agreement or agreements (collectively, the
"Management Agreement") with the Manager pursuant to which the Manager, subject
to the supervision of the Board of Directors, will assist the Board of
Directors in the formulation of operating strategies for the Company, advise
the Company concerning the acquisition of assets by the Company, advise the
Company concerning various types of financing for the Company, including the
issuance of CMOs and the use of warehouse lines of credit, reverse repurchase
agreements, bank credit facilities, mortgage loans on Real Property and other
borrowings, monitor the performance of the Company's assets and provide certain
administrative and managerial services in connection with the operation of the
Company. The Management Agreement has been approved by all of the Independent
Directors.

For performing these services, the Manager will receive the following
compensation, fees and other benefits (including reimbursement of out-of-pocket
expenses):

<TABLE>
<CAPTION>
RECIPIENT PAYOR AMOUNT
--------- ------ ------
<C> <C> <S>
Manager(1) ICCMIC Base management fee equal to a percentage of the Average
Invested Assets of the Company(2)
Manager(1) ICCMIC Incentive compensation based on the amount, if any, by which
the Company's Funds From Operations and certain net gains
exceed a hurdle rate(3)
Manager(1) ICCMIC Out-of-pocket expenses of Manager paid to third parties in
connection with due diligence
</TABLE>
- --------
(1) The Manager is a wholly-owned subsidiary of Imperial Credit.
(2) The base management fee is equal to 1% per annum of the first $1 billion of
Average Invested Assets, 0.75% of the next $250 million of Average Invested
Assets, and 0.50% of Average Invested Assets above $1.25 billion.
(3) For a detailed explanation of the calculation of the incentive compensation
payable to the Manager, see "Management of Operations--Management Fees."

The Board of Directors may adjust the base management fee in the future if
necessary to align the fee more closely with the actual costs of such services.
In addition, the Manager will be reimbursed for costs and expenses in employing
third parties to perform due diligence on assets acquired or considered for
acquisition by the Company. See "Management of Operations."

Imperial Credit will purchase 2,970,000 shares of Common Stock on the Closing
Date at the initial public offering price, net of underwriting discounts and
commissions, after which Imperial Credit will own 9.9% of the Common Stock of
the Company. To provide an incentive for the Manager to enhance the value of
the Common Stock, the Company will grant to the Manager and certain directors
and executive officers of the Manager options to purchase shares of Common
Stock at a price per share equal to the initial public offering price of the
Common Stock. The number of shares to be subject to such stock options will be
10% of the number of shares to be issued pursuant to the Offering, assuming the
Underwriters fully exercise their over-allotment option. Thus, if the number of
shares to be issued pursuant to the Offering (prior to the exercise by the
underwriters of their over-allotment option) is 30,000,000, the number of
shares subject to such stock options will be 3,450,000. One third of these
stock options generally will be exercisable on each of the first three
anniversaries of the closing date of this Offering (the "Closing Date").
Unexercised stock options will expire on the tenth anniversary of their grant.
See "Management of Operations--1997 Stock Option Plan."

6
<PAGE>

CONFLICTS OF INTEREST

The Company will be managed by the Manager, a wholly-owned subsidiary of
Imperial Credit. Because of the Company's relationship with the Manager and
Imperial Credit, the Company will be subject to various potential conflicts of
interest. First, although the Company's Board of Directors includes four
Independent Directors, the other three directors and each of the executive
officers of the Company also serve as directors or executive officers of the
Manager, and one of the executive officers is an employee of and devotes
substantial time to Imperial Credit and is a director of one of its affiliates.
Second, although the Manager has agreed not to advise another REIT that invests
primarily in multifamily and commercial Mortgage Loans and CMBS, nothing
restricts the Manager from providing advice to other REITs that may compete in
certain respects with the Company for other types of assets. Third, the Manager
will receive a management fee for services rendered to the Company. The
Management Agreement may be terminated without cause only if the Manager is
paid a termination fee in an amount to be determined by independent appraisal,
which may affect adversely the Company's ability to terminate the Manager
without cause. Fourth, the Company will acquire the Initial Investments from
Imperial Credit and SPB, and anticipates acquiring substantial additional
assets from Imperial Credit and its affiliates following completion of the
Offering.

To protect the Company's stockholders from risks related to these potential
conflicts, a majority of the Board of Directors will be Independent Directors.
The Independent Directors have approved the Company's acquisition of the
Initial Investments, the execution of the Management Agreement and general
guidelines for the Company's investments, borrowings and operations (the
"Guidelines"). Although the Manager will perform the day-to-day operations of
the Company, the Independent Directors will review all transactions on a
quarterly basis to insure compliance with the Guidelines. In such a review, the
Independent Directors are expected to rely primarily on information provided by
the Manager. See "Operating Policies and Objectives--The Company's Guidelines."

THE OFFERING

<TABLE>
<S> <C>
Shares offered to the public (1)..................................... 30,000,000
Shares to be outstanding after the Offering (1)(2)................... 30,000,000
Nasdaq Symbol........................................................ ICMI
</TABLE>
- --------
(1) Assumes the Underwriters' over-allotment option is not exercised.

(2) Does not include 7,500,000 shares reserved for issuance pursuant to the
Company's Stock Option Plan. Options for 3,450,000 shares of Common Stock
(assuming 30,000,000 shares of Common Stock are issued pursuant to the
Offering prior to exercise by the Underwriters of their over-allotment
option) are expected to be granted to the Manager and certain directors and
executive officers of the Company and the Manager prior to the consummation
of the Offering. See "Management of Operations--1997 Stock Option Plan,"
"Capitalization" and "Description of Capital Stock."

USE OF PROCEEDS

The Company intends to purchase from Imperial Credit and SPB certain assets
upon completion of the Offering for a purchase price of approximately
$163 million, which is equal to approximately 39% of the expected net proceeds
of the Offering. These assets will consist primarily of Mortgage Loans and MBS
Interests. See "Initial Investments." The Company intends to invest the balance
of the net proceeds of this Offering temporarily in readily marketable,
interest-bearing securities. See "Operating Policies and Objectives."

7
<PAGE>

DISTRIBUTION POLICY

ICCMIC intends to make distributions to its stockholders of at least 95% of
the Company's taxable income each year (subject to certain adjustments) so as
to qualify for the tax benefits accorded to REITs under the Code. ICCMIC
intends to make distributions at least quarterly. It is anticipated that the
first distribution to stockholders will be made promptly after the first full
calendar quarter following the Closing Date.

TAX STATUS OF THE COMPANY

ICCMIC intends to qualify and will elect to be taxed as a REIT under sections
856 through 860 of the Code, commencing with its short first taxable year
ending December 31, 1997. If ICCMIC qualifies for taxation as a REIT, ICCMIC
generally will not be subject to federal corporate income tax on its taxable
income that is distributed to its stockholders. A REIT is subject to a number
of organizational and operational requirements, including a requirement that it
currently distribute at least 95% of its annual taxable income. Although ICCMIC
does not intend to request a ruling from the Internal Revenue Service (the
"Service") as to its REIT status, ICCMIC will receive an opinion of
Sonnenschein Nath & Rosenthal that ICCMIC qualifies as a REIT, which opinion is
based on certain assumptions and representations about the Company's ongoing
businesses and investment activities and other matters. No assurance can be
given that the Company will be able to comply with such assumptions and
representations in the future. Furthermore, such opinion is not binding on the
Service or on any court. Failure to qualify as a REIT would render ICCMIC
subject to federal income tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates and distributions to
ICCMIC's stockholders would not be deductible. Even if ICCMIC qualifies for
taxation as a REIT, the Company may be subject to certain federal, state, local
and foreign taxes on its income and property. ICCMIC's Bylaws (the "Bylaws")
provide for ICCMIC's taxable year to be the calendar year. In connection with
ICCMIC's election to be taxed as a REIT, ICCMIC's Charter (the "Charter")
imposes restrictions on the transfer and ownership of its Common Stock. See
"Risk Factors--Legal and Tax Risks--Adverse Consequences of Failure to Maintain
REIT Status May Include ICCMIC Being Subject to Taxation as a Regular
Corporation" and "Federal Income Tax Considerations--Taxation of the Company."

8
<PAGE>

ORGANIZATION AND RELATIONSHIPS

The Manager will manage the day-to-day operations of the Company, subject to
the supervision of the Board of Directors. The relationship among ICCMIC, its
affiliates and the Manager is depicted in the organization chart shown below.

[GRAPH APPEARS HERE]

- --------
(1) ICCMIC will issue 9.9% of its Common Stock to Imperial Credit and 90.1% of
its Common Stock to public investors (including up to 2.5% of its Common
Stock to certain directors, officers and employees of the Company, the
Manager and Imperial Credit, members of their respective immediate
families and certain other persons).

(2) ICCMIC has incorporated and capitalized a qualified REIT subsidiary,
Imperial Credit Commercial Mortgage Securitization Corp. ("ICCMSC"), which
will be used as a vehicle primarily for the issuance of CMOs
collateralized by Mortgage Loans transferred from ICCMIC.

(3) Imperial Credit has incorporated and capitalized the Manager.

(4) The Manager will enter into a Management Agreement with ICCMIC, pursuant
to which the Manager will formulate operating strategies and provide
certain managerial and administrative functions for the Company, subject
to the supervision of ICCMIC's Board of Directors.

(5) Imperial Credit and SPB will sell the Initial Investments to ICCMIC for
cash.

9
<PAGE>

This prospectus contains forward-looking statements, which can be identified
by the use of forward-looking terminology such as "may," "will," "should,"
"expect," "anticipate," "estimate" or "continue" or the negatives thereof or
other comparable terminology. The Company's actual results could differ
materially from those described in such forward-looking statements as a result
of certain factors, including those set forth in the following risk factors
and the other factors described elsewhere in this Prospectus.

RISK FACTORS

An investment in the Common Stock involves various risks. Before purchasing
shares of Common Stock offered hereby, prospective investors should consider
carefully the information set forth below, in addition to the information set
forth elsewhere in this Prospectus.

CONFLICTS OF INTEREST IN THE BUSINESS OF THE COMPANY MAY RESULT IN DECISIONS
OF THE COMPANY THAT DO NOT FULLY REFLECT THE INTERESTS OF THE STOCKHOLDERS OF
THE COMPANY

BENEFITS TO INSIDERS; COMMON OFFICERS AND DIRECTORS. The Company is subject
to various potential conflicts of interests arising from its relationship with
the Manager and its affiliates. First, after the Closing, Imperial Credit will
own 2,970,000 shares, representing 9.9% of the Common Stock, which will be
purchased for cash at the initial public offering price net of underwriting
discounts. Second, the Manager will render management services to the Company
for a management fee, which benefits Imperial Credit, the Manager's parent
company.

The Management Agreement has been approved by a majority of the Independent
Directors (as defined in "Glossary of Terms"). The renewal of the Management
Agreement after the initial two-year term will require the affirmative vote of
a majority of the Independent Directors, and a majority of the Independent
Directors may terminate the Management Agreement at any time after two years
upon 60 days' notice. However, the Company will be required to pay a
termination fee to the Manager upon any termination (or non-renewal) of the
Management Agreement without cause. The termination fee will be determined by
independent appraisal. See "Management of Operations--The Management
Agreement." This requirement may affect adversely the Company's ability to
terminate the Manager without cause.

Three of the Company's directors and each of its executive officers serve as
directors or officers of the Manager. Moreover, Joseph R. Parise, Managing
Director and Senior Vice President of the Company, is also Managing Director
of Capital Markets and Head of Structured Finance of Imperial Credit and a
director of Imperial Credit Worldwide, Ltd. ("ICW"), and will continue to
serve in those capacities in the future. As such, he is expected to provide
services not only to the Company but also to Imperial Credit and its
affiliates, including SPB. Although the Company expects that he will devote
adequate time to the Company's operations, if the operations of Imperial
Credit or its affiliates need immediate attention, there can be no assurance
that he will have adequate time for the Company.

Imperial Credit Mortgage Holdings, Inc. ("IMH"), a residential REIT
externally advised by an affiliate of Imperial Credit and formerly affiliated
with Imperial Credit, recently formed IMH Commercial Holdings, Inc. ("ICH"),
formerly known as Imperial Credit Commercial Holdings, Inc. ICH intends to
invest in commercial and multifamily mortgage loans and CMBS and will compete
with the Company for assets. Imperial Credit is not sponsoring and does not
own any interest in ICH. However, Joseph R. Tomkinson, the chairman and chief
executive officer of ICH, is a member of Imperial Credit's board of directors.

MANAGER MAY ADVISE OTHERS. Although the Manager may not manage or advise
another REIT or other entity that invests or intends to invest primarily in
Term Loans or subordinated CMBS, nothing restricts the Manager from providing
advice to REITs or other entities, or from establishing REITs or other
companies that may compete in certain respects with the Company.

INDEPENDENT DIRECTORS WILL NOT PARTICIPATE IN DAY-TO-DAY
OPERATIONS. Although the Management Agreement has been approved by the
Independent Directors, daily operations between the Company and the

10
<PAGE>

Manager and its affiliates will not be required to be approved by a majority
of the Independent Directors. Instead, the Manager will conduct the day-to-day
operations of the Company in accordance with the Guidelines that have been
approved by a majority of the Independent Directors. On a quarterly basis, the
Independent Directors will review transactions engaged in by the Company to
monitor compliance with the Guidelines. Moreover, the Independent Directors
will review the Guidelines at least annually. Investors should be aware that,
in conducting this review, the Independent Directors are expected to rely
primarily on information provided to them by the Manager.

PURCHASE OF ASSETS FROM IMPERIAL CREDIT AND ITS AFFILIATES. The Company is
subject to conflicts of interest with the Manager because the Company intends
to purchase assets from the Manager's affiliates, including Imperial Credit
and SPB. The Company will acquire the Initial Investments from SPB and
Imperial Credit. Moreover, SPB has agreed to offer $150 million of its typical
newly-originated Mortgage Loans annually for sale to the Company. The
agreement between Company and SPB is designed to ensure that the Company will
pay a fair price in such transactions, and the Independent Directors will
review such transactions on a quarterly basis to ensure that they are
consistent with the Guidelines. However, the Independent Directors are
expected to rely primarily on the advice of and information provided by the
Manager in deciding whether to approve such transactions, and no assurance can
be made that the price and other terms of such transactions will be fair to
the Company.

RISKS RELATED TO INVESTMENTS IN MORTGAGE LOANS

MULTIFAMILY AND COMMERCIAL LOANS INVOLVE A GREATER RISK OF LOSS THAN SINGLE
FAMILY LOANS. The Mortgage Loans that the Company expects to acquire generally
will be secured by existing multifamily or commercial real estate, including
apartments, shopping centers, office buildings, hotels, industrial properties,
theme parks, hospitals and nursing homes. Property pledged as security for
Mortgage Loans is referred to as "Mortgaged Property." Multifamily and
commercial real estate lending is considered to involve a higher degree of
risk than single family residential lending because of a variety of factors,
including generally larger loan balances, dependency on successful operation
of the Mortgaged Property and tenants operating businesses therein for
repayment, and loan terms that often require little or no amortization and,
instead, provide for balloon payments at stated maturity. In addition, the
value of multifamily and commercial real estate can be affected significantly
by the supply and demand in the market for that type of property. Market
values may vary as a result of economic events, governmental regulations or
other factors outside the control of the borrower or the Company, such as rent
control laws in the case of multifamily Mortgage Loans, which may impact the
future cash flow of the underlying Mortgaged Property.

The successful operation of a multifamily or commercial real estate project
also generally is dependent on the performance and viability of the property
manager of that project. The property manager would be responsible for
responding to changes in the local market, planning and implementing the
rental structure, including establishing appropriate rental rates, and
advising the owner so that maintenance and capital improvements can be carried
out in a timely fashion and at an appropriate cost. There can be no assurance
regarding the performance of any operators and/or managers or persons who may
become operators and/or managers upon the expiration or termination of leases
or management agreements or following any default or foreclosure under a
Mortgage Loan.

VOLATILITY OF VALUES OF MORTGAGED PROPERTIES MAY AFFECT ADVERSELY THE
COMPANY'S MORTGAGE LOANS. Commercial and multifamily property values and net
operating income derived therefrom are subject to volatility and may be
affected adversely by a number of factors, including, but not limited to,
national, regional and local economic conditions (which may be impacted
adversely by plant closings, industry slowdowns and other factors); local real
estate conditions (such as an oversupply of housing, retail, industrial,
office or other commercial space); changes or continued weakness in specific
industry segments; perceptions by prospective tenants and, in the case of
retail properties, retailers and shoppers, of the safety, convenience,
services and attractiveness of the property; the willingness and ability of
the property's owner to provide capable management and adequate maintenance;
construction quality, age and design; demographic factors; retroactive changes
to building or similar codes; and increases in operating expenses (such as
energy costs). The historical operating

11
<PAGE>

results of the Mortgaged Properties may not be comparable to future operating
results. In addition, other factors may affect adversely the Mortgaged
Properties' value without affecting the net operating income, including
changes in governmental regulations, zoning or tax laws, potential
environmental or other legal liabilities, the availability of refinancing, and
changes in interest rate levels.

CONSTRUCTION AND MEZZANINE LOANS INVOLVE GREATER RISKS OF LOSS THAN LOANS
SECURED BY INCOME PRODUCING PROPERTIES. The Company may acquire Construction
Loans and, in some cases, Mezzanine Loans. Construction Loans and Mezzanine
Loans are considered to involve a higher degree of risk than term mortgage
lending secured by income-producing Real Property. This is because of a
variety of factors, including, in the case of Construction Loans, dependency
on successful completion and operation of the project for repayment,
difficulties in estimating construction or rehabilitation costs and loan terms
that often require little or no amortization, providing instead for additional
advances to be made and for a balloon payment at a stated maturity date. In
the case of Mezzanine Loans, the factors would include, among other things,
that a foreclosure by the holder of the senior loan could result in a
Mezzanine Loan becoming unsecured. Accordingly, the Company may not recover
the full amount, or indeed any, of its investment in such Mezzanine Loan. In
addition, Construction Loans and Mezzanine Loans may have higher loan to value
ratios than conventional Term Loans because of shared appreciation provisions.
Although the borrower may have an initial equity investment of 10% to 15% of
total project costs, such initial equity may not be sufficient to protect the
Company's investment in Construction Loans and Mezzanine Loans.

DISTRESSED MORTGAGE LOANS MAY HAVE GREATER DEFAULT RISKS THAN PERFORMING
LOANS. The Company may acquire Nonperforming and Subperforming Mortgage Loans,
as well as Mortgage Loans that have had a history of delinquencies. These
Mortgage Loans presently may be in default or may have a greater than normal
risk of future defaults and delinquencies, as compared to newly originated,
high quality loans. Returns on an investment of this type depend on the
borrower's ability to make required payments (or, with respect to
Subperforming Loans, the modified monthly payments required under the
applicable forbearance plan) or, in the event of default, the ability of the
loan's servicer to foreclose and liquidate the Mortgaged Property underlying
the Mortgage Loan. There can be no assurance that the servicer can liquidate a
defaulted Mortgage Loan successfully or in a timely fashion. See "Certain
Legal Aspects of Mortgage Loans and Real Property Investments."

GEOGRAPHIC CONCENTRATION OF THE COMPANY'S ASSETS IN CALIFORNIA MAY MAKE THE
COMPANY'S PERFORMANCE SUBJECT TO ECONOMIC CONDITIONS IN
CALIFORNIA. Approximately 51% (by principal balance) of the Mortgaged
Properties underlying the Mortgage Loans (and a majority of the real property
pledged as security for the mortgage loans underlying the MBS Interests)
within the Initial Investments are located in California. Moreover, the
Company anticipates acquiring a large volume of Mortgage Loans from SPB in the
future, and a significant portion of the Mortgage Loans originated by SPB are
secured by Mortgaged Properties located in California. California recently
began to recover from an economic recession that has affected the state since
the early 1990s. The Company's performance and its ability to make
distributions to its stockholders likely will be affected significantly by
future economic conditions in California. See "--Volatility of Values of
Mortgaged Properties May Affect Adversely the Company's Mortgage Loans."

DELINQUENCY AND LOSS RATIOS MAY BE AFFECTED BY PERFORMANCE OF THIRD-PARTY
SERVICERS. The Company intends to contract for the servicing of its Mortgage
Loans with servicers (including SPB) and will be subject to risks associated
with potentially inadequate servicing. Many borrowers require notices and
reminders to keep Mortgage Loans current and to prevent delinquencies and
foreclosures. A substantial increase in the delinquency or foreclosure rate
resulting from inadequate servicing could affect adversely the Company's
performance and ability to access profitably the capital markets for its
financing needs, including future securitizations.

The Company's servicing agreements with its servicers often will provide
that if the Company terminates the servicing agreement without cause (as
defined in the agreement), the Company may be required to pay the third-party
servicer a termination fee. Depending upon the size of the particular Mortgage
Loan portfolio then

12
<PAGE>

being serviced, the termination fee that the Company would be obligated to pay
upon termination of a servicing agreement without cause could be substantial
and could deter a termination without cause that otherwise would be
advantageous to the Company.

LIMITED RECOURSE LOANS MAY LIMIT THE COMPANY'S RECOVERY TO THE VALUE OF THE
MORTGAGED PROPERTY. The Company anticipates that a substantial portion of the
Mortgage Loans that it will acquire and of the mortgage loans underlying MBS
Interests that it will acquire (mortgage loans underlying MBS Interests are
referred to herein as "Mortgage Collateral") may contain limitations on the
mortgagee's recourse against the borrower. In other cases, the mortgagee's
recourse against the borrower may be limited by applicable provisions of the
laws of the jurisdictions in which the Mortgaged Properties are located or by
the mortgagee's selection of remedies and the impact of those laws on that
selection. In those cases, in the event of a borrower default, recourse may be
limited to only the specific Mortgaged Property and other assets, if any,
pledged to secure the relevant Mortgage Loan. As to those Mortgage Loans that
provide for recourse against the borrower and its assets generally, there can
be no assurance that such recourse will provide a recovery in respect of a
defaulted Mortgage Loan greater than the liquidation value of the Mortgaged
Property securing that Mortgage Loan.

ONE ACTION RULES MAY LIMIT THE COMPANY'S RIGHTS FOLLOWING DEFAULTS. Several
states (including California) have laws that prohibit more than one "judicial
action" to enforce a mortgage obligation, and some courts have construed the
term "judicial action" broadly. The servicer of the mortgage obligation may be
required to foreclose first on properties located in states where such "one
action" rules apply (and when non-judicial foreclosure is permitted) before
foreclosing on properties located in states where judicial foreclosure is the
only permitted method of foreclosure. See "Certain Legal Aspects of Mortgage
Loans and Real Property Investments--Foreclosure and "--California Real
Property Laws."

RISKS RELATED TO INVESTMENTS IN MBS INTERESTS

SUBORDINATED MBS INTERESTS ARE SUBJECT TO GREATER CREDIT RISKS THAN MORE
SENIOR CLASSES. The Company intends to acquire a significant amount of various
classes of MBS Interests, including "first loss" classes of subordinated MBS
Interests. A first loss class is the most subordinated class of a multi-class
issuance of pass-through or debt securities and is the first to bear the loss
upon a default on the underlying Mortgage Collateral. Subordinated MBS
Interests are subject to special risks, including a substantially greater risk
of loss of principal and non-payment of interest than more senior classes. The
market values of subordinated classes of MBS Interests tend to be more
sensitive to changes in economic conditions than more senior classes. As a
result of these and other factors, subordinated MBS Interests generally are
not actively traded and may not provide holders thereof with liquidity of
investment.

The yield to maturity on subordinated MBS Interests of the type the Company
intends to acquire will be extremely sensitive to the default and loss
experience of the underlying Mortgage Collateral and the timing of any such
defaults or losses. Because the subordinated classes of the type the Company
intends to acquire generally have no credit support, to the extent there are
realized losses on the Mortgage Collateral, the Company may not recover the
full amount, or indeed any, of its investment in such subordinated MBS
Interests.

When the Company acquires a subordinated MBS Interest, it typically will be
unable to obtain the right to service the underlying performing Mortgage
Collateral. To minimize its losses, the Company will seek to obtain the rights
to service the underlying Mortgage Collateral in default (the servicing of
defaulted mortgage loans is referred to as "Special Servicing"), although in
many cases it will not be able to obtain Special Servicing rights on
acceptable terms. If the Company does acquire Special Servicing rights, then
it will contract with a third-party special servicer to perform the Special
Servicing functions, and thus the performance of the Company's investments
will be dependent upon such third party's performance. To the extent the
Company does not obtain Special Servicing rights with respect to the Mortgage
Collateral underlying its MBS Interests, the servicer of the Mortgage
Collateral generally would be responsible to holders of the senior classes of
MBS, whose interests may not be the same as those of the holders of the
subordinated classes. Accordingly, the Mortgage Collateral may not be serviced
in a manner that is most advantageous to the Company as the holder of a
subordinated class.

13
<PAGE>

The subordination of MBS Interests to more senior classes may affect the
yield on the subordinated MBS Interests adversely even if realized losses
ultimately are not allocated to such classes. On any payment date, interest
and principal generally would be paid on the more senior classes before
interest and principal would be paid with respect to the subordinated classes.
Typically, interest deferred on subordinated classes would be payable on
subsequent payment dates to the extent funds become available, but such
deferral itself may not bear interest. Such deferral of interest generally
will affect adversely the yield on the subordinated classes.

YIELDS ON SUBORDINATED MBS INTERESTS, IOS AND POS MAY BE AFFECTED ADVERSELY
BY INTEREST RATE CHANGES. The yield on subordinated classes generally will be
affected by the rate and timing of payments of principal on the Mortgage
Collateral underlying a series of MBS. The rate of principal payments may vary
significantly over time depending on a variety of factors such as the level of
prevailing mortgage loan interest rates and economic, demographic, tax, legal
and other factors. Prepayments on the Mortgage Collateral underlying a series
of MBS Interests generally are allocated to the more senior classes of MBS
until those classes are paid in full or until the end of a lock-out period,
typically of five years or more. Thus, prepayments of principal from the
Mortgage Collateral generally are not received by the subordinated class
holders for a period of at least five years. As a result, the weighted-average
lives of the subordinated classes may be longer than would be the case if, for
example, prepayments were allocated pro rata to all classes of MBS. To the
extent that the holder of a subordinated class is not paid compensating
interest on interest shortfalls due to prepayments, liquidations or otherwise,
the yield on the subordinated class may be affected adversely.

The Company may acquire IOs, which are classes of MBS Interests that are
entitled to no (or only nominal) payments of principal, but only to payments
of interest. The yield to maturity of IOs is very sensitive to changes in the
weighted average life of such securities, which in turn is dictated by the
rate of prepayments on the underlying Mortgage Collateral. In periods of
declining interest rates, rates of prepayments on mortgage loans generally
increase, and if the rate of prepayments is faster than anticipated, then the
yield on IOs will be affected adversely. Inverse IOs are a class of MBS that
bear interest at a floating rate that varies inversely with (and often at a
multiple of) changes in a specified index. The Company may invest in Inverse
IOs for the purpose of, among other things, hedging its portfolio of IOs. The
yield to maturity of an Inverse IO generally is extremely sensitive to changes
in the related index. The Company also expects to invest in Sub IOs, a class
for which interest generally is withheld and used to make principal payments
on more senior classes or to fund a reserve account for the protection of
senior classes until overcollateralization or until the balance in the reserve
account reaches a specified level. Interest on a Sub IO generally will be paid
only after the overcollateralization or the balance in the reserve account
reaches the specified level. Sub IOs provide credit support to the senior
classes, and thus bear substantial credit risk. Moreover, because all IO
classes only receive interest payments, their yields are extremely sensitive
not only to default losses but also to changes in the weighted average life of
the relevant classes, which in turn will be dictated by the rate of
prepayments on the underlying Mortgage Collateral. In addition, Sub IOs often
generate taxable income in excess of cash received. See "--Legal and Tax
Risks--Adverse Consequences of Failure to Maintain REIT Status May Include
ICCMIC Being Subject to Taxation as a Regular Corporation."

The Company may acquire POs, which are classes of MBS Interests that are
entitled to no payments of interest, but only to payments of principal. The
yield to maturity of POs is very sensitive to changes in the weighted average
life of such securities, which in turn is dictated by the rate of prepayments
on the underlying Mortgage Collateral. In periods of declining interest rates,
rates of prepayment on mortgage loans generally increase, and if the rate of
prepayments is faster than anticipated, the yield on POs will be positively
affected. Conversely, the yield on POs will be affected adversely by slower
than anticipated prepayment rates, which generally are associated with a
rising interest rate environment. In addition, POs typically generate original
issue discount ("OID"). See "--Legal and Tax Risks--Adverse Consequences of
Failure to Maintain REIT Status May Include ICCMIC Being Subject to Taxation
as a Regular Corporation."

14
<PAGE>

REMIC RESIDUAL INTERESTS AND OTHER MBS INTERESTS MAY GENERATE TAXABLE INCOME
IN EXCESS OF CASH RECEIVED. The Company also may invest in MBS Interests
issued by a real estate mortgage investment conduit ("REMIC") that are
designated as the residual interest in the REMIC ("REMIC Residual Interests").
In addition, the Company may invest in residual interests in Mortgage Loans
subject to CMO debt ("Non-REMIC Residual Interests"). In any given year, the
taxable income produced by REMIC Residual Interests and Non-REMIC Residual
Interests may exceed the cash received. See "--Legal and Tax Risks--Adverse
Consequences of Failure to Maintain REIT Status May Include ICCMIC Being
Subject to Taxation as a Regular Corporation." The Company intends to invest
in various types of MBS Interests, including, but not limited to, subordinated
MBS Interests, Sub IOs and POs, which are subordinated to more senior classes
of MBS Interests. These MBS Interests may generate OID or, as a result of
subordination, the recognition of taxable income in excess of cash received.
See "--Legal and Tax Risks--Adverse Consequences of Failure to Maintain REIT
Status May Include ICCMIC Being Subject to Taxation as a Regular Corporation."

RISKS RELATED TO INVESTMENTS IN REAL PROPERTY

CONDITIONS BEYOND COMPANY'S CONTROL MAY AFFECT ADVERSELY THE VALUE OF REAL
PROPERTY. Real Properties are subject to varying degrees of risk as described
under "Risk Factors--Risks Related to Investments in Mortgage Loans--
Volatility of Values of Mortgaged Properties May Affect Adversely the
Company's Mortgage Loans." In addition, Distressed Real Properties may have
significant amounts of unleased space and thus may not generate revenues
sufficient to pay operating expenses and meet debt service obligations. The
value of the Company's investments in Real Property and the Company's income
and ability to make distributions to its stockholders will be dependent upon
the ability of the Manager to hire and supervise capable property managers to
operate the Real Property in a manner that maintains or increases revenues in
excess of operating expenses and debt service or, in the case of Real Property
leased to a single lessee, the ability of the lessee to make rent payments.
Revenues from Real Property may be affected adversely by changes in national
or local economic conditions, competition from other properties offering the
same or similar attributes, changes in interest rates and in the availability,
cost and terms of mortgage funds, the impact of present or future
environmental legislation and compliance with environmental laws, the ongoing
need for capital improvements (particularly in older structures), changes in
real estate tax rates and other operating expenses, adverse changes in
governmental rules and fiscal policies, civil unrest, acts of God, including
earthquakes, hurricanes and other natural disasters (which may result in
uninsured or underinsured losses), acts of war, adverse changes in zoning
laws, and other factors which will be beyond the control of the Company.

THE COMPANY'S INSURANCE WILL NOT COVER ALL LOSSES. The Company intends to
maintain comprehensive casualty insurance on its Real Property, including
liability and fire and extended coverage, in amounts sufficient to permit
replacement in the event of a total loss, subject to applicable deductibles.
The Company will endeavor to obtain coverage of the type and in the amount
customarily obtained by owners of properties similar to its Real Property.
There are certain types of losses, however, generally of a catastrophic
nature, such as earthquakes, floods and hurricanes, that may be uninsurable or
not economically insurable. Inflation, changes in building codes and
ordinances, environmental considerations, provisions in loan documents
encumbering properties that have been pledged as collateral security for
loans, and other factors also might make it economically impractical to use
insurance proceeds to replace a property if it is damaged or destroyed. Under
such circumstances, the insurance proceeds received by the Company, if any,
might not be adequate to restore the Company's investment with respect to the
affected property.

PROPERTY TAXES DECREASE RETURNS ON REAL ESTATE. All Real Property owned by
the Company will be subject to real property taxes and, in some instances,
personal property taxes. Such real and personal property taxes may increase or
decrease as property tax rates change and as the properties are assessed or
reassessed by taxing authorities. An increase in property taxes on the
Company's Real Property could affect adversely the Company's income and
ability to make distributions to its stockholders and could decrease the value
of that Real Property.

15
<PAGE>

COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND OTHER CHANGES IN
GOVERNMENTAL RULES AND REGULATIONS MAY BE COSTLY. Under the Americans with
Disabilities Act of 1990 (the "ADA"), all public properties are required to
meet certain federal requirements related to access and use by disabled
persons. Certain Real Property that the Company acquires may not be in
compliance with the ADA. If such Real Property is not in compliance, the
Company may be required to make modifications to bring it into compliance or
face the possibility of an imposition of fines or an award of damages to
private litigants. In addition, changes in governmental rules and regulations
or enforcement policies affecting the use and operation of the Company's Real
Property, including changes to building codes and fire and life-safety codes,
may occur. If the Company is required to make substantial modifications at its
Real Property to comply with the ADA or other changes in governmental rules
and regulations, the Company's income and ability to make distributions to its
stockholders could be affected adversely.

PROPERTIES WITH HIDDEN ENVIRONMENTAL PROBLEMS MAY INCREASE COSTS AND CREATE
LIABILITIES FOR THE COMPANY. The operating costs and values of Real Property
owned by the Company may be affected by the obligation to pay for the cost of
complying with existing environmental laws, ordinances and regulations, as
well as the cost of complying with future legislation. Under various federal,
state and local environmental laws, ordinances and regulations, a current or
previous owner or operator of Real Property may be liable for the costs of
removal or remediation of hazardous or toxic substances in, on, under or in
the vicinity of such Real Property. Such laws often impose liability whether
or not the owner or operator knew of, or was responsible for, the presence of
such hazardous or toxic substances. The Company's income and ability to make
distributions to its stockholders could be affected adversely by the existence
of an environmental liability with respect to its properties.

The Company may obtain Phase I environmental assessments on Real Properties
prior to their acquisition. The purpose of Phase I environmental assessments
is to identify existing and potential environmental contamination that is made
apparent from historical reviews of the properties, reviews of certain public
records, preliminary investigations of the sites and surrounding properties,
and screening for the presence of hazardous substances, toxic substances and
underground storage tanks. However, the Company will exercise judgment on this
issue and may choose not to obtain Phase I environmental assessments on
certain Real Property prior to its acquisition and to purchase Mortgage Loans
without Phase I environmental assessments on the underlying Mortgaged Property
if it deems that to do so is prudent. Further, even if a Phase I environmental
assessment is obtained, there is no assurance it will reveal all existing and
potential environmental risks and liabilities, and there is no assurance that
there will be no unknown or material environmental obligations or liabilities.

REAL PROPERTIES WITH KNOWN ENVIRONMENTAL PROBLEMS MAY CREATE LIABILITY FOR
THE COMPANY. The Company may invest in Real Property with known material
environmental problems or Mortgage Loans secured by such Real Property. If it
does so, the Company may take certain steps to limit its liability for such
environmental problems, such as creating a special purpose entity to own such
Real Property. See "Operating Policies and Objectives--The Company's Assets--
Real Properties with Known Material Environmental Problems." Despite these
steps, there are risks associated with such an investment. Imperial Credit has
only limited experience in investing in Real Property with environmental
problems.

FOREIGN REAL PROPERTIES ARE SUBJECT TO CURRENCY CONVERSION RISKS, FOREIGN
TAX LAWS AND UNCERTAINTY OF FOREIGN LAWS. The Company may invest in Real
Property, or Mortgage Loans secured by Real Property, located outside the
United States. Investing in Real Property located in foreign countries creates
risks associated with the uncertainty of foreign laws and markets. Moreover,
investments in foreign assets may be subject to currency conversion risks. In
addition, income from investment in foreign Real Property and, in some
instances, foreign Mortgage Loans may be subject to tax by foreign
jurisdictions, which would reduce the economic benefit of such investments.
Imperial Credit and its affiliates have limited experience in investing in
foreign Real Property. The Company intends to limit its investments in foreign
Real Property and such Mortgage Loans to no more than 20% of the Company's
assets.

16
<PAGE>

ECONOMIC AND BUSINESS RISKS

INTEREST RATE CHANGES MAY AFFECT ADVERSELY THE VALUE OF THE COMPANY'S
INVESTMENTS. The value of the Company's Mortgage Loans will be affected by the
prepayment rates on such Mortgage Loans, although multifamily and commercial
Mortgage Loans, which will be the Company's primary investment focus,
generally provide for lock-out periods and prepayment penalties that reduce
this risk. No assurance can be made that prepayment penalties will deter
prepayments. Similarly, the value of the Company's MBS Interests will be
affected by the prepayment rates on the mortgage loans comprising the Mortgage
Collateral for such securities. Prepayment rates on Mortgage Loans and MBS
Interests are influenced by changes in current interest rates and a variety of
economic, geographic and other factors and cannot be predicted with certainty.
In periods of declining mortgage interest rates, prepayments on Mortgage Loans
and MBS Interests generally increase. If general interest rates also decline,
the funds available for reinvestment by the Company during such periods are
likely to be reinvested at lower interest rates than the Company was earning
on the Mortgage Loans and MBS Interests that were prepaid. Mortgage Loans and
MBS Interests may decrease in value as a result of increases in interest rates
and may benefit less than other fixed-income securities from declining
interest rates because of the risk of prepayment. In general, changes in both
interest rates and prepayment rates will affect the total return on the
Company's Mortgage Loans and MBS Interests, which in turn will affect the
amount available for distribution to the Company's stockholders. This
volatility may be greater with certain MBS Interests, such as POs, IOs, Sub
IOs and Inverse IOs, that the Company intends to acquire. The value of
adjustable rate Mortgage Loans and MBS Interests paying adjustable coupon
rates, which the Company may acquire, generally will vary inversely with
changes in prevailing interest rates. Under certain interest rate and
prepayment rate scenarios, the Company may not recover fully its investment in
such assets.

The Company's strategy is to leverage its investments significantly by
borrowing against them, investing the net proceeds of those borrowings in
additional Mortgage Loans and MBS Interests, borrowing against those
additional assets, and repeating the process of borrowing and investing until
it has a significantly leveraged portfolio. See "Operating Policies and
Objectives--Strategy." The Company will be required to bear interest costs,
transaction costs and other fees, costs and expenses related to its
anticipated borrowings that it will use in seeking to implement its strategy
of achieving a significantly leveraged portfolio. The Company's operating
results depend in part on the difference between the income earned on the
Company's income-generating assets and the interest expense incurred in
connection with its borrowings. See "--Leverage Can Reduce Income Available
for Distribution and Cause Losses." As the positive spread between the two
increases, the Company's net income should increase. Accordingly, changes in
the general level of interest rates can affect the Company's income by
affecting the spread between the Company's income-earning assets and interest-
bearing liabilities, as well as, among other things, the value and the average
life of the Company's interest-earning assets and its ability to realize gains
from the sale of its assets. Interest rates are highly sensitive to many
factors, including governmental monetary, fiscal and tax policies, domestic
and international economic and political considerations, and other factors
beyond the control or anticipation of the Company.

THE COMPANY'S PERFORMANCE MAY BE AFFECTED ADVERSELY IF ITS HEDGING STRATEGY
IS NOT SUCCESSFUL. The Company's performance may be affected adversely if the
Company fails to limit the effects of changes in interest rates on its
operations by employing an effective hedging strategy, including engaging in
interest rate swaps, caps, floors and other interest rate exchange contracts,
and buying and selling interest rate futures and options on such futures. The
use of these instruments to hedge a portfolio carries certain risks, including
the risk that losses on a hedge position will reduce the funds available for
distribution to shareholders and, indeed, that such losses may exceed the
amount invested in such instruments. There is no perfect hedge for any
investment and a hedge may not perform its intended purpose of offsetting
losses on an investment. For example, the Company will attempt to match the
interest rate indexes and repricing terms of its Mortgage Loans with those of
its borrowings, but it may not be able to achieve a perfect match. During
periods of volatile interest rates, such interest rate mismatches could affect
adversely the Company's ability to hedge effectively its interest rate risk.
The Company may enter into over-the-counter hedging transactions in which the
protections afforded to participants in an organized exchange and in a
regulated environment may not be available, which will expose the Company to
counterparty risk. Although the Company intends to enter into such contracts
only with

17
<PAGE>

counterparties the Company believes to be financially sound and to monitor the
financial soundness of such parties on a periodic basis, the Company may be
exposed to the risk that the counterparties with which the Company trades may
become financially unsound or insolvent. If a counterparty ceases making
markets and quoting prices in such instruments, which may render the Company
unable to enter into an offsetting transaction with respect to an open
position, the Company may be forced to unwind its position, which may result
in a loss on the hedge position and could cause the Company to suffer the
adverse consequence against which the hedging transaction was designed to
protect. Certain of the hedging instruments acquired by the Company are traded
on exchanges, which may subject the Company to the risk of trading halts,
suspensions, exchange or clearing house equipment failure, insolvency of a
brokerage firm or other disruptions of normal trading activities. If the
Company anticipates that the income from any hedging transaction will not be
qualifying income for REIT income test purposes, the Company may form a
corporate subsidiary that is subject fully to federal corporate income
taxation through which the Company could conduct part or all of its hedging
activities. See "Federal Income Tax Considerations--Requirements for
Qualification--Income Tests."

LEVERAGE CAN REDUCE INCOME AVAILABLE FOR DISTRIBUTION AND CAUSE LOSSES. The
Charter and the Bylaws do not limit the amount of indebtedness the Company can
incur. The Company intends to leverage its assets through securitizations and
other borrowings, generally through the issuance of CMOs and the use of
warehouse lines of credit, reverse repurchase agreements, bank credit
facilities and other borrowings. The Company will leverage its assets only
when it expects that such leverage will enhance returns, although there can be
no assurance that the Company's use of leverage will prove to be beneficial.
The extent to which the Company uses leverage will be determined by the
Manager pursuant to the Guidelines and ultimately, by the Board of Directors,
who may act at any time without the approval of or notice to the stockholders.
The percentage of leverage used will vary depending on, among other things,
the Company's estimate of the cash flow that its assets will generate, and the
stability of that cash flow. Leverage can reduce the cash flow available for
distributions to stockholders. Moreover, there can be no assurance that the
Company will be able to meet its debt service obligations resulting from
leverage and, to the extent that it cannot, the Company risks the loss of some
or all of its assets.

MATURITY MISMATCH BETWEEN ASSET MATURITIES AND BORROWING MATURITIES MAY
AFFECT ADVERSELY THE COMPANY'S NET INCOME. The Company's use of short-term
floating rate borrowings to acquire long term assets, including Mortgage Loans
and MBS Interests, some of which will bear a fixed rate of interest may expose
the Company to a maturity mismatch. As a consequence, the Company's borrowing
costs could exceed the income earned on the Company's assets acquired with the
borrowed funds, thereby reducing the Company's income and ability to make
distributions to its stockholders. Further, MBS Interests subject to reverse
repurchase agreements periodically are marked to market by the repurchase
lender, and a decline in the value of MBS Interests pledged to secure reverse
repurchase agreements may result in margin calls. In addition, if renewals of
or substitutes for maturing or called short term borrowings are unavailable to
the Company for any reason, the Company may be required to sell assets quickly
to repay those borrowings. Certain of the Company's MBS Interests may be
illiquid and a sale associated with a short marketing period generally would
result in the Company receiving a lower price than otherwise would be
available. There can be no assurance that the Company will not incur losses
associated with forced sales of illiquid collateral to repay borrowings.
Furthermore, the use of leverage will magnify the Company's exposure to
losses. For example, a loss equal to 20% on an asset that is 80% leveraged
would eliminate the Company's equity in that asset completely, while the same
loss would leave the Company with 80% of its equity in an asset if no leverage
had been applied to that asset.

INTEREST RATE MISMATCH BETWEEN ASSET YIELDS AND BORROWING RATES MAY AFFECT
ADVERSELY THE COMPANY'S NET INCOME. The Company's borrowings may be at
interest rates based on indexes and repricing terms similar to, but of
somewhat shorter maturities than, the interest rate indexes and repricing
terms of various of the Company's variable rate assets. While the historical
spread between relevant short-term interest rate indexes has been relatively
stable, there have been periods, such as the 1979 through 1982 high interest
rate environment, when the spread between those indexes was volatile. Further,
certain of the Company's assets will bear fixed rates of interest and have
long term maturities. There can be no assurance that such fixed rates of

18
<PAGE>

interest will exceed the variable rates of interest on related borrowings.
Interest rate mismatches could impact the Company's financial condition in a
material way, and affect adversely the Company's income and ability to make
distributions to its Stockholders, dividend yield and the market price of the
Common Stock. See "--Leverage Can Reduce Income Available for Distribution and
Cause Losses" and "--The Company May Not Be Able to Borrow Money on Favorable
Terms."

THE COMPANY MAY NOT BE ABLE TO BORROW MONEY ON FAVORABLE TERMS. The ability
of the Company to achieve its investment objectives through leverage will
depend on the Company's ability to borrow money on favorable terms. The
Company has not entered into any borrowing arrangements at the present time,
and there can be no assurance that the Company will be able to enter into
arrangements enabling it to borrow money on favorable terms.

ADVERSE CHANGES IN GENERAL ECONOMIC CONDITIONS CAN AFFECT ADVERSELY THE
COMPANY'S BUSINESS. The Company's success is dependent upon the general
economic conditions in the geographic areas in which a substantial number of
its investments are located. Adverse changes in national economic conditions
or in the economic conditions of the regions in which the Company conducts
substantial business likely would have an adverse effect on real estate
values, interest rates and, accordingly, the Company's business, income and
ability to make distributions to its stockholders. The general economic
conditions in the geographic areas in which the Company's investments are
located will be beyond the control of the Company.

SIGNIFICANT COMPETITION MAY AFFECT ADVERSELY THE COMPANY'S ABILITY TO
ACQUIRE ASSETS AT FAVORABLE SPREADS RELATIVE TO BORROWING COSTS. The Company
will engage in a business that may become increasingly competitive in the
future as more people enter the market, which may affect adversely the
Company's ability to achieve its investment objectives. In acquiring Real
Estate Related Assets, the Company will compete with CRIIMI MAE, Inc., Ocwen
Asset Investment Corporation, Goldman Sachs' Whitehall Street Real Estate
Limited Partnership Funds, IMH Commercial Holdings, Inc. and Allied Capital
Commercial Corporation, as well as other REITs, investment banking firms,
savings and loan associations, banks, mortgage bankers, insurance companies,
mutual funds, other lenders, Fannie Mae, Government National Mortgage
Association ("GNMA") and other entities purchasing similar assets, many of
which have established operating histories and procedures, may have access to
greater capital and other resources and may have other advantages over the
Company in conducting certain businesses and providing certain services. There
are several REITs similar to the Company and others may be organized in the
future. The effect of the existence of additional REITs may be to increase
competition for the available supply of Real Estate Related Assets
contemplated to be acquired by the Company. The Company's net income will
depend, in large part, on the Company's ability to acquire and originate
Mortgage Loans and MBS Interests having yields that produce favorable spreads
over the Company's borrowing costs. Increased competition for the acquisition
of Mortgage Loans and MBS Interests or a reduction in the available supply
could result in higher prices and thus lower yields on such Mortgage Loans and
MBS Interests, which could narrow (or make negative) the yield spread relative
to the Company's borrowing costs. In addition, the Company's competitors may
seek to establish relationships with the financial institutions and other
firms from whom the Company intends to acquire such assets. There can be no
assurance that the Company will be able to acquire sufficient Real Estate
Related Assets at favorable spreads relative to the Company's borrowing costs
to achieve the Company's objectives. In addition, there can be no assurance
that a supply of Real Estate Related Assets suitable for acquisition by the
Company will continue to be available, or that changes in market conditions or
applicable laws will not affect the availability of suitable Real Estate
Related Assets.

APPROPRIATE INVESTMENTS MAY NOT BE AVAILABLE AND FULL INVESTMENT OF NET
PROCEEDS MAY BE DELAYED. Only approximately $163 million (approximately 39% of
the net proceeds of the Offering) of the Company's assets have been
identified. The Company intends to invest the remaining net proceeds of this
Offering (after purchase of the Initial Investments) in readily marketable,
interest-bearing securities on a temporary basis until the Company finds
appropriate Mortgage Loans, MBS Interests and Real Property in which to
invest. There can be no assurance, however, that the Company will identify
Mortgage Loans, MBS Interests or Real Property that meet its investment
criteria or that any such assets will produce a return on the Company's

19
<PAGE>

investments. Moreover, the Company and the Manager have broad discretion in
determining how to invest the remaining net proceeds of this Offering and may
change the current investment and operating policies of the Company without a
vote of the stockholders. Such deviations from current policies might expose
the Company to increased risks of loss or liability, which could affect
adversely the Company or the market price of the Common Stock.

INVESTMENTS MAY BE ILLIQUID AND THEIR VALUE MAY DECREASE. Many of the
Company's assets are and will be relatively illiquid. In addition, certain of
the MBS Interests that the Company will acquire will include interests that
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or other applicable securities laws, resulting in a
prohibition against transfer, sale, pledge or other disposition of those MBS
Interests except in a transaction that is exempt from the registration
requirements of, or is otherwise in accordance with, those laws. The ability
of the Company to vary its portfolio in response to changes in economic and
other conditions will be relatively limited. No assurances can be given that
the fair market value of any of the Company's assets will not decrease in the
future.

LEGAL AND TAX RISKS

ADVERSE CONSEQUENCES OF FAILURE TO MAINTAIN REIT STATUS MAY INCLUDE ICCMIC
BEING SUBJECT TO TAXATION AS A REGULAR CORPORATION. ICCMIC intends to operate
in a manner so as to qualify as a REIT for federal income tax purposes.
Although ICCMIC does not intend to request a ruling from the Service as to its
REIT status, ICCMIC has received an opinion of its legal counsel that, based
on certain assumptions and representations, it so qualifies. Investors should
be aware, however, that opinions of counsel are not binding on the Service or
any court. The REIT qualification opinion only represents the view of counsel
to ICCMIC based on counsel's review and analysis of existing law, which
includes no controlling precedent. Furthermore, both the validity of the
opinion and the continued qualification of ICCMIC as a REIT will depend on
ICCMIC's satisfaction of certain asset, income, organizational, distribution
and stockholder ownership requirements on a continuing basis. If ICCMIC were
to fail to qualify as a REIT in any taxable year, ICCMIC would be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates, and distributions to stockholders
would not be deductible by ICCMIC in computing its taxable income. Any such
corporate tax liability could be substantial and would reduce the amount of
cash available for distribution to stockholders, which in turn could have an
adverse impact on the value of, and trading prices for, the Common Stock.
Unless entitled to relief under certain Code provisions, ICCMIC also would be
disqualified from taxation as a REIT for the four taxable years following the
year during which ICCMIC ceased to qualify as a REIT.

ICCMIC must distribute annually at least 95% of its taxable income
(excluding any net capital gain) in order to avoid corporate income taxation
of the earnings that it distributes. In addition, ICCMIC will be subject to a
4% nondeductible excise tax on the amount, if any, by which certain
distributions paid by it with respect to any calendar year are less than the
sum of (i) 85% of its ordinary income for that year, (ii) 95% of its net
capital gain for that year and (iii) 100% of its undistributed taxable income
from prior years. See "Federal Income Tax Considerations--New Tax
Legislation."

ICCMIC intends to make distributions to its stockholders to comply with the
95% distribution requirement and to avoid the nondeductible excise tax.
However, there may be differences in timing between the recognition of taxable
income and the actual receipt of cash, requiring the Company to borrow funds,
issue capital stock or sell assets on a short-term basis to meet the 95%
distribution requirement and to avoid the nondeductible excise tax. The
requirement to distribute a substantial portion of ICCMIC's taxable income
could cause ICCMIC (i) to sell assets in adverse market conditions, (ii) to
distribute amounts that represent a return of capital or (iii) to distribute
amounts that would otherwise be spent on future acquisitions, unanticipated
capital expenditures or repayment of debt. Gain from the disposition of any
asset held primarily for sale to customers in the ordinary course of business
generally will be subject to a 100% tax. In addition, gain from the sale of
securities held for less than one year and Real Property (including interests
in Mortgage Loans secured by Real Property) held for less than four years
generally will be nonqualifying income for purposes of the 30% income test.
See "Federal Income Tax Considerations--Requirements for Qualification--Income
Tests" and "--New Tax Legislation."

20
<PAGE>

The Company expects to acquire certain MBS Interests and other debt
obligations that are deemed to have OID for federal income tax purposes, which
generally is equal to the difference between an obligation's issue price and
its redemption price. ICCMIC will be required to recognize as income each year
the portion of the OID that accrues during that year, which will increase the
REIT distribution requirement for that year, notwithstanding the fact that
there may be no corresponding contemporaneous receipt of cash by the Company.

The Company's planned investment in various types of subordinated MBS
Interests, particularly Sub IOs, also could result in the recognition of
taxable income, in addition to OID, in excess of the Company's cash receipts.
The payment of interest on certain types of subordinated MBS Interests may be
deferred (or placed into a reserve account) until after the payment of all or
a substantial portion of the interest or principal (or both) on senior debt
obligations, or until the overcollateralization or reserve balance reaches a
specified level. As a result of its ownership of such subordinated MBS
Interests, the Company would recognize interest income but could receive no
cash. Although the Company may benefit from tax deductions (such as interest
and depreciation) from its investments and borrowings, it is unlikely that
such tax benefits would be sufficient to offset completely the phantom income
realized by the Company from OID and its investment in subordinated MBS
Interests. Accordingly, to satisfy the REIT distribution requirement (95% of
taxable income), the Company may need to borrow money, raise additional
capital or sell assets to obtain the cash needed for distribution to its
shareholders.

REMIC Residual Interests and retained interests in non-REMIC securitization
transactions also may generate taxable income in excess of cash flow. In
addition, certain taxable income produced by a REMIC Residual Interest
("Excess Inclusion") may cause ICCMIC's stockholders to suffer certain adverse
tax consequences. See "Federal Income Tax Considerations." Consequently, an
acquisition by the Company of debt obligations that are deemed to have OID or
to be REMIC Residual Interests, or the retention of interests in connection
with non-REMIC securitization transactions, could have the effect of requiring
the Company to incur borrowings or to liquidate a portion of its portfolio
under circumstances that the Company regards as unfavorable to meet the REIT
95% distribution requirement.

In addition, in order to qualify as a REIT, the Company must satisfy certain
requirements concerning the nature of its assets and income, which may
restrict the Company's ability to invest in various types of assets. See
"Federal Income Tax Considerations--Requirements for Qualification--Asset
Tests." Without limiting the generality of the foregoing, the Company will not
be able to acquire securities (other than securities which are treated as an
interest in real property) of any single issuer which would represent either
more than 5% of the total value of the Company's assets or 10% of the voting
securities of such issuer. In addition, in order to satisfy the income
requirements of a REIT, the Company generally will be restricted to acquiring
assets which generate qualifying income for purposes of certain income tests.
See "Federal Income Tax Considerations--Requirements for Qualification--Income
Tests." These restrictions could affect adversely the Company's ability to
optimize its portfolio of assets.

The Company may acquire at less than their face amount Mortgage Loans, MBS
Interests and other debt obligations that are deemed to have market discount
for federal income tax purposes, which generally is equal to the excess of an
obligation's redemption price over the holder's basis in the obligation at the
time of acquisition. All or a portion of the gain recognized by the Company
from the disposition of, or principal payments on, an obligation which has
market discount would be treated as ordinary income and not capital gain, so
that the Company would be required to make a distribution to its shareholders
in order to satisfy the requirement that a REIT distribute 95% of its taxable
income to its shareholders each taxable year.

If a Mortgage Loan, MBS Interest or other debt obligation with market
discount is held by a REMIC in which the Company acquires a REMIC Residual
Interest, a portion of the market discount would be recognized as income each
year by the REMIC and, hence, the Company. As a result, the market discount on
obligations held by a REMIC in which the Company holds a REMIC Residual
Interest could increase the Company's annual distribution requirement.

21
<PAGE>

INVESTMENT IN THE COMMON STOCK OF THE COMPANY BY CERTAIN PLANS MAY GIVE RISE
TO A PROHIBITED TRANSACTION UNDER ERISA AND THE CODE. The Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and section 4975 of the
Code prohibit certain transactions that involve (i) certain pension, profit-
sharing or other employee benefit plans subject to Title I of ERISA (each a
"Plan") and (ii) the assets of a Plan. A "party in interest" or "disqualified
person" with respect to a Plan will be subject to (x) an initial 15% excise
tax on the amount involved in any prohibited transaction involving the assets
of the Plan for each year or part thereof during which the transaction is not
corrected and (y) an excise tax equal to 100% of the amount involved if any
prohibited transaction is not corrected. Consequently, the fiduciary of a Plan
contemplating an investment in the Common Stock should consider whether the
Company, any other person associated with the issuance of the Common Stock, or
any affiliate of the foregoing is or might become a "party in interest" or
"disqualified person" with respect to the Plan. In such a case, the
acquisition or holding of Common Stock by or on behalf of the Plan could be
considered to give rise to a prohibited transaction under ERISA and the Code.
See "ERISA Considerations--Employee Benefit Plans, Tax Qualified Retirement
Plans and IRAs."

OWNERSHIP LIMITATION MAY RESTRICT BUSINESS COMBINATION OPPORTUNITIES. In
order for ICCMIC to maintain its qualification as a REIT, not more than 50% in
value of its outstanding shares of capital stock may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities). For the purpose of preserving its REIT qualification, the
Charter generally prohibits direct or indirect ownership of more than 9.9% of
the number of outstanding shares of Common Stock or any series of preferred
stock (the "Ownership Limitation"). The Ownership Limitation could have the
effect of discouraging a takeover or other transaction in which holders of
some, or a majority, of the shares of Common Stock might receive a premium for
their shares of Common Stock over the then prevailing market price or which
such holders might believe to be otherwise in their best interests. See
"Description of Capital Stock--Restrictions on Transfer" and "Federal Income
Tax Considerations--Requirements for Qualification."

PREFERRED STOCK MAY PREVENT CHANGE IN CONTROL. The Charter authorizes the
Board of Directors to classify and reclassify unissued capital stock into
shares of preferred stock of one or more series and to establish the
preferences and rights of any shares of preferred stock issued. Although the
Company has no current intention to issue any series of preferred stock in the
foreseeable future, the issuance of any series of preferred stock could have
the effect of delaying or preventing a change in control of the Company even
if a majority of the holders of the Company's Common Stock (the "Common
Stockholders") believed such change of control was in their best interest. See
"Description of Capital Stock--Preferred Stock."

MARYLAND ANTI-TAKEOVER STATUTES MAY RESTRICT BUSINESS COMBINATION
OPPORTUNITIES. As a Maryland corporation, ICCMIC is subject to various
provisions of Maryland law, which impose certain restrictions and require
certain procedures with respect to certain stock purchases and business
combinations. See "Certain Provisions of Maryland Law and of ICCMIC's Charter
and Bylaws--Business Combinations" and "--Control Share Acquisitions."

BOARD OF DIRECTORS MAY CHANGE CERTAIN POLICIES WITHOUT STOCKHOLDER
CONSENT. The major policies of the Company, relating to the purchase and sale
of assets, financing, operations, debt and distributions, are determined by
its Board of Directors. The Board of Directors, and in certain cases, the
Independent Directors, may amend or revise these and other policies, or
approve transactions that deviate from these policies, from time to time
without a vote of the stockholders. The effect of any such changes may be
positive or negative. ICCMIC cannot change its policy of seeking to maintain
its qualification as a REIT without the affirmative vote of two-thirds of all
of the votes ordinarily entitled to be cast in the election of directors,
voting together as a single class. See "Operating Policies and Objectives" and
"Certain Provisions of Maryland Law and of ICCMIC's Charter and Bylaws."

LOSS OF INVESTMENT COMPANY ACT EXEMPTION WOULD AFFECT THE COMPANY
ADVERSELY. The Company believes that it will not be, and intends to conduct
its operations so as not to become, regulated as an investment company under
the Investment Company Act. The Investment Company Act exempts entities that,
directly or through majority-owned subsidiaries, are "primarily engaged in the
business of purchasing or otherwise acquiring mortgages and other liens on and
interests in real estate" ("Qualifying Interests"). Under current
interpretations by the Staff of the Securities and Exchange Commission (the
"Commission"), in order to qualify

22
<PAGE>

for this exemption, the Company, among other things, must maintain at least
55% of its assets in Qualifying Interests and also may be required to maintain
an additional 25% in Qualifying Interests or other assets related to real
estate. The assets that the Company may acquire therefore may be limited by
the provisions of the Investment Company Act. In connection with its
acquisition of MBS Interests, the Company will seek, where appropriate, to
obtain foreclosure rights by obtaining the Special Servicing rights with
respect to the underlying mortgage loans, although there can be no assurance
that it will be able to do so on acceptable terms. If the Company does not
obtain such rights, the related MBS Interests will not constitute Qualifying
Interests (but the Company believes they would constitute other assets related
to real estate) for the purpose of the Investment Company Act. If the Company
obtains such rights, the Company believes that the related MBS Interests will
constitute Qualifying Interests for the purpose of the Investment Company Act.
The Company does not intend, however, to seek an exemptive order, no-action
letter or other form of interpretive guidance from the Commission or its Staff
on this position. If the Commission or its staff were to take a different
position with respect to whether such MBS Interests constitute Qualifying
Interests, the Company, among other things, could be required either (a) to
change the manner in which it conducts its operations to avoid being required
to register as an investment company under the Investment Company Act or (b)
to register as an investment company, either of which could have an adverse
effect on the Company and the market price for the Common Stock.

THE COMPANY'S RESPONSIBILITY TO INDEMNIFY THE MANAGER AND OFFICERS AND
DIRECTORS OF THE COMPANY MAY RESULT IN LIABILITY FOR THE ACTIONS OF THE
MANAGER AND OFFICERS AND DIRECTORS OF THE COMPANY. Maryland law permits a
Maryland corporation to include in its charter a provision limiting the
liability of its directors and officers to the corporation and its
stockholders for money damages except for liability resulting from (a) actual
receipt of an improper benefit or profit in money, property or services or (b)
active and deliberate dishonesty established by a final judgment as being
material to the cause of action. The Charter contains such a provision which
eliminates such liability to the maximum extent permitted by Maryland law. See
"The Company--Directors and Executive Officers."

The Company will indemnify the Manager and its officers and directors from
any action or claim brought or asserted by any party by reason of any
allegation that the Manager or one or more of its officers or directors is
otherwise accountable or liable for the debts or obligations of the Company or
its affiliates. In addition, the Manager and its officers and directors will
not be liable to the Company, and the Company will indemnify the Manager and
its officers and directors, for acts performed in good faith pursuant to the
Management Agreement, except for claims arising from acts constituting bad
faith, willful misconduct, gross negligence or reckless disregard of their
duties under the Management Agreement. See "Management of Operations--Limits
of Responsibility." In addition, ICCMIC will indemnify, hold harmless and pay
reasonable expenses in advance of final disposition of a proceeding to present
or former directors and officers and certain other parties to the fullest
extent permitted from time to time by Maryland Law. See "The Company."

CHANGES IN THE REGULATION OF THE MANAGER'S AFFILIATES MAY AFFECT ADVERSELY
THE MANAGER'S ABILITY TO CARRY OUT MANAGEMENT FUNCTIONS. The Manager is a
wholly-owned subsidiary of Imperial Credit, a company that conducts most of
its operations through numerous subsidiaries and other entities in which
Imperial Credit owns a significant interest. Certain of these subsidiaries and
entities are subject to extensive government supervision and regulation,
intended primarily for the protection of depositors and other third parties.
In addition, each of Imperial Credit and its affiliates is subject to changes
in federal and state laws, including changes in tax laws, that could affect
materially the real estate industry, as well as changes in regulations,
governmental policies and accounting principles. Such changes may increase the
costs of doing business for Imperial Credit and its affiliates and assist
their competitors. Any such added burdens may affect adversely the Manager's
ability to carry out its management functions.

OTHER RISKS

UNCERTAINTY AS TO THE COMPANY'S ABILITY SUCCESSFULLY TO IMPLEMENT ITS
OPERATING POLICIES AND STRATEGIES RESULTING FROM ITS LACK OF OPERATING
HISTORY. ICCMIC was organized on July 31, 1997. The Company has no operating
history and has not implemented its operating policies and strategies. The
Company will be dependent upon the experience and expertise of the Manager in
advising the Company and administering its day-to-day operations.

23
<PAGE>

THE COMPANY'S SUCCESS MAY DEPEND ON THE SERVICES OF EXTERNAL MANAGEMENT. The
Company will contract with the Manager to advise the Board of Directors and
direct the day-to-day business affairs of the Company. Thus, the Company's
success may depend on the services of the Manager and its officers and
employees. Certain officers, directors and employees of the Company and the
Manager and its affiliates have experience in creating, evaluating, acquiring
and managing Mortgage Loans and MBS Interests. However, such officers,
directors and employees have never directly managed a REIT. Moreover, the
Manager, a newly organized company, will need to subcontract with third
parties or with employees of Imperial Credit and its affiliates to provide
certain services on behalf of the Company. For example, the Manager recently
acquired, and the Company is training personnel to become proficient in the
use of, certain internal computer analytic programs designed, among other
things, for use in analyzing MBS Interests. Until those programs are fully
integrated into the Company's operations, the Manager intends to contract with
third party experts to perform such analytics. Third parties and Imperial
Credit employees who provide services to the Company through subcontracts with
the Manager may provide similar services to other mortgage REITs and other
competitors of the Company. There can be no assurance that the Company and the
Manager will be able to implement successfully the strategies that the Company
intends to pursue. Subject to the Guidelines, the Manager is expected to have
significant latitude as to the types of assets it may determine to be proper
investments for the Company. No assurance can be made that the Manager's
decisions in this regard will result in a profit for the Company. Moreover,
certain of the Manager's personnel are employees of Imperial Credit or its
affiliates, and accordingly the Company's success may depend in part on the
continuing ability of Imperial Credit and its affiliates, including the
Manager, to hire and retain knowledgeable personnel and the Manager's ability
to cause such personnel to focus their attention to the affairs of the Company
rather than the affairs of Imperial Credit and its affiliates. The ability of
Imperial Credit and its affiliates to attract and retain such personnel may be
affected, in turn, by Imperial Credit's continued financial strength. Finally,
the Company is subject to the risk that the Manager will terminate the
Management Agreement and that no suitable replacement will be found to manage
the Company.

A FAILURE BY SPB TO COMPLY WITH A CERTAIN MEMORANDUM OF UNDERSTANDING MAY
HAVE CERTAIN MATERIAL ADVERSE EFFECTS ON THE COMPANY. A failure by SPB to
comply with the requirements set forth in a certain Memorandum of
Understanding ("MOU") previously executed and delivered by SPB, the Federal
Deposit Insurance Corporation ("FDIC") and the California Department of
Corporations (the "DOC") could have a material adverse effect on the
performance of the Initial Investments and other assets that the Company
acquires from or has serviced by SPB, and on the Company's ability to acquire
additional assets from SPB in the future. See "Operating Policies and
Objectives--The SPB Memorandum of Understanding."

THE FAILURE TO DEVELOP A MARKET FOR COMMON STOCK MAY RESULT IN A DECREASE IN
ITS MARKET PRICE. Prior to this offering, there has not been a public market
for the shares of Common Stock offered hereby. The initial public offering
price will be determined by the Company and representatives of the
Underwriters. There can be no assurance that the price at which the shares of
Common Stock will sell in the public market after the offering will not be
lower than the price at which they are sold by the Underwriter. The Common
Stock has been approved for listing, subject to official notice of issuance,
on the Nasdaq Stock Market. Quotation through The Nasdaq Stock Market does not
insure, however, that an active market will develop for the Common Stock.

INCREASES IN INTEREST RATES MAY AFFECT ADVERSELY THE YIELD OF THE COMMON
STOCK. The Company's earnings will be derived primarily from the expected
positive spread between the yield on the Company's Real Estate Related Assets
and the costs to the Company of its borrowings. This expected positive spread
will not necessarily be larger in high interest rate environments than in low
interest rate environments. In periods of high interest rates, however, the
net income of the Company, and therefore the dividend yield on the Common
Stock, may be less attractive compared to alternative investments of equal or
lower risk, which could impact adversely the market price of the Common Stock.

FUTURE OFFERINGS OF CAPITAL STOCK MAY RESULT IN DILUTION OF THE BOOK VALUE
OR EARNINGS PER SHARE OF THE OUTSTANDING COMMON STOCK. The Company may
increase its capital resources in the future by making additional offerings of
its Common Stock, securities convertible into its Common Stock or preferred
stock. The actual or perceived effect of such offerings may be the dilution of
the book value or earnings per share of the Common Stock outstanding, which
may result in the reduction of the market price of the Common Stock.

24
<PAGE>

OPERATING POLICIES AND OBJECTIVES

STRATEGY

The Company intends to invest primarily in Term Loans and CMBS. The
Company's MBS Interests are expected to consist primarily of non-investment
grade (including subordinated, Sub IO and PO) classes and investment grade IO
and Inverse IO classes. The Company also may invest in Real Property,
Distressed Mortgage Loans, Construction Loans, Mezzanine Loans and RMBS. The
Initial Investments will consist of approximately $104 million (in unpaid
principal balance) of Mortgage Loans for which the Company will pay
approximately $109 million, and approximately $54 million (in purchase price)
of MBS Interests. The Company intends to hold, whenever possible, the Initial
Investments and any future investments for a period of time sufficient to
avoid owning property characterized as property held "primarily for sale to
customers in the ordinary course of trade or business," gain from which would
be treated as income from a prohibited transaction that is subject to a 100%
penalty tax under the Code. See "Risk Factors--Legal and Tax Risks--Adverse
Consequences of Failure to Maintain REIT Status May Include ICCMIC Being
Subject to Taxation as a Corporation."

To create yields commensurate with its investment objectives, the Company
intends to borrow funds through the issuance of CMOs in debt securitizations
or other borrowing arrangements, pledging its assets (including Mortgage Loans
and MBS Interests) as collateral security for its repayment obligations. The
Company also, in certain cases, may securitize Mortgage Loans by transferring
them to a special purpose trust or corporation which elects to be treated as a
REMIC or a financial asset securitization investment trust ("FASIT"). The
special purpose entity would issue MBS pass-through Certificates ("Pass-
Through Certificates") to the Company, which would sell certain classes and
retain certain non-investment grade and IO classes. The Company intends to use
the proceeds from securitizations and borrowings to invest in additional
Mortgage Loans MBS Interests and other assets and, in turn, to borrow against
those newly acquired assets, primarily through additional securitizations. The
Company's strategy is to repeat this process to the extent opportunities to
use leverage are available and the Manager determines and advises that using
leverage is prudent and consistent with maintaining acceptable level of risk
until the Company has significantly leveraged its portfolio of Mortgage Loans
and MBS Interests. There can be no assurances that the Company will be able to
acquire appropriate assets other than the Initial Investments, that the terms
or results of the Company's acquisitions will be beneficial to it, or that the
Company will achieve its objectives. See "Risk Factors."

The Company may take advantage of opportunities to originate Construction
Loans and Mezzanine Loans as part of its investment strategy. See "--The
Company's Assets--Construction Financing and Loans Subject to Prior Liens."

In addition, the Company may decide to pursue other strategies and other
available acquisition opportunities it deems suitable for the Company's
portfolio. The Company also may acquire Real Property, including Distressed
Real Property.

Although the Company intends to invest primarily in Term Loans and CMBS, the
Company's investment decisions will depend on changing market factors. Thus
the Company cannot anticipate with any certainty the percentage of its assets
that will be invested in each category of Real Estate Related Assets, except
that the Company does not anticipate investing more than 20% of its assets in
foreign Real Property and foreign Mortgage Loans. Subject to the Guidelines,
and to the acquisition of the Initial Investments, the Company has a great
deal of discretion as to the manner in which it may invest its assets,
including future borrowings. There can be no assurance that the Company will
be successful in its investment strategy.

The Company will have no predetermined limitations or targets for
concentration of property type or geographic location. Instead, the Company
plans to make acquisition decisions through asset and collateral analysis,
evaluating investment risks and potential rewards on a case-by-case basis.
However, because SPB will be the Company's primary source of assets, and a
significant portion of SPB's Mortgage Loans are secured by Mortgage Properties
in California, the return on an investment in the Common Stock will be
dependent on the

25
<PAGE>

economy of California. See "Risk Factors--Risks Related to Investments in
Mortgage Loans--Geographic Concentration of the Company's Assets in California
May Make the Company's Performance Subject to Economic Conditions in
California."

The Company will acquire all of the Initial Investments from Imperial Credit
and SPB, and in the future may acquire additional assets from Imperial Credit
and its affiliates. SPB has granted the Company a right of first offer on $150
million Mortgage Loans per year typical of those originated by SPB for as long
as the Management Agreement is in place. The Company intends to acquire
assets, other than the Initial Investments, from various sources unaffiliated
with Imperial Credit located throughout the United States, such as savings and
loan associations, banks, mortgage bankers, home builders, insurance companies
and other mortgage lenders.

If the Company decides to acquire assets from a prospective seller or other
transferor that would realize significant gain on the sale or other
disposition of those assets, the Company may, in an attempt to make a transfer
of those assets to the Company a more attractive disposition alternative to
the prospective transferor, establish a limited partnership (the "Operating
Partnership") to which the prospective transferor could contribute those
assets. Both the general partner and initial limited partner of the Operating
Partnership would be wholly-owned qualified REIT subsidiaries of ICCMIC. In
exchange for the contribution of those appreciated assets sought by the
Company, the prospective transferor would receive units of ownership in the
Operating Partnership as a limited partner therein. Those units would be
redeemable for cash or shares of Common Stock of the Company on a "one for
one" basis. The number of such units in the Operating Partnership to be issued
to the prospective transferor in exchange for its contribution of the assets
desired by the Company would be determined by the Manager based on its
analysis of the value of those assets (that is, such analysis would be
performed in substantially the same manner as if the Company were considering
a purchase of those assets for cash).

The Company currently does not intend to invest in the securities of other
issuers for the purpose of exercising control, to issue any series of senior
securities, to underwrite securities of other issuers, to offer securities in
exchange for property or to repurchase or otherwise reacquire the Common
Stock.

The Company may change its policies in connection with any of the foregoing
without the approval of the stockholders.

RELATIONSHIP WITH IMPERIAL CREDIT

Imperial Credit, a California corporation organized in 1986, is a
diversified commercial and consumer finance company engaged, primarily through
its subsidiaries and affiliates, in a variety of lending activities. The
Company believes that Imperial Credit and its affiliates will prove to be a
significant source of assets for the Company. Subsidiaries and other entities
in which Imperial Credit holds a significant interest and through which it
conducts most of its lending activities include, among others, Southern
Pacific Bank ("SPB"), Franchise Mortgage Acceptance Company LLC ("FMAC"),
Imperial Business Credit, Inc. ("IBC"), Southern Pacific Funding Corporation
("SPFC") and Auto Marketing Network, Inc. ("AMN").

Imperial Credit conducts its multifamily and commercial mortgage lending
operations through the Income Property Lending Division ("IPLD") of SPB,
formed in February 1994 to expand Imperial Credit's multifamily and commercial
property lending business. The Initial Investments include approximately
$104 million (in unpaid principal balance) of Mortgage Loans originated by
IPLD, and the Company believes that IPLD will continue to be a significant
source of Mortgage Loans for the Company. Indeed, the Mortgage Loans to be
purchased by the Company pursuant to the right of first offer with SPB will be
originated in the IPLD division. The focus of IPLD's lending activities is the
small loan market (consisting almost entirely of loans less than $3.0 million)
for multifamily and commercial properties. Imperial Credit and its affiliates
have engaged in a number of structured finance transactions.

26
<PAGE>

THE SPB MEMORANDUM OF UNDERSTANDING

The FDIC and the DOC conducted a joint examination of SPB in January 1996.
In their reports of examination, the agencies criticized several areas of
SPB's policies, operations and procedures, and noted among other things
perceived weaknesses in various policies related to lending, investment,
audit, security and information systems and violations of certain Federal
statutes in connection with certain transactions with affiliates and certain
other laws, regulations and statutes. Following that examination, the FDIC,
the DOC and SPB entered into a Memorandum of Understanding (the "MOU"), which
required SPB to take certain actions to correct the perceived deficiencies.
The required actions included specific actions related to (i) hiring and
retention of qualified management, (ii) adoption of comprehensive risk
management policies, programs and systems to monitor and control risk, (iii)
formulation and adoption of a plan to correct certain violations of law, (iv)
development of a credit review program and (v) enhancement of information
systems and other operational policies. If SPB fails to comply with the MOU,
SPB and its affiliates, officers and directors could be subject to various
enforcement actions, including cease and desist orders, criminal and civil
penalties, removal from office, termination of deposit insurance or the
revocation of SPB's charter. Any such enforcement action could have a material
adverse effect on SPB, the Initial Investments and other assets that the
Company acquires from or has serviced by SPB, and on the Company's ability to
acquire additional assets from SPB in the future.

SPB has represented to the Company that SPB does not believe the MOU has had
or will have a material adverse effect on SPB. The Company recently reviewed
copies of various correspondence from SPB to the FDIC related to the MOU. That
correspondence states that SPB has made significant progress in rectifying
many of the deficiencies outlined in the MOU by implementing various
operational and other policies and procedures, including the following: (i)
the formalization of SPB's account reconciliation process, (ii) the
establishment of an oversight committee to review all affiliated transactions
and to establish guidelines and procedures relative to affiliate transactions
with a focus on regulatory compliance, (iii) the establishment of a problem
asset committee to formalize review of SPB's loan portfolio (which committee
meets regularly and monitors non-performing assets, reviews and approves
actions on "watch list" loans, reviews loan charge-offs and prepares reports
for submission to SPB's board of directors), (iv) the establishment of a
senior loan committee to monitor the credit approval process, to approve loan
credits in accordance with authority limits established by SPB's board of
directors and to report to such board of directors, (v) the hiring of a credit
review manager and implementation of a Credit Review Program (including a
detailed review plan for 1997) that addresses loan evaluation methodology and
sets forth criteria to be used for specific portfolio review, examination
procedures and methodology for testing the allowance for loans and lease
losses, (vi) the establishment of investment, liquidity, interest rate and
enhanced quality control and internal audit policies, (vii) the engagement of
a nationally-recognized firm of certified public accountants to perform SPB's
internal audit function, (viii) the establishment of a compliance committee
and hiring of a compliance manager to oversee all compliance activities, (ix)
the establishment and designation of an Executive Committee to have primary
responsibility for overseeing risk management functions of SPB, (x) the hiring
of a systems administrator, (xi) the implementation of policies and procedures
to enhance systems security and administration, (xii) the implementation of a
Disaster Recovery Plan and (xiii) the hiring of a chief appraiser to revise
and implement appraisal policies and procedures. The Company does not believe
that the MOU will have a material adverse effect on the Company or its ability
to procure Mortgage Loans from SPB. Moreover, the Company understands that the
FDIC and the DOC recently conducted their annual examination of SPB and have
reported to SPB that it has made significant progress in these areas.

27
<PAGE>

Approximately 95% of the Initial Mortgage Loans were originated after the
FDIC, the DOC and SPB entered into the MOU. The following table illustrates
the years of origination of the Initial Mortgage Loans.

YEARS OF ORIGINATION OF THE INITIAL MORTGAGE LOANS

<TABLE>
<CAPTION>
PERCENT BY PERCENT BY
AGGREGATE AGGREGATE AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
MORTGAGE BALANCE AT BALANCE AT BALANCE AS OF BALANCE AS OF
YEAR OF ORIGINATION LOANS ORIGINATION ORIGINATION SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------- --------- ------------ ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
1995.................... 7 $ 3,112,196 2.97% $ 2,996,533 2.87%
1996.................... 7 2,025,000 1.93 1,986,289 1.90
1997.................... 256 99,667,701 95.10 99,362,942 95.22
--- ------------ ------ ------------ ------
270 $104,804,897 100.00% $104,345,764 100.00%
=== ============ ====== ============ ======
</TABLE>

PURCHASE OF INITIAL INVESTMENTS AND RIGHT OF FIRST OFFER FOR ADDITIONAL
INVESTMENTS

The Company intends to purchase the Initial Investments from Imperial Credit
and SPB at the Closing for an aggregate purchase price of approximately $163
million (approximately 39% of the net proceeds of the Offering) plus accrued
interest. See "Initial Investments." Imperial Credit and SPB will realize a
book gain as a result of this sale, subject to the terms of the definitive
agreement to purchase the Initial Investments, satisfaction of the GAAP sale
criteria and consummation of the transaction. The Independent Directors have
approved the purchase of the Initial Investments and have authorized the
officers of the Company to negotiate the final terms of the purchase.

The Initial Mortgage Loans to be acquired at Closing consist of
approximately $104 million in unpaid principal balance of Term Loans
originated or acquired by SPB. The MBS Interests to be acquired at Closing are
interests in CMBS backed by Term Loans originated or acquired by SPB. These
MBS Interests include various classes issued pursuant to the J. P. Morgan
Commercial Mortgage Finance Corp., Commercial Mortgage Pass-Through
Certificates, Series 1997-SPTL-C1 transaction, which closed on June 27, 1997,
and the Southern Pacific Thrift & Loan Association, Commercial Mortgage Pass-
Through Certificates, Series 1996-C1 transaction, which closed on September
30, 1996.

THE COMPANY'S GUIDELINES

GENERAL. The following is a summary of the guidelines setting forth the
general parameters for the Company's investments, borrowings and operations
(the "Guidelines"). See also "--The Company's Assets." The Guidelines have
been approved by the Board of Directors (including a majority of the
Independent Directors) and may be changed by the Board of Directors without a
vote of the stockholders. The Manager is empowered to make the day-to-day
investment decisions of the Company based on the Guidelines. Such investment
decisions will include decisions to issue commitments on behalf of the Company
to purchase Mortgage Loans, MBS Interests and other assets meeting the
investment criteria of the Company. The Independent Directors will review all
transactions of the Company on a quarterly basis to insure compliance with the
Guidelines. The Independent Directors are likely to rely substantially on
information and analysis provided by the Manager to evaluate the Company's
Guidelines, compliance therewith and other matters relating to the Company's
investments.

The Company intends to invest primarily in Real Estate Related Assets with a
view to maximizing income for distribution to stockholders, consistent with
levels of risk that are perceived by the Company to be acceptable. Pending
investment of its funds in longer term investments as provided for in the
Guidelines, the Company intends to invest those funds in readily marketable
securities or interest-bearing deposit accounts, consistent in each case with
maintaining the Company's status as a REIT. The Company is permitted to take
an opportunistic approach to its investments, and may acquire any of the types
of assets described in the Guidelines if the Company and the Manager determine
that to do so would be in the Company's best interests.

28
<PAGE>

The Company, in consultation with the Manager, may establish underwriting
criteria for evaluating potential investments and, if such underwriting
criteria are established, the Company, in consultation with the Manager, may
modify such underwriting criteria at any time and from time to time. The
Company's policy generally is to offer a price for each asset that it
contemplates acquiring not greater than the price that the Manager estimates
to be sufficient to generate an acceptable risk-adjusted return to the Company
from the acquisition of that asset.

PURCHASE FROM IMPERIAL CREDIT AND ITS AFFILIATES. The price at which the
Company will purchase Mortgage Loans and other assets from Imperial Credit and
its affiliates, including SPB, will be determined in accordance with the
Guidelines, as amended from time to time. A majority of the Independent
Directors have approved the purchase of the Initial Investments and have
authorized certain of the officers of the Company to negotiate the final terms
of the purchase. In the future, the Manager will determine fair transfer
prices for the Company's acquisitions of assets from Imperial Credit and its
affiliates based on the Guidelines approved by the Independent Directors. The
Independent Directors will review those transactions on a quarterly basis to
insure compliance with the Guidelines.

In deciding whether to approve an acquisition of any assets, including
acquisitions of Mortgage Loans, MBS Interests and other assets from Imperial
Credit or its affiliates, the Manager may consider such information as it
deems appropriate to determine whether the acquisition is consistent with the
Guidelines, such as whether the price is fair and the investment otherwise is
suitable and in the best interests of the Company. In addition, the Manager
may consider, among other factors, whether the acquisition of that asset will
enhance the Company's ability to achieve or exceed the Company's risk adjusted
target rate of return, if any, established for the relevant time period by the
Board, whether the asset otherwise is well-suited for the Company and whether
the Company financially is able to take advantage of the investment
opportunity presented thereby. There is no geographic limitation or
requirement of geographic diversification (either as to size, jurisdictional
boundary, zip code or other geographic measure) as to the properties that
secure repayment of the Mortgage Loans or underlying the MBS Interests
contemplated to be acquired by the Company; the only limitations as to the
type of assets that the Company may acquire and the characteristics thereof
being limitations either (i) imposed by law, (ii) set forth in the Guidelines
or (iii) with which the Company must comply as a condition of maintaining both
its status as a REIT and its exemption from regulation under the Investment
Company Act. In approving the acquisition of a Mortgage Loan or MBS Interest
from Imperial Credit or its affiliates in the future, the Manager may consider
data such as that presented in the tables contained in "Initial Investments."

When possible, the price that the Company will pay for Mortgage Loans, MBS
Interests and other assets acquired from Imperial Credit or its affiliates
will be determined by reference to the prices most recently paid to Imperial
Credit or its affiliates for similar assets, adjusted for differences in the
terms of such transactions and for changes in market conditions between the
dates of the relevant transactions. If no previous sales of similar assets
have occurred, the Company will attempt to determine a market price for the
asset by an alternative method, such as obtaining a broker's price opinion or
an appraisal, if it can do so at a reasonable cost. Investors should
understand, however, that such determinations are estimates and are not bona
fide third party offers to buy or sell. Investors should carefully and
independently consider the information set forth under "Initial Investments"
and "Yield Considerations Related to the Initial MBS Interests," including the
assumptions and scenarios described therein.

It is the intention of the Company that the agreements and transactions,
including the sale of pools of Mortgage Loans, MBS Interests and Real
Property, between the Company on the one hand and Imperial Credit, SPB and
their affiliates on the other hand are fair to both parties. However, there
can be no assurance that each of such agreements and transactions will be on
terms at least as favorable to the Company as it could have obtained from
unaffiliated third parties.

29
<PAGE>

The Company anticipates that the price it pays for assets acquired from
Imperial Credit or its affiliates, in certain cases, may be lower than the
price that a third party would pay for those assets if economic benefits would
inure to Imperial Credit and its affiliates by selling to the Company, rather
than a third party. For example, Imperial Credit and its affiliates generally
would not incur any broker's fees in connection with a sale of Mortgage Loans
and MBS Interests to the Company. In addition, if Imperial Credit and its
affiliates engage in repetitive sales of assets to the Company, the purchase
and sale agreement used in the successive transactions is likely to contain
standard terms and conditions that previously will have been negotiated by the
parties, resulting in reduced legal costs.

Imperial Credit and its affiliates, including SPB, expect to continue to
originate Mortgage Loans and MBS Interests. SPB will enter into an agreement
granting to the Company, for as long as the Management Agreement with the
Manager remains in effect, a right of first offer to purchase, in addition to
the Initial Investments, not less than $150 million annually of multifamily
and commercial Mortgage Loans typical of those originated by SPB. Although not
contractually committed to do so, the Company presently intends to purchase
the Mortgage Loans offered to it pursuant to the foregoing right of first
offer, subject to compliance with the Guidelines and the Company's
underwriting criteria as established and modified from time to time.

The Company expects to maintain a relationship with Imperial Credit and SPB
in which the Company will be a ready, willing and able purchaser of not only
Mortgage Loans, but also other assets, that may be offered from time to time
by Imperial Credit and SPB. Although no binding commitment will exist on the
part of Imperial Credit, SPB or the Company regarding the sale and purchase of
such other assets, the Company expects to be able to purchase such other
assets from Imperial Credit and SPB on terms and at prices that will be fair
to both parties and that meet the Company's investment criteria. See
"Management of Operations--Certain Relationships; Conflicts of Interests." If
an asset that otherwise meets all of the Company's criteria for asset
acquisition is being offered to the Company by Imperial Credit or one of its
affiliates at a price that is greater, or on terms that are less favorable,
than would be available from third parties for similar assets in bona fide
arms' length transactions, the Manager would be expected to recommend that the
Company decline to acquire that asset at the quoted price and terms,
notwithstanding the relationship among the Company, Imperial Credit and its
affiliates.

THE COMPANY'S ASSETS

The discussion below describes the principal categories of assets that the
Company intends to acquire.

MORTGAGE LOANS FOR SECURITIZATION. The Company intends to acquire
multifamily and commercial Mortgage Loans (primarily Term Loans), to transfer
such Mortgage Loans to Imperial Credit Commercial Mortgage Securitization
Corp. ("ICCMSC"), a newly-formed special purpose qualified REIT subsidiary,
and to have ICCMSC (or a special purpose trust or corporation formed by
ICCMSC) issue CMOs secured by such Mortgage Loans or to otherwise borrow
against those Mortgage Loans. If the Company issues CMOs, the Company would
retain the equity ownership interest in the Mortgage Loans, subject to the CMO
debt, thereby creating the economic equivalent of a subordinated MBS Interest.

Losses on the Company's Mortgage Loans will depend upon a number of factors,
many of which will be beyond the control of the Company or the applicable
servicer. Among other things, the default frequency on the Mortgage Loans will
reflect broad conditions in the economy generally and Real Property
particularly, economic conditions in the local area in which the underlying
Mortgaged Property is located, the loan-to-value ratio of the Mortgage Loans,
the purposes for which the borrowers undertook the Mortgage Loans, and the
debt service coverage ratio. The loss severity on the Mortgage Loans will
depend upon many of the same factors described above, and will also be
influenced by the servicer's ability to foreclose on defaulted Mortgage Loans
and, if it is the successful bidder at the foreclosure sale, to sell the
underlying Mortgaged Property. For a discussion of certain legal issues
affecting the servicer's ability to foreclose on a Mortgage Loan, and the
legal impediments to the sale of the underlying Mortgaged Property, see
"Certain Legal Aspects of Mortgage Loans and Real Property

30
<PAGE>

Investments." These legal issues may extend the time of foreclosure
proceedings or may require the expenditure of additional sums to sell the
underlying Mortgaged Property, in either case increasing the amount of loss
with respect to the relevant Mortgage Loans.

The Company intends to acquire a majority of its Mortgage Loans, other than
those included within the Initial Investments (the "Initial Mortgage Loans"),
and other Real Estate Related Assets from various sources unaffiliated with
Imperial Credit located throughout the United States. The Company may acquire
Mortgage Loans directly from originators and entities holding Mortgage Loans
originated by others. While the Company has no present intent to originate
Mortgage Loans, the Company retains the flexibility to originate Mortgage
Loans in the future. The Board of Directors has not established any limits
upon the geographic concentration or credit quality of the Mortgage Loans to
be acquired by the Company.

Certain of the Mortgage Loans acquired by the Company within a short time
after the origination of such Mortgage Loans may be affected by below market
"teaser" interest rates. The "teaser" interest rates generally are to increase
to the fully indexed rates within 24 months after the origination of such
Mortgage Loans. See "Initial Investments."

The Company may acquire Mortgage Loans from failed savings and loan
associations or banks through United States government agencies. These
institutions and agencies might not provide representations against fraud and
misrepresentation, or meaningful recourse if the representations provided
should prove to be false. The Company may acquire third party insurance to the
extent that it is available for such risks. Accordingly, the Company will be
subject to a greater risk of loss on obligations purchased from these
institutions. If the Company does not choose, or is unable, to acquire such
insurance, the risk of loss will be greater and the Company will be relying
solely on the value of the collateral underlying the Mortgage Loan.

In considering whether to acquire a pool of Mortgage Loans other than the
Initial Mortgage Loans, the Company's policy is to request that the Manager
perform certain due diligence tasks on behalf of the Company that reasonably
may be expected to provide relevant and material information as to the value
of the Mortgage Loans within that pool and whether the Company should acquire
that pool.

The Company's policy is to acquire Mortgage Loans only at prices that are
fair to the Company and that meet the Company's investment criteria. In
determining the price of a Mortgage Loan, the Company may request that the
Manager review and analyze a number of factors. These factors include market
conditions (market interest rates, the availability of mortgage credit and
economic, demographic, geographic, tax, legal and other factors). They also
include the yield to maturity of the Mortgage Loan, the liquidity of the
Mortgage Loan, the limitations on the obligations of the seller with respect
to the Mortgage Loan, the rate and timing of payments to be made with respect
to the Mortgage Loan, the Mortgaged Property underlying the Mortgage Loan, the
risk of adverse fluctuations in the market values of that Mortgaged Property
as a result of economic events or governmental regulations, the historical
performance and other attributes of the property manager responsible for
managing that Mortgaged Property, relevant laws limiting actions that may be
taken with respect to loans secured by Real Property and limitations on
recourse against the obligors following realization on the collateral through
various means, risks of timing with respect to Mortgage Loan prepayments,
risks associated with geographic concentration of underlying assets
constituting the Mortgaged Property for the relevant Mortgage Loan,
environmental risks, pending and threatened litigation, junior liens and other
issues relating to title, a prior history of defaults by affiliated parties on
similar and dissimilar obligations, and other factors. In determining whether
to recommend the approval of the acquisition of a Mortgage Loan, the Manager
may be instructed to consider data such as that presented in the tables
contained in "Initial Investments."

DISTRESSED MORTGAGE LOANS. The Company may acquire Nonperforming or
Subperforming Mortgage Loans secured by multifamily and commercial properties.
In general, the Company expects to foreclose on such Mortgage Loans in an
attempt to acquire title to the underlying Distressed Real Properties. See
"Certain Legal Aspects of Mortgage Loans and Real Property Investments" and
"Federal Income Tax Considerations--Requirements for Qualification--Income
Tests." If the Company acquires pools of Distressed Mortgage Loans

31
<PAGE>

(or pools of Mortgage Loans that are primarily Distressed Mortgage Loans), the
Company's policy is that the due diligence to be performed before acquiring
such Distressed Mortgage Loans or pools is to be substantially similar to the
due diligence process described above in connection with the acquisition of
performing Term Loans and the due diligence process described below to be
performed in connection with the acquisition of Distressed Real Properties.

CONSTRUCTION FINANCING AND LOANS SUBJECT TO PRIOR LIENS. The Company may
invest in or provide Contruction Loans. The Company will be permitted to make
a Construction Loan of up to 90% of total project costs if the Construction
Loan is secured by a first lien mortgage, deed of trust or deed to secure
debt, as collateral security for the borrower's obligations with respect to
the Construction Loan. In addition, the Company may invest in or provide
Mezzanine Loans to owners of Real Properties that are encumbered by first lien
mortgages, deeds of trust or deeds to secure debt, but only if the Company's
Mezzanine Loans are to be secured by junior liens on the subject properties.
The policy of the Company is that, at the time of origination of a Mezzanine
Loan, the value of the subject property should not exceed the sum of the
outstanding balances of the debt secured by the first lien and the maximum
amount contemplated to be advanced by the Company under the Mezzanine Loan.
With respect to both Construction Loans and Mezzanine Loans, the Company may
receive not only a stated fixed or variable interest rate on the loan, but
also a percentage of gross revenues or a percentage of the increase in the
fair market value of the property securing repayment of that Construction Loan
or Mezzanine Loan, payable upon maturity or refinancing of the applicable
Construction Loan or Mezzanine Loan.

MBS INTERESTS. The Company intends to acquire MBS Interests, primarily non-
investment grade classes, from various sources. MBS typically are divided into
two or more interests, sometimes called "tranches" or "classes." The senior
classes are often securities which, if rated, would have ratings ranging from
low investment grade "BBB" to higher investment grades "A," "AA" or "AAA." The
junior, subordinated classes typically would include one or more non-
investment grade classes which, if rated, would have ratings below investment
grade "BBB." Such subordinated classes also typically include an unrated
higher-yielding, credit support class (which generally is required to absorb
the first losses on the underlying mortgage loans).

MBS generally are issued either as CMOs or Pass-Through Certificates. "CMOs"
are debt obligations of special purpose corporations, owner trusts or other
special purpose entities secured by commercial mortgage loans or MBS. Pass-
Through Certificates evidence interests in trusts, the primary assets of which
are mortgage loans. CMO Bonds and Pass-Through Certificates may be issued or
sponsored by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage bankers, commercial banks,
investment banks and other entities. MBS are not guaranteed by an entity
having the credit status of a governmental agency or instrumentality and
generally are structured with one or more of the types of credit enhancement
described below. In addition, MBS may be illiquid. See "Risk Factors--Risks
Related to Investments in MBS Interests--Subordinated MBS Interests are
Subject to Greater Credit Risks than More Senior Classes."

In most mortgage loan securitizations, a series of MBS Interests is issued
in multiple classes in order to obtain investment-grade credit ratings for the
senior classes and thus increase their marketability. Each class of MBS may be
issued with a specific fixed or variable coupon rate and has a stated maturity
or final scheduled distribution date. Principal prepayments on the mortgage
loans comprising the Mortgage Collateral may cause the MBS to be retired
substantially earlier than their stated maturities or final scheduled
distribution dates, although, with respect to commercial mortgage loans, there
generally are penalties for or limitations on the ability of the borrower to
prepay the loan. Interest is paid or accrued on MBS on a periodic basis,
typically monthly.

The credit quality of MBS depends on the credit quality of the underlying
Mortgage Collateral. Among the factors determining the credit quality of the
Mortgage Collateral will be the ratio of the mortgage loan balances to the
value of the properties securing the mortgage loans, the purpose of the
mortgage loans (e.g., refinancing or new purchase), the amount of the mortgage
loans, their terms, the geographic diversification of the location of the
properties securing the mortgage loans, and, in the case of commercial
mortgage loans, the credit-worthiness of tenants.

32
<PAGE>

The principal of and interest on the underlying mortgage loans may be
allocated among the several classes of a MBS in many ways, and the credit
quality of a particular class results primarily from the order and timing of
the receipt of cash flow generated from the underlying mortgage loans.
Subordinated interests in MBS carry significant credit risks. Typically, in a
"senior-subordinated" structure, the subordinated interests provide credit
protection to the senior classes by absorbing losses from loan defaults or
foreclosures before such losses are allocated to senior classes. As long as
the more senior classes of securities are outstanding, all prepayments on the
mortgage loans generally are paid to those senior classes, at least until the
end of a lock-out period, which typically is five years or more. In some
instances, particularly with respect to subordinated interests in commercial
mortgage securitizations, the holders of subordinated interests are not
entitled to receive scheduled payments of principal until the more senior
classes are paid in full or until the end of a lock-out period. Because of
this structuring of the cash flows from the underlying mortgage loans,
subordinated interests in a typical securitization are subject to a
substantially greater risk of non-payment than are those more senior classes.
Accordingly, the subordinated interests are assigned lower credit ratings, or
no ratings at all. Neither the subordinated interests nor the underlying
mortgage loans are guaranteed by agencies or instrumentalities of the U.S.
government or by other governmental entities and accordingly are subject,
among other things, to credit risks. See "Risk Factors--Risks Related to
Investments in MBS Interests--Credit Risks from Ownership of Subordinated MBS
Interests are Subject to Greater Credit Risks than More Senior Classes."

As a result of the typical "senior-subordinated" structure, the subordinated
classes of MBS Interests will be extremely sensitive to losses on the
underlying mortgage loans. For example, if the Company owns a $10 million
first loss subordinated class of MBS consisting of $100 million of underlying
mortgage loans, a 7% loss on the underlying mortgage loans generally will
result in a 70% loss of the stated principal amount of the subordinated
interest. Accordingly, the holder of the subordinated interest is particularly
interested in minimizing the loss frequency (the percentage of the loan
balances that default over the life of the Mortgage Collateral) and the loss
severity (the amount of loss on defaulted mortgage loans, i.e., the principal
amount of the mortgage loan unrecovered after applying any recovery to the
expenses of foreclosure and accrued interest) on the underlying mortgage
loans.

Losses on the Mortgage Collateral underlying the Company's MBS Interests
will depend upon a number of factors, many of which will be beyond the control
of the Company or the applicable servicer. Among other things, the default
frequency on the Mortgage Collateral will reflect broad conditions in the
economy generally and Real Property particularly, economic conditions in the
local area in which the underlying Mortgaged Property is located, the loan-to-
value ratio of the Mortgage Loan, the purpose of the loan, and the debt
service coverage ratio (with respect to commercial Mortgage Loans). The loss
severity on the Mortgage Collateral will depend upon many of the same factors
described above, and will also be influenced by certain legal aspects of
mortgage loans that underlie the MBS Interests acquired by the Company,
including the servicer's ability to foreclose on the defaulted Mortgage Loan
and sell the underlying Mortgaged Property. For a discussion of certain legal
issues affecting mortgage loans and the servicer's ability to foreclose on a
Mortgage Loan, and the legal impediments to the sale of the underlying
Mortgaged Property, see "Certain Legal Aspects of Mortgage Loans and Real
Property Investments." These legal issues may extend the time of foreclosure
proceedings or may require the expenditure of additional sums to sell the
underlying Mortgaged Property, in either case increasing the amount of loss
with respect to the Mortgage Loans.

The Company may invest in IOs, which are entitled to no (or only nominal)
payments of principal, but only to payments of interest. The holder of an IO
may be entitled to receive a stated rate of interest on a notional principal
balance equal to all or a portion of the principal balance of the Mortgage
Collateral, or that portion of the interest received that is in excess of a
certain stated rate or received by one or more classes of that MBS (for
example, where the Mortgage Collateral, or portion thereof, carries an 8.5%
interest rate after servicing costs, and the holders of the other classes are
entitled to receive 8.0% interest, leaving 0.5% on the notional principal
balance for the holder of the IO). Alternatively, the holder of an IO may be
entitled to a variable rate of interest on a nominal principal balance that
adjusts based upon adjustment in the interest rate of the underlying Mortgage
Collateral.

33
<PAGE>

Because IOs often pay at a relatively small rate of interest on a large
notional principal balance, an accelerated reduction of that principal balance
will have an adverse effect on the anticipated yield to maturity of such IO.
Accordingly, if the underlying Mortgage Collateral prepays (including
prepayments as a result of default and repurchases by the seller) at a rate
faster than anticipated, the weighted average life of the IO will be reduced,
and the yield to maturity adversely affected. Conversely, if the underlying
Mortgage Collateral prepays at a rate slower than anticipated, the weighted
average life of the IO will be extended, with the consequent positive effect
on the anticipated yield to maturity.

The Company may invest in Inverse IOs, which bear interest at a floating
rate that varies inversely with (and often at a multiple of) changes in a
specified index. The yield to maturity of a class of Inverse IOs is not only
very sensitive to the rate of prepayments on the underlying Mortgage
Collateral, but also changes in the related index.

The Company may acquire subordinated IOs, known as Sub IOs, which are
entitled to no payments of principal; moreover, interest on a Sub IO often is
withheld in a reserve fund or spread account and is used to fund required
payments of principal and interest on the more senior classes. Once the
balance in the reserve fund or spread account reaches a certain level,
interest on the Sub IO is paid to the holders of the Sub IO. Sub IOs provide
credit support to the more senior classes, and thus bear substantial credit
risks. Moreover, because a Sub IO receives only interest payments, its yield
is extremely sensitive to changes in the weighted average life of the class,
which in turn is dictated by the rate of prepayments (including those
resulting from default) on the underlying loans. See "Risk Factors--Risks
Related to Investments in MBS Interests--Yields on Subordinated MBS Interests,
IOs and POs May Be Affected Adversely By Interest Rate Changes." Some Sub IOs
are designated as REMIC Residual Interests. Such a Sub IO typically generates
Excess Inclusion or other forms of phantom income. See "Federal Income Tax
Considerations--Requirements for Qualification--Income Tests" and "--
Distribution Requirements."

In considering whether to acquire an MBS Interest, the Company's policy is
to determine, in consultation with the Manager, the scope of review to be
performed before the Company acquires that MBS Interest, which review will be
designed to provide to the Company such information regarding that MBS
Interest as the Company and Manager determine to be relevant and material to
the Company's decision regarding the acquisition of that MBS Interest. With
respect to MBS Interests acquired subsequent to the Company's acquisition of
the Initial Investments, the Company's policy generally is to request that the
Manager perform due diligence substantially similar to that described above in
connection with the acquisition of performing Term Loans. The due diligence
may include an analysis of (i) the underlying collateral pool, (ii) the
prepayment and default history of the originator's prior loans, (iii) cash
flow analyses under various prepayment and interest rate scenarios (including
sensitivity analyses) and (iv) an analysis of various default scenarios. The
Company also may request that the Manager determine and advise the Company as
to the price at which the Manager would recommend acquisition of the MBS
Interest by the Company, and the Manager's reasons for such advice. See "Yield
Considerations Related to the Company's Investments" and "Risk Factors--Risks
Related to Investments in MBS Interests--Yields on Subordinated MBS Interests,
IOs and POs May Be Affected Adversely By Interest Rate Changes." However,
which of these characteristics (if any) are important and how important each
characteristic may be to the evaluation of a particular MBS Interest depends
on the individual circumstances. Because there are so many characteristics to
consider, each MBS Interest must be analyzed individually, taking into
consideration both objective data as well as subjective analysis.

The Company may acquire Special Servicing rights with respect to certain of
the Mortgage Collateral underlying MBS Interests acquired by the Company. Such
Special Servicing rights would give the Company, among other things, some
control over the timing of foreclosures on the Mortgage Collateral and, thus,
may enable the Company to reduce losses on such MBS Interests. No assurances
can be made, however, that the Company will be able to acquire such Special
Servicing rights or that losses will not exceed the Company's expectations.
Although the Company's strategy is to acquire various classes of MBS Interests
at a price intended to return the Company's investment and generate a profit
thereon, there can be no assurance that such goal will

34
<PAGE>

be met or, indeed, that the Company's investment in those classes of MBS
Interests will be returned in full or at all. See "Risk Factors--Risks Related
to Investments in MBS Interests" and "--Economic and Business Risks."

If the Company acquires Special Servicing rights, the Company will
subcontract with an entity in the business of providing special servicing on
commercial and multifamily mortgage loans and rated above average or better as
a special servicer by Standard & Poors Ratings Services, Fitch Investors
Service, L.P., Duff & Phelps Credit Rating Co. or Moody's Investors Service to
perform the special servicing functions. One such special servicer is Midland
Loan Services, L.P., which is the special servicer of the Mortgage Collateral
underlying the Initial MBS Investments. The Company may benefit in certain
cases from the ability to direct certain of the Special Servicing activities,
but does not expect to benefit in a material way from receipt of material
amounts of Special Servicing fees. See "Servicing of Mortgage Loans--Special
Servicing."

Many of the MBS Interests to be acquired by the Company will not have been
registered under the Securities Act, but instead initially will have been sold
in private placements. Because MBS Interests acquired in private placements
have not been registered under the Securities Act, they will be subject to
certain restrictions on resale and, accordingly, will have substantially more
limited marketability and liquidity.

Many issuers of multi-class MBS are special purpose trusts or corporations,
which elect to be treated, for federal income tax purposes, as REMICs. The
Company may acquire not only MBS Interests that are treated as regular
interests in REMICs, but also those that are designated as REMIC Residual
Interests. The Company also may acquire Non-REMIC Residual Interests. Regular
interests in a REMIC are treated as debt for tax purposes. Unlike regular
interests in REMICs, REMIC Residual Interests typically generate Excess
Inclusion or other forms of taxable income (including the accretion of market
discount) that bear no relationship to the actual economic income that is
generated by a REMIC. Non-REMIC Residual Interests also typically generate
taxable income in excess of cash receipts. Consequently, if an MBS Interest
that is designated as a REMIC or Non-REMIC Residual Interest generates a
significant amount of phantom income in any taxable year, the Company could be
required to borrow funds, to issue capital stock or to liquidate assets in
order to meet the REIT distribution requirement for such taxable year.

Subordinated MBS Interests generally are issued at a significant discount to
their outstanding principal balance, which gives rise to OID for federal
income tax purposes. The Company will be required to accrue the OID as taxable
income over the life of the related subordinated MBS Interest on a level-yield
method whether or not the Company receives the related cash flow. The OID
income attributable to a subordinated MBS Interest generally will increase the
Company's REIT distribution requirement in the early years of the Company's
ownership of the MBS Interest even though the Company may not receive the
related cash flow from the MBS Interest until a later taxable year. As a
result, the Company could be required to borrow funds, to issue capital stock
or to liquidate assets in order to satisfy the REIT distribution requirement
for any taxable year. See "Risk Factors--Legal and Tax Risks." There can be no
assurance that the Company's strategy for investing in subordinated MBS
Interests will be successful.

In addition, because the payment of interest on certain subordinated MBS
Interests (including particularly Sub IOs) will be subordinated to the payment
of interest on the senior classes of such series of MBS, even if the
subordinated MBS Interest does not have OID, the Company may recognize
interest income on the MBS Interests without the receipt of cash. As a result,
the Company could be required to borrow funds, issue capital stock or to
liquidate assets in order to satisfy the REIT distribution requirement for any
taxable year.

COMMERCIAL MORTGAGE-BACKED SECURITIES. It is expected that many of the MBS
Interests acquired by the Company will be interests in CMBS. The Mortgage
Collateral supporting CMBS may be pools of whole loans or other MBS, or both.
Of the interests in CMBS that the Company acquires, most will be subordinated
or IO classes of MBS Interests, but the Company also may acquire more senior
classes or combined classes of first-loss and more senior CMBS.

35
<PAGE>

Unlike RMBS, which typically are collateralized by thousands of single
family mortgage loans, CMBS are collateralized generally by a more limited
number of commercial or multifamily mortgage loans with larger principal
balances than those of single family mortgage loans. As a result, a loss on a
single mortgage loan underlying a CMBS will have a greater negative effect on
the yield of such CMBS, especially the subordinated MBS Interests in such
CMBS.

With respect to CMBS, the Company will use sampling and other appropriate
analytical techniques to determine on a loan-by-loan basis which loans will
undergo a full-scope review and which loans will undergo a more streamlined
review process. Although the choice is a subjective one, considerations that
influence the choice for scope of review often include loan size, debt service
coverage ratio, loan to value ratio, loan maturity, lease rollover, property
type and geographic location. A full-scope review may include, among other
factors, a property site inspection, tenant-by-tenant rent roll analysis,
review of historical income and expenses for each property securing the loan,
a review of major leases for each property (if available); recent appraisals
(if available), engineering and environmental reports (if available), and the
price paid for similar CMBS by unrelated third parties in arms' length
purchases and sales (if available) or a review of broker price opinions (if
the price paid by a bona fide third party for similar CMBS is not available
and such price opinions are available). For those loans that are selected for
the more streamlined review process, the Manager's evaluation may include a
review of the property operating statements, summary loan level data, third
party reports, and a review of prices paid for similar CMBS by bona fide third
parties or broker price opinions, each as available. If the Manager's review
of such information does not reveal any unusual or unexpected characteristics
or factors, no further due diligence is performed.

The Company believes that there will be opportunities to invest in MBS
Interests in CMBS. Increasingly, owners of commercial mortgage loans are
choosing to securitize their portfolios. However, no assurances can be made
that appropriate opportunities for investment in CMBS will continue to be
available.

RESIDENTIAL MORTGAGE-BACKED SECURITIES. The Company may acquire MBS
Interests in RMBS collateralized by "non-conforming" mortgage loans, that is,
one- to four-family mortgage loans that do not qualify for sale to FHLMC or
FNMA. Although the RMBS market has matured, the Company believes that
acquisition opportunities continue to be available in MBS Interests in RMBS.
The Company will seek, among other things, to manage the credit risks
associated with making this type of investment through certain credit
underwriting procedures (that is, a review of the expected economic
performance of, and risks associated with, such interests).

MULTIFAMILY AND COMMERCIAL REAL PROPERTIES. The Company believes that under
appropriate circumstances the acquisition of multifamily and commercial Real
Properties, including REO Properties and other Distressed Real Properties, may
offer significant opportunities to the Company. The Company's policy will be
to conduct an investigation and evaluation of the Real Properties in a
portfolio of Real Properties before purchasing such a portfolio. Prior to
purchasing Real Estate Related Assets, the Manager generally will identify and
contact real estate brokers and/or appraisers in the relevant market areas to
obtain rent and sale comparables for the assets in a portfolio contemplated to
be acquired. This information will be used to supplement due diligence that
will be performed by the Manager's employees.

The Company's policy is to conduct an investigation and evaluation of the
properties in a portfolio of Real Properties before acquiring such a
portfolio. Prior to acquiring such a portfolio, the Company's policy generally
is to request that the Manager identify and contact real estate brokers and
appraisers in the market area of the Real Properties within the portfolio to
obtain information regarding rental rates and sale prices of comparable real
property. The Company's policy is to determine, in consultation with the
Manager, whether to obtain a Phase I environmental assessment (or, if
available to the Company or the Manager, to request that the Manager review a
previously obtained Phase I environmental assessment) for each Real Property,
certain Real Properties, or none of the Real Properties within the portfolio
prior to its acquisition by the Company. The policy of the Company is to use
the information contained in such comparables and environmental assessments to
supplement the due diligence that is to be performed by the Manager with
respect to that portfolio.

36
<PAGE>

The Company's policy generally is to request that the Manager include within
its due diligence review and analysis of those Real Properties contemplated to
be acquired by the Company a review of market studies for each geographic
market designated by the Company in which the Real Properties within a
portfolio are concentrated. The Company may request that such studies include
area economic data, employment trends, absorption rates and market rental
rates. The Company's policy is that such due diligence analyses generally also
include (i) site inspections of the most significant properties in a portfolio
of Real Properties (and, if the Company determines that such a review will be
cost-effective, a random sampling of the less significant properties), and
(ii) a review of all property files and documentation that are made available
to the Company or the Manager. The Company generally will require that such
reviews include, to the extent possible, examinations of available legal
documents, litigation files, correspondence, title reports, operating
statements, appraisals and engineering and environmental reports.

The Company's policy is that the process of determining the fair market
value of a Real Property is to utilize those procedures that the Company and
the Manager deem relevant for the specific Real Property being evaluated,
which procedures need not be the same for each Real Property being evaluated.
Sources of information that may be examined in determining the fair market
value of a Real Property may include one or more of the following: (a) current
and historical operating statements; (b) existing or new appraisals; (c) sales
comparables; (d) industry statistics and reports regarding operating expenses,
such as those compiled by the Institute of Real Estate Management and the
Building Owners and Managers Association; (e) existing leases and market rates
for comparable leases; (f) deferred maintenance observed during site
inspections or described in structural and engineering reports; and (g)
correspondence and other documents and memoranda found in the files of the
seller of that Real Property or other relevant parties.

The Manager is expected to develop projections of net operating income and
cash flows taking into account lease rollovers, tenant improvement costs and
leasing commissions. The Manager will compare its estimates of revenue and
expenses to historical operating statements and estimates provided in
appraisals and general industry and regional statistics. Market capitalization
rates and discount rates are then applied to the cash flow projections to
estimate values. These values are then compared to available appraisals and
market sale comparables to determine recommended bid prices for each asset.
The amount offered by the Company generally will take into account projected
holding periods, capital costs and projected profit expectations, and will be
the price that the Manager estimates is sufficient to generate an acceptable
risk-adjusted return on the Company's investment.

After the Company acquires Distressed Real Property, the Company's goal will
be to improve management of that Real Property so as to increase its cash
flow. If cash flows can be increased and the net operating income stabilized,
the Company may seek an opportunity to sell the Real Property. The length of
time the Company will hold Distressed Real Properties may vary considerably
from asset to asset, and will be based on the Manager's analysis and
conclusions as to the best time to sell some or all of them.

If the Company is offered the opportunity to acquire Real Property that is
likely to be held for fewer than four years, the Company intends to establish
a taxable corporation in which the Company or, if it has been formed, the
Operating Partnership will hold a 95% non-voting ownership interest to make
the acquisition. Such a corporation will not be eligible for taxation as a
qualified REIT subsidiary, and any profits that it earns on its activities
will be subject to federal corporate income tax before they are distributable
to the Company. If the Company acquires Real Property with the intent to hold
it for more than four years, but an opportunity arises to sell the property
sooner, the Company will consider certain strategies, such as a like-kind
exchange, to reduce any negative tax consequences relating to the sale. Income
from such sale will be nonqualifying income for purposes of the 30% gross
income test. See "Federal Income Tax Considerations--Requirements for
Qualification--Income Tests."

Although the Company believes that a permanent market for the acquisition of
Distressed Real Property has emerged in recent years within the private
sector, there can be no assurance that the Company will be able to acquire the
desired amount and type of Distressed Real Property in future periods or that
there will not be significant inter-period variations in the amount of such
acquisitions. See "Risk Factors--Risks Related to

37
<PAGE>

Investments in Mortgage Loans--Volatility of Values of Mortgaged Properties
May Affect Adversely the Company's Mortgage Loans." Moreover, there can be no
assurance that the Company will be effective in making any asset acquired more
valuable than the price paid to acquire it. See "Risk Factors."

FOREIGN REAL PROPERTIES. In addition to acquiring Distressed Real
Properties, the Company may acquire or originate Mortgage Loans secured by
Real Property located outside the United States or acquire such Real Property,
but the Company does not intend to invest more than 20% of its portfolio in
foreign Real Property and Mortgage Loans secured by foreign Real Property.
Investing in Real Estate Related Assets located in foreign countries creates
risks associated with the uncertainty of foreign laws and markets and risks
related to currency conversion. The Company may be subject to foreign income
tax with respect to its investments in foreign Real Estate Related Assets.
However, any foreign tax credit that otherwise would be available to the
Company for U.S. federal income tax purposes will not flow through to the
Company's stockholders.

When acquiring Real Properties located outside the United States or Mortgage
Loans secured by foreign Real Properties, the Company will perform, or request
that the Manager perform, a due diligence review and analysis of such foreign
Mortgage Loans or Real Properties substantially similar to that described
above in connection with the acquisition of performing Term Loans and Real
Properties. In addition, the Company will hire, or request that the Manager
hire, a local law firm to advise the Company concerning the applicable laws,
including real property laws, of the local jurisdiction and to provide a legal
opinion about the Company's rights with respect to the Mortgage Loans or Real
Properties. If the country in which the relevant real property is located is
subject to political instability, the Company may request that the Manager
investigate the availability of, cost of, and benefits that reasonably can be
expected to be provided to the Company by, obtaining insurance against such
political risks. The Company's policy is to purchase such insurance only if
the Manager advises the Company that based on the Manager's analysis of the
relevant factors, the Manager has determined that the Company should purchase
such insurance. The Company may request that the Manager consider ways to
minimize currency conversion risks that may be associated with the investment
in foreign Mortgage Loans or foreign Real Properties, such as the purchase of
currency swaps, and make a recommendation to the Company with respect thereto.

REAL PROPERTIES WITH KNOWN ENVIRONMENTAL PROBLEMS. The Company may acquire
Real Properties with known material environmental problems and Mortgage Loans
secured by such Real Properties. In considering whether to acquire Real
Properties with known material environmental problems and Mortgage loans
secured by such Real Properties, the Company will perform, or request that the
Manager perform, a due diligence review and analysis substantially similar to
that described above in connection with the acquisition of Distressed Mortgage
Loans and Real Property. In addition, the Company will hire, or request that
the Manager hire, an environmental engineering consultant to determine whether
environmental remediation or monitoring of the relevant property will be
required and, if so, to provide an estimate of the costs of such remediation
or monitoring and the time required to effect such remediation or complete
such monitoring. The Manager has no experience in investing in Mortgage Loans
secured by environmentally distressed Real Property, or in such
environmentally distressed Real Property.

The Company's policy is generally to avoid acquiring in its own name Real
Property with known material environmental problems (other than such Real
Property acquired by the Company through foreclosure, or deed-in-lieu of
foreclosure, when an "innocent lender" defense appears to be available to the
Company). The Company's policy instead is to establish a special purpose
entity to hold such Real Property. If the Company determines that to do so
would be appropriate, such special purpose entity could hold other Real
Properties with known material environmental problems that the Company
thereafter may wish to acquire.

SALE-LEASEBACK TRANSACTIONS. The Company may participate in sale-leaseback
transactions, in which the Company would acquire improved or unimproved Real
Property and then lease such Real Property back to the seller under a long-
term triple net lease. The Company also may provide financing necessary to
build commercial improvements on the Real Property, to refinance existing debt
on the Real Property or to provide additional funds to operate the business.
After participating in a number of these transactions, the Company may pool
the leased Real Property and issue debt collateralized by the Real Property
and the related leases in a securitization transaction.

38
<PAGE>

OTHER ASSETS. The Company currently has no plans to acquire assets unrelated
to real estate ("Other Assets"), such as asset-backed securities and
receivables financings. However, the Company may acquire such assets, but only
if the Company's status as a REIT and its exemption from regulation under the
Investment Company Act would not be jeopardized. The Company believes that its
ability to acquire Other Assets may enable it to diversify its asset base and
to take advantage of opportunities in the marketplace that otherwise would not
be available.

PORTFOLIO MANAGEMENT

The following describes some of the investment management practices that the
Company may employ from time to time to earn income, facilitate portfolio
management (including managing the effect of maturity or interest rate
sensitivity) and mitigate risk (such as the risk of changes in interest
rates). There can be no assurance that the Company will not amend or deviate
from these policies or adopt other policies in the future.

LEVERAGE AND BORROWING. The Company intends to leverage its assets through
securitizations and other borrowings, generally through the issuance of CMOs
and the use of warehouse lines of credit, reverse repurchase agreements, bank
credit facilities, mortgage loans on Real Property and other borrowings, when
the opportunity to use leverage is present and there is an expectation that
such leverage will benefit the Company. However, the Company does not intend
to borrow funds from Imperial Credit or its affiliates. If changes in market
conditions cause the cost of such financing to increase relative to the income
that can be derived from securities purchased with the proceeds thereof, the
Company may reduce the amount of leverage it utilizes.

Leverage creates an opportunity for increased income but, at the same time,
creates risks. For example, leveraging magnifies changes in the net worth of
the Company and affects the amounts available for distribution to
stockholders. Although the amount owed will be fixed, the Company's assets may
change in value during the time the debt is outstanding. Leverage will create
interest expenses for the Company which can exceed the revenues from the
assets retained.

To the extent the revenues derived from assets acquired with borrowed funds
exceed the interest expense the Company will have to pay, the Company's net
income will be greater than if borrowing had not been used. Conversely, if the
revenues from the assets acquired with borrowed funds are not sufficient to
cover the cost of borrowing, the net income of the Company will be less than
if borrowing had not been used, and therefore the amount available for
distribution to stockholders will be reduced. See "Risk Factors--Economic and
Business Risks--Leverage Can Reduce Income Available for Distribution and
Cause Losses."

Under certain circumstances, and notwithstanding adverse interest rate or
market conditions, the Company may use leverage to obtain sufficient cash to
make required distributions of dividends or to fund share repurchases and
tender offers when such leveraging is deemed to be in the best interests of
stockholders. Such situations may arise if ICCMIC's status as a REIT or its
ability to maintain minimum liquidity levels is endangered.

CMOS AND WAREHOUSE LINES OF CREDIT. The Company intends to acquire Mortgage
Loans and to issue non-REMIC CMOs collateralized by such loans. Moreover, the
Company may issue non-REMIC CMOs collateralized by previously issued CMOs or
MBS in transactions known as "resecuritizations." The Company will structure a
resecuritization in the same manner as a securitization. The collateral
(whether whole mortgage loans or MBS) will be transferred into a qualified
REIT subsidiary, and that entity (or a special purpose trust or corporation
formed by that entity) will issue non-REMIC CMOs. The transaction will be
structured as debt, with the issuer retaining an equity interest in the
collateral. In a debt transaction, the principal balance of the collateral
(whether whole loans or MBS) will exceed the principal balance of the CMOs.
Thus, once the CMOs are paid in full, the issuer will own the collateral free
of the lien of the CMO debt. During the period in which the Company is
acquiring mortgage loans for securitization, the Company is likely to borrow
funds secured by such loans pursuant to warehouse lines of credit.

REVERSE REPURCHASE AGREEMENTS. The Company intends to enter into reverse
repurchase agreements, which are agreements under which the Company would sell
assets to a third party with the commitment that the Company repurchase such
assets from the purchaser at a fixed price on an agreed date. Reverse
repurchase

39
<PAGE>

agreements will be treated for federal income tax purposes as loans to the
Company from the other party that are secured by the underlying assets. The
repurchase price reflects the purchase price plus an agreed market rate of
interest.

BANK CREDIT FACILITIES. The Company intends to borrow money through various
bank credit facilities, which will have varying interest rates, may be fixed
or adjustable, and may have varying maturities.

MORTGAGE LOANS ON REAL PROPERTY OWNED BY THE COMPANY. The Company expects to
borrow funds secured by mortgages on the Company's Real Property, including
any Distressed Real Properties owned by the Company.

INTEREST RATE MANAGEMENT TECHNIQUES. The Company may engage in a variety of
interest rate management techniques for the purpose of managing the effective
maturity or interest rate of its assets. These techniques also may be used to
attempt to protect against declines in the market value of the Company's
assets resulting from general trends in debt markets. Any such transaction is
subject to risks, and may limit the potential earnings on the Company's
investment in Real Estate Related Assets. Such techniques may include puts and
calls on securities or indices of securities, Eurodollar futures contracts and
options on such contracts, interest rate swaps (the exchange of fixed-rate
payments for floating-rate payments), or other such transactions. Applicable
REIT qualification rules may limit the Company's ability to use these
techniques, except through a corporate subsidiary that is fully subject to
corporate income taxation. See "--Hedging" and "Federal Income Tax
Considerations--Requirements for Qualification--Income Tests."

HEDGING. The Guidelines permit the Company to enter into hedging
transactions in certain circumstances. The Company may at times be hedged
against variable-rate indebtedness incurred by the Company to finance its
acquisition and origination of Mortgage Loans and MBS Interests to attempt to
provide protection from interest rate fluctuations or other market movements.
The Company's Guidelines expressly state that the Company's policy is to use
hedging techniques to mitigate potential risks, and not for speculative
purposes. For example, the Company may use hedging techniques to limit, fix or
cap the interest rate on variable interest rate indebtedness. The Manager will
implement the hedging policies of the Company consistent with the Guidelines,
subject to quarterly review by the Board of Directors.

The Company's hedging activities may include interest rate swaps, the
purchase of interest rate caps and the purchase of excess servicing rights
constituting "real estate assets" for purposes of the REIT qualification tests
under the Code. See "Federal Income Tax Considerations--Requirements for
Qualification--Asset Tests." The Company may hedge against interest rate
increases by purchasing Qualified Hedges. A "Qualified Hedge" for this purpose
is limited to a bona fide interest rate swap or cap agreement entered into by
the Company to hedge any variable rate indebtedness that the Company may incur
to acquire or carry real estate assets, or any other option or other
investment made by the Company to hedge its Mortgage Loans and MBS Interests
or its borrowings that have been determined by a favorable opinion of counsel
to generate qualified income for purposes of the 95% gross income test
applicable to REITs. See "Federal Income Tax Considerations--Requirements for
Qualification--Income Tests." The provisions of the Code regarding the
qualification of an entity as a REIT may restrict the Company's ability to
enter into hedging transactions. See "Federal Income Tax Considerations--
Requirements for Qualification--Asset Tests" and "--Income Tests." The Company
also may purchase or sell financial futures contracts and options on financial
futures contracts, trade forward contracts and employ other hedging strategies
that do not constitute Qualified Hedges. The provisions of the Code regarding
qualification of an entity as a REIT may restrict severely the Company's
ability to employ these other strategies or may require the Company to conduct
part or all of its hedging activities through a taxable corporation.

The Company does not expect to leverage its investments until it has
invested a substantial portion of the net proceeds of the Offering remaining
after the purchase of the Initial Investments. Before the Company begins
leveraging its investments, the Company will direct the Manager to appoint a
hedging specialist who, among other things, will be expected to monitor and
manage risks associated with derivative financial investments.

40
<PAGE>

MANAGEMENT OF OPERATIONS

IMPERIAL CREDIT INDUSTRIES, INC.

The Manager is a wholly-owned subsidiary of Imperial Credit. Imperial Credit
is a diversified financial services company that, together with its
affiliates, is primarily engaged in the origination, acquisition, management,
securitization and resolution of various types of loans and leases, and in
diverse mortgage lending activities. The activities of Imperial Credit are
primarily conducted through its numerous subsidiaries and other entities in
which it holds a significant interest.

Imperial Credit was organized as a California corporation in 1986. In 1995,
Imperial Credit began to reposition its business from originating and selling
conforming residential Mortgage Loans to offering higher margin loan and lease
products. It has sought to accomplish this through a business strategy that
emphasizes: (i) opportunistic expansion and acquisitions of businesses in
niche segments of the financial services industry, (ii) disciplined
underwriting and credit risk management, (iii) loan and lease originations,
where possible, on a wholesale basis, (iv) securitization or sale in the
secondary market of substantially all of its loans and leases, other than
those held by SPB or other subsidiaries for investment, and (v) maintaining
business and financial flexibility to take advantage of changing market
conditions with respect to specific financial services businesses.

Although many of the Company's prospective competitors may have access to
greater capital and other advantages, the Company believes that the experience
of Imperial Credit and its affiliates in originating Mortgage Loans and other
loan and lease products, and creating, acquiring and managing MBS, will
provide it with the means to compete. It should be noted, however, that
Imperial Credit has conducted its operations primarily through various
subsidiaries and other entities, which have different investment objectives
and different investment guidelines than the Company will have. There can be
no assurance that the resources and relationships developed by Imperial Credit
will enable the Company to be successful.

THE MANAGER

The Manager was incorporated on August 12, 1997. The following tables set
forth certain information about the directors and executive officers of the
Manager. Each of the directors of the Manager is also a director of the
Company. No director or executive officer is related by blood, marriage or
adoption to any other director or executive officer of the Company or the
Manager or any of their respective affiliates.

DIRECTORS OF THE MANAGER

<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
---- --- ----------------
<S> <C> <C>
H. Wayne Snavely................ 56 Chairman of the Board of Directors
Kevin E. Villani................ 49 Vice Chairman of the Board of Directors
Mark S. Karlan.................. 39 President and Chief Executive Officer

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

<CAPTION>
NAME AGE POSITION(S) HELD
---- --- ----------------
<S> <C> <C>
Joseph R. Parise................ 39 Managing Director and Senior Vice President
Sebastian M. Hoppe.............. 35 Senior Vice President
Daniel J. Occelli............... 40 Senior Vice President
Norbert M. Seifert.............. 41 Senior Vice President
</TABLE>

H. WAYNE SNAVELY has been Chairman of the Board and Chief Executive Officer
of Imperial Credit since December 1991 and President since February 1996. From
1986 to February 1992, Mr. Snavely served as

41
<PAGE>

Executive Vice President of Imperial Bancorp and Imperial Bank with direct
management responsibility for the following bank subsidiaries and divisions:
Imperial Bank Mortgage, SPTL, Imperial Trust Company, Wm. Mason & Company,
Imperial Ventures, Inc. and The Lewis Horwitz Organization. From 1983 through
1986, Mr. Snavely was employed as Chief Financial Officer of Imperial Bancorp
and Imperial Bank. Mr. Snavely served as a director of Imperial Bank from 1975
to 1983 and currently serves as a director. Mr. Snavely is Chairman of the
Board of SPFC and IMH.

KEVIN E. VILLANI has been the Executive Vice President and Chief Financial
Officer of Imperial Credit since September 1995. From 1993 to 1996, Mr.
Villani was the Associate Professor of Clinical Finance and Real Estate for
the University of Southern California. From 1985 to 1990, he was the Executive
Vice President and Chief Financial Officer for Imperial Corporation of
America. From 1982 to 1985, he served in various senior executive capacities
at the Federal Home Loan Mortgage Corporation. From 1975 to 1982, he served as
the Financial Economist, The Director for the Division of Housing Finance
Analysis and The Deputy Assistant Secretary for the Office of Economic Affairs
and Chief Economist for the Department of Housing and Urban Development. From
1974 to 1975, he was an economist for the Federal Reserve Bank of Cleveland.
Mr. Villani has also served as a consultant to the World Bank and USAID on
banking, housing, finance, and privatization.

MARK S. KARLAN joined Imperial Credit in June 1997. From 1990 to 1997, Mr.
Karlan was a private real estate investor managing all aspects of
approximately $100 million of real estate transactions including the
acquisition, financing, leasing and sale of office, retail, industrial and
residential assets. From 1984 to 1990, Mr. Karlan served in the acquisition
group of JMB Realty Corporation, most recently as Senior Vice President. Mr.
Karlan acquired for institutional clients more than one hundred commercial
properties, individually and in portfolios, including shopping centers, office
buildings, apartment complexes and hotels located throughout the United States
and Canada, with a gross asset value exceeding $6 billion. Mr. Karlan had full
responsibility for negotiating, structuring and analyzing all assets he
acquired for JMB, including valuation and credit analyses and cash flow
projections. Mr. Karlan's primary focus was larger portfolio acquisitions. In
1987, Mr. Karlan led the 100 person JMB acquisition team during the $5 billion
leveraged acquisition of the Cadillac Fairview, Inc. real estate company. In
1987, Mr. Karlan became the youngest partner of JMB. Mr. Karlan received a
Bachelor of Arts degree in Economics, magna cum laude, from Harvard College in
1980 and was awarded a John Harvard Scholarship for academic achievement of
the highest distinction. Mr. Karlan received a Master of Business
Administration degree with second year honors from the Harvard Business School
and a Juris Doctor degree, cum laude, from the Harvard Law School, both in
1984.

JOSEPH R. PARISE has served as Managing Director of Capital Markets and Head
of Structured Finance for Imperial Credit Industries, Inc. since August 1996
and as a Director of Imperial Credit Worldwide since September 1997, and he
will continue to hold those positions. Mr. Parise served a two year term from
April 1995 through April 1997 on the investment advisory committee for the
City of Orange, overseeing a $125 million fixed income portfolio. From 1987 to
1992, Mr. Parise served in the mortgage finance group at Salomon Brothers Inc,
most recently as Vice President. At Salomon Brothers, he handled over 50 CMO
and pass-through securitizations exceeding $8 billion, and helped create
several innovations in securitization techniques. Mr. Parise also participated
in the early development of "B" and "C" credit residential mortgage
securitization. Prior to Salomon Brothers, Mr. Parise was a tax attorney
specializing in mortgage-backed securities at Cadwalader, Wickersham & Taft
from 1985 to 1987 and at Thacher, Proffitt & Wood from 1983 to 1985. At
Cadwalader, Mr. Parise was involved in the development of the REMIC
legislation. Mr. Parise received a Master of Laws degree in Taxation from the
New York University School of Law, a Juris Doctor degree from the University
of Michigan Law School and a Bachelor of Business Administration degree with
high distinction from the University of Michigan where he was a James B.
Angell Scholar.

SEBASTIAN M. HOPPE served as President and portfolio manager of HCM, Inc.
from 1994 to 1997, a private investment firm where he invested in high yield
debt securities. From 1991 to 1994, Mr. Hoppe was a Senior Vice President of
Dabney Resnick, Inc. (now known as Dabney/Resnick/Imperial LLC), where he
specialized in the analysis and trading of distressed high yield bonds and in
the structuring and selling of private placement investments. From 1989 to
1991, Mr. Hoppe was a Vice President of Drexel Burnham Lambert and then of

42
<PAGE>

Canyon Partners, a Drexel Burnham spinoff, where he worked as a high yield and
distressed credit specialist. From 1988 to 1989, Mr. Hoppe served as a real
estate investment associate at TCW Realty Advisors, a joint venture partner of
Trust Company of the West. Mr. Hoppe received a Bachelor of Arts degree in
Economics, summa cum laude, from the University of California at Berkeley in
1983 where he was a U.C. Regents Scholar. Mr. Hoppe received a Master of
Business Administration degree from the Harvard Business School and a Juris
Doctor degree from the Harvard Law School, both in 1988.

DANIEL J. OCCELLI served as Vice President of the Structured Finance Group
of E. J. De La Rosa & Co. from 1993 to 1997. At De La Rosa & Co., an
investment firm specializing in municipal bond financing, Mr. Occelli
participated in the issuance of $5 billion of tax exempt bonds. From 1995 to
1997, Mr. Occelli also served as Chief Operating Officer of Rincon Advisors,
Inc., a real estate advisory firm. At Rincon Advisors, Mr. Occelli was
involved in the restructuring of $200 million of mortgage debt. From January
1993 through May 1993, Mr. Occelli worked at Real Estate Disposition Corp., a
real estate brokerage and auction firm specializing in the disposition of
distressed real property. From 1986 to 1993, Mr. Occelli was a Vice President
at First Interstate Bank where he most recently served as a team leader in the
Real Estate Asset Disposition Group. At First Interstate Bank, he participated
in the restructuring and disposition of $650 million of problem real estate
assets, including $500 million of non-performing mortgage loans and
$150 million of foreclosed properties. From 1984 to 1986, Mr. Occelli was an
Assistant Vice President at Wells Fargo Bank. From 1982 to 1984, he taught
computer science at the University of Rhode Island. Mr. Occelli received a
Master in Chemical Engineering degree, magna cum laude, from the Ecole
Superieure de l'Energie et des Materiaux in France in 1981, and he received a
Master of Business Administration in Finance from the University of Rhode
Island in 1984.

NORBERT M. SEIFERT was a partner in the real estate department of
Sonnenschein Nath & Rosenthal from 1992 to 1997. Mr. Seifert resigned from
Sonnenschein Nath & Rosenthal in September 1997. At Sonnenschein, Mr. Seifert
represented institutional lenders in the origination and sale of term loans
and construction loans secured by multifamily and commercial real estate, and
he was involved in restructuring underperforming mortgage loans. From 1989 to
1992, Mr. Seifert was a partner in the real estate department of Mayer, Brown
& Platt and from 1987 to 1989 he was a partner at Turkowitz & Seifert. From
1982 through 1987, Mr. Seifert was an associate in the tax and real estate
departments of Milbank, Tweed, Hadley & McCloy where he was involved in
structuring the initial public offering of the Rockefeller Center Properties,
Inc. mortgage REIT. Mr. Seifert received a Bachelor of Science degree, cum
laude, from the Wharton School of the University of Pennsylvania in 1977 and a
Juris Doctor degree from the New York University School of Law in 1980.

Officers, directors and other personnel have significant experience in
mortgage finance and in the acquisition and management of commercial real
estate; however, with the exception of H. Wayne Snavely, who is the Chairman
of the Board of Directors of IMH, none of them previously has managed a REIT.
See "Risk Factors--Other Risks--Uncertainty as to the Company's Ability to
Successfully Implement Its Operating Policies and Strategies Resulting From
Its Lack at Operating History."

THE MANAGEMENT AGREEMENT

The Company will enter into the Management Agreement with the Manager for an
initial term expiring on the second anniversary of the Closing Date.
Thereafter, successive extensions, each for a period not to exceed two years,
may be made by agreement between the Company and the Manager, subject to the
affirmative vote of a majority of the Independent Directors. The Company may
terminate, or decline to renew the term of, the Management Agreement without
cause at any time after the first two years upon 60 days' written notice by a
majority vote of the Independent Directors; provided that the Company shall
pay the Manager a termination fee determined by independent appraisal. Such
appraisal is to be conducted by a nationally-recognized appraisal firm
mutually agreed upon by the Company and the Manager. If the Company and the
Manager are unable to agree upon an appraisal firm, then each of the Company
and the Manager is to choose an independent appraisal firm to conduct an
appraisal. In such event, (i) if the appraisals prepared by the two appraisers
so selected are the same or differ by an amount that does not exceed 20% of
the higher of the two appraisals, the termination fee is to be deemed to be
the average of the appraisals as prepared by each party's chosen appraiser,
and (ii) if these two

43
<PAGE>

appraisals differ by more than 20% of such higher amount, the two appraisals
together are to select a third appraisal firm to conduct an appraisal. If two
appraisers are unable to agree as to the identity of such third appraiser,
either of the Manager and the Company may request that the American
Arbitration Association ("AAA") select the third appraiser. The termination
fee then is to be the amount determined by such third appraiser, but in no
event less than the lower of the two initial appraisals or more than the
higher of such two initial appraisals.

In addition, the Company has the right at any time during the term of the
Management Agreement to terminate the Management Agreement without the payment
of any termination fee upon, among other things, a material breach by the
Manager of any provision contained in the Management Agreement that remains
uncured at the end of the applicable cure period (including the failure of the
Manager to use reasonable efforts to comply with the Guidelines).

Pursuant to the provisions of the Management Agreement, the Manager at all
times will be subject to the supervision of the Board of Directors and will
have only such functions and authority as the Company delegates to it. The
Manager will advise the Board of Directors as to the activities and operations
of the Company. The Manager will be responsible for the day-to-day operations
of the Company pursuant to the authority granted to it by the Board of
Directors under the Management Agreement, and the Manager will perform (or
cause to be performed) such services and activities relating to the assets and
operations of the Company as may be directed by the Board of Directors or as
the Manager otherwise considers appropriate, including:

(i) serving as the Company's consultant with respect to formulation of
investment criteria and preparation of policy Guidelines by the Board of
Directors;

(ii) advising and representing the Company in connection with the
acquisition and commitment to acquire assets, the sale and commitment to
sell assets, and the maintenance and administration of its portfolio of
assets;

(iii) advising the Company regarding, and arranging for, (a) the issuance
of CMOs collateralized by the Company's Mortgage Loans, (b) reverse
repurchase agreements on the Company's MBS Interests, and (c) other
borrowings, as appropriate;

(iv) furnishing reports and statistical and economic research to the
Company regarding the Company's activities and the services performed for
the Company by the Manager;

(v) monitoring and providing to the Board of Directors on an ongoing
basis price information and other data obtained from dealers that maintain
markets in assets identified by the Board of Directors from time to time,
and providing data and advice to the Board of Directors in connection with
the identification of such dealers;

(vi) providing executive and administrative personnel, administering
office space and office services required in rendering services to the
Company; administering the day-to-day operations of the Company; and
performing and supervising the performance of such other administrative
functions necessary in the management of the Company, including the
collection of revenues and the payment of the Company's debts and
obligations and the maintenance of appropriate data processing and computer
services to perform such administrative functions;

(vii) communicating on behalf of the Company with the holders of any
equity or debt securities of the Company as required to satisfy the
reporting and other requirements of any governmental bodies or agencies or
trading markets and to maintain effective relations with such holders;

(viii) to the extent not otherwise subject to an agreement executed by
the Company, designating a servicer for mortgage loans sold to the Company
and arranging for the monitoring and administering of such servicers;

(ix) counseling the Company in connection with policy decisions to be
made by the Board of Directors;

(x) engaging in hedging activities on behalf of the Company which are
consistent with the Company's status as a REIT and with the Guidelines;

44
<PAGE>

(xi) upon request by the Board of Directors and in accordance with the
Guidelines, investing or reinvesting any money of the Company;

(xii) counseling the Company regarding the maintenance of its exemption
from the Investment Company Act and monitoring compliance with the
requirements for maintaining exemption from that Act;

(xiii) counseling the Company regarding the maintenance of its status as
a REIT and monitoring compliance with the various REIT qualification tests
and other rules set out in the Code and the income tax regulations
promulgated thereunder (the "Treasury Regulations"); and

(xiv) counseling the Company as to compliance with all applicable laws,
including those that would require the Company to qualify to do business in
particular jurisdictions.

The Manager will perform portfolio management services on behalf of the
Company pursuant to the Management Agreement with respect to the Company's
investments. Such services will include, but not be limited to, consulting the
Company on purchase, sale and other opportunities, collection of information
and submission of reports pertaining to the Company's assets, interest rates,
and general economic conditions, periodic review and evaluation of the
performance of the Company's portfolio of assets, acting as liaison between
the Company and banking, mortgage banking, investment banking and other
parties with respect to the purchase, financing and disposition of assets, and
other customary functions related to portfolio management. The Manager may
enter into subcontracts with other parties, including Imperial Credit and its
affiliates, to provide any such services to the Company.

The Manager will perform monitoring services on behalf of the Company
pursuant to the Management Agreement with respect to loan servicing activities
provided by third parties and with respect to the Company's portfolio of
Special Servicing rights. Such monitoring services will include, but not be
limited to, the following activities: negotiating Special Servicing
agreements; acting as a liaison between the servicers of the Mortgage Loans
and the Company; review of servicers' delinquency, foreclosures and other
reports on Mortgage Loans; supervising claims filed under any mortgage
insurance policies; and enforcing the obligation of any servicer to repurchase
Mortgage Loans. The Manager may enter into subcontracts with other parties,
including its affiliates, to provide any such services for the Manager.

MANAGEMENT FEES

The Manager will receive a base management fee calculated as a percentage of
the Average Invested Assets of the Company for each calendar quarter and equal
to 1% per annum of the first $1 billion of such Average Invested Assets, 0.75%
of the next $250 million of such Average Invested Assets, and 0.50% of Average
Invested Assets above $1.25 billion. The term "Average Invested Assets" for
any period means the average of the aggregate book value of the assets of the
Company, including the assets of all of its direct and indirect subsidiaries,
before reserves for depreciation or bad debts or other similar noncash
reserves, computed by taking the daily average of such values during such
period. The Manager will not receive any management fee for the period prior
to the sale of the shares of Common Stock offered hereby. The base management
fee is intended to compensate the Manager, among other things, for its costs
in providing management services to the Company. The Board of Directors may
adjust the base management fee in the future if necessary to align the fee
more closely with the costs of such services.

The Manager shall be entitled to receive incentive compensation for each
fiscal quarter in an amount equal to the product of (A) 25% of the dollar
amount by which (1)(a) Funds From Operations of the Company (before the
incentive fee) per share of Common Stock (based on the weighted average number
of shares outstanding) plus (b) gains (or minus losses) from debt
restructuring and sales of property per share of Common Stock (based on the
weighted average number of shares outstanding), exceed (2) an amount equal to
(a) the weighted average of the price per share at the initial offering and
the prices per share at any secondary offerings by the Company multiplied by
(b) the Ten-Year U.S. Treasury Rate plus four percent per annum multiplied by
(B) the weighted average number of shares of Common Stock outstanding during
such quarter. "Funds From Operations" as defined by NAREIT means net income
(computed in accordance with GAAP) excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization on
real estate assets, and after

45
<PAGE>

adjustments for unconsolidated partnerships and joint ventures. Funds from
Operations does not represent cash generated from operating activities in
accordance with GAAP and should not be considered as an alternative to net
income as an indication of the Company's performance or to cash flows as a
measure of liquidity or ability to make distributions. As used in calculating
the Manager's compensation, the term "Ten Year U.S. Treasury Rate" means the
arithmetic average of the weekly average yield to maturity for actively traded
current coupon U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of ten years) published by the Federal Reserve Board
during a quarter, or, if such rate is not published by the Federal Reserve
Board, any Federal Reserve Bank or agency or department of the federal
government selected by the Company. If the Company determines in good faith
that the Ten Year U.S. Treasury Rate cannot be calculated as provided above,
then the rate shall be the arithmetic average of the per annum average yields
to maturities, based upon closing asked prices on each business day during a
quarter, for each actively traded marketable U.S. Treasury fixed interest rate
security with a final maturity date not less than eight nor more than twelve
years from the date of the closing asked prices as chosen and quoted for each
business day in each such quarter in New York City by at least three
recognized dealers in U.S. government securities selected by the Company.

The ability of the Company to generate Funds From Operations in excess of
the Ten Year U.S. Treasury Rate, and of the Manager to earn the incentive
compensation described in the preceding paragraph, is dependent upon the level
and volatility of interest rates, the Company's ability to react to changes in
interest rates and to utilize successfully the operating strategies described
herein, and other factors, many of which are not within the Company's control.

The Manager is expected to use the proceeds from its base management fee and
incentive compensation in part to pay compensation to its officers and
employees who, notwithstanding that certain of them also are officers of the
Company, will receive no cash compensation directly from the Company.

COSTS AND EXPENSES

The Company does not expect to employ full-time personnel. Instead it
expects to rely on the facilities, personnel and resources of the Manager to
conduct its operations. The Manager will be reimbursed for (or charge the
Company directly for) the Manager's costs and expenses in employing third-
parties to perform due diligence tasks on assets purchased or considered for
purchase by the Company. Expense reimbursement will be made quarterly.

The management fees are payable in arrears. The Manager's base and incentive
fees and reimbursable costs and expenses shall be calculated by the Manager
within 45 days after the end of each quarter, and such calculation shall be
promptly delivered to the Company. The Company is obligated to pay such fees,
costs and expenses within 60 days after the end of each fiscal quarter.

TABULAR PRESENTATION OF AMOUNTS PAYABLE TO THE MANAGER

The following table presents all compensation, fees and other benefits
(including reimbursement of out-of-pocket expenses) that the Manager may earn
or receive under the terms of the Management Agreement.

<TABLE>
<CAPTION>
RECIPIENT PAYOR AMOUNT
--------- ------ ------
<C> <C> <S>
Manager(1) ICCMIC Base management fee equal to a percentage of the Average
Invested Assets of the Company(2)
Manager(1) ICCMIC Incentive compensation based on the amount, if any, by which
the Company's Funds From Operations and certain net gains
exceed a hurdle rate(3)
Manager(1) ICCMIC Out-of-pocket expenses of Manager paid to third parties in
connection with due diligence
</TABLE>
- --------
(1) The Manager is a wholly-owned subsidiary of Imperial Credit.
(2) The base management fee is equal to 1% per annum of the first $1 billion
of Average Invested Assets, 0.75% of the next $250 million of Average
Invested Assets, and 0.50% of Average Invested Assets above $1.25 billion.
(3) For a detailed explanation of the calculation of the incentive
compensation payable to the Manager, see "--Management Fees."

46
<PAGE>

1997 STOCK OPTION PLAN

The Company has adopted and its sole stockholder has approved the Imperial
Credit Commercial Mortgage Investment Corp. 1997 Stock Option Plan (the
"Option Plan") under which the Compensation Committee of the Board or, if
none, the Board (the "Committee") is authorized to grant options to purchase
shares of Common Stock ("Options"). The maximum number of shares of Common
Stock that may be subject to Options granted as of the date of the pricing of
the Offering (the "Pricing Date") is 10% of the number of shares to be issued
pursuant to the Offering (assuming the Underwriters fully exercise their over-
allotment option). The maximum aggregate number of shares of Common Stock that
may be issued pursuant to the exercise of Options granted during the term of
the Option Plan is 7,500,000.

ELIGIBILITY AND AWARDS. All employees (including officers), directors and
others providing services to the Company, as well as the Manager and employees
(including officers) and directors of the Manager (collectively, the "Eligible
Recipients"), are eligible to receive Options at the discretion of the
Committee. The Committee is authorized to determine which Eligible Recipients
shall receive Options, and the terms and conditions on which Options shall be
granted, but not less than 30% of the total number of shares of Common Stock
subject to Options granted as of any date shall have been granted to employees
of the Manager (the "Manager Reserve"), and at least one-third of such Manager
Reserve shall have been granted to the President of the Manager. Up to one-
third of the Manager Reserve on the Pricing Date (the "Special Reserve
Shares") may be set aside and be not subject to Options that are granted as of
the Pricing Date. The Committee, or a special committee consisting solely of
the President of the Company if he is a member of the Board, may grant Options
for Special Reserve Shares to employees of the Manager, including its
President, within one year after the Pricing Date, subject to certain limits
described in the Option Plan. The Company intends that Options with respect to
Special Reserve Shares be granted to new employees hired by the Manager after
the Offering is consummated. Special Reserve Shares that are not granted to
such new employees may be granted to existing employees of the Manager.
Options granted pursuant to the Option Plan may be either nonqualified stock
options or incentive stock options. Options granted pursuant to the Option
Plan generally are not transferable except that, to the extent permitted by
the Committee, a grantee may transfer Options to members of his immediate
family (including spouse, parents, children and siblings) and the Manager may
transfer its Options to any other Eligible Recipient. Grants of Options under
the Option Plan for Special Reserve Shares or to persons or entities other
than employees and directors of the Company may result in a charge against the
Company's earnings for financial reporting purposes under GAAP. Any such
charge to earnings will be recognized over the period during which such
Options become exercisable.

EXERCISE PRICE AND EXERCISABILITY. The exercise price of all Options (other
than Options for Special Reserve Shares) will be not less than 100% of the
fair market value of the Common Stock subject to the Options on the date of
grant. All Options for Special Reserve Shares will have an exercise price
equal to the price at which the Common Stock first is offered to the public
pursuant hereto. All Options will become exercisable not earlier than one year
following the date of award or as otherwise determined by the Committee at the
time of the award. Options granted on the Pricing Date (and Options for
Special Reserve Shares) generally will be exercisable in equal installments on
each of the first three anniversaries of the date on which they are granted.
The exercise price of an Option may be paid by any one or more of the
following: (i) cash or its equivalent, (ii) shares of Common Stock, (iii)
cancellation of any indebtedness owed by the Company, (iv) a full-recourse
promissory note, if approved by the Committee, (v) a "cashless" exercise
pursuant to a sale through a broker of all or a portion of the shares covered
by the Option or (vi) by making payment with shares of Common Stock
simultaneously acquired on exercise of the Option pursuant to procedures
approved by the Committee.

47
<PAGE>

PRE-CLOSING GRANTS. On the Pricing Date, the Company will grant Options
which, including all Options for Special Reserve Shares, would represent 10%
of the number of shares to be issued pursuant to the Offering (assuming the
Underwriters fully exercise their over-allotment option) if all such Options
could be exercised immediately. Options granted on the Pricing Date, when
added to Options that may be granted for Special Reserve Shares, have been
allocated as follows: (1) to the Manager, Options representing the right to
acquire approximately 49.0% of the aggregate number of shares subject to
Options, (2) to certain executive officers of the Manager (who are executive
officers of the Company), Options representing the right to acquire
approximately 32.5% of the aggregate number of shares subject to Options
(including Special Reserve Shares) and (3) to certain directors of the Company
(who are not officers of the Company), Options representing the right to
acquire approximately 18.5% of the aggregate number of shares subject to
Options. All Options granted on the Pricing Date will terminate on the tenth
anniversary of the Pricing Date.

TERMINATION OF EMPLOYMENT. If an Eligible Recipient's affiliation with the
Company is terminated for cause or if such Eligible Recipient terminates his
affiliation voluntarily, all of such Eligible Recipient's unexercised Options
will terminate immediately upon such termination. Except as otherwise
determined by the Committee, if an Eligible Recipient has a termination of
affiliation because of death or permanent disability or for any other reason
(other than a voluntary termination or a termination for cause), all of such
Eligible Recipient's unexercised Options may be exercised by the Eligible
Recipient or his beneficiary or legal representative to the extent such
Options are or become exercisable in accordance with their terms for up to one
year after the later of (i) the date of such Eligible Recipient's termination
of affiliation or (ii) the date the Options first become exercisable, but in
no event later than the expiration of the Option term.

AMENDMENT AND TERMINATION. The Board generally may amend the Option Plan at
any time, except that approval by ICCMIC's stockholders will be required for
any amendment that increases the aggregate number of shares of Common Stock
that may be issued pursuant to the Option Plan, that materially changes the
class of persons eligible to receive such Options, that extends the maximum
Option term, that decreases the exercise price of any Option to less than the
fair market value of the Common Stock on the date of grant (or, in the case of
Options for Special Reserve Shares, to less than the price at which the Common
Stock first is offered to the public pursuant hereto) or that materially
increases benefits accruing to the participants under the Option Plan. Shares
of Common Stock subject to Options that expire, are terminated or otherwise
are surrendered to the Company will be available for issuance in connection
with future awards under the Option Plan. No Option term may exceed ten years
from the date of grant, and no Option grant may be made under the Option Plan
after the tenth anniversary of the date the Option Plan was adopted by the
Board.

LIMITS OF RESPONSIBILITY

Pursuant to the Management Agreement, the Manager will not assume any
responsibility other than to render the services called for thereunder and
will not be responsible for any action of the Board of Directors in following
or declining to follow its advice or recommendations. The Manager, its
directors and its officers will not be liable to the Company, any subsidiary
of the Company, the Independent Directors, ICCMIC's stockholders or any
subsidiary's stockholders for acts performed in accordance with and pursuant
to the Management Agreement, except by reason of acts constituting bad faith,
willful misconduct, gross negligence or reckless disregard of their duties
under the Management Agreement. The Company has agreed to indemnify the
Manager, its directors and its officers with respect to all expenses, losses,
damages, liabilities, demands, charges and claims arising from acts of the
Manager not constituting bad faith, willful misconduct, gross negligence or
reckless disregard of duties, performed in good faith in accordance with and
pursuant to the Management Agreement.

The Management Agreement does not limit or restrict the right of the Manager
or any of its officers, directors, employees or Affiliates to engage in any
business or to render services of any kind to any other person, including the
purchase of, or rendering advice to others purchasing, assets that meet the
Company's policies and criteria, except that the Manager may not manage or
advise another REIT or other entity that invests or intends to invest
primarily in commercial and multifamily Mortgage Loans or subordinated CMBS
Interests.

48
<PAGE>

Imperial Credit and its affiliates, including SPB, expect to continue to
originate Mortgage Loans and MBS Interests. SPB will enter into an agreement
granting the Company, as long as the Management Agreement is in effect, a
right of first offer to purchase, in addition to the Initial Investments, not
less than $150 million annually of multifamily and commercial Mortgage Loans
typical of those originated by SPB. Although not contractually committed to do
so, the Company intends to purchase Mortgage Loans offered to it pursuant to
the foregoing right of first offer, subject to compliance with the Guidelines
and underwriting criteria as established and modified from time to time by the
Company's Independent Directors.

The Company expects to maintain a relationship with Imperial Credit and SPB
in which the Company will be a ready, willing and able purchaser of not only
Mortgage Loans, but other assets that may be sold from time to time by
Imperial Credit and SPB. Although no binding commitment will exist on the part
of Imperial Credit, SPB or the Company regarding the sale and purchase of such
assets, the Company expects to be able to purchase such assets from Imperial
Credit and SPB at prices and on terms meeting the Company's investment
criteria. The Company expects that Imperial Credit and SPB will offer to sell
assets to the Company on terms and at prices that, in the aggregate, will be
fair to both parties, subject to compliance with the Guidelines. See
"Management of Operations--Certain Relationships; Conflicts of Interest." In
deciding whether to acquire any such asset, the Manager may consider, among
other factors, whether acquisition of the asset will enhance the Company's
ability to achieve or exceed the Company's risk adjusted target rate of return
established for that period by the Company's Board of Directors, whether the
asset otherwise is well-suited for the Company and whether the Company is
financially able to take advantage of the investment opportunity. If an asset
that otherwise meets all of the Company's criteria for asset acquisition is
being offered to the Company at a price that is greater, or on terms that are
less favorable, than would be required by third parties for similar assets in
bona fide arms' length transactions, the Manager would be expected to
recommend that the Company decline to acquire that asset at the quoted price
and terms, notwithstanding the relationship among the Company, Imperial Credit
and SPB. See "Risk Factors--Conflicts of Interest in the Business of the
Company May Result in Decisions of the Company That Do Not Fully Reflect the
Interests of the Stockholders of the Company" and "--Certain Relationships;
Conflicts of Interest."

CERTAIN RELATIONSHIPS; CONFLICTS OF INTEREST

The Company, on the one hand, and Imperial Credit and its affiliates, on the
other, will enter into a number of relationships other than those governed by
the Management Agreement, some of which may give rise to conflicts of
interest. Moreover, three of the members of the Board of Directors and all of
its officers also are employed by the Manager or its affiliates.

The relationships between the Company, on the one hand, and Imperial Credit
and its affiliates, on the other, will be governed by the Guidelines that have
been approved by a majority of the Independent Directors. The Guidelines
establish general parameters for the Company's investments, borrowings and
operations, including quantitative and qualitative limitations on the
Company's assets that may be acquired. The Guidelines are to assist and
instruct the Manager generally, and to establish restrictions applicable to
transactions with Imperial Credit and its affiliates. A majority of the
Independent Directors have approved the acquisition of the Initial Investments
by the Company from Imperial Credit and SPB. However, subsequent to the
acquisition of the Initial Investments, the Manager may enter into
transactions on behalf of the Company with Imperial Credit and its affiliates
based upon the Guidelines approved by the Independent Directors. Such
transactions will be reviewed on a quarterly basis to insure compliance with
the Guidelines.

Although the Independent Directors will review the Guidelines periodically
and will monitor compliance with those Guidelines, investors should be aware
that, in conducting this review, the Independent Directors will rely primarily
on information provided to them by the Manager. The Manager may obtain the
prices paid for similar Mortgage Loans and MBS Interests by unrelated third
parties in arms' length purchases and sales (if available) or brokers'
opinions as to the market price for Mortgage Loans and MBS Interests (if the
prices paid by bona fide third parties are not available and such price
opinions are available), and appraisals for Distressed Real Properties
purchased from Imperial Credit or its affiliates, but the Independent
Directors are likely to rely substantially on information and analysis
provided by the Manager to evaluate the Company's Guidelines,

49
<PAGE>

compliance therewith and other matters relating to the Company's investments.
Moreover, broker price opinions and appraisals are not always reliable
indicators of the value of assets. In particular, broker price opinions may be
obtained from the underwriter or placement agent of the MBS, who may have an
incentive to overstate the value of the MBS. Moreover, the market for
unregistered MBS is illiquid, and therefore accurate prices are difficult to
estimate. See "Risk Factors--Conflicts of Interest in the Business of the
Company May Result in Decisions of the Company That Do Not Fully Reflect the
Interests of the Stockholders of the Company."

If the Independent Directors determine in their periodic review of
transactions that a particular transaction does not comply with the
Guidelines, then the Independent Directors will consider what corrective
action, if any, can be taken. If the transaction is one with Imperial Credit
or an affiliate, and if the Independent Directors so direct, the Manager shall
use its best reasonable efforts to cause Imperial Credit or the relevant
affiliate to repurchase the asset at the purchase price to the Company.
Moreover, if transactions are consummated that materially deviate from the
Guidelines, then the Independent Directors will have the option, under the
terms of the Management Agreement, to terminate the Manager.

The Management Agreement prohibits the Manager from managing or advising any
REIT or other entity that invests or intends to invest primarily in commercial
and multifamily Mortgage Loans or subordinated CMBS Interests, but it does not
limit or restrict the right of the Manager to engage in any business or
rendering services to REITs that compete in certain respects with the Company.

The Company intends to acquire the Initial Investments from Imperial Credit
and SPB for an aggregate purchase price of approximately $163 million plus
accrued interest. At $163 million, the sale will result in a book gain to
Imperial Credit and SPB, subject to the terms of the definitive agreement to
purchase the Initial Investments, satisfaction of GAAP sale criteria, and
consummation of the transaction.

The Company may acquire additional assets from Imperial Credit and its
affiliates in the future. See "Risk Factors" Other Risks--Conflicts of
Interest in the Business of the Company. Any such acquisitions will be in
accordance with the Guidelines. The terms of a particular transaction,
however, will not be approved in advance by the Company's Independent
Directors in all cases. The Independent Directors will review any such
transactions quarterly to insure compliance with the Guidelines, but in doing
so they, by necessity, will rely primarily on information and analysis
provided to them by the Manager.

Imperial Credit will purchase 2,970,000 shares of Common Stock on the
Closing Date at a price equal to the public offering price, net of any
underwriting discounts or commissions. This purchase will result in Imperial
Credit's ownership of 9.9% of the total shares offered hereby, exclusive of
the Underwriters' over-allotment option. The Manager also has received stock
options pursuant to the Company's Option Plan. See "Management of Operations--
Stock Options." Imperial Credit will retain its shares of the Company for at
least two years after the Company's initial public offering of shares of
Common Stock, but may dispose of its shares any time thereafter.
Notwithstanding the foregoing, if the Company terminates the Management
Agreement, Imperial Credit may dispose of its shares at that time.

The market in which the Company expects to acquire assets is characterized
by rapid evolution of products and services and, thus, there may in the future
be relationships between the Company, the Manager, and affiliates of the
Manager in addition to those described herein.

50
<PAGE>

THE COMPANY

ICCMIC was incorporated in the State of Maryland on July 31, 1997 and will
elect to be taxed as a REIT under the Code. The principal executive offices of
the Company are located at 11601 Wilshire Blvd., Suite 2080, Los Angeles,
California 90025. The Company's telephone number is (310) 231-1280.

DIRECTORS AND EXECUTIVE OFFICERS

The following tables set forth certain information about the directors and
executive officers of ICCMIC.

DIRECTORS OF ICCMIC

<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
---- --- ----------------
<S> <C> <C>
INSIDE DIRECTORS

H. Wayne Snavely........................... 56 Chairman of the Board of Directors
Kevin E. Villani........................... 49 Vice Chairman of the Board of Directors
Mark S. Karlan............................. 39 President and Chief Executive Officer
<CAPTION>
<S> <C> <C>
INDEPENDENT DIRECTORS

Patric H. Hendershott...................... 58 Director
Joseph A. Jaconi........................... 52 Director
Louis H. Masotti........................... 63 Director
Kenneth A. Munkacy......................... 42 Director
<CAPTION>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<S> <C> <C>
Joseph R. Parise........................... 39 Managing Director and Senior Vice President
Sebastian M. Hoppe......................... 35 Senior Vice President
Daniel J. Occelli.......................... 40 Senior Vice President
Norbert M. Seifert......................... 41 Senior Vice President
</TABLE>

The Board of Directors has appointed Messrs. Jaconi and Masotti to the Audit
Committee and Messrs. Hendershott, Munkacy and Snavely to the Compensation
Committee of the Board of Directors. Mr. Jaconi will serve as the initial
chairman of the Audit Committee and Mr. Hendershott will serve as the initial
chairman of the Compensation Committee.

The Company does not expect to employ full-time personnel. Instead it
expects to rely on the personnel of the Manager to conduct its operations. For
biographical information on Messrs. Snavely, Villani, Karlan, Parise, Hoppe,
Occelli and Seifert, who also are directors and/or officers of the Manager,
see "Management of Operations--The Manager." Moreover, Joseph R. Parise,
Managing Director and Senior Vice President of the Company, is also Managing
Director of Capital Markets and Head of Structured Finance of Imperial Credit
and a director of Imperial Credit Worldwide, Ltd. ("ICW"), and will continue
to serve in those capacities in the future.

PATRIC H. HENDERSHOTT holds the Galbreath Chair in Real Estate at Ohio State
University where he has been Professor of Finance since 1981. From 1969 to
1981, Dr. Hendershott was a Professor of Economics and Finance at Purdue
University where he was Chairman of the Economics Group from 1971 to 1974.
Dr. Hendershott was an Assistant Professor of Economics at Northwestern
University from 1967 to 1969, and he was a Research Economist at the Federal
Reserve Board from 1964 to 1967. He has served as a consultant to major
national and international organizations including the World Bank from 1991 to
1993, the U.S. government Accounting Office from 1982 to 1990 and the National
Swedish Institute for Building Research since 1991. Dr. Hendershott has been a
Research Associate at the National Bureau of Economic Research since 1979 and
he has been the Director of Housing and Real Estate Finance Research at Price
Waterhouse since 1994. His honors and awards include the George Bloom Award
for Outstanding Contributions to the Field of Real Estate in 1992, Fellow of
the Homer Hoyt Advanced Studies Institute since 1991, Academic Fellow of the
Urban Land Institute since 1990, Fulbright Senior Research Scholar in 1989 and
Member of the Fulbright Senior Awards Committee from 1995 to 1997.
Dr. Hendershott has written more than one hundred articles in academic and
professional journals on real estate and mortgage finance, and he currently
serves on the editorial boards of many of the leading journals including
Journal of the American Real Estate and Urban Economics Association, Journal
of Money, Credit and Banking, Journal of Financial Services Research, Journal
of Property Research and Journal of Housing Economics. Dr. Hendershott
received a Ph.D. in Economics from Purdue University in 1965.

51
<PAGE>

JOSEPH A. JACONI, JR. has been involved in the real estate development
industry in California since 1971. Mr. Jaconi began the development of real
property for his own account in 1976, completing projects such as the
Wilshire-Grand Building, a 16 story office building in downtown Los Angeles;
the Marina Business Center, a 400,000 square foot office and business park in
Marina Del Rey; the Village Del Amo, a 30 acre retail and office building
project in Torrance; redevelopment projects at Corte Madera Mall and Garden
Grove Mall totaling 400,000 square feet; and the 100 acre Bakersfield Airport
Business Center. From 1971 to 1976, Mr. Jaconi practiced law and specialized
in real estate development, representing clients such as Carter Hawley Hale
Stores, Inc., Ernest W. Hahn, Inc., Security Pacific National Bank, Barclay-
Curci Investment Company, Transpacific Development Company, Business
Properties and Real Property Resources. Mr. Jaconi received a Bachelor of Arts
degree from the University of Santa Clara in 1966 and he received a Juris
Doctor degree from the University of Southern California School of Law in
1969.

LOUIS H. MASOTTI is Professor of Management and Urban Development in the
Graduate School of Management at the University of California, Irvine, where
he has served as the Director of the Program in Real Estate Management since
1992. He also serves as President of Louis H. Masotti, Ltd., a management,
real estate and urban development consulting firm. From 1970 to 1992,
Dr. Masotti was Professor of Management and Urban Development at the Kellogg
Graduate School of Management at Northwestern University, and between 1989 and
1992, Dr. Masotti also taught real estate and urban development courses as a
Visiting Professor at the Anderson Graduate School of Management at UCLA and
at Stanford Business School. In 1985, Dr. Masotti founded the Kellogg Center
for Real Estate Research at Northwesten University and served as its Director
until 1992. From 1970 to 1980, Dr. Masotti served as the Director of the
Center for Urban Policy Research at Northwestern. Dr. Masotti has authored and
edited 14 books and published many articles on real estate, urban development
and public policy issues. His views are often quoted in the national media,
including The Wall Street Journal, Barron's, The New York Times, Business
Week, Time and Newsweek. His honors and awards include Fellow of the Homer
Hoyt Advanced Studies Institute since 1993 and Senior Fulbright Fellow in
1969. Dr. Masotti has served as a director of Samuel Zell's Manufactured Home
Communities Inc. REIT since 1993, and he served from 1993 to 1996 as a
director of the Tucker Company REIT, both listed on the NYSE. Dr. Masotti
earned his Bachelor of Arts degree at Princeton University in 1956 and he
received a Ph.D. degree in political science from Northwestern University in
1964.

KENNETH A. MUNKACY is the Managing Director of TrizecHahn Asia-Pacific, a
subsidiary of TrizecHahn, a NYSE listed commercial real estate company.
Mr. Munkacy is responsible for TrizecHahn's investment and development
activities in Asia. From 1994 to 1997, Mr. Munkacy served as President of Koll
Asia Pacific, an affiliate of the Koll Real Estate Group. From 1989 to 1994,
Mr. Munkacy was a Senior Vice President and partner of Golub & Co., a Chicago
based real estate investment and development company, and he served from 1987
to 1989 as the Director of Development and Acquisitions for Xerox Realty
Corp., a Xerox subsidiary with an $850 million real estate portfolio. Mr.
Munkacy was the Director of Development Services and a partner at Halcyon Real
Estate Advisors from 1981 to 1987. Mr. Munkacy has published articles on
commercial real estate in The Real Estate Finance Journal, Real Estate Review
and Urban Land, and his real estate perspectives have been quoted in the Wall
Street Journal, Real Estate Finance & Investment, Journal of Property
Management, Commercial Property News and Real Estate Forum. He has lectured on
real estate investing at Harvard, Wharton, Stanford, Northwestern, the
University of Texas at Austin, and the Urban Land Institute. Mr. Munkacy
received a Bachelor of Arts degree in Economics-Government from Franklin and
Marshall College in 1976 and a Masters of City Planning from the University of
Pennsylvania in 1981.

All directors will be elected at each annual meeting of ICCMIC's
stockholders for a term of one year, and hold office until their successors
are elected and qualified. All officers serve at the discretion of the Board
of Directors. Although the Company may have salaried employees, it currently
does not have employees and does not expect to employ anyone as long as the
Management Agreement is in force. The executive officers of the Company have
no employment agreements with the Company and will not receive any salaries or
other cash compensation directly from the Company. Each of the executive
officers, however, will receive a salary and other compensation from the
Manager. The Company will pay an annual director's fee to each Independent
Director equal to $20,000, paid quarterly. Each Independent Director will be
paid a fee of $500 for each meeting of the

52
<PAGE>

Board of Directors or committee thereof attended in person or by telephone by
such Independent Director. All Directors will be reimbursed for their costs
and expenses in attending all meetings of the Board of Directors. In addition,
an annual fee of $2,000 will be paid to any Independent Director who serves as
chair of any committee of the Board. Affiliated directors, however, will not
be separately compensated by the Company.

Directors and executive officers of ICCMIC will be required to devote only
so much of their time to the Company's affairs as is necessary or required for
the effective conduct and operation of the Company's business. Because the
Management Agreement provides that the Manager will assume, subject to the
supervision of the Board of Directors, principal responsibility for managing
the day-to-day affairs of the Company, the officers of the Company, in their
capacities as such, are not expected to devote substantial portions of their
time to the affairs of the Company. However, in their capacities as officers
or employees of the Manager, or its affiliates, they will devote such portion
of their time to the affairs of the Manager as is required for the performance
of the duties of the Manager under the Management Agreement.

The Charter and Bylaws of ICCMIC provide that, except in the case of a
vacancy, the majority of the members of the Board of Directors will at all
times after the issuance of the shares offered hereby be Independent
Directors. Vacancies occurring on the Board of Directors among the Independent
Directors will be filled by the vote of a majority of the directors, including
a majority of the Independent Directors.

The Charter limits the liability of its directors and officers to ICCMIC and
its stockholders to the fullest extent permitted from time to time by Maryland
law. Maryland law presently permits the liability of directors and officers to
a corporation or its stockholders for money damages to be limited, except (i)
to the extent that it is proved that the director or officer actually received
an improper benefit or profit in money property or services for the amount of
the benefit or profit in money, property or services actually received, or
(ii) if a judgment or other final adjudication is entered in a proceeding
based on a finding that the director's or officer's action, or failure to act,
was the result of active and deliberate dishonesty and was material to the
cause of action adjudicated in the proceeding. This provision does not limit
the ability of ICCMIC or its stockholders to obtain other relief, such as an
injunction or rescission.

The Charter and Bylaws require ICCMIC to indemnify and hold harmless and,
without requiring a determination of the ultimate entitlement to
indemnification, pay reasonable expenses in advance of the final disposition
of any proceeding to its present and former directors and officers and certain
other parties to the fullest extent permitted from time to time by Maryland
law. The Maryland General Corporation Law ("MGCL") permits a corporation to
indemnify its directors, officers and certain other parties against judgments,
penalties, fines, settlements and reasonable expenses incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service to or at the request of the corporation, unless it is
established that (i) the act or omission of the indemnified party was material
to the matter giving rise to the proceeding and (x) was committed in bad faith
or (y) was the result of active and deliberate dishonesty, (ii) the
indemnified party actually received an improper personal benefit in money,
property or services or (iii) in the case of any criminal proceeding, the
indemnified party had reasonable cause to believe that the act or omission was
unlawful. Indemnification may be made against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by the director or
officer in connection with the proceeding. Indemnification is limited to court
ordered reimbursement for expenses; however, if the proceeding is one by or in
the right of the corporation, and the director or officer was adjudged to be
liable to the corporation or if the proceeding is one charging improper
personal benefit to the director or officer and the director or officer was
adjudged to be liable on the basis that personal benefit was improperly
received. The termination of any proceeding by conviction, or upon a plea of
nolo contendere or its equivalent, or an entry of any order of probation prior
to judgment, creates a rebuttal presumption that the director or officer did
not meet the requisite standard of conduct required for indemnification to be
permitted. Maryland law requires a corporation (unless its charter provides
otherwise, which ICCMIC's Charter does not) to indemnify a director or officer
who has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity. It is the position of the Commission that indemnification of
directors and officers for liabilities arising under the Securities Act is
against public policy and is unenforceable pursuant to Section 14 of the
Securities Act.

53
<PAGE>

DISTRIBUTION POLICY

In order to avoid corporate income taxation on the earnings that it
distributes, ICCMIC must distribute to its stockholders an amount at least
equal to (i) 95% of its REIT taxable income (determined before the deduction
for dividends paid and excluding any net capital gain but including any market
discount) plus (ii) 95% of the excess of its net income from foreclosure
property over the tax imposed on such income by the Code less (iii) any excess
noncash income (as determined under the Code). See "Federal Income Tax
Considerations." The actual amount and timing of distributions, however, will
be at the discretion of the Board of Directors and will depend upon the
financial condition of ICCMIC in addition to the requirements of the Code. It
is anticipated that the first distribution will be made after the first full
fiscal quarter following the completion of this Offering.

Subject to the distribution requirements referred to in the immediately
preceding paragraph, ICCMIC intends, to the extent practicable, to invest
substantially all of the principal from repayments, sales and refinancings of
the Company's assets in Mortgage Loans, MBS Interests and the other types of
assets discussed above. ICCMIC may, however, under certain circumstances, make
a distribution of principal. Such distributions, if any, will be made at the
discretion of the Board of Directors.

It is anticipated that distributions generally will be taxable as ordinary
income to non-exempt stockholders of ICCMIC, although a portion of such
distributions may be designated by ICCMIC as long-term capital gain or may
constitute a return of capital. ICCMIC will furnish annually to each of its
stockholders a statement setting forth distributions paid during the preceding
year and their federal income tax status. For a discussion of the federal
income tax treatment of distributions by ICCMIC, see "Federal Income Tax
Considerations--Taxation of the Company," "--Taxation of Taxable U.S.
Stockholders," "Taxation of Tax-Exempt Stockholders" and "Taxation of Non-U.S.
Stockholders."

YIELD CONSIDERATIONS RELATED TO THE COMPANY'S INVESTMENTS

Before acquiring any Real Estate Related Assets, the Company, with the
assistance of the Manager, will consider the expected yield of the investment.
The Company considers the expected yield of an investment to be a benchmark
for evaluating profitability of all types of assets over time. "Yield" or
"yield to maturity" is the interest rate that will make the present value of
the future cash flow from an investment equal to its price. Despite the
substantial experience of the employees of the Manager in evaluating potential
yields on Real Estate Related Assets, no assurances can be given that the
Company can make an accurate assessment of the actual yield to be produced by
an asset. Many factors beyond the control of the Company are likely to
influence the yield on the Company's investments, as described in more detail
below, such that the actual yield on an investment may vary substantially from
its expected yield.

MORTGAGE LOANS

The yield to maturity on the Company's investment in Mortgage Loans will
depend upon and be sensitive to, among other things, (i) whether there are any
defaults or losses on such Mortgage Loans, (ii) whether and when there are any
prepayments of such Mortgage Loans, (iii) the interest rates on such Mortgage
Loans, and (iv) the purchase price of such Mortgage Loans.

The yield to maturity on all Mortgage Loans will be sensitive to defaults by
the borrowers and the severity of the losses that might result from such
defaults. Construction Loans and Mezzanine Loans will be particularly
sensitive to defaults because they generally have higher loan to value ratios
than traditional mortgage loans. The borrower generally will have an equity
investment of 10% to 15% of total project costs, but if the borrower defaults
there can be no assurance that losses will not exceed such amount. Because the
borrower's equity may be insufficient to protect the Company's investment, the
Company's yield on such loans may be directly and adversely affected by
defaults.

If the Company acquires a Mortgage Loan at a significant discount from its
outstanding principal balance and the Company estimates the yield on the
Mortgage Loan based on a faster prepayment rate than actually

54
<PAGE>

occurs, the Company's yield on that Mortgage Loan will be lower than the
Company anticipated. Conversely, if the Company acquires a Mortgage Loan at a
significant premium to its outstanding principal balance, estimating the yield
on such Mortgage Loan based on a slower prepayment rate than actually occurs,
the Company's yield on that Mortgage Loan will be lower than anticipated.

Whether and when there are any principal prepayments on the Mortgage Loans
will be affected by a variety of factors, including, without limitation, the
credit, liquidity and other attributes of the borrower, the terms of the
Mortgage Loans, the level of prevailing interest rates, the availability of
mortgage credit and economic, tax, legal and other factors. Principal
prepayments on Mortgage Loans secured by multifamily and commercial properties
are likely to be affected by lock-out periods and prepayment premium
provisions applicable to each of the Mortgage Loans, and by the extent to
which the servicer is able to enforce such prepayment premium provisions.
Moreover, the yield to maturity on Mortgage Loans also may be affected by any
extension, if permitted, of the scheduled maturity dates of the Mortgage Loans
as a result of modifications of the Mortgage Loans by the servicer.

In addition to acquiring Mortgage Loans, the Company may originate Mortgage
Loans secured by multifamily and commercial Real Properties. The Company will
originate Mortgage Loans only when they are anticipated to achieve the
Company's yield and risk objectives.

MBS INTERESTS

The yield to maturity on any class of MBS Interests will depend upon, among
other things, the price at which such class is purchased, the interest rate
for such class and the timing and aggregate amount of distributions on the
securities of such class, which in turn will depend primarily on (i) whether
there are any losses on the underlying loans allocated to such class and (ii)
whether and when there are any prepayments of the underlying related mortgage
loans (which include both voluntary prepayments by the obligors on the
underlying mortgage loans and prepayments resulting from liquidations due to
defaults and foreclosures).

The yield on the MBS Interests acquired by the Company will be extremely
sensitive to defaults on the mortgage loans comprising the Mortgage Collateral
for such securities and the severity of losses resulting from such defaults,
as well as the timing of such defaults and actual losses. The Company's right
as a holder of subordinated classes of MBS Interests to distributions of
principal and interest will be subordinated to all of the more senior classes
of securities. Actual losses on the Mortgage Collateral (after default, where
the proceeds from the foreclosure sale of the Real Property securing the
Mortgage Collateral are less than the unpaid balance of the mortgage loan plus
accrued interest thereon and disposition costs) will be allocated first to the
subordinated classes of MBS Interests prior to being allocated to the more
senior classes of securities. The subordinated classes of MBS Interests the
Company intends to acquire with the proceeds from this offering are subject to
substantially greater risk of loss of principal and non-payment of interest
than the more senior classes of such securities.

If the Company acquires MBS Interests with an anticipated yield as of the
acquisition date based on an assumed rate of default and severity of loss on
the mortgage loans comprising the Mortgage Collateral that is lower than the
actual default rate and severity of loss, the yield on such MBS Interests will
be lower than the Company initially anticipated. In the event of substantial
losses, the Company may not recover the full amount (or, indeed, any) of its
acquisition cost. The timing of actual losses also will affect the Company's
yield, even if the rate of default and severity of loss are consistent with
the Company's anticipation. In general, the earlier a loss occurs, the greater
the adverse effect on the Company's yield. Additionally, the yield on CMBS and
RMBS collateralized by adjustable rate mortgage loans will vary depending on
the amount of and caps on the adjustments to the interest rates of such
mortgage loans. There can be no assurance as to the rate of default, severity
of loss or the timing of any such losses on mortgage loans underlying MBS
Interests and thus as to the actual yield received by the Company.

The aggregate amount of distributions on the Company's MBS Interests and
their yield also will be affected by the amount and timing of principal
prepayments on the mortgage loans comprising the Mortgage Collateral. To the
extent that more senior classes are outstanding, all prepayments of principal
on the underlying mortgage

55
<PAGE>

loans typically will be paid to the holders of the more senior classes, and
typically none (or very little) will be paid to the Company as holder of the
MBS Interests during the first five years, and in some cases a longer period,
after the original issue date of the MBS. This subordination of the MBS
Interests to more senior classes may affect adversely the yield on the MBS
Interests acquired by the Company. Even if there are no actual losses on the
mortgage loans, interest and principal payments are made on the more senior
classes before interest and principal are paid with respect to subordinated
classes of MBS Interests. Typically, interest deferred on MBS Interests is
payable on subsequent payment dates to the extent funds are available, but
such deferral does not itself bear interest. Such deferral of interest will
reduce the actual yield on the Company's MBS Interests.

Because the Company will acquire MBS Interests at a significant discount
from their outstanding principal balance, if the Company estimates the yield
on a security based on a faster rate of payment of principal than actually
occurs, the Company's yield on that security will be lower than the Company
anticipated. Whether and when there are any principal prepayments on the
underlying mortgage loans will be affected by a variety of factors, including,
without limitation, the terms of the mortgage loans, the level of prevailing
interest rates, the availability of mortgage credit and economic, tax, legal
and other factors. Principal prepayments on mortgage loans secured by
multifamily and commercial properties are likely to be affected by lock-out
periods and prepayment premium provisions applicable to each of the mortgage
loans, and by the extent to which the servicer is able to enforce such
prepayment premium provisions. Moreover, the yield to maturity on such MBS
Interests also may be affected by any extension of the scheduled maturity
dates of the mortgage loans as a result of modifications of the mortgage loans
by the servicer, if permitted.

The timing of any prepayments on the mortgage loans underlying MBS Interests
owned by the Company may significantly affect the Company's yield to maturity,
even if the average rate of principal payments is consistent with the
Company's expectation. In general, the earlier a prepayment of principal of
the Mortgage Loans, the greater the effect on an investor's yield. The effect
on the Company's yield of principal payments occurring at a rate higher (or
lower) than the rate anticipated by the Company during any particular period
may not be fully offset by a subsequent like decrease (or increase) in the
rate of principal payments.

Because the rate and timing of principal payments on the underlying mortgage
loans will depend on future events and on a variety of factors, no assurances
can be given as to such rate or the timing of principal payments on
subordinated classes of MBS Interests the Company owns or acquires.

IOS, INVERSE IOS AND SUB IOS

The Company's earnings resulting from its investments in IOs, Inverse IOs
and Sub IOs will be extremely sensitive to changes in the prepayment rates on
the underlying mortgage loans, and investments in Inverse IOs will be very
sensitive to changes in the index used to calculate the interest on such
classes.

The yield on IOs declines as prepayments on the underlying mortgage loans
increase. As market interest rates decline, prepayments on the underlying
loans typically increase as borrowers refinance their mortgage loans, although
multifamily and commercial loans typically have provisions that prohibit or
provide disincentives for prepayments for specified periods. Prepayment rates
on mortgage loans on which there is no prepayment penalty or prepayment "lock
out" period (as is typical for single-family residential loans) may be
particularly sensitive to changes in interest rates and, therefore, quite
volatile. Faster than anticipated prepayment rates can result in a loss of
part or all of the purchase price for the IO.

The Company may invest in Inverse IOs, interest on which is payable at a
floating rate that varies inversely with (and often at a multiple of) a
specified index, such as the prime rate, one-month, three-month or six-month
LIBOR, or a U.S. Treasury rate. Generally, if the index exceeds a certain
level, the Inverse IO receives no payments. Moreover, Inverse IOs generally
have a cap on the interest rate payable on such class.

Investors in Inverse IOs are subject to the risk that higher than
anticipated levels of the index could result in actual yields to investors
that are significantly lower than the anticipated yields, and that the
interest rate on the class will be 0% at or above specified levels of the
index. In addition, the interest rate on an Inverse IO cannot exceed its
specified maximum rate, regardless of the level of the index. Further, high
levels of the index

56
<PAGE>

(especially in combination with fast prepayment rates on the underlying
mortgage loans) may result in the failure of the Company to recover fully its
investments in Inverse IOs. For example, the holder of an Inverse IO with a
per annum interest rate equal to 8.5% minus one-month LIBOR, subject to a
maximum rate of 8.5%, would receive no interest if one-month LIBOR were to
equal or exceed 8.5%. Moreover, under no circumstance will such Inverse IO
accrue interest at a rate greater than 8.5% per annum.

Changes in the index may not correlate with changes in mortgage interest
rates. It is possible that lower prevailing mortgage interest rates (which
would be expected to result in faster prepayments) could occur concurrently
with a higher level of the index, thereby compounding the negative effects of
each separate factor on the yields to investors in the Inverse IOs.
Conversely, higher prevailing mortgage interest rates (which would be expected
to result in slower prepayments) could occur concurrently with a lower level
of the index.

It is highly unlikely that the index will remain constant at any level. The
timing of changes in the level of the index may affect the actual yield to the
Company, even if the average level is consistent with the Company's
expectation. In general, the earlier a change in the level of the index, the
greater the effect on the Company's yield. As a result, the effect on the
Company's yield of the index level that is higher (or lower) than the rate
anticipated by the Company during earlier periods is not likely to be offset
by a later equivalent reduction (or increase).

The Company intends to invest in Sub IOs. Interest otherwise allocable to
Sub IOs generally is withheld and used to make payments on more senior classes
or to fund a reserve account for the protection of senior classes until over
collateralization or the balance in the reserve account reaches a specified
level. In those cases, interest on the Sub IO generally will be paid to the
holders of the Sub IO only after the balance in the reserve account reaches
the specified level. Sub IOs of this nature provide credit support to the
senior classes, and thus bear substantial credit risk. Moreover, because a Sub
IO receives only interest payments, its yield is extremely sensitive not only
to default losses but also to changes in the weighted average life of the
class, which in turn is dictated by the rate of prepayments (including as a
result of defaults) on the underlying loans. See "Risk Factors--Risks Related
to Investments in MBS Interests--Yield on Subordinated MBS Interests, IOs and
POs May Be Affected Adversely By Interest Rate Changes."

POS

The Company may invest in POs, which do not provide for payment of periodic
interest, but only provide for payment of the stated principal amount at
maturity or earlier prepayment of the underlying loans. The Company believes
that its POs will be affected adversely by slower than anticipated prepayment
rates. Generally, a rising interest rate environment will result in the
interest rate to be paid by the borrower pursuant to the terms of a fixed rate
loan becoming relatively more favorable to that borrower, decreasing the
likelihood of that borrower making a prepayment on that loan. Slower than
anticipated prepayment rates can result in a significant decrease in the yield
realized by the Company on its investments in POs. See "Risk Factors--Risks
Related to Investments in MBS Interests--Yield on Subordinated MBS Interests,
IOs and POs May Be Affected Adversely By Interest Rate Changes."

REAL PROPERTY

The yield on the Company's investments in Real Property, including
Distressed Real Property, if any, will depend upon the price that the Company
pays for such investments, the costs of capital improvements and other costs
of managing the properties, the level of rents and other income generated by
the properties, the length of time between acquisition and disposition and the
price at which the Company ultimately disposes of such properties. The yield
on such investments may be adversely affected by factors beyond the Company's
control, such as adverse changes in economic conditions, neighborhood
characteristics and competition from other properties offering the same or
similar services. See "Risk Factors--Risks Related to Investments in Real
Property--Conditions Beyond Company's Control May Affect Adversely the Value
of Real Property." No assurances can be given, however, that the Company will
be successful in this endeavor.

57
<PAGE>

INITIAL INVESTMENTS
GENERAL

The Company intends to acquire from Imperial Credit and SPB the Initial
Investments consisting of Mortgage Loans having an aggregate principal balance
of approximately $104 million (the "Initial Mortgage Loans") and certain MBS
Interests, all of which are described below, for an aggregate cash price equal
to approximately $163 million plus accrued interest (39% of the expected net
proceeds of this Offering).

The Initial Mortgage Loans are Term Loans originated or acquired by SPB. The
MBS Interests to be acquired at Closing are interests in CMBS backed by Term
Loans originated or acquired by SPB. These MBS Interests include various
classes issued pursuant to the J. P. Morgan Commercial Mortgage Finance Corp.,
Commercial Mortgage Pass-Through Certificates, Series 1997-SPTL-C1
transaction, which closed on June 27, 1997, and the Southern Pacific Thrift &
Loan Association, Commercial Mortgage Pass-Through Certificates, Series 1996-
C1 transaction, which closed on September 30, 1996.

The purchase prices to be paid by the Company for the Initial Investments
were derived by considering a number of factors, including the amount and
timing of potential net cash flows, the range of possible returns, and the
risks associated with such Initial Investments, including the risk that the
ultimate return will be significantly affected by losses, if any, realized on
the Initial Mortgage Loans or the mortgage loans underlying the MBS Interests
included in the Initial Investments, and other factors that are not controlled
or controllable by the Company, such as prepayment experience on the
underlying mortgage loans. These factors may result in a below market rate of
return or a loss on the purchase prices paid for the Initial Investments in
certain situations. See "Risk Factors--Risks Related to Investments in MBS
Interests--Subordinated MBS Interests are Subject to Greater Credit Risks Than
More Senior Classes."

Imperial Credit and its affiliates will realize a book gain on the sale of
the Initial Investments to the Company, subject to the terms of the definitive
agreement to purchase the Initial Investments, satisfaction of GAAP sale
criteria, and consummation of the transaction. The sale of the Initial
Investments to the Company will be subject to the consent of the Independent
Directors.

The Company believes that the descriptions of the Initial Investments set
forth below are summaries of the material terms of the Initial Investments. In
the case of the Initial Mortgage Loans, they have been taken from information
provided by the servicer. In the case of the MBS Interests, they have been
taken from the prospectus and prospectus supplement for each MBS Interest
included therein (the "Underlying Prospectuses") and the information provided
to the Company by the trustees of the series of MBS Interests included
therein. Such information with respect to the Initial Mortgage Loans and MBS
Interests, which is peculiarly within the control of the servicer of the
Initial Mortgage Loans and the trustees and issuers of the MBS Interests, has
not been independently confirmed by the Company, the Manager or the
Underwriters, and is all the information on the subject that the Company
possesses or can acquire without unreasonable effort or expense.

THE INITIAL MORTGAGE LOANS

GENERAL. The Initial Mortgage Loans will have original terms to maturity of
not more than 360 months. Each of those Initial Mortgage Loans is secured by a
first lien mortgage or deed of trust (each, a "Mortgage") on multifamily,
retail, office, industrial, mobile home, mixed use (including mixed commercial
uses and mixed commercial and residential uses) or other commercial Real
Property. The Initial Mortgage Loans were originated primarily by SPB
(formerly known as SPTL) and will be sold to the Company immediately after the
consummation of this Offering. SPB (formerly known as SPTL) will retain and
perform the primary servicing of the Initial Mortgage Loans on behalf and at
the direction of the Company.

58
<PAGE>

other things, perceived weaknesses in various policies related to lending,
investment, audit, security and information systems and violations of certain
Federal statutes in connection with certain transactions with affiliates and
certain other laws, regulations and statutes. Following that examination, the
FDIC, the DOC and SPB entered into a Memorandum of Understanding (the "MOU")
which required SPB to take certain actions to correct the perceived
deficiencies. Correspondences from SPB to the FDIC states that SPB has made
significant progress in rectifying many of the deficiencies outlined in the
MOU by implementing various operational and other policies and procedures.
Approximately 95% of the Initial Mortgage Loans were originated after the
FDIC, the DOC and SPB entered into the MOU. See "Operating Policies and
Objectives--The SPB Memorandum of Understanding."

REPRESENTATIONS AND WARRANTIES. SPB (formerly known as SPTL) will represent
and warrant as of the Closing Date of this Offering with respect to each
Initial Mortgage Loan that, among other things, (i) such Initial Mortgage Loan
is secured by a Mortgage that is a valid and subsisting first priority lien on
the Real Property purported to be encumbered thereby (each such Real Property
is referred to as a "Mortgaged Property") free and clear of any prior liens,
claims or encumbrances, subject only to certain permitted encumbrances; (ii)
such Mortgage, together with any separate security agreements, establishes a
perfected first priority security interest in favor of the holder of the
Mortgage in all the related mortgagor's personal property constituting
fixtures used in, and reasonably necessary to operate, the Mortgaged Property
and, to the extent a security interest may be created therein, the proceeds
arising from the Mortgaged Property and such fixtures subject only to certain
permitted encumbrances; (iii) there is an assignment of leases and rents
provision creating a perfected first priority security interest in leases and
rents arising in respect of the related Mortgaged Property, subject only to
certain permitted encumbrances; (iv) there are no mechanics' or other similar
liens affecting the Mortgaged Property which are or may be prior or equal to
the lien of the Mortgage, except those insured against pursuant to the
applicable title insurance policy; (v) the related mortgagor has good and
indefeasible title to the related Mortgaged Property; (vi) the Mortgaged
Property is covered by a title insurance policy insuring that the Mortgage is
a valid and perfected first lien, subject only the certain permitted
encumbrances (vii) no claims have been made under the related title insurance
policy and such policy is in full force and effect and insures SPB as the
owner of the Initial Mortgage Loan; (viii) at the time of the assignment of
such Initial Mortgage Loan to ICCMIC, SPB had good title to and was the sole
owner of such Initial Mortgage Loan free and clear of any pledge, lien or
encumbrance (other than an encumbrance in favor of The Federal Home Loan Bank
of San Francisco, which will be released upon its receipt of certain funds to
be delivered to it from the proceeds of the Closing), and such assignment will
validly transfer ownership of such Initial Mortgage Loan to ICCMIC free and
clear of any pledge, lien or encumbrance; (ix) the related assignment of
mortgage and related assignment of rents and leases is legal, valid and
binding and has been recorded or submitted for recording in the applicable
jurisdiction; (x) SPB's endorsement of the promissory note or other evidence
of indebtedness secured by the related Mortgage (such promissory note or other
evidence of indebtedness is referred to as a "Mortgage Note") constitutes the
legal and binding assignment of such Mortgage Note and together with an
assignment of mortgage and the assignment of the assignment of leases and
rents, legally and validly conveys all right, title and interest in such
Initial Mortgage Loan to ICCMIC; (xi) each Initial Mortgage Loan document is a
legal, valid and binding obligation of the parties thereto, enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by applicable federal and state laws and bankruptcy, insolvency,
reorganization or other loss relating to creditors' rights and general
equitable principles, and certain provisions of such Initial Mortgage Loan
documents are and may be unenforceable in whole or in part, but the inclusion
of such provisions does not render the Initial Mortgage Loan documents invalid
as a whole, and such Initial Mortgage Loan documents taken as a whole are
enforceable to the extent necessary and customary for the practical
realization of the rights and benefits purported to be afforded thereby; (xii)
unless otherwise disclosed in writing to the Company, such Initial Mortgage
Loan is not, as of the date of its sale to ICCMIC, and has not been at any
time during the 12 preceding months, more than 30 days delinquent in payments
of principal or interest; (xiii) SPB has not modified the terms of the related
Initial Mortgage Loan and the related Initial Mortgage Loan documents have not
been modified or waived in any material respect except as disclosed in writing
to the Company; (xiv) such Initial Mortgage Loan has not been satisfied,
cancelled, subordinated, released or rescinded and the related mortgagor has
not been released from any of its obligations under any Initial Mortgage Loan
documents; (xv) none of the Initial

59
<PAGE>

Mortgage Loan documents is subject to any right of rescission, set-off, valid
counterclaim or defense; (xvi) each Initial Mortgage Loan document complied in
all material respects with all material applicable state or federal laws, and
regulations; (xvii) the related Mortgaged Property is, in all material
respects, in compliance with, and is used and occupied in accordance with,
applicable laws; (xviii) the related Mortgaged Property is in good repair and
Seller has no knowledge of any condemnation proceedings with respect thereto
that are pending; (xix) there are no delinquent property taxes, and premiums
for all insurance policies required to be maintained pursuant to the related
Mortgage with respect to each Mortgaged Property have been paid to the extent
such amounts have become due; (xx) if so indicated to the Company in writing
with respect to such Initial Mortgage Loan, either an environmental site
assessment was prepared in connection with the origination of such Initial
Mortgage Loan or SPB reviewed a compilation of data bases made available by
several regulatory agencies constructed by a private service with respect to
an area within a certain radius surrounding the related Mortgaged Property,
and no such assessment or review revealed any known circumstances or
conditions and SPB has no knowledge of any circumstances or conditions with
respect to such Mortgaged Property (including any Mortgaged Property with
respect to which neither an assessment was prepared nor a review was performed
as described above), that would constitute or result in a material violation
of any environmental laws or require any expenditure material in relation to
the principal balance of such Initial Mortgage Loan to achieve or maintain
compliance in all material respects with any environmental laws; (xxi) the
documents governing such Initial Mortgage Loan require that the Mortgaged
Property be covered by insurance policies providing insurance against certain
losses or damage; (xxii) all amounts required to be deposited by the mortgagor
at origination of such Initial Mortgage Loan have been deposited; (xxiii) to
SPB's best knowledge, all significant leases are in full force and effect, and
there have been no material default by the related Mortgagor or, to SPB's best
knowledge, lessee; and (xxiv) to SPB's best knowledge, there are no pending or
threatened actions, suits or proceedings by or before any court or other
governmental authority against or effecting the related mortgagor under such
Initial Mortgage Loan or the Mortgaged Property which, if determined against
such mortgagor or Mortgaged Property, would materially and adversely affect
the value of such Mortgaged Property or the ability of the mortgagor to pay
principal, interest and other amounts due under such Mortgaged Loan.

SPB will agree to cure any breach of the foregoing representations and
warranties or to repurchase any Initial Mortgage Loans from the Company as to
which there exists any breach of any such representations or warranties that
materially and adversely affects the interests of the Company therein. SPB
will covenant with the Company to repurchase any such Initial Mortgage Loan
from the Company or cure any such breach within 90 days of receiving notice
thereof. The sole remedy available to the Company is the obligation of SPB to
cure or repurchase any Initial Mortgage Loan in connection with which there
has been a breach of any such representation or warranty which materially and
adversely affects the interest of the Company in such Initial Mortgage Loan.

In addition, Imperial Credit will represent as of the Closing Date to the
Company that there are no circumstances or conditions with respect to any
Mortgaged Property that would constitute or result in a material violation of
any environmental laws or require an expenditure material in relation to the
principal balance of the related Initial Mortgage Loan to achieve or maintain
compliance in all material respects with any environmental laws. Imperial
Credit will agree to purchase from the Company (within 30 days of receiving
notice thereof) any Initial Mortgage Loan as to which there exists a breach of
such representation that materially and adversely affects the interests of the
Company in such Initial Mortgage Loan. There can be no assurance that Imperial
Credit will be able to purchase any or all such Initial Mortgage Loans
following any such breach.

CERTAIN CHARACTERISTICS OF THE INITIAL MORTGAGE LOANS. The due dates for
most of the Initial Mortgage Loans occur on the first day of a calendar month.
SPB will represent that all of the Initial Mortgage Loans are secured by
perfected first priority liens on the related Mortgaged Properties.
Substantially all of the Mortgaged Properties are not owner-occupied. As of
September 30, 1997 (the "Cut-Off Date"), no Initial Mortgage Loan was more
than 30 days delinquent. In addition, as of the Cut-Off Date, the Initial
Mortgage Loans had the additional characteristics set forth below. The totals
in the tables may not add up to 100% due to rounding.

60
<PAGE>

MORTGAGE INTEREST RATES(1)
<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
MORTGAGE INTEREST RATES LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
- ----------------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
7.0001% - 7.5000%....... 80 29.63% $ 35,566,464 34.09%
7.5001 - 8.0000........ 116 42.96 40,878,559 39.18
8.0001 - 8.5000........ 19 7.04 10,119,410 9.70
8.5001 - 9.0000........ 20 7.41 5,543,520 5.31
9.0001 - 9.5000........ 18 6.67 4,778,219 4.58
9.5001 - 10.0000........ 6 2.22 3,549,577 3.40
10.0001 - 10.5000........ 2 0.74 450,370 0.43
10.5001 - 11.0000........ 1 0.37 173,347 0.17
11.0001 - 11.5000........ 1 0.37 289,765 0.28
11.5001 - 12.0000........ 7 2.59 2,996,533 2.87
--- ------ ------------ ------
Total: 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>
Weighted Average Mortgage Interest Rate: 8.10%
- --------
(1) All of the Mortgage Loans are adjustable rate mortgage loans (the "ARM
Loans").

PRINCIPAL BALANCES

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
PRINCIPAL NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
BALANCE AS OF MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
THE CUT-OFF DATE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
---------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
$0.01 -
$ 100,000............. 15 5.56% $ 1,156,321 1.11%
100,000.01 -
200,000............. 93 34.44 14,068,326 13.48
200,000.01 -
300,000............. 55 20.37 13,560,077 13.00
300,000.01 -
400,000............. 29 10.74 10,371,602 9.94
400,000.01 -
500,000............. 23 8.52 10,310,248 9.88
500,000.01 -
600,000............. 10 3.70 5,719,328 5.48
600,000.01 -
700,000............. 12 4.44 7,973,435 7.64
700,000.01 -
800,000............. 6 2.22 4,508,743 4.32
800,000.01 -
900,000............. 3 1.11 2,489,628 2.39
900,000.01 -
1,000,000............. 9 3.33 8,575,262 8.22
1,000,000.01 -
1,100,000............. 1 0.37 1,047,762 1.00
1,100,000.01 -
1,200,000............. 1 0.37 1,198,368 1.15
1,200,000.01 -
1,300,000............. 1 0.37 1,245,936 1.19
1,300,000.01 -
1,400,000............. 2 0.74 2,715,259 2.60
1,400,000.01 -
1,500,000............. 3 1.11 4,458,972 4.27
1,500,000.01 -
1,600,000............. 2 0.74 3,126,720 3.00
1,700,000.01 -
1,800,000............. 1 0.37 1,760,000 1.69
1,800,000.01 -
1,900,000............. 1 0.37 1,821,147 1.75
2,300,000.01 -
2,400,000............. 1 0.37 2,338,676 2.24
2,900,000.01 -
3,000,000............. 2 0.74 5,899,954 5.65
--- ------ ------------ ------
Total:.................. 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

Average Principal Balance: $386,466

INDICES

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
PERCENT BY AGGREGATE PRINCIPAL
NUMBER OF NUMBER OF PRINCIPAL BALANCE AS OF
MORTGAGE MORTGAGE BALANCE AS OF THE CUT-
INDEX LOANS LOANS THE CUT-OFF DATE OFF DATE
----- --------- ---------- ---------------- -------------
<S> <C> <C> <C> <C>
Six-Month LIBOR............. 226 83.70% $ 83,954,193 80.46%
Bank of America Prime....... 20 7.41 4,862,000 4.66
One-Year CMT................ 24 8.89 15,529,571 14.88
--- ------ ------------ ------
Total:...................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

61
<PAGE>

NOTE MARGINS

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
PERCENT BY AGGREGATE PRINCIPAL
NUMBER OF NUMBER OF PRINCIPAL BALANCE AS OF
MORTGAGE MORTGAGE BALANCE AS OF THE CUT-
NOTE MARGIN LOANS LOANS THE CUT-OFF DATE OFF DATE
----------- --------- ---------- ---------------- -------------
<S> <C> <C> <C> <C>
2.501%- 3.000%.............. 7 2.59% $ 5,443,632 5.22%
3.001 - 3.500............... 33 12.22 16,380,149 15.70
3.501 - 4.000............... 148 54.81 49,942,516 47.86
4.001 - 4.500............... 54 20.00 20,688,678 19.83
4.501 - 5.000............... 21 7.78 9,969,324 9.55
5.001 - 5.500............... 7 2.59 1,921,465 1.84
--- ------ ------------ ------
Total:...................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

Weighted Average Note Margin: 3.96%

MINIMUM MORTGAGE INTEREST RATES

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
MINIMUM NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MORTGAGE MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
INTEREST RATE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
7.001%- 7.500%.......... 93 34.44% $ 40,231,422 38.56%
7.501 - 8.000........... 137 50.74 48,734,250 46.70
8.001 - 8.500........... 22 8.15 11,097,396 10.64
8.501 - 9.000........... 15 5.56 2,378,429 2.28
9.001 - 9.500........... 3 1.11 1,904,267 1.82
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

Weighted Average Minimum Mortgage Interest Rate: 7.80%

MAXIMUM MORTGAGE INTEREST RATES

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
MAXIMUM NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MORTGAGE MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
INTEREST RATE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
13.001%- 13.500% ........ 105 38.89% $ 43,768,869 41.95%
13.501 - 14.000.......... 129 47.78 47,608,678 45.63
14.001 - 14.500.......... 17 6.30 8,265,414 7.92
14.501 - 15.000.......... 12 4.44 1,913,807 1.83
15.001 - 15.500.......... 3 1.11 1,904,267 1.82
15.501 - 16.000.......... 2 0.74 213,844 0.20
16.001 - 16.500.......... 1 0.37 420,108 0.40
17.001 - 17.500.......... 1 0.37 250,777 0.24
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

Weighted Average Maximum Mortgage Interest Rate: 13.79%

62
<PAGE>

PERIODIC CAP

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
PRINCIPAL
BALANCE OF
PERCENT BY AGGREGATE MORTGAGE LOANS
NUMBER OF NUMBER OF PRINCIPAL AS OF
MORTGAGE MORTGAGE BALANCE AS OF THE CUT-
PERIODIC CAP LOANS LOANS THE CUT-OFF DATE OFF DATE
------------ --------- ---------- ---------------- --------------
<S> <C> <C> <C> <C>
1.001% - 1.500%............ 195 72.22% $ 70,124,712 67.20%
1.501 - 2.000.............. 74 27.41 33,831,052 32.42
3.501 - 4.000.............. 1 0.37 390,000 0.37
--- ------ ------------ ------
Total:..................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

Weighted Average Periodic Cap: 1.67%

NEXT RATE ADJUSTMENT DATE

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
NEXT RATE MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
ADJUSTMENT DATE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
--------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
October 1, 1997.......... 49 18.15 17,679,439 16.94
November 1, 1997......... 51 18.89 20,634,022 19.77
December 1, 1997......... 46 17.04 17,947,098 17.20
December 10, 1997........ 1 0.37 314,329 0.30
January 1, 1998.......... 52 19.26 19,694,471 18.87
February 1, 1998......... 39 14.44 16,435,728 15.75
March 1, 1998............ 32 11.85 11,640,677 11.16
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======

ORIGINAL TERM TO MATURITY IN MONTHS

<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
ORIGINAL NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
TERM IN MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
MONTHS LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
-------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
180...................... 4 1.48% $ 2,712,597 2.60%
240...................... 4 1.48 4,001,623 3.83
300...................... 4 1.48 2,446,932 2.35
360...................... 258 95.56 95,184,612 91.22
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

Weighted Average Original Term to Maturity in Months: 349

63
<PAGE>

REMAINING TERM TO MATURITY IN MONTHS

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
PERCENT BY PRINCIPAL PRINCIPAL
REMAINING NUMBER OF NUMBER OF BALANCE AS OF BALANCE AS OF
TERM IN MORTGAGE MORTGAGE THE CUT- THE CUT-
MONTHS LOANS LOANS OFF DATE OFF DATE
--------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
169 - 180...................... 4 1.48% $ 2,712,597 2.60%
229 - 240...................... 4 1.48 4,001,623 3.83
289 - 300...................... 4 1.48 2,446,932 2.35
325 - 336...................... 6 2.22 2,954,875 2.83
337 - 348...................... 2 0.74 181,021 0.17
349 - 360...................... 250 92.59 92,048,716 88.22
--- ------ ------------ ------
Total:......................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

Weighted Average Remaining Term to Maturity in Months: 345

YEAR OF FIRST DUE DATE

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
YEAR LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
---- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
1995..................... 6 2.22% $ 2,954,875 2.83%
1996..................... 4 1.48 1,268,309 1.22
1997..................... 260 96.30 100,122,580 95.95
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

YEAR OF SCHEDULED MATURITY

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
YEAR LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
---- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
2011..................... 1 0.37% $ 928,657 0.89%
2012..................... 5 1.85 2,286,265 2.19
2017..................... 4 1.48 4,001,623 3.83
2022..................... 4 1.48 2,446,932 2.35
2025..................... 6 2.22 2,954,875 2.83
2026..................... 6 2.22 989,357 0.95
2027..................... 244 90.37 90,738,055 86.96
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

64
<PAGE>

The "Debt Service Coverage Ratio" for any Initial Mortgage Loan is the ratio
of Net Operating Income produced by the related Mortgaged Property, in most
cases as underwritten by SPB, to the amounts of principal and interest, not
fully indexed, due under such Initial Mortgage Loan as of the Cut-off Date.
Generally, "Net Operating Income" or "NOI" for a Mortgaged Property equals the
operating revenues for such Mortgaged Property minus its operating expenses
and replacement reserves, but without giving effect to debt service,
depreciation, non-recurring capital expenditures, tenant improvements, leasing
commissions and similar items. The Net Operating Income of a Mortgage Property
was determined based on SPB's underwriting guidelines, including appraisals,
and do not necessarily reflect the operating statements for the Mortgaged
Properties obtained from the respective Mortgagors. The information contained
herein was unaudited, and the Company has made no attempt to verify its
accuracy. The information derived from these sources was not uniform among the
Initial Mortgage Loans.

DEBT SERVICE COVERAGE RATIOS
FOR MORTGAGE LOANS

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
PRINCIPAL
PERCENT BY AGGREGATE BALANCE AS
NUMBER OF NUMBER OF PRINCIPAL OF
DEBT SERVICE MORTGAGE MORTGAGE BALANCE AS OF THE CUT-OFF
COVERAGE RATIO LOANS LOANS THE CUT-OFF DATE DATE
-------------- --------- ---------- ---------------- -----------
<S> <C> <C> <C> <C>
0.5001 - 1.0000............... 1 0.37% $ 144,098 0.14%
1.0001 - 1.5000............... 52 19.26 22,736,201 21.79
1.5001 - 2.0000............... 149 55.19 63,798,326 61.14
2.0001 - 2.5000............... 46 17.04 13,038,058 12.50
2.5001 - 3.0000............... 16 5.93 3,220,817 3.09
3.0001 - 3.5000............... 4 1.48 974,399 0.93
3.5001 - 4.0000............... 1 0.37 200,532 0.19
4.0001 - 4.5000............... 1 0.37 233,333 0.22
--- ------ ------------ ------
Total:........................ 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

Weighted Average Debt Service Coverage Ratio: 1.74

YEAR OF CALCULATION OF UNDERWRITTEN NOI

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
YEAR LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
---- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Unknown.................. 1 0.37% $ 199,452 0.19%
1987 .................... 2 0.74 180,424 0.17
1994..................... 1 0.37 1,550,166 1.49
1995..................... 6 2.22 1,334,953 1.28
1996..................... 7 2.59 3,191,854 3.06
1997..................... 253 93.70 97,888,915 93.81
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

65
<PAGE>

The Initial Mortgage Loans are secured by Mortgaged Properties located in 16
different states. The table below sets forth the states in which the Mortgaged
Properties are located:

GEOGRAPHIC DISTRIBUTION

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
STATE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
----- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Arizona................. 30 11.11% $ 10,366,012 9.93%
California
(Southern)(1).......... 133 49.26 43,965,757 42.13
California
(Northern)(1).......... 15 5.56 9,009,441 8.63
Colorado................ 20 7.41 5,988,681 5.74
Florida................. 5 1.85 1,047,038 1.00
Idaho................... 1 0.37 139,363 0.13
Illinois................ 1 0.37 1,496,007 1.43
Nebraska................ 1 0.37 398,860 0.38
Nevada.................. 2 0.74 1,109,452 1.06
New Jersey ............. 7 2.59 3,620,181 3.47
New Mexico ............. 1 0.37 59,445 0.06
New York................ 2 0.74 2,508,447 2.40
Ohio ................... 1 0.37 159,672 0.15
Oregon.................. 20 7.41 9,266,214 8.88
Texas .................. 9 3.33 4,107,662 3.94
Utah.................... 1 0.37 129,560 0.12
Washington.............. 21 7.78 10,973,972 10.52
--- ------ ------------ ------
Total:.................. 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>
- --------
(1) Mortgaged Properties are deemed to be in California (Southern) if located
in California with zip codes less than or equal to 93600. Mortgaged
Properties are deemed to be in California (Northern) if located in
California with zip codes greater than 93600.

PROPERTY TYPES(1)

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
PROPERTY TYPE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Commercial............... 1 0.37% $ 289,765 0.28%
Industrial............... 7 2.59 2,819,594 2.70
Mixed Use................ 21 7.78 9,864,588 9.45
Mobile Home.............. 1 0.37 373,876 0.36
Multifamily.............. 201 74.44 71,274,886 68.31
Office................... 12 4.44 5,352,227 5.13
Retail................... 27 10.00 14,370,828 13.77
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>
- --------
(1) Property types reflect primary use of property.

66
<PAGE>

LOAN PURPOSES(1)

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
LOAN MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
PURPOSE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Purchase................. 145 53.70% $ 56,467,526 54.12%
Refinance................ 125 46.30 47,878,238 45.88
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>
- --------
(1) Includes cash-out refinancing

Approximately 97.4% of the Initial Mortgage Loans are subject to prepayment
premiums. In general, these prepayment terms provide that if the related
mortgagor prepays the principal balance thereof in an amount in excess of 20%
of the original principal balance of the related Mortgage Loan for any 12-
month period during a certain period of time following the origination (the
"Prepayment Period"), such mortgagor will be required to pay a prepayment
premium equal to six months' interest at the Mortgage Interest Rate then in
effect for such Initial Mortgage Loan on the amount of such prepayment in
excess of 20% of the original principal amount thereof (a "Prepayment
Premium"). The following table sets forth the approximate months remaining in
the Prepayment Premium Period of the Initial Mortgage Loans.

MONTHS OF PREPAYMENT PREMIUM PERIOD
REMAINING AS OF THE CUT-OFF DATE

<TABLE>
<CAPTION>
PERCENT BY
MONTHS OF PERCENT BY AGGREGATE AGGREGATE
PREPAYMENT NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
PREMIUM PERIOD MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
REMAINING LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
-------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
None..................... 5 1.85% $ 2,731,504 2.62%
1 - 6.................. 6 2.22 3,251,618 3.12
7 - 12.................. 15 5.56 6,977,535 6.69
13 - 18.................. 2 0.74 181,021 0.17
25 - 30.................. 30 11.11 11,116,101 10.65
31 - 36.................. 212 78.52 80,087,985 76.75
--- ------ ------------ ------
Total:................... 270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

67
<PAGE>

The following table sets forth the range of Cut-off Date LTV Ratios of the
Initial Mortgage Loans. A "Cut-off Date LTV Ratio" is a fraction, expressed as
a percentage, the numerator of which is the Cut-off Date Balance of an Initial
Mortgage Loan, and the denominator of which is the appraised value of the
related Mortgaged Property as determined by an appraisal thereof obtained in
connection with the origination of such Initial Mortgage Loan. The appraised
value does not incorporate any pledges of additional collateral, if any, which
under SPB's underwriting guidelines, are taken into account in approving loans
with a higher LTV than 75%. Because the value of Mortgaged Properties at the
maturity date may be different than such appraisal value, there can be no
assurance that the loan-to-value ratio for any Initial Mortgage Loan
determined at any time following origination thereof will be lower than the
Cut-off Date LTV Ratio, notwithstanding any positive amortization of such
Initial Mortgage Loan. It is possible that the market value of a Mortgaged
Property securing an Initial Mortgage Loan may decline between the origination
thereof and the related maturity date.

An appraisal of each of the Mortgaged Properties was made between November
1994 and July 1997. It is possible that the market value of a Mortgaged
Property securing an Initial Mortgage Loan has declined since the most recent
appraisal for such Mortgaged Property, and that such market values could
decline in the future. All appraisals were obtained by SPB in accordance with
the requirements of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, as amended ("FIRREA").

CUT-OFF DATE LTV RATIOS

<TABLE>
<CAPTION>
PERCENT BY
PERCENT BY AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF
CUT-OFF DATE LTV RATIOS LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE
----------------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
30.001% - 35.000%....... 5 1.85% $ 2,569,494 2.46%
35.001 - 40.000......... 5 1.85 773,404 0.74
40.001 - 45.000......... 7 2.59 1,422,721 1.36
45.001 - 50.000......... 19 7.04 4,648,981 4.46
50.001 - 55.000......... 19 7.04 8,155,356 7.82
55.001 - 60.000......... 33 12.22 14,059,002 13.47
60.001 - 65.000......... 62 22.96 19,266,437 18.46
65.001 - 70.000......... 78 28.89 28,462,932 27.28
70.001 - 75.000......... 34 12.59 20,451,204 19.60
75.001 - 80.000......... 4 1.48 3,217,177 3.08
80.001 - 85.000......... 2 0.74 914,439 0.88
85.001 - 90.000......... 1 0.37 89,850 0.09
95.001 -100.000......... 1 0.37 314,767 0.30
--- ------ ------------ ------
270 100.00% $104,345,764 100.00%
=== ====== ============ ======
</TABLE>

Weighted Average Cut-off Date LTV Ratio: 63.93%

68
<PAGE>

INDICES

General. The Mortgage Interest Rate will generally adjust periodically to a
rate equal to the sum of the related Index and the margin set forth on the
related Mortgage Note (the "Note Margin"). The Index on each Initial Mortgage
Loan will be Six-Month LIBOR, Bank of America Prime or One-Year U.S. Treasury,
all as more fully described below. The Mortgage Interest Rate on each Mortgage
Loan prior to the first date on which such Mortgage Interest Rate adjusts
(each such date, a "Rate Adjustment Date") is typically an introductory rate
which is generally lower than the rate which would have been in effect based
on the related Index and Note Margin. A description of each Index is set forth
below.

Six-Month LIBOR Index. The Index for 80.46% of the Initial Mortgage Loans
will be Six-Month LIBOR. Six-Month LIBOR for any Six-Month LIBOR Mortgage Loan
will generally be calculated for each six-month accrual period as the six-
month London Interbank Offered Rate for U.S. Dollar deposits published in The
Wall Street Journal on the 25th day (or if such day is not a business day, the
following business day) of the month preceding the month of the Rate
Adjustment Date for such Initial Mortgage Loan. Listed below are levels of
Six-Month LIBOR as published by The Wall Street Journal on such dates. Such
levels may fluctuate significantly from month to month as well as over longer
periods and may not increase or decrease in a constant pattern from period to
period. The following does not purport to be representative of future levels
of Six-Month LIBOR as published in The Wall Street Journal. No assurance can
be given as to the level of Six-Month LIBOR for any Rate Adjustment Date or
during the life of any Six-Month LIBOR Mortgage Loan.

SIX-MONTH LIBOR

<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
January............................... 4.313% 3.438% 3.375% 6.750% 5.735% 5.719%
February.............................. 4.500 3.313 4.000 6.438 5.188 5.594
March................................. 4.625 3.313 4.188 6.438 5.469 5.938
April................................. 4.250 3.313 4.625 6.313 5.563 6.031
May................................... 4.125 3.438 5.000 6.125 5.594 5.969
June.................................. 4.125 3.563 5.000 5.813 5.781 5.906
July.................................. 3.625 3.563 5.250 5.938 5.844 5.813
August................................ 3.563 3.438 5.313 6.000 5.688 5.844
September............................. 3.438 3.375 5.688 5.844 5.875 5.813
October............................... 3.563 3.375 5.938 5.906 5.625 --
November.............................. 3.938 3.500 6.313 5.688 5.531 --
December.............................. 3.625 3.500 6.938 5.594 5.688 --
</TABLE>

69
<PAGE>

Bank of America Prime Index. The Index for 4.66% of the Initial Mortgage
Loans will be Bank of America Prime. Bank of America Prime for any Bank of
America Prime Mortgage Loan will be the prime lending rate of the Bank of
America N.T. & S.A. as publicly announced by Bank of America N.T. & S.A. as
its prime rate as most recently available on the indicated Rate Adjustment
Dates. Listed below are levels of Bank of America Prime that were applicable
to mortgage loans on such date. Such levels may fluctuate significantly from
month to month as well as over longer periods and may not increase or decrease
in constant pattern from period to period. The following does not purport to
be representative of future levels of Bank of America Prime. No assurance can
be given as to the level of Bank of America Prime for any Rate Adjustment Date
or during the life of any Bank of America Prime Mortgage Loan.

BANK OF AMERICA PRIME

<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
January 1................................... 6.50% 6.00% 6.00% 8.50% 8.50% 8.25%
February 1.................................. 6.50 6.00 6.00 9.00 8.25 8.25
March 1..................................... 6.50 6.00 6.00 9.00 8.25 8.25
April 1..................................... 6.50 6.00 6.25 9.00 8.25 8.50
May 1....................................... 6.50 6.00 6.75 9.00 8.25 8.50
June 1...................................... 6.50 6.00 7.25 9.00 8.25 8.50
July 1...................................... 6.50 6.00 7.25 9.00 8.25 8.50
August 1.................................... 6.00 6.00 7.25 8.75 8.25 8.50
September 1................................. 6.00 6.00 7.75 8.75 8.25 8.50
October 1................................... 6.00 6.00 7.75 8.75 8.25 8.50
November 1.................................. 6.00 6.00 7.75 8.75 8.25 --
December 1.................................. 6.00 6.00 8.50 8.75 8.25 --
</TABLE>

70
<PAGE>

One-Year U.S. Treasury Index. The Index for 14.88% of the Initial Mortgage
Loans will be the One-Year U.S. Treasury. The One-Year U.S. Treasury is
currently calculated based on information reported in the Federal Reserve
board's Statistical Release No. H.15(519). Listed below are the weekly average
yields on actively traded U.S. Treasury securities adjusted to a constant
maturity of one year "one-year CMT" as reported by the Federal Reserve Board
in Statistical Release No. H.15(519) that was most recently available as of
the date indicated. Such average yields may fluctuate significantly from week
to week as well as over longer periods and may not increase or decrease in
constant pattern from period to period. The following does not purport to be
representative of future average yields. No assurance can be given as to the
average yields on such U.S. Treasury securities on any Rate Adjustment Date or
during the life of any One-Year Treasury Mortgage Loan.

ONE-YEAR U.S. TREASURY

<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
January 1............................. 4.170% 3.643% 3.600% 7.120% 5.300% 5.500%
February 1............................ 4.142 3.408 3.510 6.950 5.050 5.610
March 1............................... 4.373 3.312 4.010 6.540 5.040 5.470
April 1............................... 4.644 3.300 4.360 6.370 5.420 5.940
May 1................................. 4.324 3.184 4.900 6.240 5.520 6.010
June 1................................ 4.267 3.550 5.290 5.920 5.590 5.850
July 1................................ 4.136 3.526 5.300 5.590 5.790 5.650
August 1.............................. 3.532 3.530 5.510 5.720 5.850 5.540
September 1........................... 3.518 3.366 5.610 5.810 5.640 5.540
October 1............................. 3.156 3.392 5.850 5.570 5.720 5.470
November 1............................ 3.482 3.462 6.220 5.580 5.560 --
December 1............................ 3.755 3.610 6.630 5.440 5.420 --
</TABLE>

The tables on the following pages show certain characteristics of the
largest 50 Initial Mortgage Loans, based upon information provided by SPB as
of the Cut-off Date.

71
<PAGE>

CERTAIN CHARACTERISTICS OF THE LARGEST 50 INITIAL MORTGAGE LOANS AS OF THE
CUT-OFF DATE

<TABLE>
<CAPTION>
LOAN ZIP PROPERTY YEAR UNITS/ APPRAISAL APPRAISAL ORIGINAL
NUMBER ADDRESS CITY STATE CODE TYPE(1) BUILT SF(2) VALUE DATE LTV(3) BALANCE
------ ---------------- ---------------- ----- ----- ----------- ----- ------- ---------- --------- ------ ----------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
236313197 251 Hilltop
Drive Redding CA 96003 Multifamily 1978 149 $4,500,000 24-Apr-97 66.51% $3,000,000
217013106 8800-8920
Limonite Ave. Riverside CA 92509 Retail 1981 93,845 4,250,000 4-Mar-97 68.40 2,915,000
287013239 9 West 20th
Street New York NY 10011 Mixed Use 1920 30,318 3,930,000 27-May-97 59.51 2,350,000
216313341 215 E. 15th
Street Santa Ana CA 92701 Multifamily 1985 74 2,350,000 2-Jul-97 77.50 1,822,500
216313346 1354, 1374,
1378, 1384, 1388
& 1394 5th Upland CA 91786 Multifamily 1962 80 2,360,000 10-Jul-97 74.58 1,760,000
256313054 12704-14 49th
Av/4704-4810
127th St Lakewood WA 98499 Multifamily 1988 94 2,200,000 24-Feb-97 71.66 1,582,500
227011047 9935 Beverly Bl Los Angeles CA 90660 Industrial 1973 213,956 4,650,000 11-Nov-94 33.34 1,650,000
277013112 801 East
Algonquin Road Schaumburg IL 60173 Retail 1987 8,782 2,305,000 13-Mar-97 64.90 1,500,000
267013227 16 & 28 SW First
Avenue Portland OR 97204 Mixed Use 1890 33,408 3,200,000 13-May-97 46.60 1,500,000
266313151 6622-6766 North
Fessenden Street Portland OR 97203 Multifamily 1972 72 2,515,000 6-Mar-97 58.52 1,475,000
266313003 1313 NE 131st
Place Portland OR 97233 Multifamily 1965 51 1,865,000 11-Dec-96 73.48 1,375,500
216313045 13633 Doty
Avenue Hawthorne CA 90250 Multifamily 1973 80 1,875,000 20-Mar-97 71.73 1,350,000
227013233 3910 North Long
Beach Boulevard Long Beach CA 90806 Retail 1991 7,231 1,680,000 18-Apr-97 74.16 1,250,000
217013283 8500-8522 South
Broadway Los Angeles CA 90003 Retail 1963 27,370 2,000,000 24-Jun-97 59.92 1,200,000
216313174 1414 North 34th
Street Phoenix AZ 85008 Multifamily 1970 66 2,000,000 28-Apr-97 52.39 1,050,000
276313092 201 Passaic
Avenue Harrison NJ 07029 Multifamily 1986 24 1,335,000 11-Feb-97 74.75 1,000,000
256313007 17 West Casino
Road Everett WA 98204 Multifamily 1979 40 1,335,000 25-Nov-96 74.25 995,000
216313264 11433 Rochester
Avenue Los Angeles CA 90025 Multifamily 1962 18 1,850,000 3-Jun-97 53.21 985,000
247013000 7211 Regency
Square Boulevard Houston TX 77036 Office 1979 61,135 1,800,000 19-Dec-96 52.99 960,000
256312971 10245 Des Moines
Way South Seattle WA 98168 Multifamily 1967 37 1,325,000 13-Jan-97 71.84 956,250
216313307 1132 N.
Wilmington
Boulevard Wilmington CA 90744 Multifamily 1987 62 1,250,000 10-Jun-97 74.95 937,500
237012543 100 Hegenberger
Road Oakland CA 94621 Office 1978 36,067 1,600,000 5-Sep-96 58.04 960,000
216313164 219 N. Avenue 51 Los Angeles CA 90042 Multifamily 1991 44 1,400,000 24-Mar-97 65.85 924,000
246313225 6130 North
Seventh Street Phoenix AZ 85014 Multifamily 1967 79 1,425,000 17-Apr-97 63.76 910,000
216313184 2815 Peavy Road Dallas TX 75228 Multifamily 1970 102 1,200,000 14-Apr-97 69.90 840,000
246313181 1065-1095 South
Quivas Street Denver CO 80223 Multifamily 1970 84 1,625,000 4-Apr-97 50.97 830,000
256313100 6334 Rainer
Avenue South Seattle WA 98118 Multifamily 1961 54 1,225,000 21-Mar-97 67.16 825,000
227013178 111 Avenida
Palizada San Clemente CA 92672 Retail 1956 18,244 990,000 17-Apr-97 80.64 800,000
216312997 3925 W. Walnut
St. Garland TX 75042 Multifamily 1964 116 1,229,000 17-Feb-97 64.58 798,000
226312906 333-339
Halesworth
Street Santa Ana CA 92701 Multifamily 1979 39 1,210,000 10-Dec-96 64.72 786,500
287013091 1139-1141 Main
Ave. Clifton NJ 07013 Mixed Use 1922 2 1,200,000 12-Feb-97 59.42 715,000
256313077 8501 Midvale Ave
N & 8500 Nesbit
Ave Seattle WA 98103 Multifamily 1962 23 975,000 3-Mar-97 73.05 715,000
216313064 21125 Saticoy St Canoga Park CA 91304 Multifamily 1971 30 1,100,000 10-Mar-97 64.39 711,000
217013110 1401 S. Arville
St Las Vegas NV 89102 Mixed Use 1978 14,304 1,220,000 4-Mar-97 57.23 700,000
246312983 625 Hathaway
Drive Colorado Springs CO 80915 Multifamily 1963 29 1,055,000 27-Jan-97 66.05 700,000
236313147 2001 and 2023
Broadway and
Rumrill San Pablo CA 94806 Multifamily 1994 24 925,000 25-Mar-97 74.97 695,000
216312992 11720 Runnymede
Street North Hollywood CA 91605 Multifamily 1983 52 1,050,000 12-Feb-97 65.04 686,000
266313163 2601-2639
Rossiter Lane Vancouver WA 98661 Multifamily 1969 20 1,025,000 7-Apr-97 66.62 685,000
266313339 17140 SW
Heritage Court Beaverton OR 97006 Multifamily 1971 24 930,000 2-Jul-97 72.53 675,000
217013146 14760 Ventura
Blvd. Sherman Oaks CA 91403 Retail 1962 9,736 1,000,000 1-Apr-97 66.18 663,600
256313162 1111 West James
Street Kent WA 98032 Multifamily 1968 33 900,000 14-Apr-97 73.16 675,000
<CAPTION>
LOAN CUT-OFF
NUMBER ADDRESS BALANCE RATE
------ -------------- ------- ----
<C> <S> <C> <C>
236313197 251 Hilltop
Drive $2,992,937 7.250%
217013106 8800-8920
Limonite Ave. 2,907,018 7.950
287013239 9 West 20th
Street 2,338,676 8.500
216313341 215 E. 15th
Street 1,821,147 7.500
216313346 1354, 1374,
1378, 1384, 1388
& 1394 5th 1,760,000 8.250
256313054 12704-14 49th
Av/4704-4810
127th St 1,576,554 7.500
227011047 9935 Beverly Bl 1,550,166 12.000
277013112 801 East
Algonquin Road 1,496,007 8.000
267013227 16 & 28 SW First
Avenue 1,491,108 7.750
266313151 6622-6766 North
Fessenden Street 1,471,857 7.750
266313003 1313 NE 131st
Place 1,370,332 7.500
216313045 13633 Doty
Avenue 1,344,928 7.500
227013233 3910 North Long
Beach Boulevard 1,245,936 8.375
217013283 8500-8522 South
Broadway 1,198,368 7.950
216313174 1414 North 34th
Street 1,047,762 7.750
276313092 201 Passaic
Avenue 997,868 7.750
256313007 17 West Casino
Road 991,261 7.500
216313264 11433 Rochester
Avenue 984,372 8.250
247013000 7211 Regency
Square Boulevard 953,792 9.950
256312971 10245 Des Moines
Way South 951,923 9.000
216313307 1132 N.
Wilmington
Boulevard 936,838 7.750
237012543 100 Hegenberger
Road 928,657 9.750
216313164 219 N. Avenue 51 921,930 7.500
246313225 6130 North
Seventh Street 908,621 7.500
216313184 2815 Peavy Road 838,749 7.500
246313181 1065-1095 South
Quivas Street 828,231 7.750
256313100 6334 Rainer
Avenue South 822,648 7.750
227013178 111 Avenida
Palizada 798,362 7.950
216312997 3925 W. Walnut
St. 793,649 9.450
226312906 333-339
Halesworth
Street 783,115 9.250
287013091 1139-1141 Main
Ave. 713,042 7.950
256313077 8501 Midvale Ave
N & 8500 Nesbit
Ave 712,246 7.375
216313064 21125 Saticoy St 708,328 7.500
217013110 1401 S. Arville
St 698,178 8.200
246312983 625 Hathaway
Drive 696,834 9.000
236313147 2001 and 2023
Broadway and
Rumrill 693,443 7.500
216312992 11720 Runnymede
Street 682,897 9.000
266313163 2601-2639
Rossiter Lane 682,830 7.500
266313339 17140 SW
Heritage Court 674,499 7.500
217013146 14760 Ventura
Blvd. 661,783 7.950
256313162 1111 West James
Street 658,349 7.500
</TABLE>
72
<PAGE>

CERTAIN CHARACTERISTICS OF THE LARGEST 50 INITIAL MORTGAGE LOANS AS OF THE
CUT-OFF DATE--(CONTINUED)

<TABLE>
<CAPTION>
LOAN ZIP PROPERTY YEAR UNITS/ APPRAISAL APPRAISAL ORIGINAL CUT-OFF
NUMBER ADDRESS CITY STATE CODE TYPE(1) BUILT SF(2) VALUE DATE LTV(3) BALANCE BALANCE
------ ---------------- ----------- ----- ----- ----------- ----- ------ --------- --------- ------ -------- --------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
246313035 1031 East Lemon
Street Tempe AZ 85281 Multifamily 1963 36 $ 937,000 27-Feb-97 69.75% $655,900 $653,555
227013058 1601 Carmen
Drive Camarillo CA 93010 Office 1982 22,988 1,250,000 27-Feb-97 51.70 650,000 646,245
216313010 3147-3155 El
Segundo Blvd. Lynwood CA 90262 Multifamily 1963 40 1,000,000 7-Feb-97 61.77 620,000 617,728
216313340 1518 N. Spurgeon
Street Santa Ana CA 92701 Multifamily 1987 27 810,000 2-Jul-97 74.94 607,500 607,049
216313094 7259 Willoughby
Avenue Los Angeles CA 90046 Multifamily 1963 21 930,000 4-Mar-97 64.32 600,000 598,202
287013089 191 Vineyard Rd Edison NJ 08817 Industrial 1962 38,855 1,200,000 10-Mar-97 49.85 600,000 598,157
227012996 174 & 180 E.
Main St. Tustin CA 92780 Office 1956 18,471 1,100,000 11-Feb-97 54.32 600,000 597,519
266312982 629 E. 19th
Street Oakland CA 94606 Multifamily 1930 18 815,000 4-Feb-97 73.29 600,000 597,286
286313033 361-371 12th Ave Paterson NJ 07514 Multifamily 1920 48 1,250,000 10-Feb-97 46.63 585,000 582,909
<CAPTION>
LOAN
NUMBER ADDRESS RATE
------ ---------------- ------
<C> <S> <C>
246313035 1031 East Lemon
Street 7.750%
227013058 1601 Carmen
Drive 7.750
216313010 3147-3155 El
Segundo Blvd. 7.750
216313340 1518 N. Spurgeon
Street 7.500
216313094 7259 Willoughby
Avenue 7.500
287013089 191 Vineyard Rd 8.500
227012996 174 & 180 E.
Main St. 9.750
266312982 629 E. 19th
Street 9.000
286313033 361-371 12th Ave 7.750
</TABLE>
- ----
(1) "Mixed Use" includes mixed commercial and residential use as well as mixed
commercial use.

(2) Units/square feet represents the number of multifamily, mobile home park,
and self storage properties and square feet for all other properties.

(3) LTV represents the ratio of the outstanding principal balance as of the
Cut-Off Date to appraised value at appraisal date indicated.

73
<PAGE>

CERTAIN CHARACTERISTICS OF THE LARGEST 50 INITIAL MORTGAGE LOANS AS OF THE
CUT-OFF DATE

<TABLE>
<CAPTION>
LOAN REMAINING FIRST MATURITY YEAR OF NOI
NUMBER P&I TERM PAYMENT DATE DATE NOI DETERMINATION DSCR INDEX MARGIN PERIODIC CAP
- ------ ------- --------- ------------ --------- -------- ------------- ---- ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
236313197....... $20,465 357 01-Jul-97 01-Jun-27 $366,088 1997 1.49x 1-yr. CMT 2.950% 1.500%
217013106....... 21,288 356 01-Jun-97 01-May-27 387,841 1997 1.52 6-mo. LIBOR 3.950 2.000
287013239....... 20,394 238 01-Aug-97 01-Jul-17 390,265 1997 1.59 6-mo. LIBOR 4.750 2.000
216313341....... 12,743 359 01-Sep-97 01-Aug-27 246,851 1997 1.61 6-mo. LIBOR 4.000 1.500
216313346....... 13,222 359 01-Sep-97 01-Aug-27 267,551 1997 1.69 6-mo. LIBOR 3.500 1.500
256313054....... 11,065 355 01-May-97 01-Apr-27 201,083 1997 1.51 1-yr. CMT 3.250 1.500
227011047....... 16,112 329 01-Mar-95 01-Feb-25 415,929 1994 2.15 B of A Prime 3.550 2.000
277013112....... 11,006 356 01-Jun-97 01-May-27 228,192 1997 1.73 6-mo. LIBOR 4.200 2.000
267013227....... 14,119 178 01-Aug-97 01-Jul-12 245,709 1997 1.45 6-mo. LIBOR 4.500 2.000
266313151....... 10,567 357 01-Jul-97 01-Jun-27 226,955 1997 1.79 6-mo. LIBOR 4.000 1.500
266313003....... 9,618 355 01-May-97 01-Apr-27 181,383 1997 1.57 6-mo. LIBOR 3.750 1.500
216313045....... 9,439 355 01-May-97 01-Apr-27 196,601 1996 1.74 6-mo. LIBOR 3.750 1.500
227013233....... 10,749 238 01-Aug-97 01-Jul-17 158,012 1997 1.23 6-mo. LIBOR 4.375 2.000
217013283....... 8,763 358 01-Aug-97 01-Jul-27 184,767 1997 1.76 6-mo. LIBOR 4.750 2.000
216313174....... 7,522 357 01-Jul-97 01-Jun-27 187,629 1997 2.08 6-mo. LIBOR 4.000 1.500
276313092....... 7,164 357 01-Jul-97 01-Jun-27 132,857 1997 1.55 6-mo. LIBOR 4.000 1.500
256313007....... 6,957 355 01-May-97 01-Apr-27 110,737 1997 1.33 1-yr. CMT 3.000 1.500
216313264....... 7,400 358 01-Aug-97 01-Jul-27 139,140 1997 1.57 6-mo. LIBOR 4.000 1.500
247013000....... 7,378 294 01-Apr-97 01-Mar-22 183,692 1997 2.07 6-mo. LIBOR 4.750 2.000
256312971....... 6,686 354 01-Apr-97 01-Mar-27 114,509 1997 1.43 6-mo. LIBOR 3.500 1.500
216313307....... 6,716 359 01-Sep-97 01-Aug-27 147,266 1997 1.83 6-mo. LIBOR 3.750 1.500
237012543....... 10,140 170 01-Dec-96 01-Nov-11 208,530 1996 1.71 6-mo. LIBOR 4.250 2.000
216313164....... 6,461 357 01-Jul-97 01-Jun-27 114,291 1997 1.47 1-yr. CMT 3.250 1.500
246313225....... 6,363 358 01-Aug-97 01-Jul-27 132,803 1997 1.74 6-mo. LIBOR 3.750 1.500
216313184....... 5,873 358 01-Aug-97 01-Jul-27 130,142 1997 1.85 6-mo. LIBOR 4.000 1.500
246313181....... 5,946 357 01-Jul-97 01-Jun-27 129,760 1997 1.82 6-mo. LIBOR 4.250 1.500
256313100....... 5,910 356 01-Jun-97 01-May-27 111,369 1997 1.57 1-yr. CMT 3.500 1.500
227013178....... 5,842 357 01-Jul-97 01-Jun-27 75,591 1997 1.08 6-mo. LIBOR 4.500 2.000
216312997....... 5,828 354 01-Apr-97 01-Mar-27 135,921 1997 1.94 6-mo. LIBOR 4.500 1.500
226312906....... 5,635 354 01-Apr-97 01-Mar-27 122,866 1997 1.82 6-mo. LIBOR 4.000 1.500
287013091....... 5,222 356 01-Jun-97 01-May-27 99,411 1997 1.59 6-mo. LIBOR 4.500 2.000
256313077....... 4,938 356 01-Jun-97 01-May-27 81,999 1997 1.38 1-yr. CMT 3.125 1.500
216313064....... 4,971 355 01-May-97 01-Apr-27 106,714 1997 1.79 6-mo. LIBOR 4.250 1.500
217013110....... 5,234 356 01-Jun-97 01-May-27 108,666 1997 1.73 6-mo. LIBOR 4.750 2.000
246312983....... 4,895 354 01-Apr-97 01-Mar-27 96,987 1997 1.65 6-mo. LIBOR 3.750 1.500
236313147....... 4,860 356 01-Jun-97 01-May-27 105,625 1997 1.81 1-yr. CMT 3.250 1.500
216312992....... 4,797 354 01-Apr-97 01-Mar-27 112,454 1997 1.95 6-mo. LIBOR 4.000 1.500
266313163....... 4,790 357 01-Jul-97 01-Jun-27 87,201 1997 1.52 1-yr. CMT 3.250 1.500
266313339....... 4,720 359 01-Sep-97 01-Aug-27 79,851 1997 1.41 1-yr. CMT 3.500 1.500
217013146....... 4,846 356 01-Jun-97 01-May-27 124,324 1997 2.14 6-mo. LIBOR 4.500 2.000
256313162....... 4,720 357 01-Jul-97 01-Jun-27 80,305 1997 1.42 1-yr. CMT 3.250 1.500
<CAPTION>
MAXIMUM MINIMUM RATE AND
LOAN MORTGAGE MORTGAGE PAYMENT NEXT RATE LOAN
NUMBER INTEREST RATE INTEREST RATE RESET FREQ CHANGE DATE PURPOSE(1)
- ------ ------------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
236313197....... 13.250% 7.250% 6 01-Dec-97 refinance
217013106....... 13.950 7.950 6 01-Nov-97 purchase
287013239....... 14.500 8.500 6 01-Jan-98 refinance
216313341....... 13.500 7.500 6 01-Feb-98 purchase
216313346....... 14.250 8.250 6 01-Feb-98 purchase
256313054....... 13.500 7.500 6 01-Oct-97 purchase
227011047....... 15.450 9.450 6 01-Feb-98 refinance
277013112....... 14.000 8.000 6 01-Nov-97 purchase
267013227....... 13.750 7.750 6 01-Jan-98 refinance
266313151....... 13.750 7.750 6 01-Dec-97 refinance
266313003....... 13.500 7.500 6 01-Oct-97 purchase
216313045....... 13.500 7.500 6 01-Oct-97 purchase
227013233....... 13.875 8.375 6 01-Jan-98 refinance
217013283....... 13.950 7.950 6 01-Jan-98 refinance
216313174....... 13.750 7.750 6 01-Dec-97 refinance
276313092....... 13.750 7.750 6 01-Dec-97 purchase
256313007....... 13.500 7.500 6 01-Oct-97 purchase
216313264....... 13.750 8.250 6 01-Jan-98 refinance
247013000....... 13.950 7.950 6 01-Mar-98 purchase
256312971....... 13.500 7.500 6 01-Mar-98 refinance
216313307....... 13.450 7.750 6 01-Feb-98 purchase
237012543....... 13.750 7.750 6 01-Nov-97 purchase
216313164....... 13.500 7.500 6 01-Dec-97 purchase
246313225....... 13.500 7.500 6 01-Jan-98 purchase
216313184....... 13.500 7.500 6 01-Jan-98 purchase
246313181....... 13.750 7.750 6 01-Dec-97 refinance
256313100....... 13.750 7.750 6 01-Nov-97 purchase
227013178....... 13.950 7.950 6 01-Dec-97 refinance
216312997....... 13.950 7.950 6 01-Mar-98 purchase
226312906....... 13.750 7.750 6 01-Mar-98 refinance
287013091....... 13.950 7.950 6 01-Nov-97 refinance
256313077....... 13.375 7.375 6 01-Nov-97 purchase
216313064....... 14.000 7.500 6 01-Oct-97 purchase
217013110....... 14.200 8.200 6 01-Nov-97 refinance
246312983....... 13.500 7.500 6 01-Mar-98 purchase
236313147....... 13.500 7.500 6 01-Nov-97 purchase
216312992....... 13.500 7.500 6 01-Mar-98 purchase
266313163....... 13.500 7.500 6 01-Dec-97 purchase
266313339....... 13.500 7.500 6 01-Feb-98 purchase
217013146....... 13.950 7.950 6 01-Nov-97 purchase
256313162....... 13.500 7.500 6 01-Dec-97 purchase
</TABLE>

74
<PAGE>

CERTAIN CHARACTERISTICS OF THE LARGEST 50 INITIAL MORTGAGE LOANS AS OF THE
CUT-OFF DATE--(CONTINUED)

75
<PAGE>

UNDERWRITING GUIDELINES

SPB has represented to the Company that all of the Mortgage Loans were
underwritten pursuant to its Multifamily and Commercial Lending Program. SPB
began underwriting mortgage loans in accordance with such standards in
February 1994. Typically, the multifamily loans are 30 year term fully
amortizing loans secured by 5 to 164 unit apartment buildings and the
commercial loans are 30 year term fully amortizing loans secured by office
buildings, shopping centers, mobile home parks, industrial properties and
other approved property types. Mortgage loans underwritten pursuant to the
Multifamily and Commercial Lending Program have maximum loan amounts and LTV's
and minimum DSCR's which are determined from time to time by the Loan
Committee of the Board of Directors of SPB. Appraisals and field inspections
(performed by outside and certified inspectors) and title insurance are
required for each multifamily and commercial loan.

Under the Multifamily and Commercial Lending Program standards presently in
effect, the maximum loan amount is generally $3,000,000, the maximum LTV is
80% of the appraised value of the mortgaged property for multifamily loans and
75% for commercial loans, and the minimum DSCR is 1.20 to 1.00, based on the
applicable level of the related index and the related Note Margin, for
multifamily loans, 1.25 to 1.00, based on the applicable level of the related
index and the related Note Margin for commercial loans. However, senior
management may approve a higher loan amount, a lower DSCR or a higher LTV if
it is determined that borrower has a strong financial position, good credit
and good property management skills and/or pledges additional collateral. With
respect to mortgage loans secured by seasoned multifamily properties, either
80% of the living units (or the higher level necessary to cover debt service
and pay all other expenses) must be occupied at rent levels that support the
appraised value of the mortgaged property, or an appropriate holdback of loan
proceeds must be established until the required occupancy level is met. For
newly constructed properties, a lower occupancy level may be approved by the
Loan Committee.

SPB's underwriting standards under the Multifamily and Commercial Lending
Program are primarily intended to assess the economics of the mortgaged
property and the financial capabilities, credit standing and managerial
ability of the borrower. In determining whether a loan should be made, SPB
considers, among other things, the creditworthiness of the mortgagor, the
borrower's income, liquid assets and liabilities, the borrower's management
experience, DSCRs, the borrower's overall financial position and the adequacy
of such property as collateral for the mortgage loan. While the primary
consideration in underwriting a mortgage loan is the property securing the
mortgage loan, sufficient documentation on the borrower is required to
establish the financial strength and ability of the borrower to successfully
operate the property and meet its obligations under the note and deed of
trust. The majority of the mortgage loans originated by SPB provide for
recourse against the related borrower.

The Multifamily and Commercial Lending Program requires that the property
and records regarding the property are inspected to determine the number of
units that can be rebuilt under current zoning requirements, the number of
buildings on the property, the type of construction materials used, the
proximity of the property to natural hazards, flood zones and fire stations
and whether there are any environmental factors and whether a tract map has
been recorded. The property must front on publicly dedicated and maintained
streets with provisions for adequate and safe ingress and egress. Properties
that share ingress and egress through an easement or private road must have a
recorded non-exclusive easement. Recreational facilities and amenities, if
any, must be located on site and be under the exclusive control of the owner
of the premises. If available, engineering reports concerning the condition of
the major building components of the property are reviewed as is a ground
lease analysis if the property is on leased ground. Also, the title is
reviewed to determine if there are any covenants, conditions and restrictions,
easements or reservations of mineral interests in the property. The properties
are appraised by independent appraisers approved by SPB.

In addition to the considerations set forth above, with respect to Mortgage
Loans secured by commercial properties, SPB's lending policies typically
require that the commercial usage is permitted under local zoning and use
ordinances and the utilization of the commercial space is compatible with the
property and neighborhood. If the commercial property is an office building,
the office building must have an excellent occupancy history,

76
<PAGE>

must be located in a good office market area and in a conforming neighborhood,
must have on-site parking and must be fire sprinkler equipped according to
zoning codes. Industrial properties must be located in a conforming industrial
marketplace and may not be used for the production, storage or treatment of
toxic waste. Retail properties must be highly visible and located on a heavily
traveled thoroughfare and typically have tenants on term leases. SPB may not
make a loan secured by a property that has any of the following
characteristics: inadequate maintenance or repairs as determined by SPB, the
property is subject to covenants, conditions and restrictions unacceptable to
SPB, existence of or potential for hazardous geological conditions, the
property is not to code or the cost of restoring the property to code is
prohibitive or existence of or potential for contamination by hazardous toxic
materials.

SPB analyzes the financial statements of the borrower to determine the
borrower's equity position, particularly as it relates to real estate mortgage
demands on equity. If the borrower's holdings are heavily encumbered so that
the debt service requirements consume a high percentage of the rental income
from the mortgaged property, or consist substantially of unimproved or
underimproved properties having little or no gross income, SPB analyzes
whether the borrower will be able to meet all of the mortgaged property's loan
obligations (expenses, debt service and equity return). In addition to DSCRs,
the borrower's income and expense ratios are calculated.

In addition to the income from the mortgaged property, SPB also evaluates
the borrower's income as a possible secondary source of repayment for the
mortgage loan. In analyzing such income, SPB considers, among other factors,
employment or business history of the borrower and the stability and
seasonality of the borrower's current employment or business. If the borrower
derives income from rental property, SPB evaluates the experience of the
manager of the rental property, type of tenancy and the cash flow generated by
the borrower's real estate portfolio. SPB also reviews the borrower's credit
history to determine the borrower's ability and willingness to repay debts. In
general, SPB will not make a mortgage loan to a borrower who has a history of
slow payments or delinquencies, bankruptcies, collection actions, foreclosures
or judgments against the borrower without adequate explanations and
verifications.

INITIAL MBS INTERESTS

GENERAL. ICCMIC will purchase the MBS Interests immediately after the
consumation of this Offering (those MBS Interests are referred to as the
"Initial MBS Interests") for an aggregate cash price equal to approximately
$54 million plus accrued interest, representing 12.9% of the expected net
proceeds of this Offering.

JPM SERIES 1997-SPTL-C1, CLASSES E, F, G, H, NR AND X

The Initial Investments include J.P. Morgan Commercial Mortgage Finance
Corp., Commercial Mortgage Pass-Through Certificates, Series 1997-SPTL-C1,
Class E, Class F, Class G, Class H, and Class NR (the "JPM Subordinated
Interests"), and Class X (the "JPM IO," and, together with the JPM
Subordinated Interests, the "JPM Investments"), which were issued on June 27,
1997. The JPM Investments and the SPTL Investments, hereinafter defined, are
referred to herein as the "Initial MBS Investments." The securities to be
purchased represent 100% of the outstanding principal balance of each class
purchased, except that the Company is purchasing $39,738,361 notional amount
of Class X, which represents approximately 20% of such class. The JPM
Investments were acquired by Imperial Credit and SPB in June of 1997.

The following table shows each class of MBS issued as part of JPM Series
1997-SPTL-C1, including the JPM Subordinated Interests and JPM IO, as well as
other classes of MBS that are not being sold to the Company. The table
indicates the interest rate at which interest accrues on each class (the
"Pass-Through Rate"), the principal balance as of June 27, 1997 (the "Initial
Principal Balance") and the principal balance as of September 25, 1997. Only
Classes E, F, G, H and NR and approximately 20% of Class X are being sold to
the Company.

77
<PAGE>

JPM, SERIES 1997-SPTL-C1
CLASSES E, F, G, H, NR AND X

<TABLE>
<CAPTION>
PRINCIPAL
PASS- INITIAL PRINCIPAL BALANCE AS OF
DESIGNATION THROUGH RATE BALANCE SEPTEMBER 25, 1997
----------- ------------ ----------------- ------------------
<S> <C> <C> <C>
Class A1
Securities(1)......... (2) $ 81,230,000 $ 76,482,488
Class A2
Securities(1)......... (2) 60,922,000 60,922,000
Class B Securities(1).. (2) 10,153,000 10,153,000
Class C Securities(1).. (2) 12,184,000 12,184,000
Class D Securities(1).. (2) 10,153,000 10,153,000

JPM IO:
Class X Securities..... (3) 203,075,453(3) 198,327,941(3)

JPM SUBORDINATED
INTERESTS:
Class E Securities..... 6.50% 10,153,000 10,153,000
Class F Securities..... 6.50% 6,092,000 6,092,000
Class G Securities..... 6.50% 2,030,000 2,030,000
Class H Securities..... (4) 3,046,000 3,046,000
Class NR Securities.... (4) 7,112,453 7,112,453
</TABLE>

- --------
(1) The Class A1, Class A2, Class B, Class C, and Class D Securities are not
being sold to the Company.

(2) The Class A1, Class A2, Class B, Class C and Class D Securities accrue
interest at a floating rate that is based on the one-month London
interbank offered rate quotation for U.S. dollar deposits ("LIBOR")
subject to a maximum rate equal to the weighted average of the Remittance
Rates on the JPM Mortgage Loans (as defined below). "Remittance Rate" for
any JPM Mortgage Loan is equal to the excess of the mortgage interest rate
thereon over 0.3775% per annum adjusted to reflect the actual number days
in the related Remittance Period and a 360 day year.

(3) The Class X Securities accrue interest on the notional balance of such
class, which notional balance is equal to the aggregate of the outstanding
principal balances of all other Classes of Securities, at a rate per annum
equal to the weighted average of the Remittance Rates on the JPM Mortgage
Loans minus the weighted average of the Pass-Through Rates on all other
Classes of Certificates. As of September 25, 1997, the notional balance of
the Class X Securities to be purchased by the Company is $39,738,361.

(4) The Class H and Class NR Securities do not accrue interest.

Structure and Subordination. Each of the JPM Subordinated Interests is
subordinated in right of payments of principal and interest and protects the
more senior classes from losses on the related mortgage loans (the "JPM
Mortgage Loans"). Principal distributions on the securities are applied
sequentially, with no principal paid to a class until the outstanding
principal balance of the more senior classes are reduced to zero. Thus, as of
September 25, 1997, no principal has been distributed to any of the JPM
Subordinated Interests.

Moreover, the JPM Subordinated Interests provide credit support to the more
senior classes, including the JPM IO. On any distribution date, no interest is
distributed to the JPM Subordinated Interests until principal and interest
allocable to Classes A1, A2, B, C and D and interest allocable to the JPM IO
for that distribution date has been distributed. In addition, as losses are
incurred on the JPM Mortgage Loans, the principal balance of Class NR, then
Class H, then Class G, then Class F, then Class E will be reduced, until the
outstanding principal balance of each such class has been reduced to zero.

As of August 31, 1997, there have been no reported realized losses on the
JPM Mortgage Loans, and, to SPB's knowledge, no JPM Mortgage Loans are in
foreclosure. However, as of August 31, 1997, the trustee has reported that
nine JPM Mortgage Loans, representing 1.7% of JPM Mortgage Loans by principal
balance, are one or two months delinquent in monthly payments.

78
<PAGE>

JPM Mortgage Loans. The JPM Mortgage Loans, which underlie the JPM 1997-
SPTL-C1 Subordinated Interests, the JPM IO and the other classes of MBS in JPM
Series 1997-SPTL-C1, are monthly-pay, variable rate, mortgage loans with an
aggregate principal balance as of June 1, 1997 of $203,075,453 and an
aggregate principal balance as of August 31, 1997, of $198,327,941. The
Mortgage Loans are secured by first liens on multifamily, retail, office,
industrial, mixed use or other commercial properties (the "JPM Mortgaged
Properties"). When the JPM Investments were originally issued, they were
secured by 540 JPM Mortgage Loans. However, six JPM Mortgage Loans have
prepaid in full through August 31, 1997, leaving 534 JPM Mortgage Loans in the
pool as of August 31, 1997. All of the JPM Mortgage Loans were originated by
SPTL and were underwritten using guidelines substantially similar to the
guidelines set forth in the SPTL Multifamily and Commercial Lending Program,
as described under "--The Initial Mortgage Loans--Underwriting Guidelines." At
origination, most of the JPM Mortgage Loans had thirty year terms and bore
interest at an adjustable interest rate that was subject to periodic interest
rate adjustments and lifetime maximum and minimum Interest Rates. 296 of the
Mortgage Loans, representing 49.66% of the JPM Mortgage Loans as of August 31,
1997 by principal balance, are secured by Mortgaged Properties located in
California. The following table sets forth certain information, obtained from
the trustee of the JPM Mortgage Loans, about the JPM Mortgaged Properties, as
of August 31, 1997, except as otherwise indicated.

CERTAIN CHARACTERISTICS OF THE JPM MORTGAGE LOANS

The due dates for most of the JPM Mortgage Loans occur on the first day of
each month. All of the JPM Mortgage Loans are secured by first liens on fee
simple interests in the related JPM Mortgaged Properties. At June 1, 1997,
based on information provided by the borrowers in the loan documents created
at origination, approximately 8.4% of the JPM Mortgaged Properties are owner-
occupied. The Company does not have any more recent information as to the
occupancy status of the JPM Mortgage Loans, and the Company does not
anticipate being able to obtain more recent information. As of August 31,
1997, the JPM Mortgage Loans had characteristics set forth below, based upon
information provided by the trustee. The totals may not add up to 100% due to
rounding.

MORTGAGE INTEREST RATES

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
MORTGAGE INTEREST RATES OF LOANS BALANCE BALANCE
- ----------------------- -------- ------------ ----------
<S> <C> <C> <C>
7.001% - 7.500%.............................. 23 $ 10,014,751 5.05%
7.501 - 8.000................................ 17 6,266,706 3.16
8.001 - 8.500................................ 15 8,867,917 4.47
8.501 - 9.000................................ 174 67,238,311 33.90
9.001 - 9.500................................ 101 38,967,592 19.65
9.501 - 10.000................................ 89 30,111,733 15.18
10.001 - 10.500................................ 55 19,469,476 9.82
10.501 - 11.000................................ 33 10,252,112 5.17
11.001 - 11.500................................ 5 1,123,469 0.57
11.501 - 12.000................................ 14 4,438,862 2.24
12.001 - 12.500................................ 6 1,072,073 0.54
12.501 - 13.000................................ 1 99,537 0.05
13.000% and above 1 405,402 0.20
--- ------------ ------
Total: ........................................ 534 $198,327,941 100.00%
=== ============ ======
</TABLE>

Weighted Average Mortgage Interest Rate: 9.34%

79
<PAGE>

PRINCIPAL BALANCES

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
SCHEDULED PRINCIPAL BALANCES OF LOANS BALANCE BALANCE
- ---------------------------- -------- ------------ ----------
<S> <C> <C> <C>
$0 - $100,000....................... 38 $ 3,200,750 1.61%
100,000.01 - 200,000..................... 181 27,293,665 13.76
200,000.01 - 300,000..................... 109 26,606,494 13.42
300,000.01 - 400,000..................... 60 20,775,450 10.48
400,000.01 - 500,000..................... 38 17,282,088 8.71
500,000.01 - 600,000..................... 19 10,506,557 5.30
600,000.01 - 700,000..................... 18 11,549,947 5.82
700,000.01 - 800,000..................... 12 9,224,173 4.65
800,000.01 - 900,000..................... 13 10,860,863 5.48
900,000.01 - 1,000,000..................... 9 8,533,256 4.30
1,000,000.01 - 1,100,000..................... 10 10,498,897 5.29
1,100,000.01 - 1,200,000..................... 4 4,692,140 2.37
1,200,000.01 - 1,300,000..................... 4 4,971,569 2.51
1,300,000.01 - 1,400,000..................... 5 6,721,238 3.39
1,400,000.01 - 1,500,000..................... 3 4,351,810 2.19
1,500,000.01 - 1,600,000..................... 2 3,136,170 1.58
1,600,000.01 - 1,700,000..................... 2 3,333,613 1.68
1,700,000.01 - 1,800,000..................... 1 1,788,723 0.90
1,800,000.01 - 1,900,000..................... 1 1,860,712 0.94
1,900,000.01 and Above....................... 5 11,139,826 5.62
--- ------------ ------
Total:......................................... 534 $198,327,941 100.00%
=== ============ ======

Average Principal Balance: $371,401

INDICES

<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
INDICES OF LOANS BALANCE BALANCE
- ------- -------- ------------ ----------
<S> <C> <C> <C>
Six-Month LIBOR ............................... 434 $161,498,396 81.43%
One-Year CMT .................................. 46 23,781,285 11.99
Bank of America Prime.......................... 54 13,048,260 6.58
--- ------------ ------
Total:......................................... 534 $198,327,941 100.00%
=== ============ ======
</TABLE>

80
<PAGE>

NOTE MARGINS

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
NOTE MARGINS OF LOANS BALANCE BALANCE
- ------------ -------- ------------ ----------
<S> <C> <C> <C>
2.51% - 3.00%................................. 26 $ 13,333,352 6.72%
3.01 - 3.25................................... 25 9,057,536 4.57
3.26 - 3.50................................... 33 15,153,532 7.64
3.51 - 3.75................................... 148 52,692,281 26.57
3.76 - 4.00................................... 125 40,489,808 20.42
4.01 - 4.25................................... 65 24,279,302 12.24
4.26 - 4.50................................... 42 15,807,744 7.97
4.51 and Above................................. 70 27,514,386 13.87
--- ------------ ------
Total:......................................... 534 $198,327,941 100.00%
=== ============ ======

Weighted Average Note Margin: 3.99%

MINIMUM MORTGAGE INTEREST RATES

<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
MINIMUM MORTGAGE INTEREST RATES OF LOANS BALANCE BALANCE
- ------------------------------- -------- ------------ ----------
<S> <C> <C> <C>
6.51% - 7.00%................................ 2 $ 1,511,698 0.76%
7.01 - 7.25.................................. 29 17,614,448 8.88
7.26 - 7.50.................................. 208 78,865,868 39.77
7.51 - 7.75.................................. 174 58,546,363 29.52
7.76 - 8.00.................................. 24 6,964,281 3.51
8.01 - 8.25.................................. 6 2,366,537 1.19
8.26 - 8.50.................................. 33 14,015,276 7.07
8.51 - 8.75.................................. 23 6,727,717 3.39
8.76 - 9.00.................................. 21 7,095,254 3.58
9.01 - 9.50.................................. 9 3,100,709 1.56
9.51 - 10.00.................................. 3 822,380 0.41
10.01 and Above................................ 2 697,410 0.35
--- ------------ ------
Total:......................................... 534 $198,327,941 100.00%
=== ============ ======
</TABLE>

Weighted Average Minimum Mortgage Interest Rate: 7.78%

81
<PAGE>

MAXIMUM MORTGAGE INTEREST RATES

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
MAXIMUM MORTGAGE INTEREST RATES OF LOANS BALANCE BALANCE
- ------------------------------- -------- ------------ ----------
<S> <C> <C> <C>
12.51% - 13.00%................................ 2 $ 1,511,698 0.76%
13.01 - 13.50.................................. 214 90,933,565 45.85
13.51 - 14.00.................................. 205 69,192,750 34.89
14.01 - 14.50.................................. 58 21,433,567 10.81
14.51 - 15.00.................................. 41 12,227,219 6.17
15.01 - 15.50.................................. 3 438,588 0.22
15.51 - 16.00.................................. 8 2,117,783 1.07
16.51 - 17.00.................................. 2 373,234 0.19
17.01 - 17.50.................................. 1 99,537 0.05
--- ------------ ------
Total:......................................... 534 $198,327,941 100.00%
=== ============ ======
</TABLE>

Weighted Average Maximum Mortgage Interest Rate: 13.80%

The interest rates on the JPM Mortgage Loans adjust once every six months.

LOAN SEASONING

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
AGE OF LOANS SINCE ORIGINATION (MONTHS) OF LOANS BALANCE BALANCE
- --------------------------------------- -------- ------------ ----------
<S> <C> <C> <C>
12 and lower................................... 444 $164,245,769 82.82%
13 - 24........................................ 77 28,909,695 14.58
25 - 36........................................ 13 5,172,477 2.61
--- ------------ ------
Total:......................................... 534 $198,327,941 100.00%
=== ============ ======
</TABLE>

Weighted Average Loan Seasoning: 10 months

LOAN AMORTIZATION TYPE

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
AMORTIZATION TYPE OF LOANS BALANCE BALANCE
- ----------------- -------- ------------ ----------
<S> <C> <C> <C>
Fully Amortizing............................... 524 $191,915,640 96.77%
Interest Only/Balloon.......................... 10 6,412,301 3.23
--- ------------ ------
Total:......................................... 534 $198,327,941 100.00%
=== ============ ======
</TABLE>

82
<PAGE>

REMAINING TERM OF FULLY AMORTIZING LOANS

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
REMAINING TERM (MONTHS) OF LOANS BALANCE BALANCE
- ----------------------- -------- ------------ ----------
<S> <C> <C> <C>
121 - 180...................................... 4 $ 2,189,346 1.10%
181 - 240...................................... 7 2,184,996 1.10
241 - 360...................................... 513 187,541,298 94.56
--- ------------ -----
Total:......................................... 524 $191,915,640 96.77%
=== ============ =====

REMAINING TERM OF BALLOON LOANS

DEBT SERVICE COVERAGE RATIO

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
DEBT SERVICE COVERAGE RATIO(1) OF LOANS BALANCE BALANCE
- ------------------------------ -------- ------------ ----------
<S> <C> <C> <C>
0.626 - 0.750.................................. 3 $ 1,179,501 0.59%
0.751 - 0.875.................................. 2 540,136 0.27
0.876 - 1.000.................................. 2 600,165 0.30
1.001 - 1.125.................................. 8 3,768,700 1.90
1.126 - 1.250.................................. 52 21,512,172 10.85
1.251 - 1.375.................................. 102 32,684,217 16.48
1.376 - 1.500.................................. 93 40,682,345 20.51
1.501 - 1.625.................................. 77 27,147,060 13.69
1.626 - 1.750.................................. 56 22,777,061 11.48
1.751 - 1.875.................................. 48 14,935,096 7.53
1.876 - 2.000.................................. 25 11,104,995 5.60
2.001 - 2.125.................................. 17 7,452,886 3.76
2.126 and Above................................ 49 13,943,607 7.03
--- ------------ ------
Total:......................................... 534 $198,327,941 100.00%
=== ============ ======
</TABLE>
Weighted Average Debt Service Coverage Ratio: 1.581
- --------
(1) As defined on page 65.

83
<PAGE>

Approximately 92.34% of the JPM Mortgage Loans were subject to prepayment
penalties as of August 31, 1997. In general, the terms of such JPM Mortgage
Loans provide that if the related mortgagor prepays the principal balance
thereof in an amount in excess of 20% of the original principal balance of the
related JPM Mortgage Loan for any 12-month period during a certain period of
time following origination, such mortgagor will be required to pay a
prepayment premium equal to six months' interest at the Mortgage Interest Rate
then in effect for such Mortgage Loan on the amount of such prepayment in
excess of 20% of the original principal amount thereof.

The JPM Mortgage Loans are being serviced by Midland Loan Services, L.P., as
master servicer and special servicer and SPB as sub-servicer, and the trustee
for the series is LaSalle National Bank. See "Servicing of the Mortgage
Loans."

Restrictions on Transfer of JPM Subordinated Interests. Although the JPM IO
has been registered with the Commission, the JPM Subordinated Interests have
not been registered under the Securities Act or any state securities laws,
and, accordingly, transfer of the JPM Subordinated Interests is restricted.
Moreover, the JPM Subordinated Interests cannot be transferred to a Plan or
Plan investor except in certain limited circumstances. As a result, there is
no liquid market for the JPM Subordinated Interests.

Ratings. The Class X Securities are rated "AAA" by Duff & Phelps Credit
Rating Co. ("DCR") and "AAA" by Fitch Investors Service, L.P. ("Fitch"). The
Class E Securities are rated "BB+" by DCR, "BB" by Fitch and "BB" by Standard
& Poor's Ratings Service ("S&P"). The Class F Securities are rated "B" by DCR,
"BB" by Fitch and "B+" by S&P. The Class G Securities are rated "B-" by DCR,
and the Class H Securities are rated "B" by DCR. The Class NR Securities are
unrated.

The ratings of the Rating Agencies on mortgage pass-through certificates
address the likelihood of the receipt of all distributions to which such
holders are entitled. The ratings do not represent any assessment of (i) the
likelihood or frequency of principal prepayments on the JPM Mortgage Loans,
(ii) the degree to which such prepayments might differ from those originally
anticipated or (iii) whether and to what extent yield maintenance premiums
will be received. Also, a security rating does not represent any assessment of
the yield to maturity that investors may experience on any Class of JPM
Investments nor does it assess any possibility that the holders of the JPM IO
might not fully recover their investment in the event of rapid prepayments of
the JPM Mortgage Loans (including both voluntary and involuntary prepayments).
A security rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time by the assigning rating
agency. The ratings assigned to the JPM IO should be evaluated independently
of similar ratings assigned to securities that have a principal balance.

SPTL, SERIES 1996-C1, CLASSES E, F, NR, A1X, D1X AND NRX

The Initial Investments also include Southern Pacific Thrift & Loan
Association, Commercial Mortgage Pass-Through Certificates, Series 1996-C1,
Class E, Class F and Class NR (the "SPTL Subordinated Interests"), Class A1X
(the "SPTL Senior IO") and Class DX and Class NRX (the "SPTL Subordinated
IOs," and, together with the SPTL Subordinated Interests and the SPTL Senior
IO, the "SPTL Investments"), which were issued on September 30, 1996. The
securities to be purchased represent 100% of the outstanding principal balance
(or notional balance) of each class purchased, except that the Company is
purchasing approximately 44% of Class AIX, Class DX and Class NRX.

The following table shows each class of MBS issued as part of SPTL Series
1996-C1, including the SPTL Subordinated Interests, the SPTL Senior IO and the
SPTL Subordinated IOs, as well as other classes of MBS that are not being sold
to the Company. The table indicates the interest rate at which interest
accrues on each class (the "Pass-Through Rate"), the principal balance as of
September 30, 1996 (the "Initial Principal Balance") and the principal balance
as of September 25, 1997. Only Classes E, F, NR and approximately 44% of
Classes AIX, DX and NRX are being sold to the Company.

84
<PAGE>

SPTL, SERIES 1996-C1
CLASSES A1X, DX, E, F, NR AND NRX

<TABLE>
<CAPTION>
PASS- INITIAL PRINCIPAL
THROUGH PRINCIPAL BALANCE AS OF
DESIGNATION RATE BALANCE SEPTEMBER 25, 1997
----------- ------- ------------ ------------------
<S> <C> <C> <C>
Class A1 Securities(1)........... (2) $110,780,000 $ 89,454,161
Class A2 Securities(1)........... (2) 76,161,000 76,161,000
Class B Securities(1)............ (2) 19,386,000 19,386,000
Class C Securities(1)............ (2) 18,001,000 18,001,000
Class D Securities(1)............ (2) 13,847,000 13,847,000

SPTL SENIOR IO:
Class A1X Securities............. (3) 110,780,000(3) 89,454,161(3)
SPTL SUBORDINATED IOS:
Class DX Securities.............. (4) 127,395,000(4) 127,395,000(4)
Class NRX Securities............. (5) 38,775,097(5) 38,677,057(5)
SPTL SUBORDINATED INTERESTS:
Class E Securities............... (6) 12,462,000 12,462,000
Class F Securities............... (6) 11,078,000 11,078,000
Class NR Securities.............. (7) 15,235,097 15,137,057
</TABLE>

- --------
(1) The Class A1, Class A2, Class B, Class C and Class D Securities are not
being sold to the Company.
(2) The Class A1, Class A2, Class B, Class C and Class D Securities accrue
interest at a floating rate that is based on one-month LIBOR subject to a
maximum rate equal to the weighted average of the Remittance Rates on the
SPTL Mortgage Loans (as defined below). "Remittance Rate" for any SPTL
Mortgage Loan is equal to the excess of the mortgage interest rate thereon
over 0.37375% per annum adjusted to reflect the actual number of days in
the related Remittance Period and a 360 day year.
(3) The Class A1X Securities accrue interest on the notional balance of such
class, which notional balance is equal to the outstanding principal
balances of the Class A1 Securities for the related distribution date, at
a rate per annum equal to the excess of (i) the weighted average by stated
principal balance, of the Remittance Rates on the SPTL Mortgage Loans over
(ii) the Pass-Through Rate on the Class A1 Securities. As of September 25,
1997, the notional balance of the Class A1X Securities to be purchased by
the Company is $39,359,831.
(4) The Class DX Securities consist of the Class A2X, Class BX, Class CX and
Class DX Components. The notional balance of the Class A2X, Class BX,
Class CX and Class DX Components is equal to the class balance of the
Class A2, Class B, Class C and Class D Securities, respectively. The Class
A2X, Class BX, Class CX and Class DX Components accrue interest on the
notional balance of such class, at a rate per annum equal to the excess of
the weighted average of the Remittance Rates on the SPTL Mortgage Loans
over the weighted average of the Pass-Through Rates on the Class A2, Class
B, Class C and Class D Securities. As of September 25, 1997, the notional
balance of the Class A2X, Class BX, Class CX and Class DX Components to be
purchased by the Company is $33,510,840, $8,529,840, $7,920,440 and
$6,092,680, respectively.

(5) The Class NRX Securities consist of the Class EX, Class FX and Class NRX
Components. The notional balance of the Class EX, Class FX and Class NRX
Components is equal to the class balance of the Class E, Class F and Class
NR Securities, respectively. The Class EX, Class FX and Class NRX
Components accrue interest on the notional balance of such class, at a
rate per annum equal to 1.5%, 1.5% and 3.0%, respectively. As of
September 25, 1997, the notional balance of the Class EX, Class FX and
Class NRX Components to be purchased by the Company is $5,483,280,
$4,874,320 and $6,660,305, respectively.

85
<PAGE>

(6) The Class E and Class F Securities accrue interest at a floating rate per
annum equal to the excess of (i) the weighted average of the Remittance
Rates over (ii) 1.5%.

(7) The Class NR Securities accrue interest at a floating rate per annum equal
to the excess of (i) the weighted average of the Remittance Rates over
(ii) 3.0%.

Structure and Subordination. Each of the SPTL Subordinated Interests is
subordinated in right of payments of principal and interest and protects the
more senior classes from losses on the related mortgage loans (the "SPTL
Mortgage Loans"). Principal distributions on the securities are applied
sequentially, with no principal paid to a class until the outstanding
principal balance of the more senior classes are reduced to zero. Thus, as of
September 25, 1997, no principal has been distributed to any of the SPTL
Subordinated Interests.

Moreover, the SPTL Subordinated Interests and SPTL Subordinated IOs provide
credit support to the more senior classes, including the SPTL Senior IO. On
any distribution date, no interest is distributed to the SPTL Subordinated
Interests and SPTL Subordinated IOs until principal and interest allocable to
Classes A1, A1X, A2, B, C and D for that distribution date has been
distributed. Thus, if there are any losses on the SPTL Mortgage Loans,
interest otherwise distributable on the SPTL Subordinated Interests and SPTL
Subordinated IOs will be reduced by the amount of such losses, and cash will
be used to make principal and interest payments to the more senior classes. In
addition, as losses are incurred on the SPTL Mortgage Loans, the principal
balance of Class NR, then Class F, then Class E will be reduced, until the
outstanding principal balance of each such class has been reduced to zero.

As of August 31, 1997, there have been no reported realized losses on the
SPTL Mortgage Loans; however, as of August 31, 1997, one SPTL Mortgage Loan,
with an unpaid principal balance of $231,396, has become an REO Property and a
collateral value adjustment of $102,750 has been made to that unpaid principal
balance. Moreover, as of August 31, 1997, 30 SPTL Mortgage Loans, representing
4.0% by principal balance of the SPTL Mortgage Loans, are delinquent in
monthly payments. Moreover, as of August 31, 1997, ten SPTL Mortgage Loans,
representing approximately 1.1% by principal balance of the SPTL Mortgage
Loans, are in foreclosure or the related mortgagor is in bankruptcy.

SPTL Mortgage Loans. The SPTL Mortgage Loans, which underlie the SPTL 1996-
C1 Subordinated Interests, the SPTL Senior IO, the SPTL Subordinated IOs and
the other classes of MBS in SPTL Series 1996-C1, are monthly-pay, variable
rate, mortgage loans with an aggregate principal balance as of September 30,
1996 of $276,950,097 and an aggregate principal balance as of August 31, 1997,
of $255,628,968. The SPTL Mortgage Loans are secured by first liens on
multifamily, retail, office, industrial, mixed use or other commercial
properties (the "SPTL Mortgaged Properties"). Most of the SPTL Mortgage Loans
were originated by SPB, and most of the remaining SPTL Mortgage Loans were
originated by several lending institutions and purchased by SPB from Fremont
Thrift & Loan Association or an affiliate thereof. All of the SPTL Mortgage
Loans were originated using guidelines substantially similar to the guidelines
set forth in the SPTL Multifamily and Commercial Lending Program, as described
under "--The Initial Mortgage Loans--Underwriting Guidelines." At origination,
most of the SPTL Mortgage Loans had thirty year terms and bore interest at an
adjustable interest rate that was subject to semi-annual interest rate
adjustments. $188,418,915 of the SPTL Mortgage Loans, representing 73.71% of
the SPTL Mortgage Loans as of August 31, 1997 by principal balance, are
secured by SPTL Mortgaged Properties located in California. When the SPTL
Investments were originally issued, they were secured by 848 SPTL Mortgage
Loans. However, 55 SPTL Mortgage Loans have prepaid in full through
August 31, 1997, leaving only 793 SPTL Mortgage Loans in the pool as of August
31, 1997.

86
<PAGE>

CERTAIN CHARACTERISTICS OF THE SPTL MORTGAGE LOANS

The Due Dates for most of the SPTL Mortgage Loans occur on the first day of
each month. All of the SPTL Mortgage Loans are secured by first liens on fee
simple interests in the related SPTL Mortgaged Properties. At September 30,
1996, based on information provided by the borrowers in the loan documents
created at origination, 88.54% of the SPTL Mortgaged Properties were not
owner-occupied. The Company does not have any more recent information as to
the occupancy status of the SPTL Mortgage Loans, and the Company does not
anticipate being able to obtain more recent information. As of August 31,
1997, the SPTL Mortgage Loans had characteristics set forth below, based upon
information provided by the trustee. The totals in the following tables may
not add up to 100% due to rounding.

MORTGAGE INTEREST RATES

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
MORTGAGE INTEREST RATES OF LOANS BALANCE BALANCE
- ----------------------- -------- ------------ ----------
<S> <C> <C> <C>
6.001% - 6.500%.............................. 1 $ 77,608 0.03%
7.001 - 7.500................................ 19 16,301,651 6.38
7.501 - 8.000................................ 24 6,936,541 2.71
8.001 - 8.500................................ 32 8,749,577 3.42
8.501 - 9.000................................ 43 14,485,237 5.67
9.001 - 9.500................................ 100 39,131,615 15.31
9.501 - 10.000................................ 101 35,227,111 13.78
10.001 - 11.000................................ 234 69,409,327 27.15
11.001 - 12.000................................ 131 43,858,239 17.16
12.001 - 13.000................................ 101 20,986,677 8.21
13.001 and Above............................... 7 465,385 0.18
--- ------------ ------
Total:......................................... 793 $255,628,968 100.00%
=== ============ ======
</TABLE>

Weighted Average Mortgage Interest Rate: 10.16%

87
<PAGE>

PRINCIPAL BALANCES

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
PRINCIPAL BALANCES OF LOANS BALANCE BALANCE
- ------------------ -------- ------------ ----------
<S> <C> <C> <C>
$0 - $100,000......................... 109 $ 8,455,124 3.31%
100,001 - 200,000......................... 285 41,871,841 16.38
200,001 - 300,000......................... 139 33,886,203 13.26
300,001 - 400,000......................... 86 30,443,203 11.91
400,001 - 500,000......................... 56 24,917,956 9.75
500,001 - 600,000......................... 24 13,192,262 5.16
600,001 - 700,000......................... 16 10,553,854 4.13
700,001 - 800,000......................... 13 9,740,735 3.81
800,001 - 900,000......................... 14 11,931,995 4.67
900,001 - 1,000,000......................... 11 10,431,924 4.08
1,000,001 - 1,100,000......................... 4 4,126,477 1.61
1,100,001 - 1,200,000......................... 6 6,853,836 2.68
1,200,001 - 1,300,000......................... 3 3,699,495 1.45
1,300,001 - 1,400,000......................... 6 8,000,039 3.13
1,400,001 - 1,500,000......................... 4 5,737,065 2.24
1,500,001 - 1,600,000......................... 5 7,793,259 3.05
1,600,001 - 1,800,000......................... 4 6,839,307 2.68
1,800,001 - 2,000,000......................... 4 7,643,100 2.99
2,200,000 and Above .......................... 4 9,511,293 3.72
--- ------------ ------
Total:........................................ 793 $255,628,968 100.00%
=== ============ ======
</TABLE>

Average Principal Balance: $322,357

INDICES

<TABLE>
<CAPTION>
PERCENT BY
NUMBER AGGREGATE AGGREGATE
OF PRINCIPAL PRINCIPAL
INDICES LOANS BALANCE BALANCE
- ------- ------ ------------ ----------
<S> <C> <C> <C>
Six-Month LIBOR................................. 383 $124,565,926 48.73%
Bank of America Prime........................... 222 57,352,223 22.44
One-Year CMT.................................... 93 39,404,381 15.41
11th District COFI.............................. 95 34,306,438 13.42
--- ------------ ------
Total:.......................................... 793 $255,628,968 100.00%
=== ============ ======
</TABLE>

88
<PAGE>

NOTE MARGINS

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
NOTE MARGINS OF LOANS BALANCE BALANCE
- ------------ -------- ------------ ----------
<S> <C> <C> <C>
0.01% - 2.50%.................................. 17 $ 15,996,924 6.26%
2.51 - 3.00.................................... 64 19,666,071 7.69
3.01 - 3.50.................................... 137 42,555,189 16.65
3.51 - 4.00.................................... 273 86,646,258 33.90
4.01 - 4.50.................................... 143 52,013,363 20.35
4.51 - 5.00.................................... 139 30,398,307 11.89
5.01 - 5.50.................................... 15 6,358,085 2.49
5.51 - 6.00.................................... 4 1,647,623 0.64
6.01 and Above................................. 1 347,148 0.14
--- ------------ ------
Total: ........................................ 793 $255,628,968 100.00%
=== ============ ======
</TABLE>

Weighted Average Note Margin: 3.82%

MINIMUM MORTGAGE INTEREST RATES

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
MINIMUM MORTGAGE INTEREST RATES OF LOANS BALANCE BALANCE
- ------------------------------- -------- ------------ ----------
<S> <C> <C> <C>
No Minimum..................................... 1 $ 745,699 0.29%
3.51% - 4.50%................................ 11 1,696,327 0.66
4.51 - 5.50.................................. 13 3,196,819 1.25
5.51 - 6.50.................................. 14 2,471,598 0.97
6.51 - 7.50.................................. 275 113,749,933 44.50
7.51 - 8.50.................................. 270 82,338,421 32.21
8.51 - 9.50.................................. 120 34,207,545 13.38
9.51 - 10.50.................................. 41 9,957,544 3.90
10.51 - 11.50.................................. 14 3,623,820 1.42
11.51 - 12.50.................................. 20 2,237,861 0.88
12.51 - 13.50.................................. 9 1,027,779 0.40
13.51 - 14.50.................................. 4 357,973 0.14
14.51 and Above................................ 1 17,649 0.01
--- ------------ ------
Total: ........................................ 793 $255,628,968 100.00%
=== ============ ======
</TABLE>

Weighted Average Minimum Mortgage Interest Rate: 7.89%

89
<PAGE>

MAXIMUM MORTGAGE INTEREST RATES

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
MAXIMUM RATES OF LOANS BALANCE BALANCE
- ------------- -------- ------------ ----------
<S> <C> <C> <C>
No Maximum..................................... 1 $ 745,699 0.29%
10.01% - 11.00%................................ 1 887,260 0.35
11.01 - 12.00.................................. 2 1,773,735 0.69
12.01 - 13.00.................................. 29 9,063,283 3.55
13.01 - 14.00.................................. 341 136,549,648 53.42
14.01 - 15.00.................................. 236 63,617,948 24.89
15.01 - 16.00.................................. 87 27,756,498 10.86
16.01 - 17.00.................................. 48 8,355,731 3.27
17.01 - 18.00.................................. 26 4,544,959 1.78
18.01 - 19.00.................................. 18 2,081,332 0.81
19.01 - 20.00.................................. 2 209,125 0.08
21.01 and Above................................ 2 43,750 0.02
--- ------------ ------
Total: ........................................ 793 $255,628,968 100.00%
=== ============ ======
Weighted Average Maximum Mortgage Interest Rate: 14.24%

INTEREST ADJUSTMENT FREQUENCY

<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
ADJUSTMENT FREQUENCY OF LOANS BALANCE BALANCE
- -------------------- -------- ------------ ----------
<S> <C> <C> <C>
One Month...................................... 3 $ 2,270,626 0.89%
Three Months................................... 4 133,513 0.05
Six Months..................................... 770 251,310,862 98.31
One Year....................................... 16 1,913,967 0.75
--- ------------ ------
Total: ........................................ 793 $255,628,968 100.00%
=== ============ ======

LOAN SEASONING

<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
AGE OF LOANS SINCE ORIGINATION (MONTHS) OF LOANS BALANCE BALANCE
- --------------------------------------- -------- ------------ ----------
<S> <C> <C> <C>
13 - 24........................................ 467 $159,039,580 62.22%
25 - 36........................................ 90 33,659,728 13.17
37 - 48........................................ 48 13,998,242 5.48
49 - 60........................................ 36 8,960,345 3.51
61 - 72........................................ 28 4,401,252 1.72
73 - 84........................................ 19 2,476,334 0.97
85 - 96........................................ 10 1,340,460 0.52
97 - 108....................................... 39 15,616,842 6.11
109 - 120...................................... 34 13,195,607 5.16
121 or More.................................... 22 2,940,578 1.15
--- ------------ ------
Total: ........................................ 793 $255,628,968 100.00%
=== ============ ======
</TABLE>
Weighted Average Loan Seasoning: 36 months

90
<PAGE>

LOAN AMORTIZATION TYPE

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
AMORTIZATION TYPE OF LOANS BALANCE BALANCE
- ----------------- -------- ------------ ----------
<S> <C> <C> <C>
Fully Amortizing............................... 658 $210,933,928 82.52%
Interest Only/Balloon.......................... 135 44,695,040 17.48
--- ------------ ------
Total:......................................... 793 $255,628,968 100.00%
=== ============ ======
</TABLE>

REMAINING TERM OF FULLY AMORTIZING LOANS

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
REMAINING TERM (MONTHS) OF LOANS BALANCE BALANCE
- ----------------------- -------- ------------ ----------
<S> <C> <C> <C>
60 or Less.................................... 7 $ 401,910 0.16%
61 - 120...................................... 18 4,577,103 1.79
121 - 180...................................... 7 834,354 0.33
181 - 240...................................... 13 2,435,433 0.95
241 - 360...................................... 613 202,685,128 79.29
--- ------------ -----
Total:......................................... 658 $210,933,928 82.52%
=== ============ =====

REMAINING TERM OF BALLOON LOANS

<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
REMAINING TERM (MONTHS) OF LOANS BALANCE BALANCE
- ----------------------- -------- ------------ ----------
<S> <C> <C> <C>
12 or Less.................................... 19 $ 4,927,775 1.93%
13 - 24...................................... 23 4,983,114 1.95
25 - 36...................................... 10 1,416,853 0.55
37 - 48...................................... 13 3,169,786 1.24
49 - 60...................................... 15 3,191,053 1.25
61 - 120...................................... 47 20,153,131 7.88
121 - 180...................................... 8 6,853,328 2.68
--- ------------ -----
Total:......................................... 135 $ 44,695,040 17.48%
=== ============ =====
</TABLE>

91
<PAGE>

DEBT SERVICE COVERAGE RATIOS FOR MORTGAGE LOANS

<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL
DEBT SERVICE COVERAGE RATIO(1) OF LOANS BALANCE BALANCE
- ------------------------------ -------- ------------ ----------
<S> <C> <C> <C>
1.000 or Less.................................. 30 $ 11,029,777 4.31%
1.001 - 1.125.................................. 35 9,602,971 3.76
1.126 - 1.250.................................. 100 45,304,668 17.72
1.251 - 1.375.................................. 111 45,080,329 17.64
1.376 - 1.500.................................. 112 35,517,167 13.89
1.501 - 1.625.................................. 93 26,647,188 10.42
1.626 - 1.750.................................. 81 25,750,005 10.07
1.751 - 1.875.................................. 56 19,590,126 7.66
1.876 - 2.000.................................. 52 14,032,966 5.49
2.001 - 2.125.................................. 21 4,785,966 1.87
2.126 - 2.250.................................. 16 2,406,397 0.94
2.251 - 2.375.................................. 19 4,990,637 1.95
2.376 - 2.500.................................. 7 1,263,077 0.49
2.501 - 2.625.................................. 7 1,293,957 0.51
2.626 and Above................................ 53 8,333,737 3.26
--- ------------ -----
Total:......................................... 793 $255,628,968 100.0%
=== ============ =====
</TABLE>
Weighted Average Debt Service Coverage Ratio: 1.544
- --------
(1)As defined on page 65.

Approximately 65.75% of the SPTL Mortgage Loans were subject to prepayment
penalties as of August 31, 1997. In general, the terms of such SPTL Mortgage
Loans provide that if the related mortgagor prepays the principal balance
thereof in an amount in excess of 20% of the original principal balance of the
related SPTL Mortgage Loan for any 12-month period during a certain period of
time following origination, such mortgagor will be required to pay a
prepayment premium equal to six months' interest at the Mortgage Interest Rate
then in effect for such Mortgage Loan on the amount of such prepayment in
excess of 20% of the original principal amount thereof.

The SPTL Mortgage Loans are being serviced by Midland Loan Services, L.P.,
as master servicer and special servicer and SPB as sub-servicer, and the
trustee for the series is LaSalle National Bank. See "Servicing of the
Mortgage Loans."

Restrictions on Transfer of SPTL Subordinated Interests. The SPTL
Investments have not been registered under the Securities Act or any state
securities laws, and, accordingly, transfer of the SPTL Investments is
restricted. Moreover, the SPTL Investments cannot be transferred to a Plan or
Plan investor except in certain limited circumstances. As a result, there is
no liquid market for the SPTL Investments.

Ratings. The Class A1X Securities are rated "AAA" by DCR. The Class DX
Securities are rated "BBB" by DCR. The Class E Securities are rated "BB" by
DCR. The Class F Securities are rated "B" by DCR. The Class NR and NRX
Securities are unrated.

The ratings of the rating agencies on mortgage pass-through certificates
address the likelihood of the receipt of all distributions to which such
holders are entitled. The ratings do not represent any assessment of (i) the
likelihood or frequency of principal prepayments on the SPTL Mortgage Loans,
(ii) the degree to which such prepayments might differ from those originally
anticipated or (iii) whether and to what extent yield maintenance premiums
will be received. Also, a security rating does not represent any assessment of
the yield to maturity that investors may experience on any Class of SPTL
Investments nor does it assess any possibility that the holders of the SPTL
Senior IO and the SPTL Subordinated IOs might not fully recover their
investment in the event of rapid prepayments of the SPTL Mortgage Loans
(including both voluntary and involuntary prepayments). A security rating is
not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the assigning rating agency. The ratings
assigned to the SPTL Senior IO and SPTL Subordinated IOs should be evaluated
independently of similar ratings assigned to securities that have a principal
balance.

92
<PAGE>

YIELD CONSIDERATIONS RELATED TO THE INITIAL MBS INTERESTS

GENERAL

The actual yield to maturity on the Initial MBS Interests will depend upon,
among other things, the interest rates on the Mortgage Collateral underlying
the Initial MBS Interests. The actual yield also will be dependent on the
timing and aggregate amount of distributions on each class of MBS Interests,
which in turn will depend primarily on losses and prepayments on the related
mortgage loans. See "Yield Considerations Related to the Company's
Investments."

INITIAL SUBORDINATED INTERESTS

The yield to maturity on the JPM Subordinated Interests and the SPTL
Subordinated Interests (collectively, the "Initial Subordinated Interests")
will be extremely sensitive to the default and loss experience of the
underlying Mortgage Collateral and the timing of any such defaults or losses.
See "Risk Factors--Subordinated MBS Interests are Subject to Greater Credit
Risks than More Senior Classes" and "Yield Considerations Related to the
Company's Investments."

The significance of the effect of potential Realized Losses on the Mortgage
Loans is illustrated in the following tables. This information is presented
for analytical purposes only, and is not intended as an accurate indicator or
prediction of the actual defaults and losses that may occur in the future with
respect to the Mortgage Loans. Actual defaults, liquidations and losses are
likely to differ in timing and amount from those assumed (and may differ
significantly). Investors in the Company are urged to consider their own
estimates as to possible levels and timing of defaults and losses.

The Company will purchase each class of Initial Subordinated Interests at a
discount from its principal amount. Accordingly, if the Company calculates the
anticipated yield to maturity of any such class based on an assumed rate of
payment that is faster than that actually experienced on the Mortgage Loans,
the actual yield may be lower than that so calculated.

MODELING ASSUMPTIONS

Yield Table for the JPM Subordinated Interests

The following table, regarding the JPM Subordinated Interests, indicates the
pre-tax yield to maturity and the weighted average lives that would be
produced by the specified percentages of constant prepayment ("CPR"), Mortgage
Loan annual default rates (the "Conditional Default Rates") and loss
severities, assuming the indicated purchase price and the following additional
assumptions. There can be no assurance that these assumptions are reasonable
or that additional or different assumptions should not be made to determine
potential yields on these investments.

(i) The JPM Mortgage Loans prepay at the indicated percentage of CPR;

(ii) The maturity date of each of the Balloon Mortgage Loans (as that term
is defined in "Glossary of Terms") is not extended;

(iii) Distributions on the JPM Subordinated Interests are received in
cash, on the 25th day of each month, commencing September 25, 1997;

(iv) Prepayments represent payment in full of individual JPM Mortgage
Loans and are received on the respective due dates and include a
month's interest thereon;

(v) There are no repurchases of JPM Mortgage Loans due to breaches of any
representation and warranty or pursuant to an optional termination
otherwise;

(vi) The JPM Subordinated Interests are purchased on September 22, 1997;

93
<PAGE>

(vii) The purchase price is 81.3555% for the Class E Certificates,
73.3862% for the Class F Certificates, 56.7307% for the Class G
Certificates, 7.1985% for the Class H Certificates and 0.2475% for
the Class NR Certificates, plus in each case accrued interest from
August 1, 1997 to but not including an assumed date of purchase of
September 22, 1997;

(viii) All required payments are made during the applicable collection
periods, except for balances which are assumed to be in default;

(ix) All necessary principal and interest advances will be made;

(x) Liquidation of the principal balance assumed to be in default (the
"Default Balance") occurs at the time of default;

(xi) Upon default, losses of 30% of the Default Balance will be realized
upon liquidation;

(xii) Upon liquidation, 70% (the inverse of the indicated loss severity)
of the Default Balance, less any amount in respect of principal
previously received as a result of principal and interest advances
made following assumed default, is recovered;

(xiii) No amounts will be available on future distribution dates to cover
interest shortfalls in prior periods on the JPM Subordinated
Interests;

(xiv) No mortgagor becomes the subject of a bankruptcy proceeding;

(xv) No special servicing fees are assumed to be incurred; and

(xvi) One-month LIBOR is equal to 5.66% per annum and remains constant
while the JPM Subordinated Interests remain outstanding; and

(xvii) The indices applicable to the JPM Mortgage Loan notes are equal to
the following per annum rates and remain constant while the JPM
Subordinated Interests remain outstanding:

<TABLE>
<S> <C>
Six-Month LIBOR..................................................... 5.87%
Bank of America Prime............................................... 8.50%
One-Year CMT........................................................ 5.52%
</TABLE>

(xviii) The cut-off date for the JPM Mortgage Loans is July 31, 1997.

The assumed percentages of liquidations and loss severities on the JPM
Mortgage Loans shown in the tables below are for illustrative purposes only
and the Company makes no representation with respect to the reasonableness of
the assumptions or that the actual liquidation and loss severity experience of
the JPM Mortgage Loans will in any way correspond to any of the assumptions.
In addition, it was assumed in preparing the tables that no special servicing
fees or other expenses of the JPM 1997-SPTL-C1 trust fund will be paid, but in
fact defaults and liquidations would result in the payment to the special
servicer of special servicing fees and other expenses of such trust fund,
which payments would reduce the amount available for distribution to one or
more classes of the JPM Subordinated Interests. Consequently, there can be no
assurance that the pre-tax yield to an investor in any class of JPM
Subordinated Interests will correspond to any of the pre-tax yields shown
below.

The following tables generally show higher yields for the JPM Subordinated
Interests in scenarios involving higher rates of prepayments, primarily
because loss percentages are applied to remaining JPM Mortgage Loan balances
rather than original JPM Mortgage Loan balances. Accordingly, in scenarios
with high prepayments, losses are lower. Contrary to the assumptions above,
prepayments are less likely to occur in connection with nonperforming or
troubled JPM Mortgage Loans, and accordingly, a higher rate of prepayments is
not likely to result in a proportionate reduction of defaults. As a result,
the yield on JPM Subordinated Interests may in fact not improve as
significantly at higher prepayment speeds as shown in the tables. High
prepayment rates are more likely to occur in an environment of improved
property values and lower interest rates, and to the extent defaults are less
likely to occur in such an environment, defaults could decline as a percentage
of original principal amounts while prepayment rates are high.

94
<PAGE>

JPM 1997-SPTL-C1, CLASS E
(PURCHASE PRICE OF 81.3555% OF PRINCIPAL AMOUNT)

<TABLE>
<CAPTION>
0.0% CDR 1.5% CDR 3.0% CDR 6.0% CDR
----------- ----------- ----------- -------------
CPR BEY WAL BEY WAL BEY WAL BEY WAL
--- ---- ----- ---- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0% 8.30% 27.89 8.29% 28.55 5.50% 29.21 (8.47)% N/A
---- ----- ---- ----- ---- ----- ----- -----
5.0% 8.39% 23.94 8.37% 24.64 8.34% 26.04 1.82 % 28.81
---- ----- ---- ----- ---- ----- ----- -----
10.0% 8.69% 17.03 8.67% 17.34 8.63% 17.98 7.80 % 20.61
---- ----- ---- ----- ---- ----- ----- -----
15.0% 9.15% 12.09 9.13% 12.21 9.10% 12.45 8.99 % 13.52
---- ----- ---- ----- ---- ----- ----- -----
20.0% 9.69% 9.10 9.67% 9.16 9.65% 9.27 9.57 % 9.66
---- ----- ---- ----- ---- ----- ----- -----
</TABLE>
- --------

CDR: Conditional Default Rate

CPR: Constant Prepayment Rate

BEY: Bond Equivalent Yield

WAL: Weighted Average Life (Years)

JPM 1997-SPTL-C1, CLASS F
(PURCHASE PRICE OF 73.3862% OF PRINCIPAL AMOUNT)

<TABLE>
<CAPTION>
0.0% CDR 1.5% CDR 3.0% CDR 6.0% CDR
------------ ------------ ------------- --------------
CPR BEY WAL BEY WAL BEY WAL BEY WAL
--- ----- ----- ----- ----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0% 9.25% 28.37 8.13% 29.21 (1.97)% N/A (28.12)% N/A
----- ----- ----- ----- ----- ----- ------ -----
5.0% 9.33% 25.71 9.28% 27.21 5.93 % 28.92 (19.87)% N/A
----- ----- ----- ----- ----- ----- ------ -----
10.0% 9.62% 19.70 9.54% 20.99 9.40 % 23.92 (9.37)% N/A
----- ----- ----- ----- ----- ----- ------ -----
15.0% 10.15% 14.30 10.06% 14.97 9.92 % 16.17 5.75 % 20.64
----- ----- ----- ----- ----- ----- ------ -----
20.0% 10.81% 10.83 10.72% 11.20 10.59 % 11.76 9.82 % 14.71
----- ----- ----- ----- ----- ----- ------ -----
</TABLE>
- --------

CDR: Conditional Default Rate

CPR: Constant Prepayment Rate

BEY: Bond Equivalent Yield

WAL: Weighted Average Life (Years)

95
<PAGE>

JPM 1997-SPTL-C1, CLASS G
(PURCHASE PRICE OF 56.7307% OF PRINCIPAL AMOUNT)

<TABLE>
<CAPTION>
0.0% CDR 1.5% CDR 3.0% CDR 6.0% CDR
------------ ------------ ------------- ------------
CPR BEY WAL BEY WAL BEY WAL BEY WAL
--- ----- ----- ----- ----- ----- ----- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0% 11.98% 28.61 8.03% N/A (6.26)% N/A (43.45)% N/A
----- ----- ----- ----- ----- ----- ------ ---
5.0% 12.07% 26.62 11.98% 28.64 0.29 % N/A (36.42)% N/A
----- ----- ----- ----- ----- ----- ------ ---
10.0% 12.43% 21.39 12.24% 23.72 8.96 % 28.90 (28.16)% N/A
----- ----- ----- ----- ----- ----- ------ ---
15.0% 13.19% 15.84 12.95% 17.18 12.54 % 20.29 (18.14)% N/A
----- ----- ----- ----- ----- ----- ------ ---
20.0% 14.21% 12.07 13.96% 12.81 13.59 % 14.10 (4.23)% N/A
----- ----- ----- ----- ----- ----- ------ ---
</TABLE>
- --------

CDR: Conditional Default Rate

CPR: Constant Prepayment Rate

BEY: Bond Equivalent Yield

WAL: Weighted Average Life (Years)

JPM 1997-SPTL-C1, CLASS H
(PURCHASE PRICE OF 7.1985% OF PRINCIPAL AMOUNT)

<TABLE>
<CAPTION>
0.0% CDR 1.5% CDR 3.0% CDR 6.0% CDR
------------ --------------- --------------- -------------
CPR BEY WAL BEY WAL BEY WAL BEY WAL
--- ----- ----- ------- ----- ------- ----- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0% 9.36% 28.75 (100.00)% N/A (100.00)% N/A (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
5.0% 9.92% 27.19 3.27 % 29.23 (100.00)% N/A (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
10.0% 11.96% 22.67 10.31 % 26.24 (100.00)% N/A (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
15.0% 15.99% 17.12 14.05 % 19.44 7.25 % 24.82 (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
20.0% 21.12% 13.12 19.21 % 14.38 15.67 % 17.79 (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
</TABLE>
- --------

CDR: Conditional Default Rate

CPR: Constant Prepayment Rate

BEY: Bond Equivalent Yield

WAL: Weighted Average Life (Years)

96
<PAGE>

JPM 1997-SPTL-C1, CLASS NR
(PURCHASE PRICE OF 0.2475% OF PRINCIPAL AMOUNT)

<TABLE>
<CAPTION>
0.0% CDR 1.5% CDR 3.0% CDR 6.0% CDR
------------ --------------- --------------- -------------
CPR BEY WAL BEY WAL BEY WAL BEY WAL
--- ----- ----- ------- ----- ------- ----- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0% 21.73% 29.10 (100.00)% N/A (100.00)% N/A (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
5.0% 22.32% 28.39 (100.00)% N/A (100.00)% N/A (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
10.0% 24.72% 26.04 12.73 % 28.72 (100.00)% N/A (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
15.0% 31.06% 21.74 21.72 % 24.18 (100.00)% N/A (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
20.0% 40.59% 17.45 31.48 % 18.94 8.91 % 25.93 (100.00)% N/A
----- ----- ------- ----- ------- ----- ------- ---
</TABLE>
- --------

CDR: Conditional Default Rate

CPR: Constant Prepayment Rate

BEY: Bond Equivalent Yield

WAL: Weighted Average Life (Years)

Yield Table for the SPTL Subordinated Interests

The following table, regarding the SPTL Subordinated Interests, indicates
the pre-tax yield to maturity and the weighted average lives that would be
produced by the specified percentages of CPR, Mortgage Loan Conditional
Default Rates and loss severities, assuming the indicated purchase price and
the following additional assumptions. There can be no assurance that these
assumptions are reasonable or that additional or different assumptions should
not be made to determine potential yields on these investments.

(i) The SPTL Mortgage Loans prepay at the indicated percentage of CPR;

(ii) The maturity date of each of the Balloon Mortgage Loans is not
extended;

(iii) Distributions on the SPTL Subordinated Interests are received in
cash, on the 25th day of each month, commencing in October 1997;

(iv) Prepayments represent payment in full of individual SPTL Mortgage
Loans and are received on the respective due dates and include a
month's interest thereon;

(v) There are no repurchases of SPTL Mortgage Loans due to breaches of any
representation and warranty or pursuant to an optional termination
otherwise;

(vi) The SPTL Subordinated Interests are purchased on September 22, 1997;

(vii) The purchase price is 97.5000% for the Class E Certificates, 68.9000%
for the Class F Certificates and 28.7000% for the Class NR
Certificates plus in each case accrued interest from September 1,
1997 to but not including an assumed date of purchase of September
22, 1997;

(viii) All required payments are made during the applicable collection
periods, except for balances which are assumed to be in default;

(ix) All necessary principal and interest advances will be made;

(x) Liquidation of a Default Balance occurs 12 months after default.

(xi) Upon liquidation, 70% (the inverse of the indicated loss severity) of
the Default Balance, less any amount in respect of principal
previously received as a result of principal and interest advances
made following assumed default, is recovered;

97
<PAGE>

(xiii) No amounts will be available on future distribution dates to cover
interest shortfalls in prior periods on the SPTL Subordinated
Interests;

(xiv) No mortgagor becomes the subject of a bankruptcy proceeding;

(xv) No special servicing fees are assumed to be incurred;

(xvi) Upon default, losses of 30% (each a "Loss Severity Percentage"), as
indicated, of the Default Balance will be realized upon liquidation;

(xvii) One-month LIBOR is equal to 5.66% per annum and remains constant
while the SPTL Subordinated Interests remain outstanding; and

(xviii) The indices applicable to the SPTL Mortgage Loan notes are equal to
the following per annum rates and remain constant while the SPTL
Subordinated Interests remain outstanding:

(xix) The cut-off date for the SPTL Mortgage Loans is August 1, 1997.

The assumed percentages of liquidations and loss severities on the SPTL
Mortgage Loans shown in the tables below are for illustrative purposes only
and the Company makes no representation with respect to the reasonableness of
the assumptions or that the actual liquidation and loss severity experience of
the SPTL Mortgage Loans will in any way correspond to any of the assumptions.
In addition, it was assumed in preparing the tables that no special servicing
fees or other expenses of the SPTL 1996-C1 trust fund will be paid, but in
fact defaults and liquidations would result in the payment to the special
servicer of special servicing fees and other expenses of such trust fund,
which payments would reduce the amount available for distribution to one or
more classes of SPTL Subordinated Interests. Consequently, there can be no
assurance that the pre-tax yield to an investor in any class of SPTL
Subordinated Interests will correspond to any of the pre-tax yields shown
below.

The following table generally shows higher yields for the SPTL Subordinated
Interests in scenarios involving higher rates of prepayments, primarily
because loss percentages are applied to remaining SPTL Mortgage Loan balances
rather than original SPTL Mortgage Loan balances. Accordingly, in scenarios
with high prepayments, losses are lower. Contrary to the assumptions above,
prepayments are less likely to occur in connection with nonperforming or
troubled SPTL Mortgage Loans, and accordingly, a higher rate of prepayments is
not likely to result in a proportionate reduction of defaults. As a result,
the yield on SPTL Subordinated Interests may in fact not improve as
significantly at higher prepayment speeds as shown in the tables. High
prepayment rates are more likely to occur in an environment of improved
property values and lower interest rates, and to the extent defaults are less
likely to occur in such an environment, defaults could decline as a percentage
of original principal amounts while prepayment rates are high.

98
<PAGE>

SPTL 1996-C1 CLASS E
(PURCHASE PRICE OF 97.5000% OF PRINCIPAL AMOUNT)

<TABLE>
<CAPTION>
0.0%CDR 1.5% CDR 3.0% CDR 6.0% CDR
---------- ---------- ---------- --------------
CPR LS BEY WAL BEY WAL BEY WAL BEY WAL
- --- ----- ----- ---- ----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.0% 30.0% 8.63% 26.6 8.63% 27.1 8.29% 27.9 0.31% N/A
----- ---- ----- ---- ----- ---- ----- ----
5.0% 30.0% 8.64% 22.0 8.63% 22.4 8.63% 23.2 7.32% 25.3
----- ---- ----- ---- ----- ---- ----- ----
10.0% 30.0% 8.64% 15.2 8.64% 15.3 8.64% 15.7 8.64% 17.3
----- ---- ----- ---- ----- ---- ----- ----
15.0% 30.0% 8.66% 10.8 8.66% 10.8 8.66% 11.0 8.65% 11.5
----- ---- ----- ---- ----- ---- ----- ----
20.0% 30.0% 8.69% 8.1 8.69% 8.2 8.69% 8.3 8.68% 8.6
----- ---- ----- ---- ----- ---- ----- ----
</TABLE>
- --------

CDR: Conditional Default Rate

CPR: Constant Prepayment Rate

LS: Loss Severity Percentage--Each liquidation results in a realized loss
allocable to principal equal to the percentage indicated

BEY: Bond Equivalent Yield

WAL: Weighted Average Life (Years)

99
<PAGE>

SPTL 1996-C1 CLASS F
(PURCHASE PRICE OF 68.9000% OF PRINCIPAL AMOUNT)

<TABLE>
<CAPTION>
0.0%CDR 1.5% CDR 3.0% CDR 6.0% CDR
----------- ----------- ----------- ------------
CPR LS BEY WAL BEY WAL BEY WAL BEY WAL
- --- ----- ------ ---- ------ ---- ------ ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.0% 30.0% 12.31% 27.3 12.17% 28.1 8.25% N/A (6.09)% N/A
------ ---- ------ ---- ------ ---- ------- ----
5.0% 30.0% 12.40% 24.2 12.36% 25.4 11.61% 26.8 (0.25)% N/A
------ ---- ------ ---- ------ ---- ------- ----
10.0% 30.0% 12.71% 18.1 12.65% 19.1 12.54% 21.0 7.75 % 24.6
------ ---- ------ ---- ------ ---- ------- ----
15.0% 30.0% 13.30% 13.1 13.21% 13.6 13.09% 14.5 11.40 % 17.3
------ ---- ------ ---- ------ ---- ------- ----
20.0% 30.0% 14.04% 10.0 13.94% 10.3 13.82% 10.8 13.40 % 13.0
------ ---- ------ ---- ------ ---- ------- ----
</TABLE>
- --------

CDR: Conditional Default Rate

CPR: Constant Prepayment Rate

LS: Loss Severity Percentage--Each liquidation results in a realized loss
allocable to principal equal to the percentage indicated

BEY: Bond Equivalent Yield

WAL: Weighted Average Life (Years)

100
<PAGE>

SPTL 1996-C1 CLASS NR
(PURCHASE PRICE OF 28.7000% OF PRINCIPAL AMOUNT)

<TABLE>
<CAPTION>
0.0%CDR 1.5% CDR 3.0% CDR 6.0% CDR
----------- ----------- ----------- -------------
CPR LS BEY WAL BEY WAL BEY WAL BEY WAL
- --- ----- ------ ---- ------ ---- ------ ---- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.0% 30.0% 24.83% 28.1 17.23% N/A 4.85% N/A (20.35)% N/A
------ ---- ------ ---- ------ ---- -------- ----
5.0% 30.0% 24.86% 26.8 19.19% 27.7 8.60% N/A (17.16)% N/A
------ ---- ------ ---- ------ ---- -------- ----
10.0% 30.0% 25.02% 23.4 20.44% 24.5 13.35% 27.0 (13.30)% N/A
------ ---- ------ ---- ------ ---- -------- ----
15.0% 30.0% 25.60% 18.8 21.68% 19.5 16.49% 21.0 (8.31)% N/A
------ ---- ------ ---- ------ ---- -------- ----
20.0% 30.0% 26.77% 14.8 23.27% 15.3 18.92% 16.0 0.49 % 27.0
------ ---- ------ ---- ------ ---- -------- ----
</TABLE>
- --------

CDR: Conditional Default Rate

CPR: Constant Prepayment Rate

LS: Loss Severity Percentage--Each liquidation results in a realized loss
allocable to principal equal to the percentage indicated

BEY: Bond Equivalent Yield

WAL: Weighted Average Life (Years)

101
<PAGE>

YIELD ON THE INTEREST ONLY CERTIFICATES

The yield to investors on the JPM IO, the SPTL Senior IO and the SPTL
Subordinate IOs (collectively, the "Initial IO Investments") will be highly
sensitive to the rate and timing of principal payments (including prepayments
and liquidations) on the Mortgage loans. Investors should fully consider the
associated risks to the Company, including the risk that a rapid rate of
principal prepayments of the Mortgage Loans could result in the failure of the
Company to recoup fully its investment in the Initial IO Investments.

The Pass-Through Rate on the JPM IO will equal the excess of the weighted
average Remittance Rate on the JPM Mortgage Loans over the Pass-Through Rates
on all the other JPM 1997-SPTL-C1 Certificates. The Pass-Through Rate on the
SPTL 1996-C1, Class A1X Certificates and the Class A2X, Class BX, Class CX and
Class DX Components (which components comprise the Class DX Certificates) will
equal the excess of the weighted average Remittance Rate on the SPTL Mortgage
Loans over the Pass-Through Rates on the Class A1, Class A2, Class B, Class C
and Class D Certificates (collectively, the "SPTL Senior Certificates"),
respectively. The Pass-Through Rates on the SPTL Senior Certificates will be
based on LIBOR subject to a maximum rate equal to the weighted average of the
Remittance Rates on the SPTL Mortgage Loans. Therefore, the Pass-Through Rates
on the JPM IO and the SPTL 1996-C1, Class A1X and Class DX Certificates (the
"SPTL LIBOR IOs") will be affected adversely by increases in the value of
LIBOR in excess of increases in the value of the Indices or decreases in the
value of the Indices in excess of decreases in the value of LIBOR.

In general, the yield to maturity on the JPM IO and the SPTL LIBOR IOs will
be lower if the Pass-Through Rate on the other JPM Certificates and the SPTL
Senior Certificates rises more than the weighted average Remittance Rate on
the JPM Mortgage Loans and the SPTL Mortgage Loans, respectively. The Pass-
Through Rate on such other JPM Certificates and SPTL Senior Certificates is
based upon the value of an index (LIBOR) which is different from the value of
the indices applicable to the Mortgage Loans. Each Mortgage Loan adjusts
monthly, quarterly, semi-annually or annually based upon the related Index
whereas the Pass-Through Rates on such other JPM Certificates and SPTL Senior
Certificates adjust monthly based upon LIBOR. LIBOR and the indices applicable
to the Mortgage Loans may respond differently to economic and market factors,
and there is not necessarily any correlation between them. In addition, all of
the Mortgage Loans are subject to periodic rate caps, maximum mortgage
interest rates and minimum mortgage interest rates. Thus, it is possible, for
example, that LIBOR may rise during period in which the indices on the
Mortgage Loans are stable or are falling or that, even if both LIBOR and such
indices rise during the same period, LIBOR may rise more rapidly than such
indices and therefore the amount of interest collected on all Mortgage Loans
(adjusted to the Remittance Rate) may be insufficient to pay interest on a
class of Initial IO Investments.

The following table indicates the sensitivity of the pre-tax yield to
maturity on the JPM IO to various rates of prepayment on the JPM Mortgage
Loans by projecting the monthly aggregate payments on the JPM IO and computing
the corresponding pre-tax yields to maturity on a corporate bond equivalent
basis, based on the assumptions described in clauses (ii) through (vi), (viii)
through (ix) and (xiii) through (xviii) in the paragraph under "--Modeling
Assumptions--Yield Table for the JPM Subordinated Interests" herein. The table
is also based on the following assumptions: (i) one-month LIBOR is equal to
5.66% per annum and remains constant while the JPM Subordinated Interests
remain outstanding and (ii) the indices applicable to the JPM Mortgage Loan
notes are equal to the following per annum rates and remain constant while the
JPM Subordinated Interests remain outstanding:

Any differences between such assumptions and the actual characteristics and
performance underscore the hypothetical nature of the table, which is provided
only to give a general sense of the sensitivity of yields in varying
prepayment scenarios.

102
<PAGE>

PRE-TAX YIELD TO MATURITY OF THE JPM IO(/1/)

<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE PREPAYMENT ASSUMPTION
AS A PERCENTAGE OF THE -----------------------------------------------------------------
NOTIONAL AMOUNT 0% V1 V2 V3 V4
- ---------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
13.8611% 26.80 19.49 14.53 13.34 10.48
</TABLE>
- --------
(1) V1 assumes the JPM Mortgage Loans prepay at 2% CPR the first year, 6% CPR
the second year and 9% CPR each year thereafter, V2 assumes the JPM
Mortgage Loans prepay at 5% CPR the first year, 10% CPR the second year
and 15% CPR each year thereafter, V3 assumes the JPM Mortgage Loans prepay
at 6% CPR the first year, 12% CPR the second year and 16% CPR each year
thereafter, and V4 assumes the JPM Mortgage Loans prepay at 7% CPR the
first year, 14% CPR the second year and 20% CPR each year thereafter.
Assumes early termination is exercised.

The following table indicates the sensitivity of the pre-tax yield to
maturity on the SPTL Senior IO and the SPTL Subordinate IOs (the "SPTL IOs")
to various rates of prepayment on the SPTL Mortgage Loans by projecting the
monthly aggregate payments on the SPTL IOs and computing the corresponding
pre-tax yields to maturity on a corporate bond equivalent basis, based on the
assumptions described in clauses (ii) through (vi), (viii) through (ix),
(xiii) through (xv) and (xvii) through (xix) in the paragraph under "--
Modeling Assumptions--Yield Table for the SPTL Subordinated Interests" herein.

Any differences between such assumptions and the actual characteristics and
performance underscore the hypothetical nature of the table, which are
provided only to give a general sense of the sensitivity of yields in varying
prepayment scenarios.

103
<PAGE>

PRE-TAX YIELD TO MATURITY OF THE SPTL 1996-C1, CLASS A1X CERTIFICATES(/1/)

PRE-TAX YIELD TO MATURITY OF THE SPTL 1996-C1, CLASS DX CERTIFICATES(/1/)

<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE PREPAYMENT ASSUMPTION
AS A PERCENTAGE OF THE --------------------------------------------------------
NOTIONAL AMOUNT 0% V1 V2 V3 V4
- ---------------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
12.43% 27.5358 20.2470 16.9044 10.9266 4.9024
</TABLE>

PRE-TAX YIELD TO MATURITY OF THE SPTL 1996-C1, CLASS NRX CERTIFICATES(/1/)

<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE PREPAYMENT ASSUMPTION
AS A PERCENTAGE OF THE ---------------------------------------------------------
NOTIONAL AMOUNT 0% V1 V2 V3 V4
- ---------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
10.64% 18.5530 18.2355 17.8655 16.9580 15.7152
</TABLE>
- --------
(1) V1 assumes the SPTL Mortgage Loans prepay at 7% CPR the first year, 8% CPR
the second year and 9.5% CPR each year thereafter, V2 assumes the SPTL
Mortgage Loans prepay at 9% CPR the first year, 10.5% the second year and
12% CPR each year thereafter, V3 assumes the SPTL Mortgage Loans prepay at
12% CPR the first year, 14% the second year and 16% CPR each year
thereafter, and V4 assumes the SPTL Mortgage Loans prepay at 14% CPR the
first year, 17% the second year and 20% CPR each year thereafter. Assumes
early termination is exercised.

Each pre-tax yield to maturity set forth in the preceding tables was
calculated by determining the monthly discount rate which, when applied to the
assumed stream of cash flows to be paid on the Initial IO Investments would
cause the discounted present value of such assumed stream cash flows to equal
the assumed purchase price listed in the corresponding table. Accrued interest
is included in the assumed purchase price of the Initial IO Investments and is
used in computing the corporate bond equivalent yield shown. These yields do
not take into account the different interest rates at which investors may be
able to reinvest funds received by them as distributions on the Initial IO
Investments, and thus do not reflect the return on any investment in the
Initial IO Investments when, as applicable, any reinvestment rates other than
the discount rates set forth in the preceding table are considered.

Notwithstanding the assumed prepayment rates reflected in the preceding
tables, it is highly unlikely that the JPM Mortgage Loans and the SPTL
Mortgage Loans will be prepaid according to one particular pattern. For this
reason and because the timing of cash flows is critical to determining yields,
the pre-tax yield to maturity on the Initial IO Investments is likely to
differ from those shown in the tables, even if all of the JPM Mortgage Loans
and SPTL Mortgage Loans prepay at the indicated constant percentages of CPR
over any given time period or over the entire life of the Initial Subordinated
Investments.

104
<PAGE>

SERVICING OF MORTGAGE LOANS

Although the Company may acquire the rights to service Mortgage Loans it
purchases, it does not intend to perform the actual servicing. Instead, a
third-party servicer will be selected to service the Mortgage Loans. In
addition, the Company may enter into Special Servicing agreements with third-
party special servicers.

With respect to the Initial Mortgage Loans and the Mortgage Collateral
underlying the Initial MBS Investments, SPB will service the Mortgage Loans.
The servicing fee to be paid to SPB with respect to the Initial Mortgage Loans
initially will be 0.36% per annum of the outstanding principal balance of the
Initial Mortgage Loans, plus an additional fee of up to 0.45% per annum for
special servicing if SPB is the special servicer.

With respect to the Mortgage Collateral underlying the Initial MBS
Interests, Midland Loan Services, L.P. ("Midland") will act as special
servicer and master servicer, which means that Midland is liable for servicing
the loans, but has subcontracted with SPB to perform the day-to-day servicing.
In connection with the SPTL 1996-C1 transaction, Midland previously notified
SPB that SPB was not in compliance in certain respects with the subservicing
agreement between SPB and Midland. SPB has advised the Company that SPB has a
plan in place that, when fully implemented, it believes will rectify the
issues raised by Midland in all material respects. SPB also has informed the
Company that it believes it has made significant progress in implementing this
plan. The master servicer may remove SPB as sub-servicer at any time with or
without cause. See "Operating Policies and Objectives--The Company's Assets--
MBS Interests."

With respect to Mortgage Loans acquired from third parties unaffiliated with
Imperial Credit, the Company expects generally to contract with the current
servicer to continue to service the Mortgage Loans. The Company will attempt
to acquire the Special Servicing rights with respect to MBS Interests that it
purchases in the future, in which case it will contract with Midland or
another special servicer to perform the Special Servicing functions. No
assurances can be made, however, that the Company will be able to acquire
Special Servicing rights with respect to MBS Interests.

The Management Agreement will provide that the Manager will monitor and
administer the loan servicing activities provided by the servicers of the
Company's Mortgage Loans.

SPB'S SERVICING EXPERIENCE

SPB is a California licensed industrial loan company supervised and examined
by the DOC, and the Seller's deposits are insured by the FDIC. SPB originates
mortgage loans secured by multifamily residences and commercial properties
located primarily in California, Colorado, Oregon and Washington through its
two branches in California and several loan origination offices located in
various states.

105
<PAGE>

The table below sets forth, for the periods indicated, the prepayment
experience with respect to all commercial and multifamily mortgage loans
underwritten or purchased by the Seller. The table below only includes
information with respect to prepayments for loans that existed in the Seller's
portfolio on or after June 30, 1995. The prepayment experience with respect to
the Mortgage Loans may be substantially different from that indicated below.
(The sum of the amounts and the percentages in the table below may not equal
the totals due to rounding.)

SOUTHERN PACIFIC BANK
(FORMERLY KNOWN AS SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION)
HISTORICAL PREPAYMENTS
MULTIFAMILY AND COMMERCIAL PROPERTY PORTFOLIOS
(INCLUDING SECURITIZED LOANS)

<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1996 1996 1996 1997 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Quarter to Date
Prepayments............ $6,365,266 $3,745,087 $8,576,474 $5,338,097 $8,259,567 $14,011,932
Quarter to Date
Annualized
Prepayment(1).......... 6.34% 3.26% 6.73% 3.67% 4.99% 7.76%
</TABLE>
- --------
(1) Annualized amount of prepayment in each quarter divided by the simple
average of beginning and ending principal balance.

The following tables summarize, at the respective dates indicated, the
delinquency and charge-off experience with respect to all first lien
commercial and multifamily Mortgage Loans underwritten by SPB. The indicated
periods of delinquency are based on the number of days past due on a
contractual basis. The monthly payments under all of such Mortgage Loans are
due on the first day of each calendar month. Charge-offs generally are
established based upon an appraisal undertaken in connection with the
foreclosure or other conversion of a mortgage loan to real property.

The total amount of Mortgage Loans on which the data below is based includes
many Mortgage Loans which were not, as of June 30, 1997, outstanding long
enough to give rise to the possibility of default and charge-off. The
delinquency and charge-off experience with respect to the Initial Mortgage
Loans and the Mortgage Collateral underlying the Initial MBS Investments may
be expected to be higher, and may be substantially higher, than indicated
below. (The sum of the amounts and the percentages in the following tables may
not equal the totals due to rounding.)

106
<PAGE>

SOUTHERN PACIFIC BANK
(FORMERLY KNOWN AS SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION)

HISTORICAL DELINQUENCY AND CHARGE-OFFS

MULTIFAMILY AND COMMERCIAL INCOME PROPERTY PORTFOLIOS
(INCLUDING SECURITIZED LOANS)

<TABLE>
<CAPTION>
AT MARCH 31, 1996 AT JUNE 30, 1996 AT SEPTEMBER 30, 1996
---------------------------- ------------------------------ ------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF OF
OUTSTANDING OUTSTANDING OUTSTANDING
OUTSTANDING BALANCE OF OUTSTANDING BALANCE OF OUTSTANDING BALANCE OF
NO. BALANCE TOTAL LOANS NO. BALANCE TOTAL LOANS NO. BALANCE TOTAL LOANS
--- ------------ ----------- ----- ------------ ----------- ----- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily
Total Loans Out-
standing........ 934 $291,164,580 1,029 $325,312,554 1,114 $350,856,695
30-59 Days Past
Due............. 1 173,115 0.06% 1 89,763 0.03% 0 -- 0.00%
60-89 Days Past
Due............. 0 -- 0.00% 2 596,767 0.18% 2 1,334,734 0.38%
90-119 Days Past
Due............. 1 369,226 0.13% 0 -- 0.00% 4 618,529 0.18%
120 or More Days
Past Due........ 17 4,193,955 1.44% 12 2,104,781 0.65% 11 2,065,486 0.59%
--- ------------ ---- ----- ------------ ---- ----- ------------ ----
Total Delinquen-
cies............ 19 $ 4,736,296 1.63% 15 2,791,311 0.86% 17 $ 4,018,749 1.15%
Quarter to Date
Charge-Offs(1).. 836,000 0.32% 137,000 0.04% 4 49,563 0.01%
Commercial
Total Loans Out-
standing........ 448 $142,993,827 477 $159,437,786 506 $184,527,041
30-59 Days Past
Due............. 3 224,504 0.16% 0 -- 0.00% 0 -- 0.00%
60-89 Days Past
Due............. 0 -- 0.00% 3 573,339 0.36% 0 -- 0.00%
90-119 Days Past
Due............. 1 276,572 0.19% 0 -- 0.00% 2 404,098 0.22%
120 or More Days
Past Due........ 18 3,454,488 2.42% 15 2,738,685 1.72% 15 3,404,491 1.84%
--- ------------ ---- ----- ------------ ---- ----- ------------ ----
22 $ 3,955,564 2.77% 18 $ 3,312,024 2.08% 17 $ 3,808,589 2.06%
Quarter to Date
Charge-Offs(2).. -- 0.00% $ 249,000 0.16% 6 $ 182,873 0.11%
<CAPTION>
AT DECEMBER 31, 1996 AT MARCH 31, 1997 AT JUNE 30, 1997
------------------------------ ------------------------------ -------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF OF
OUTSTANDING OUTSTANDING OUTSTANDING
OUTSTANDING BALANCE OF OUTSTANDING BALANCE OF OUTSTANDING BALANCE OF
NO. BALANCE TOTAL LOANS NO. BALANCE TOTAL LOANS NO. BALANCE TOTAL LOANS
----- ------------ ----------- ----- ------------ ----------- ----- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily
Total Loans Out-
standing........ 1,323 $421,518,257 1,471 $477,553,328 1,585 $515,677,428
30-59 Days Past
Due............. 0 -- 0.00% 7 1,097,520 0.23% 0 -- 0.00%
60-89 Days Past
Due............. 11 3,306,353 0.78% 10 4,470,127 0.94% 11 1,859,702 0.36%
90-119 Days Past
Due............. 3 550,490 0.13% 3 644,459 0.13% 11 2,802,676 0.54%
120 or More Days
Past Due........ 10 2,125,166 0.50% 9 2,112,791 0.44% 20 6,617,143 1.28%
----- ------------ ----------- ----- ------------ ----------- ----- ------------- -----------
Total Delinquen-
cies............ 24 $ 5,982,009 1.42% 29 $ 8,324,897 1.74% 42 $ 11,279,521 2.18%
Quarter to Date
Charge-Offs(1).. 1 72,584 0.02% 1 160,537 0.04% 1 (19,637) 0.00%
Commercial
Total Loans Out-
standing........ 541 $206,205,436 565 $218,507,776 589 $232,680,320
30-59 Days Past
Due............. 0 -- 0.00% 3 1,421,040 0.65% 0 -- 0.00%
60-89 Days Past
Due............. 3 1,025,716 0.50% 4 1,117,420 0.51% 5 1,674,868 0.72%
90-119 Days Past
Due............. 0 -- 0.00% 2 276,437 0.13% 3 758,056 0.32%
120 or More Days
Past Due........ 13 3,052,814 1.48% 14 3,162,865 1.45% 17 4,562,641 1.96%
----- ------------ ----------- ----- ------------ ----------- ----- ------------- -----------
16 $ 4,078,530 1.98% 23 $ 5,977,762 2.74% 25 $ 6,975,565 3.00%
Quarter to Date
Charge-Offs(2).. 2 $ 32,548 0.02% 1 $ 35,906 0.02% 5 262,176 0.11%
</TABLE>
- -----
(1) The percentages for "Quarter To Date Charge-Offs" are calculated based
upon the average outstanding balance of all multifamily loans for the
quarter.

(2) The percentages for "Quarter To Date Charge-Offs" are calculated based
upon the average outstanding balance of all commercial loans for the
quarter.

107
<PAGE>

SPECIAL SERVICING

The special servicer and master servicer of the Mortgage Collateral
underlying the Initial MBS Interests is Midland. Midland was organized under
the laws of the state of Missouri in 1992 as a limited partnership. Midland is
a real estate financial services company which provides loan servicing and
asset management for large pools of commercial and multifamily real estate
assets and which originates commercial real estate loans. Midland's address is
210 West 10th Street, 6th Floor, Kansas City, Missouri 64105.

As of August 31, 1997, Midland and its affiliates were responsible for the
servicing of approximately 12,235 commercial and multifamily loans with an
aggregate principal balance of approximately $18.4 billion, the collateral for
which is located in 50 states, Puerto Rico and the District of Columbia. With
respect to such loans, approximately 10,647 loans with an aggregate principal
balance of approximately $13.4 billion pertain to commercial and multifamily
mortgage-backed securities. Property type concentrations within the portfolio
include multifamily, office, retail, hotel/motel and other types of income
producing properties. Midland and its affiliates also provide commercial loan
servicing for newly-originated loans and loans acquired in the secondary
market on behalf of issuers of commercial and multifamily mortgage-backed
securities, financial institutions and private investors.

RESPONSIBILITIES OF MASTER SERVICER

Under the pooling and servicing agreements related to the Initial MBS
Interests, Midland, as master servicer, is required to service and administer
the related Mortgage Collateral solely on behalf of and in the best interests
of and for the benefit of the holders of the related MBS Interests including
the classes of MBS that will not be acquired by the Company, (collectively,
the "Certificateholders"), in accordance with the terms of the pooling and
servicing agreements.

RESPONSIBILITIES OF SPECIAL SERVICER

The servicing responsibility on a particular Mortgage Loan underlying the
Initial MBS Interests will be transferred to the special servicer upon the
occurrence of certain servicing transfer events (each, a "Servicing Transfer
Event"), including the following: (i) the Mortgage Loan is more than 60 days
delinquent in whole or in part in respect of any monthly payment or is
delinquent in whole or in part in respect of the related balloon payment
(except to the extent that with respect to any delinquency in the Balloon
Payment, the master servicer and the special servicer agree that such Mortgage
Loan is likely to be paid in full within 30 days after such default); (ii) the
related mortgagor has entered into or consented to bankruptcy, appointment of
a receiver or conservator or a similar insolvency or similar proceeding, or
the mortgagor has become the subject of a decree or order for such a
proceeding which shall have remained in force undischarged or unstayed for a
period of 60 days; (iii) the master servicer shall have received notice of the
foreclosure or proposed foreclosure of any other lien on the Mortgaged
Property; (iv) in the judgment of the master servicer, a payment default has
occurred and is not likely to be cured by the related mortgagor within
60 days; (v) the related mortgagor admits in writing its inability to pay its
debts generally as they become due, files a petition to take advantage of any
applicable insolvency or reorganization statute, makes an assignment for the
benefit of its creditors, or voluntarily suspends payment of its obligations;
(vi) any other material default has in the master servicer's judgment occurred
which is not reasonably susceptible to cure within the time periods and on the
conditions specified in the related mortgage; (vii) the related Mortgaged
Property becomes an REO Property; (viii) if for any reason, the master
servicer cannot enter into an assumption agreement upon the transfer by the
related mortgagor of the mortgage or (ix) an event has occurred which has
materially and adversely affected the value of the related Mortgaged Property
in the reasonable judgment of the master servicer. The Company intends to
negotiate similar terms for the Initial Mortgage Loans. A Mortgage Loan
serviced by a special servicer is referred to herein as a "Specially Serviced
Mortgage Loan". The special servicer will collect certain payments on such
Specially Serviced Mortgage Loans and make certain remittances to, and prepare
certain reports for the master servicer with respect to such Mortgage Loans.
To the extent that any Specially Serviced Mortgage Loan, in accordance with
its original terms or as modified in accordance with the pooling and servicing
agreement, becomes a performing

108
<PAGE>

Mortgage Loan for at least three consecutive months, the special servicer will
return servicing of such Mortgage Loan to the master servicer.

Midland will act as a special servicer with respect to the Mortgage
Collateral underlying the Initial MBS Interests. Under the Pooling and
Servicing Agreement the special servicer is required to service, administer
and dispose of Specially Serviced Mortgage Loans solely in the best interests
of and for the benefit of the Certificateholders, in accordance with the
pooling and servicing agreement.

The special servicer may at any time institute foreclosure proceedings,
exercise any power of sale contained in any mortgage, obtain a deed in lieu of
foreclosure, or otherwise acquire title to a Mortgaged Property securing a
Specially Serviced Mortgage Loan by operation of law or otherwise, if such
action is consistent with the servicing standard. There are limitations on the
special servicer's ability to acquire title to Mortgaged Property or to take
any other action that would cause the Certificateholders or related trustee to
be considered to hold title to, to be a "mortgagee-in-possession" of, or to be
an "owner" or an "operator" of such Mortgaged Property within the meaning of
certain federal environmental laws.

The special servicer generally is required to use its best efforts to sell
the Mortgaged Property within two years of acquisition, with certain
exceptions. In general, the special servicer will be required to (i) solicit
offers for any Mortgaged Property so acquired in such a manner as will be
reasonably likely to realize a fair price for such property and (ii) accept an
offer received from any person that constitutes a fair price and which is in
the best interest of the Certificateholders as determined by the special
servicer in accordance with the servicing standard.

The special servicer, may retain an independent contractor to manage and
operate Mortgaged Properties acquired in foreclosure. The retention of an
independent contractor, however, will not relieve the special servicer of any
of its obligations with respect to the management and operation of such
Mortgaged Property. Any such property will be managed in a manner consistent
with the servicing standard.

The special servicer will be obligated to follow or cause to be followed
such normal practices and procedures as it deems necessary or advisable to
realize upon Specially Serviced Mortgage Loan. If the proceeds of any
liquidation of the property securing the Specially Serviced Mortgage Loan are
less than the outstanding principal balance of the Specially Serviced Mortgage
Loan plus interest accrued thereon at the mortgage interest rate plus the
aggregate amount of expenses incurred by the special servicer in connection
with such proceedings and which are reimbursable under the agreement, the
Certificateholders will realize a loss in the amount of such difference.

109
<PAGE>

CAPITALIZATION

The capitalization of the Company, as of July 31, 1997, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby, is as follows:

<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED(1)
--------- ---------------
<S> <C> <C>
Common Stock, par value $.0001....................... $ 0.01 $ 3,000.00
Authorized--500,000,000 shares
Outstanding--100 shares, 30,000,000 shares, as ad-
justed
Additional Paid-in Capital........................... 1,499.99 416,997,000.00
--------- ---------------
Total.............................................. $1,500.00 $417,000,000.00
========= ===============
</TABLE>
- --------
(1) Includes 2,970,000 shares of Common Stock to be purchased by Imperial
Credit, after deducting offering and organizational expenses estimated to
be $1,500,000 payable by the Company, and assuming no exercise of the
Underwriters' over-allotment option to purchase up to an additional
4,500,000 shares of Common Stock.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF LIQUIDITY AND CAPITAL RESOURCES

ICCMIC has no operating history. ICCMIC's opening audited balance sheet as
of July 31, 1997, and related footnotes are presented elsewhere herein. The
management's discussion and analysis of liquidity and capital resources should
be read in conjunction with such opening balance sheet and related notes.
ICCMIC has been organized and will elect to qualify as a REIT under the Code
and, as such, anticipates distributing annually at least 95% of its taxable
income, subject to certain adjustments. Cash for such distributions is
expected to be generated from the Company's investments, although the Company
also may borrow funds to make distributions. The Company's revenues will be
derived from (i) ownership of Mortgage Loans; (ii) ownership of MBS Interests;
and (iii) ownership of Real Estate Related Assets. See "Distribution Policy"
and "Federal Income Tax Considerations."

The principal sources of the Company's funds in the near term will be the
proceeds of the Offering made pursuant to this Prospectus. The proceeds of the
Offering will fund the purchase of the Initial Investments, with the remainder
to be used to create a cash reserve available to fund the operations of the
Company and to acquire new assets as they are sourced. When the Company
utilizes this cash reserve, the Company plans to raise additional operating
funds by leveraging its assets, primarily through the issuance of CMOs,
reverse repurchase agreements, warehouse lines of credit and other borrowing
arrangements, which management believes will be sufficient to enable the
Company to meet its anticipated liquidity and capital requirements in the long
term. While the Company presently does not have lines of credit or specific
borrowing arrangements with repo lenders or warehouse lenders, the Company
anticipates that it will be able to procure such financing prior to such time
that the financing becomes necessary to fund operations or acquire new assets.
See "Operating Policies and Objectives" and "Use of Proceeds."

110
<PAGE>

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Charter provides that ICCMIC may issue up to 500,000,000 shares of
capital stock, all of which shall initially be classified as Common Stock
($0.0001 par value). The Board of Directors may classify and reclassify any
unissued shares of capital stock by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of capital stock. Upon completion of
this offering, 30,000,000 shares of Common Stock will be issued and
outstanding, and 7,500,000 shares of Common Stock will be reserved for
issuance upon exercise of options, and no preferred stock will be issued and
outstanding.

COMMON STOCK

All outstanding shares of Common Stock will be duly authorized, fully paid
and nonassessable upon the Closing. Subject to the preferential rights of any
other shares or series of shares of capital stock, holders of Common Stock are
entitled to receive non-cumulative dividends if and when authorized and
declared by the Board of Directors out of assets legally available therefor
and to share ratably in the assets of ICCMIC legally available for
distribution to its stockholders in the event of its liquidation, dissolution
or winding-up after payment of, or adequate provision for, all known debts and
liabilities of ICCMIC. ICCMIC intends to pay quarterly dividends.

Each outstanding share of Common Stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
directors, and, except as otherwise required by law or except as provided with
respect to any other class or series of shares of capital stock, the holders
of Common Stock will possess the exclusive voting power. There is no
cumulative voting in the election of directors, which means in all elections
of directors, each holder of Common Stock has the right to cast one vote for
each share of stock for each candidate. For a discussion of the voting rights
of holders of the Common Stock, including the provisions specifying the vote
required by security holders to take action, see "Certain Provisions of
Maryland Law and of ICCMIC's Charter and Bylaws."

No holder of any Common Stock shall have any preemptive right to subscribe
for a purchase any stock or other securities of ICCMIC other than such, if
any, as the Board of Directors, in its sole discretion, may determine.

Certain provisions of the Charter and Bylaws and certain provisions of
Maryland law could have the effect of delaying, deferring or preventing a
change in control of ICCMIC. See "Certain Provisions of Maryland Law and of
ICCMIC's Charter and Bylaws."

PREFERRED STOCK

The Charter authorizes the Board of Directors to classify and reclassify
unissued capital stock into shares of preferred stock ("Preferred Stock") of
one or more series without the approval of the stockholders. Because the Board
of Directors has the power to establish the preferences and rights of each
class or series of Preferred Stock, the Board of Directors may afford the
holders of any series or class of Preferred Stock preferences, powers and
rights, voting or otherwise, senior to the rights of the holders of Common
Stock. The Board of Directors could authorize the issuance of Preferred Stock
with terms and conditions which could have the effect of discouraging a
takeover or other transaction which holders of some, or a majority, of the
shares of Common Stock might believe to be in their best interests or in which
holders of some, or a majority, of the shares of Common Stock might receive a
premium for their shares of Common Stock over the then market price of such
shares of Common Stock. As of the date hereof, no shares of Preferred Stock
are outstanding and the Company has no current plans to issue Preferred Stock.

111
<PAGE>

RESTRICTIONS ON TRANSFER

For ICCMIC to qualify as a REIT under the Code, it must meet certain
requirements concerning the ownership of its outstanding shares of capital
stock. Specifically, not more than 50% in value of ICCMIC's outstanding
capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the
last half of a taxable year (other than its 1997 taxable year), and ICCMIC
must be beneficially owned by 100 or more persons during at least 335 days of
a taxable year of 12 months or during a proportionate part of a shorter
taxable year (other than its 1997 taxable year). See "Federal Income Tax
Considerations--Requirements for Qualification."

Because the Board of Directors believes it is essential for ICCMIC to
continue to qualify as a REIT, the Charter, subject to certain exceptions and
waivers described below, provides that no person may own, or be deemed to own
by virtue of the attribution provisions of the Code, more than 9.9% of the
number of outstanding shares of Common Stock or of any series of Preferred
Stock (the "Ownership Limitation").

Subject to certain exceptions described below, the Charter provides that any
purported transfer of shares of Common Stock or Preferred Stock (or certain
other events) that would (i) result in any person owning, directly or
indirectly, shares of Common Stock or Preferred Stock in excess of the
Ownership Limitation, (ii) result in the shares of Common Stock or Preferred
Stock, collectively, being owned by fewer than 100 persons (determined without
reference to any rules of attribution), (iii) result in ICCMIC being "closely
held" within the meaning of section 856(h) of the Code, (iv) cause ICCMIC to
own, actually or constructively, 10% or more of the ownership interests in a
tenant of the Company's real property, within the meaning of section
856(d)(2)(B) of the Code or (v) result in such shares being owned by a
disqualified organization, (each of the foregoing shall be referred to herein
as a "Prohibited Transfer Event"), shall be void ab initio as to the transfer
of that number of shares that would otherwise be beneficially owned
(determined without reference to any rules of attribution) by the transferee,
and the intended transferee shall acquire no rights in such shares of Common
Stock or Preferred Stock. For purposes of the foregoing, a "Disqualified
Organization" means (A) the United States, any State or political subdivision
thereof, any foreign government, any international organization, or any agency
or instrumentally of the foregoing, (B) any organization (other than a
cooperative described in section 521 of the Code) which is exempt from tax
unless such organization is subject to the tax imposed by section 511 of the
Code and (C) any organization described in section 1381 (a)(2)(C) of the Code.

If there is a Prohibited Transfer Event, except as described below, the
purported transferor shall cease to own any right or interest in the number of
shares that would otherwise be transferred and such shares will be designated
as "Shares-in-Trust" and transferred automatically to a trust (the "Trust")
effective on the day before the purported transfer of such shares of Common
Stock or Preferred Stock. The record holder of the shares of Common Stock or
Preferred Stock that are designated as Shares-in-Trust (the "Prohibited
Owner") will be required to submit such number of shares of Common Stock or
Preferred Stock to ICCMIC for registration in the name of the Trust. The
trustee of the Trust (the "Trustee") will be designated by ICCMIC, but will
not be affiliated with ICCMIC. The beneficiary of the Trust (the
"Beneficiary") will be one or more charitable organizations that are named by
ICCMIC.

Shares-in-Trust will remain issued and outstanding shares of Common Stock or
Preferred Stock and will be entitled to the same rights and privileges as all
other shares of the same class or series. The Trustee will receive all
dividends and distributions on the Shares-in-Trust and will hold such
dividends or distributions in trust for the benefit of the Beneficiary. The
Trustee will vote all Shares-in-Trust. The Trustee will designate a permitted
transferee of the Shares-in-Trust, provided that the permitted transferee (i)
purchases such Shares-in-Trust for valuable consideration and (ii) acquires
such Shares-in-Trust without such acquisition resulting in a transfer to
another Trust.

The Prohibited Owner with respect to Shares-in-Trust will be required to
repay to the Trustee the amount of any dividends or distributions received by
the Prohibited Owner (i) that are attributable to any Shares-in-Trust and (ii)
the record date of which was on or after the date that such shares became
Shares-in-Trust. The Prohibited

112
<PAGE>

Owner generally will receive from the Trustee the lesser of (i) the price per
share such Prohibited Owner paid for the shares of Common Stock or Preferred
Stock that were designated as Shares-in-Trust (or, in the case of a gift or
devise, the Market Price (as defined below) per share on the date of such
transfer) or (ii) the price per share received by the Trustee from the sale of
such Shares-in-Trust. Any amounts received by the Trustee in excess of the
amounts to be paid to the Prohibited Owner will be distributed to the
Beneficiary.

The Shares-in-Trust will be deemed to have been offered for sale to ICCMIC,
or its designee, at a price per share equal to the lesser of (i) the price per
share in the transaction that created such Shares-in-Trust (or, in the case of
a gift or devise, the Market Price per share on the date of such transfer) or
(ii) the Market Price per share on the date that ICCMIC, or its designee,
accepts such offer. ICCMIC will have the right to accept such offer for a
period of ninety days after the later of (i) the date of the purported
transfer which resulted in such Shares-in-Trust or (ii) the date ICCMIC
determines in good faith that a transfer resulting in such Shares-in-Trust
occurred.

"Market Price" on any date shall mean the average of the Closing Price (as
defined below) for the five consecutive Trading Days (as defined below) ending
on such date. The "Closing Price" on any date shall mean the average of the
high bid and low asked prices in the over-the-counter market, as reported by
The Nasdaq Stock Market. "Trading Day" shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.

Any person who acquires or attempts to acquire shares of Common Stock or
Preferred Stock in violation of the foregoing restrictions, or any person who
owned shares of Common Stock or Preferred Stock that were transferred to a
Trust, will be required (i) to give immediately written notice to ICCMIC of
such event and (ii) to provide to ICCMIC such other information as it may
request in order to determine the effect, if any, of such transfer on ICCMIC's
status as a REIT.

All persons who own, directly or indirectly, more than 5% (or such lower
percentages as required pursuant to regulations under the Code) of the
outstanding shares of Common Stock or Preferred Stock must, within 30 days
after January 1 of each year, provide to ICCMIC a written statement or
affidavit stating the name and address of such direct or indirect owner, the
number of shares of Common Stock or Preferred Stock owned directly or
indirectly, and a description of how such shares are held. In addition, each
direct or indirect stockholder shall provide to ICCMIC such additional
information as ICCMIC may request in order to determine the effect, if any, of
such ownership on ICCMIC's status as a REIT and to insure compliance with the
Ownership Limitation.

The Ownership Limitation generally will not apply to the acquisition of
shares of Common Stock or Preferred Stock by an underwriter that participates
in a public offering of such shares. In addition, the Board of Directors, upon
receipt of a ruling from the Service or an opinion of counsel and upon such
other conditions as the Board of Directors may direct, may exempt a person
from the Ownership Limitation under certain circumstances. The foregoing
restrictions will not be removed until the Board of Directors determines that
it is no longer in the best interests of ICCMIC to attempt to qualify, or to
continue to qualify, as a REIT and there is an affirmative vote of two-thirds
of all of the votes ordinarily entitled to be cast in the election of
directors, voting together as a single class at a regular or special meeting
of the stockholders of ICCMIC.

All certificates representing shares of Common Stock or Preferred Stock will
bear a legend referring to the restrictions described above.

The Ownership Limitation could have the effect of discouraging a takeover or
other transaction in which holders of some, or a majority, of shares of Common
Stock might receive a premium for their shares of Common Stock over the then
prevailing market price or which such holders might believe to be otherwise in
their best interest.

113
<PAGE>

DIVIDEND REINVESTMENT PLAN

ICCMIC may implement a dividend reinvestment plan whereby stockholders may
automatically reinvest their dividends in the Common Stock. Details about any
such plan would be sent to ICCMIC's stockholders following adoption thereof by
the Board of Directors.

REPORTS TO STOCKHOLDERS

ICCMIC will furnish its stockholders with annual reports containing
information regarding the business and performance of the Company, including
audited financial statements certified by independent public accountants and
distribute quarterly reports containing unaudited financial information for
each of the first three quarters of the year.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is U.S. Stock Transfer
Corporation.

LISTING OF THE COMMON STOCK

The Common Stock has been approved for listing on the Nasdaq National
Market, subject to official notice of issuance.

114
<PAGE>

CERTAIN PROVISIONS OF MARYLAND LAW AND
OF ICCMIC'S CHARTER AND BYLAWS

The Company believes that the following is a summary of the material terms
of provisions of Maryland law and of the Charter and Bylaws. Such summary does
not purport to be complete and is subject to and qualified in its entirety by
reference to Maryland law and the Charter and Bylaws. Certain provisions of
Maryland law and the Charter and Bylaws are described elsewhere in this
Prospectus. The Charter and Bylaws became effective on July 31, 1997.

BOARD OF DIRECTORS

The Bylaws provide that the number of Directors of ICCMIC may be increased
or decreased by the Board of Directors but may not be fewer than the minimum
number required by Maryland law nor more than nine. Any vacancy on the Board
of Directors may be filled, at any regular meeting or at any special meeting
called for that purpose, by a majority of the remaining Directors, except that
a vacancy resulting from an increase in the number of Directors may be filled
by a majority of the entire Board of Directors.

ICCMIC's Charter provides that a Director may be removed from office at any
time, but only for cause and then only by the affirmative vote of at least
two-thirds of all of the votes ordinarily entitled to be cast in the election
of Directors voting together as a single class.

AMENDMENT

ICCMIC reserves the right from time to time to make any amendment to its
Charter now or hereafter authorized by law, including any amendments which
alter the contract rights as expressly set forth in the Charter of any shares
of outstanding stock, provided that no such amendment which changes the terms
or contract rights of any of its outstanding stock shall be valid unless such
amendment shall have been authorized by not less than a majority of the
outstanding shares entitled to vote thereon. The Charter provides that
provisions relating to ICCMIC's election to be taxed as a REIT, approval of
certain matters by the Independent Directors, dissolution of ICCMIC and
certain restrictions on the transferability of Common Stock or Preferred Stock
cannot be amended without the affirmative vote of at least two-thirds of all
of the votes ordinarily entitled to be cast in the election of Directors
voting together as a single class. The Bylaws may be amended by the Board of
Directors or by the affirmative vote of at least two-thirds of all of the
votes ordinarily entitled to be cast in the election of Directors voting
together as a single class. The Charter provides that any amendment of the
provisions of the Charter relating to indemnification of officers and
directors shall not retroactively affect any act or failure to act that
occurred prior to the amendment.

BUSINESS COMBINATIONS

Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10% or more of the voting
power of the corporation's shares or an affiliate of the corporation who, at
any time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then outstanding
voting stock of the corporation (an "Interested Stockholder") or an affiliate
of such an Interested Stockholder are prohibited for five years after the most
recent date on which the Interested Stockholder becomes an Interested
Stockholder. Thereafter, any such business combination must be recommended by
the board of directors of such corporation and approved by the affirmative
vote of at least (a) 80% of the votes entitled to be cast by holders of
outstanding shares of voting stock of the corporation and (b) two-thirds of
the votes entitled to be cast by holders of voting stock of the corporation
other than shares held by the Interested Stockholder with whom (or with whose
affiliate) the business combination is to be effected, unless, among other
conditions, the corporation's common stockholders receive a minimum price (as
defined in the MGCL) for their shares and the consideration is received in
cash or in the same form as previously paid by the Interested Stockholder for
its shares. These provisions of Maryland law do

115
<PAGE>

not apply, however, to business combinations that are approved or exempted by
the board of directors of the corporation prior to the time that the
Interested Stockholder becomes an Interested Stockholder.

CONTROL SHARE ACQUISITIONS

The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquirer, by officers or by
directors who are employees of the corporation. "Control shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquirer or in respect of which the acquirer is
able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquirer to exercise voting
power in electing directors within one of the following ranges of voting
power: (1) one-fifth or more but less than one-third, (2) one-third or more
but less than a majority, or (3) a majority or more of all voting power.
Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. A
"control share acquisition" means the acquisition of control shares, subject
to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders' meeting.

If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the corporation may
redeem any or all of the control shares (except those for which voting rights
have previously been approved) for fair value determined, without regard to
the absence of voting rights for the control shares, as of the date of the
last control share acquisition by the acquirer or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquirer becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share paid by the acquirer in the
control share acquisition.

The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation. The Bylaws currently contain a provision which
limits the applicability of this statute to ICCMIC and its stockholders, but
the provision may be amended or eliminated by the Board of Directors.

OPERATIONS

The Company is generally prohibited from engaging in certain activities and
acquiring or holding property or engaging in any activity that would cause
ICCMIC to fail to qualify as a REIT.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

The Bylaws provide (a) with respect to an annual meeting of stockholders,
nominations of persons for election to the Board of Directors and the proposal
of business to be considered by such stockholders may be made only (i)
pursuant to ICCMIC's notice of the meeting, (ii) by the Board of Directors or
(iii) by a stockholder who is entitled to vote at the meeting and has complied
with the advance notice procedures set forth in the Bylaws and (b) with
respect to special meetings of stockholders, only the business specified in
ICCMIC's notice of meeting may be brought before the meeting of stockholders,
and nominations of persons for election to the Board of Directors may be made
only (i) pursuant to ICCMIC's notice of meeting, (ii) by the Board of
Directors

116
<PAGE>

or (iii) provided that the Board of Directors has determined that directors
shall be elected at such meeting, by a stockholder who is entitled to vote at
the meeting and has complied with the advance notice provisions set forth in
the Bylaws.

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
CHARTER AND BYLAWS

The business combination provisions and the control share acquisition
provisions of the MGCL, the provisions of the Charter on removal of directors
and the advance notice provisions of the Bylaws could delay, defer or prevent
a change in control of ICCMIC or other transaction that might involve a
premium price for holders of Common Stock or otherwise be in their best
interest.

COMMON STOCK AVAILABLE FOR FUTURE SALE

Upon the closing of this Offering, the Company will have outstanding
30,000,000 shares of Common Stock. Of the outstanding shares, 27,030,000
shares of Common Stock to be sold in this Offering will be freely tradeable
without restriction or further registration under the Securities Act unless
purchased by "affiliates" of the Company as that term is defined in Rule 144
under the Securities Act. Of such shares, 2,970,000 shares will become
eligible for future sale commencing two years from the Closing Date (the date
of the expiration of the period during which such stockholder has agreed with
the Underwriters not to offer, sell or contact to sell or otherwise dispose of
its shares, except under certain circumstances). As described below, Rule 144,
permits resales of restricted securities subject to certain restrictions. In
general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who beneficially owned shares for at least one year,
including any person who may be deemed an "affiliate" of the Company, would be
entitled to sell within any three-month period a number of such shares that
does not exceed the greater of 1% of the shares of the Company's Common Stock
then outstanding shares upon the closing of this Offering (300,000 shares) or
the average weekly trading volume in the Company's Common Stock during the
four calendar weeks preceding the date on which notice of the sale is filed
with the Commission. A person who is not deemed to have been an "affiliate" of
the Company at any time during the three months immediately preceding a sale
and who has beneficially owned shares for at least two years would be entitled
to sell such shares under Rule 144, without regard to the volume limitation
described above.

The Company and its directors and executive officers have agreed with the
Underwriters that, for a period of 120 days following the commencement of this
Offering, they will not sell, contract to sell or otherwise dispose of any of
shares of Common Stock or rights to acquire such shares (other than pursuant
to employee plans) without the prior written consent of Friedman, Billings,
Ramsey & Co., Inc.

Additionally, upon the closing of this Offering, there will be outstanding
stock options that will be granted at the initial public offering price, to
the Manager and certain executive officers and directors of the Company and
the Manager, none of which will be exercisable until one year from the date of
grant. The number of shares to be subject to such stock options will be 10% of
the number of shares to be issued pursuant to the Offering, assuming the
Underwriters fully exercise their over-allotment option. Thus, if the number
of shares to be issued pursuant to the Offering (prior to the exercise by the
Underwriters of their over-allotment option) is 30,000,000, the number of
shares subject to such stock options will be 3,450,000.

No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price prevailing from time to time. Sales of substantial amounts of Common
Stock, or the perception that such sales could occur, may affect adversely
prevailing market prices of the Common Stock.

117
<PAGE>

FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of material federal income tax considerations
that may be relevant to a prospective holder of the Common Stock. Sonnenschein
Nath & Rosenthal has acted as counsel to ICCMIC and has reviewed this summary
and has rendered an opinion that the descriptions of the law and the legal
conclusions contained herein are correct in all material respects, and the
discussions hereunder fairly summarize the federal income tax considerations
that are likely to be material to ICCMIC and a holder of the Common Stock. The
discussion contained herein does not address 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, tax-exempt organizations, financial institutions or broker-dealers,
foreign corporations, and persons who are not citizens or residents of the
United States) subject to special treatment under the federal income tax laws.

The statements in this discussion and the opinion of Sonnenschein Nath &
Rosenthal are based on current provisions of the Code, existing, temporary,
and currently proposed Treasury Regulations promulgated under the Code, the
legislative history of the Code, existing administrative rulings and practices
of the Service, and judicial decisions. No assurance can be given that future
legislative, judicial, or administrative actions or decisions, which may be
retroactive in effect, will not affect the accuracy of any statements in this
Prospectus with respect to the transactions entered into or contemplated prior
to the effective date of such changes.

EACH PROSPECTIVE PURCHASER SHOULD CONSULT HIS OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP, AND SALE OF THE
COMMON STOCK AND OF ICCMIC'S ELECTION TO BE TAXED AS A REIT, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP, SALE, AND ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX
LAWS.

TAXATION OF THE COMPANY

ICCMIC plans to make an election to be taxed as a REIT under sections 856
through 860 of the Code, commencing with its taxable year ending on December
31, 1997.

The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following discussion sets forth the
material aspects of the Code sections that govern the federal income tax
treatment of a REIT and its stockholders. The discussion is qualified in its
entirety by the applicable Code provisions, Treasury Regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all of
which are subject to change prospectively or retroactively.

Sonnenschein Nath & Rosenthal has acted as counsel to ICCMIC in connection
with the Offering and ICCMIC's election to be taxed as a REIT. In the opinion
of Sonnenschein Nath & Rosenthal, assuming that the elections and other
procedural steps described in this discussion of "Federal Income Tax
Considerations" are completed by ICCMIC in a timely fashion, commencing with
ICCMIC's taxable year ending December 31, 1997, ICCMIC will qualify to be
taxed as a REIT pursuant to sections 856 through 860 of the Code, and ICCMIC's
organization and proposed method of operation will enable it to continue to
meet the requirements for qualification and taxation as a REIT under the Code.
Investors should be aware, however, that opinions of counsel are not binding
upon the Service or any court. It must be emphasized that Sonnenschein Nath &
Rosenthal's opinion is based on various assumptions and is conditioned upon
certain representations made by ICCMIC as to factual matters, including
representations regarding the nature of ICCMIC's properties and the future
conduct of its business. Such factual assumptions and representations are
described below in this discussion of "Federal Income Tax Considerations" and
are set out in the federal income tax opinion that will be delivered by
Sonnenschein Nath & Rosenthal at the closing of the Offering. Moreover, such
qualification and taxation as a REIT depends upon ICCMIC's ability to meet on
a continuing basis, through actual annual operating results, asset ownership,
distribution levels, and stock ownership, the various qualification tests
imposed under the Code discussed below. Sonnenschein Nath & Rosenthal will not
review ICCMIC's

118
<PAGE>

compliance with those tests on a continuing basis. Accordingly, no assurance
can be given that the actual results of ICCMIC's operations for any particular
taxable year will satisfy such requirements. For a discussion of the tax
consequences of failure to qualify as a REIT, see "--Failure to Qualify."

If ICCMIC qualifies for taxation as a REIT, it generally will not be subject
to federal corporate income tax on its net income that is distributed
currently to its stockholders. That treatment substantially eliminates the
"double taxation" (i.e., taxation at both the corporate and stockholder
levels) that generally results from an investment in a corporation. However,
ICCMIC will be subject to federal income tax in the following circumstances.
First, ICCMIC will be taxed at regular corporate rates on any undistributed
REIT taxable income, including undistributed net capital gains. Second, under
certain circumstances, ICCMIC may be subject to the "alternative minimum tax"
on its undistributed items of tax preference, if any. Third, if ICCMIC has (i)
net income from the sale or other disposition of "foreclosure property" that
is held primarily for sale to customers in the ordinary course of business or
(ii) other nonqualifying income from foreclosure property, it will be subject
to tax at the highest corporate rate on such income. Fourth, if ICCMIC has net
income from prohibited transactions (which are, in general, certain sales or
other dispositions of property (other than foreclosure property) held
primarily for sale to customers in the ordinary course of business), such
income will be subject to a 100% tax. Fifth, if ICCMIC should fail to satisfy
the 75% gross income test or the 95% gross income test (as discussed below),
and nonetheless has maintained its qualification as a REIT because certain
other requirements have been met, it will be subject to a 100% tax on the net
income attributable to the greater of the amount by which ICCMIC fails the 75%
or 95% gross income test. Sixth, if ICCMIC should fail to distribute during
each calendar year at least the sum of (i) 85% of its REIT ordinary income for
such year, (ii) 95% of its REIT capital gain net income for such year, and
(iii) any undistributed taxable income from prior periods, ICCMIC would be
subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed. Seventh, if ICCMIC acquires any asset from a
C corporation (i.e., a corporation generally subject to full corporate-level
tax) in a merger or other transaction in which the basis of the asset in
ICCMIC's hands is determined by reference to the basis of the asset (or any
other asset) in the hands of the C corporation and ICCMIC recognizes gain on
the disposition of such asset during the 10-year period beginning on the date
on which it acquired such asset, then to the extent of such asset's "built-in-
gain" (i.e., the excess of the fair market value of such asset at the time of
acquisition by ICCMIC over the adjusted basis in such asset at such time),
ICCMIC will be subject to tax at the highest regular corporate rate applicable
(as provided in Treasury Regulations that have not yet been promulgated). The
results described above with respect to the tax on "built-in-gain" assume that
ICCMIC will elect pursuant to IRS Notice 88-19 to be subject to the rules
described in the preceding sentence if it were to make any such acquisition.
See "--New Tax Legislation--Credit For Tax on Retained Capital Gains."
Finally, ICCMIC will be subject to tax at the highest marginal corporate rate
on the portion of any Excess Inclusion derived by ICCMIC from REMIC Residual
Interests equal to the percentage of the stock of ICCMIC held by the United
States, any state or political subdivision thereof, any foreign government,
any international organization, any agency or instrumentality of any of the
foregoing, any other tax-exempt organization (other than a farmer's
cooperative described in section 521 of the Code) that is exempt from taxation
under the unrelated business taxable income provisions of the Code, or any
rural electrical or telephone cooperative (each, a "Disqualified
Organization"). Any such tax on the portion of any Excess Inclusion allocable
to stock of ICCMIC held by a Disqualified Organization will reduce the cash
available for distribution from ICCMIC to all stockholders.

REQUIREMENTS FOR QUALIFICATION

The Code defines a REIT as a corporation, trust, or association (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation,
but for sections 856 through 860 of the Code; (iv) that is neither a financial
institution nor an insurance company subject to certain provisions of the
Code; (v) the beneficial ownership of which is held by 100 or more persons;
(vi) not more than 50% in value of the outstanding shares of which is owned,
directly or indirectly, by five or fewer individuals (as defined in the Code
to include certain entities) during the last half of each taxable year (the
"5/50 Rule");

119
<PAGE>

(vii) that makes an election to be a REIT (or has made such election for a
previous taxable year) and satisfies all relevant filing and other
administrative requirements established by the Service that must be met in
order to elect and maintain REIT status; (viii) that uses a calendar year for
federal income tax purposes and complies with the recordkeeping requirements
of the Code and Treasury Regulations promulgated thereunder; and (ix) that
meets certain other tests, described below, regarding the nature of its income
and assets. Conditions (i) to (iv), inclusive, must be met during the entire
taxable year and condition (v) must be met during at least 335 days of a
taxable year of 12 months, or during a proportionate part of a taxable year of
less than 12 months. Conditions (v) and (vi) will not apply until after the
first taxable year for which an election is made by ICCMIC to be taxed as a
REIT. For purposes of determining stock ownership under the 5/50 Rule, a
supplemental unemployment compensation benefits plan, a private foundation, or
a portion of a trust permanently set aside or used exclusively for charitable
purposes generally is considered an individual. A trust that is a qualified
trust under Code section 401(a), however, generally is not considered an
individual and beneficiaries of such trust are treated as holding shares of a
REIT in proportion to their actuarial interests in such trust for purposes of
the 5/50 Rule. See "--New Tax Legislation--Maximum Number of Stockholders."

Prior to the consummation of the Offering, ICCMIC did not satisfy conditions
(v) and (vi) in the preceding paragraph. ICCMIC anticipates issuing sufficient
Common Stock with sufficient diversity of ownership pursuant to the Offering
to allow it to satisfy requirements (v) and (vi). In addition, the Charter
provides for restrictions regarding the transfer of the Common Stock that are
intended to assist ICCMIC in continuing to satisfy the share ownership
requirements described in clauses (v) and (vi) above. See "Description of
Capital Stock--Restrictions on Transfer."

ICCMIC currently has one corporate subsidiary, ICCMSC, and may have
additional corporate subsidiaries in the future. Code section 856(i) provides
that a corporation that is a "qualified REIT subsidiary" shall not be treated
as a separate corporation, and all assets, liabilities, and items of income,
deduction, and credit of a "qualified REIT subsidiary" shall be treated as
assets, liabilities, and items of income, deduction, and credit of the REIT. A
"qualified REIT subsidiary" is a corporation, all of the capital stock of
which has been held by the REIT at all times during the period such
corporation was in existence. Thus, in applying the requirements described
herein, any "qualified REIT subsidiaries" of ICCMIC will be ignored, and all
assets, liabilities, and items of income, deduction, and credit of such
subsidiaries will be treated as assets, liabilities, and items of income,
deduction, and credit of ICCMIC. ICCMSC is a "qualified REIT subsidiary."
Accordingly, ICCMSC will not be subject to federal corporate income taxation,
although it may be subject to state and local taxation. See "--New Tax
Legislation--REIT Subsidiaries."

ICCMIC may decide in the future to organize the Operating Partnership. If it
does so, initially it will own 100% of the partnership interests. Pursuant to
Treasury Regulations effective January 1, 1997 relating to entity
classification (the "Check-the-Box Regulations"), an unincorporated entity
that has a single owner and that does not elect to be classified as a
corporation is disregarded as an entity separate from its owner for federal
income tax purposes. Because ICCMIC will be deemed to own 100% of the
partnership interests in the Operating Partnership for federal income tax
purposes unless and until interests in the Operating Partnership are issued to
other persons, the Operating Partnership will be disregarded as an entity
separate from ICCMIC under the Check-the-Box Regulations.

In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate
share of the assets of the partnership and will be deemed to be entitled to
the gross income of the partnership attributable to such share. In addition,
the assets and gross income of the partnership will retain the same character
in the hands of the REIT for purposes of section 856 of the Code, including
satisfying the gross income and asset tests described below. If formed, when
the Operating Partnership admits a partner other than ICCMIC or a qualified
REIT subsidiary of ICCMIC, ICCMIC's proportionate share of the assets and
gross income of the Operating Partnership will be treated as assets and gross
income of ICCMIC for purposes of applying the requirements described herein.

120
<PAGE>

INCOME TESTS. In order for ICCMIC to qualify and to maintain its
qualification as a REIT, three requirements relating to ICCMIC's gross income
must be satisfied annually. First, at least 75% of ICCMIC's gross income
(excluding gross income from prohibited transactions) for each taxable year
must consist of defined types of income derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and interest on obligations secured by mortgages on
real property or on interests in real property) or temporary investment
income. Second, at least 95% of ICCMIC's gross income (excluding gross income
from prohibited transactions) for each taxable year must be derived from such
real property, mortgages on real property, or temporary investments, and from
dividends, other types of interest, and gain from the sale or disposition of
stock or securities, or from any combination of the foregoing. Third, not more
than 30% of ICCMIC's gross income (including gross income from prohibited
transactions) for each taxable year may be gain from the sale or other
disposition of (i) stock or securities held for less than one year, (ii)
dealer property that is not foreclosure property and (iii) certain real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property). See, however, "--New Tax Legislation--Repeal
of 30-Percent Gross Income Requirement." The specific application of these
tests to ICCMIC is discussed below.

The term "interest," as defined for purposes of the 75% and 95% gross income
tests, generally does not include any amount received or accrued (directly or
indirectly) if the determination of such amount depends in whole or in part on
the income or profits of any person. However, an amount received or accrued
generally will not be excluded from the term "interest" solely by reason of
being based on a fixed percentage or percentages of receipts or sales. In
addition, an amount received or accrued generally will not be excluded from
the term "interest" solely by reason of being based on the income or profits
of a debtor if the debtor derives substantially all of its gross income from
the related property through the leasing of substantially all of its interests
in the property, to the extent the amounts received by the debtor would be
characterized as rents from real property if received by a REIT.

Interest on obligations secured by mortgages on real property or on
interests in real property is qualifying income for purposes of the 75% gross
income test. Any amount includible in gross income with respect to a regular
or residual interest in a REMIC generally is treated as interest on an
obligation secured by a mortgage on real property. If, however, less than 95%
of the assets of a REMIC consists of real estate assets (determined as if
ICCMIC held such assets), ICCMIC will be treated as receiving directly its
proportionate share of the income of the REMIC. In addition, if ICCMIC
receives interest income with respect to a mortgage loan that is secured by
both real property and other property and the highest principal amount of the
loan outstanding during a taxable year exceeds the fair market value of the
real property on the date ICCMIC purchased the mortgage loan, the interest
income will be apportioned between the real property and the other property,
which apportionment may cause ICCMIC to recognize income that is not
qualifying income for purposes of the 75% gross income test.

Sonnenschein Nath & Rosenthal is of the opinion that the interest, original
issue discount, and market discount income that ICCMIC derives from its
investments in MBS Interests, IOs and Inverse IOs generally will be qualifying
interest income for purposes of both the 75% and the 95% gross income tests,
except to the extent that less than 95% of the assets of a REMIC in which
ICCMIC holds an interest consists of real estate assets (determined as if
ICCMIC held such assets), and ICCMIC's proportionate share of the income of
the REMIC includes income that is not qualifying income for purposes of the
75% and 95% gross income tests. Most of the income that ICCMIC recognizes with
respect to its investments in Mortgage Loans will be qualifying income for
purposes of both the 75% and 95% gross income tests. In some cases, however,
the loan amount of a Mortgage Loan may exceed the value of the real property
securing the loan, which will result in a portion of the income from the loan
being classified as qualifying income for purposes of the 95% gross income
test, but not for purposes of the 75% gross income test. It is also possible
that, in some instances, the interest income from a Distressed Mortgage Loan
may be based in part on the borrower's profits or net income, which generally
will disqualify the income from the loan for purposes of both the 75% and the
95% gross income tests. Finally, if ICCMIC forecloses on a Mortgage Loan that
it has held for less than four years, any gain that ICCMIC recognizes upon the
act of foreclosure as a result of the retirement of the loan will not be
qualifying income for

121
<PAGE>

purposes of the 30% gross income test. See, however, "--New Tax Legislation--
Repeal of 30-Percent Gross Income Requirement."

ICCMIC may acquire Construction Loans or Mezzanine Loans that have shared
appreciation provisions. To the extent interest from a loan that is based on
the cash proceeds from the sale of property constitutes a "shared appreciation
provision" (as defined in the Code), income attributable to such participation
feature will be treated as gain from the sale of the secured property, which
generally is qualifying income for purposes of the 75% and 95% gross income
tests. However, if gain from any "shared appreciation provision" is triggered
within four years of the date the related loan is made, such gain will be
nonqualifying income for purposes of the 30% gross income test. See however
"--New Tax Legislation--Repeal of 30-Percent Gross Income Requirement." In
addition, ICCMIC may be required to recognize income from a shared
appreciation provision over the term of the related loan using the constant
yield method pursuant to certain Treasury Regulations.

The Company may acquire and originate Mortgage Loans and securitize such
loans through the issuance of non-REMIC CMOs. As a result of such
transactions, the Company will retain an ownership interest in the Mortgage
Loans that has economic characteristics similar to those of a MBS Interest. In
addition, the Company may resecuritize MBS (or non-REMIC CMOs) through the
issuance of non-REMIC CMOs, retaining an interest in the MBS used as
collateral in the resecuritization transaction. Such transactions will not
cause ICCMIC to fail to satisfy the gross income tests or the asset tests
described below.

ICCMIC may receive income not described above that is not qualifying income
for purposes of the 75% and 95% gross income tests. ICCMIC will monitor the
amount of nonqualifying income produced by its assets and has represented that
it will manage its portfolio in order to comply at all times with the three
gross income tests.

The rent received by ICCMIC from the tenants of its Real Property ("Rent")
will qualify as "rents from real property" in satisfying the gross income
tests for a REIT described above only if several conditions are met. First,
the amount of Rent must not be based, in whole or in part, on the income or
profits of any person. However, an amount received or accrued generally will
not be excluded from the term "rents from real property" solely by reason of
being based on a fixed percentage or percentages of receipts or sales. Second,
the Code provides that the Rent received from a tenant will not qualify as
"rents from real property" in satisfying the gross income tests if ICCMIC, or
a direct or indirect owner of 10% or more of ICCMIC, owns 10% or more of the
ownership interests in such tenant, taking into account both direct and
constructive ownership (a "Related Party Tenant"). See "--New Tax
Legislation--Attribution of Ownership." Third, if Rent attributable to
personal property, leased in connection with a lease of Real Property, is
greater than 15% of the total Rent received under the lease, then the portion
of Rent attributable to such personal property will not qualify as "rents from
real property." Finally, for the Rent to qualify as "rents from real
property," ICCMIC generally must not operate or manage the Real Property or
furnish or render services to the tenants of such Real Property, other than
through an "independent contractor" who is adequately compensated and from
whom ICCMIC derives no revenue. The "independent contractor" requirement,
however, does not apply to the extent the services provided by ICCMIC are
"usually or customarily rendered" in connection with the rental of space for
occupancy only and are not otherwise considered "rendered to the occupant."
See "--New Tax Legislation--De Minimis Tenant Service Income."

ICCMIC has represented that it will not charge Rent for any portion of any
Real Property that is based, in whole or in part, on the income or profits of
any person (except by reason of being based on a fixed percentage or
percentages of receipts of sales, as described above) to the extent that the
receipt of such Rent would jeopardize ICCMIC's status as a REIT. In addition,
ICCMIC has represented that, to the extent that it receives Rent from a
Related Party Tenant, such Rent will not cause ICCMIC to fail to satisfy
either the 75% or 95% gross income test. ICCMIC also has represented that it
will not allow the Rent attributable to personal property leased in connection
with any lease of Real Property to exceed 15% of the total Rent received under
the lease, if the receipt of such Rent would cause ICCMIC to fail to satisfy
either the 75% or 95% gross income test. Furthermore, as a result of
restrictions on the ownership of stock in ICCMIC, no person may own, directly
or

122
<PAGE>

indirectly, more than 9.9% of ICCMIC. ICCMIC has represented that neither
Imperial Credit nor any person constructively owned by Imperial Credit will
pay any rent to ICCMIC, so that ICCMIC will not receive any rent from a
Related Party Tenant. Finally, ICCMIC has represented that it will not operate
or manage its Real Property or furnish or render noncustomary services to the
tenants of its Real Property other than through an "independent contractor,"
to the extent that such operation or the provision of such services would
jeopardize ICCMIC's status as a REIT.

REITs generally are subject to tax at the maximum corporate rate on any
income from foreclosure property (other than income that would be qualifying
income for purposes of the 75% gross income test), less expenses directly
connected with the production of such income. "Foreclosure property" is
defined as any real property (including interests in real property) and any
personal property incident to such real property (i) that is acquired by a
REIT as the result of such REIT having bid in such property at foreclosure, or
having otherwise reduced such property to ownership or possession by agreement
or process of law, after there was a default (or default was imminent) on a
lease of such property or on an indebtedness owed to the REIT that such
property secured, (ii) for which the related loan was acquired by the REIT at
a time when default was not imminent or anticipated, and (iii) for which such
REIT makes a proper election to treat such property as foreclosure property.
See "--New Tax Legislation--Treatment of Foreclosure Property." ICCMIC does
not anticipate that it will receive any income from foreclosure property that
is not qualifying income for purposes of the 75% gross income test, but, if
ICCMIC does receive any such income, ICCMIC will make an election to treat the
related property as foreclosure property. If property is not eligible for the
election to be treated as foreclosure property ("Ineligible Property") because
the related loan was acquired by the REIT at a time when default was imminent
or anticipated, income received with respect to such Ineligible Property may
not be qualifying income for purposes of the 75% or 95% gross income test. In
addition, if a REIT disposes of Ineligible Property at a gain within four
years of acquiring such property, such gain will be nonqualifying income for
purposes of the 30% income test. See, however, "--New Tax Legislation--Repeal
of 30-Percent Gross Income Requirement."

ICCMIC has represented that it will manage its assets so that it does not
violate the 30% income test in any taxable year. See, however, "--New Tax
Legislation--Repeal of 30-Percent Gross Income Requirement." Any gross income
derived from a prohibited transaction is nonqualifying income for purposes of
the 30% income test and the net income from such a transaction is subject to a
100% tax. The term "prohibited transaction" generally includes a sale or other
disposition of property (other than foreclosure property) that is held
primarily for sale to customers in the ordinary course of a trade or business.
See "--New Tax Legislation--Prohibited Transaction Safe Harbor" and "--Shared
Appreciation Mortgages." The Company believes that no asset owned by ICCMIC
or, if it is formed, the Operating Partnership will be held for sale to
customers and that a sale of any such asset will not be in the ordinary course
of ICCMIC's or the Operating Partnership's business. Whether property is held
"primarily for sale to customers in the ordinary course of a trade or
business" depends, however, on the facts and circumstances in effect from time
to time, including those related to a particular property. Nevertheless,
ICCMIC will attempt to comply with the terms of safe-harbor provisions in the
Code prescribing when asset sales will not be characterized as prohibited
transactions. Complete assurance cannot be given, however, that ICCMIC can
comply with the safe-harbor provisions of the Code or avoid owning property
that may be characterized as property held "primarily for sale to customers in
the ordinary course of a trade or business."

It is possible that, from time to time, ICCMIC will enter into hedging
transactions with respect to one or more of its assets or liabilities. Any
such hedging transactions could take a variety of forms, including interest
rate swap contracts, interest rate cap or floor contracts, futures or forward
contracts, and options. To the extent that ICCMIC enters into an interest rate
swap or cap contract to hedge any variable rate indebtedness incurred to
acquire or carry real estate assets, any periodic income or gain from the
disposition of such contract should be qualifying income for purposes of the
95% gross income test, but not the 75% gross income test. Furthermore, any
such contract would be considered a "security" for purposes of applying the
30% gross income test. To the extent that ICCMIC hedges with other types of
financial instruments or in other situations, it may not be entirely clear how
the income from those transactions will be treated for purposes of the various
income tests that apply to REITs under the Code. ICCMIC intends to structure
any hedging transactions in a manner that does not

123
<PAGE>

jeopardize its status as a REIT. Accordingly, ICCMIC may conduct some or all
of its hedging activities through a corporate subsidiary that is fully subject
to federal corporate income tax. See, however, "--New Tax Legislation--
Payments under Hedging Instruments."

If ICCMIC fails to satisfy one or both of the 75% and 95% gross income tests
for any taxable year, it nevertheless may qualify as a REIT for such year if
it is entitled to relief under certain provisions of the Code. Those relief
provisions generally will be available if ICCMIC's failure to meet such tests
is due to reasonable cause and not due to willful neglect, ICCMIC attaches a
schedule of the sources of its income to its return, and ICCMIC anticipates
that any incorrect information on the schedule will not be due to fraud with
intent to evade tax. It is not possible, however, to state whether in all
circumstances ICCMIC would be entitled to the benefit of such relief
provisions. As discussed above in "Federal Income Tax Considerations--Taxation
of the Company," even if such relief provisions apply, a 100% tax would be
imposed on the net income attributable to the greater of the amount by which
ICCMIC fails the 75% or 95% gross income test. No such relief is available for
violations of the 30% income test. See, however, "--New Tax Legislation--
Repeal of 30-Percent Gross Income Requirement."

ASSET TESTS. ICCMIC, at the close of each quarter of each taxable year, also
must satisfy, either directly or through partnerships in which it has an
interest, two tests relating to the nature of its assets. First, at least 75%
of the value of ICCMIC's total assets must be represented by cash or cash
items (including certain receivables), government securities, "real estate
assets," or, in cases where ICCMIC raises new capital through stock or long-
term (at least five-year) debt offerings, temporary investments in stock or
debt instruments during the one-year period following ICCMIC's receipt of such
capital. The term "real estate assets" includes interests in real property,
interests in mortgages on real property to the extent the principal balance of
a mortgage does not exceed the fair market value of the associated real
property, regular or residual interests in a REMIC (except that, if less than
95% of the assets of a REMIC consists of "real estate assets" (determined as
if ICCMIC held such assets), ICCMIC will be treated as holding directly its
proportionate share of the assets of such REMIC), and shares of other REITs.
For purposes of the 75% asset test, the term "interest in real property"
includes an interest in mortgage loans or land and improvements thereon, such
as buildings or other inherently permanent structures (including items that
are structural components of such buildings or structures), a leasehold of
real property, and an option to acquire real property (or a leasehold of real
property). An "interest in real property" also generally includes an interest
in mortgage loans secured by controlling equity interests in entities treated
as partnerships for federal income tax purposes that own real property, to the
extent that the principal balance of the mortgage does not exceed the fair
market value of the real property that is allocable to the equity interest.
Second, of the investments not included in the 75% asset class, the value of
any one issuer's securities owned by ICCMIC may not exceed 5% of the value of
ICCMIC's total assets, and ICCMIC may not own more than 10% of any one
issuer's outstanding voting securities (except for its interests in any
partnership and any qualified REIT subsidiary).

ICCMIC expects that any Distressed Real Properties, MBS Interests, Real
Estate Related Assets and temporary investments that it acquires generally
will be qualifying assets for purposes of the 75% asset test, except to the
extent that less than 95% of the assets of a REMIC in which ICCMIC owns an
interest consists of "real estate assets" and ICCMIC's proportionate share of
those assets includes assets that are nonqualifying assets for purposes of the
75% asset test. Mortgage Loans (including Distressed Mortgage Loans,
Construction Loans and Mezzanine Loans) also will be qualifying assets for
purposes of the 75% asset test to the extent that the principal balance of
each mortgage loan does not exceed the value of the associated real property.
ICCMIC will monitor the status of the assets that it acquires for purposes of
the various asset tests and has represented that it will manage its portfolio
in order to comply at all times with such tests.

ICCMIC anticipates that it may securitize all or a portion of the Mortgage
Loans which it acquires, in which event ICCMIC will likely retain certain of
the subordinated and IO classes of MBS Interests which may be created as a
result of such securitization. The securitization of the Mortgage Loans may be
accomplished through one or more REMICs established by ICCMIC or, if a non-
REMIC securitization is desired, through one or more qualified REIT
subsidiaries established by ICCMIC. The securitization of the Mortgage Loans
through either

124
<PAGE>

one or more REMICs or one or more qualified REIT subsidiaries will not affect
the qualification of ICCMIC as a REIT or result in the imposition of corporate
income tax under the taxable mortgage pool rules.

If ICCMIC should fail to satisfy the asset tests at the end of a calendar
quarter, such a failure would not cause it to lose its REIT status if (i) it
satisfied the asset tests at the close of the preceding calendar quarter and
(ii) the discrepancy between the value of ICCMIC's assets and the asset test
requirements arose from changes in the market values of its assets and was not
wholly or partly caused by the acquisition of one or more non-qualifying
assets. If the condition described in clause (ii) of the preceding sentence
were not satisfied, ICCMIC still could avoid disqualification by eliminating
any discrepancy within 30 days after the close of the calendar quarter in
which it arose.

DISTRIBUTION REQUIREMENTS. ICCMIC, in order to avoid corporate income
taxation of the earnings that it distributes, is required to distribute with
respect to each taxable year dividends (other than capital gain dividends) to
its stockholders in an aggregate amount at least equal to (i) the sum of (A)
95% of its "REIT taxable income" (computed without regard to the dividends
paid deduction and its net capital gain) and (B) 95% of the net income (after
tax), if any, from foreclosure property, minus (ii) the sum of certain items
of noncash income. Such distributions must be paid in the taxable year to
which they relate, or in the following taxable year if declared before ICCMIC
timely files its federal income tax return for such year and if paid on or
before the first regular dividend payment date after such declaration. To the
extent that ICCMIC does not distribute all of its net capital gain or
distributes at least 95%, but less than 100%, of its "REIT taxable income," as
adjusted, it will be subject to tax thereon at regular ordinary and capital
gains corporate tax rates. See, however, "--New Tax Legislation--Credit for
Tax on Retained Capital Gains." Furthermore, if ICCMIC should fail to
distribute during each calendar year (or, in the case of distributions with
declaration and record dates falling in the last three months of the calendar
year, by the end of the January immediately following such year) at least the
sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year and (iii) any undistributed taxable
income from prior periods, ICCMIC would be subject to a 4% nondeductible
excise tax on the excess of such required distribution over the amounts
actually distributed. ICCMIC intends to make timely distributions sufficient
to satisfy the annual distribution requirements.

It is possible that, from time to time, ICCMIC may experience timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of that income and deduction of
such expenses in arriving at its REIT taxable income. For example, ICCMIC will
recognize taxable income in excess of its cash receipts when, as frequently
happens, OID accrues with respect to certain of its subordinated MBS
Interests, including POs and certain IOs. OID generally will be accrued using
a methodology that does not allow credit losses to be reflected until they are
actually incurred. See, however, "--New Tax Legislation--Excess Non-Cash
Income." In addition, ICCMIC may recognize taxable market discount income upon
the receipt of proceeds from the disposition of, or principal payments on, MBS
Interests and Distressed Mortgage Loans that are "market discount bonds"
(i.e., obligations with a stated redemption price at maturity that is greater
than ICCMIC's tax basis in such obligations), but not have any cash because
such proceeds may be used to make non-deductible principal payments on related
borrowings. Market discount income is treated as ordinary income and not as
capital gain and, thus, is subject to the 95% distribution requirement. ICCMIC
also may recognize Excess Inclusion or other taxable income in excess of cash
flow from REMIC Residual Interests or its retained interests from non-REMIC
securitization transactions. It also is possible that, from time to time,
ICCMIC may recognize net capital gain attributable to the sale of depreciated
property that exceeds its cash receipts from the sale. In addition, pursuant
to certain Treasury Regulations, ICCMIC may be required to recognize the
amount of any payment to be made pursuant to a shared appreciation provision
over the term of the related loan using the constant yield method. Finally,
ICCMIC may recognize taxable income without receiving a corresponding
cash distribution if it forecloses on or makes a "significant modification"
(as defined in Regulations section 1.1001-3(e)) to a loan, to the extent that
the fair market value of the underlying property or the principal amount of
the modified loan, as applicable, exceeds ICCMIC's basis in the original loan.
Therefore, ICCMIC may have less cash than is necessary to meet its annual 95%
distribution requirement or to avoid corporate income tax or the excise tax
imposed on certain undistributed income. In such a situation,

125
<PAGE>

ICCMIC may find it necessary to arrange for short-term (or possibly long-term)
borrowings or to raise funds through the issuance of Preferred Stock or
additional Common Stock, or through the sale of assets.

As a result of the securitization or resecuritization of Mortgage Loans or
other debt instruments, and the subsequent sale of the senior (or most secure)
securities created in the securitization, ICCMIC may retain subordinated
securities or a residual interest in the assets being securitized on which
interest or discount income will be accrued without the current payment of
cash. This situation could arise because cash payments received on the assets
are required to be paid to the holders of senior securitized interests. In
addition, ICCMIC would have phantom income to the extent of the market
discount attributable to debt securities held by a REMIC in which ICCMIC holds
a REMIC Residual Interest. In such situations, the income related to such
subordinate debt instruments will be subject to the 95% distribution
requirement. In order to satisfy the REIT distribution requirements, ICCMIC
may need to distribute funds obtained through borrowing, the issuance of
additional capital stock or the sale of assets. As a result, the maintenance
of REIT status could affect the manner in which the REIT conducts its business
operations.

Under certain circumstances, ICCMIC may be able to rectify a failure to meet
the distribution requirements for a year by paying "deficiency dividends" to
its stockholders in a later year, which may be included in ICCMIC's deduction
for dividends paid for the earlier year. Although ICCMIC may be able to avoid
being taxed on amounts distributed as deficiency dividends, it will be
required to pay to the Service interest based upon the amount of any deduction
taken for deficiency dividends.

RECORDKEEPING REQUIREMENTS. Pursuant to applicable Treasury Regulations, in
order to be able to elect to be taxed as a REIT, ICCMIC must maintain certain
records and request on an annual basis certain information from its
stockholders designed to disclose the actual ownership of its outstanding
stock. ICCMIC intends to comply with such requirements. See "--New Tax
Legislation--Maximum Number of Shareholders."

FAILURE TO QUALIFY

If ICCMIC fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, ICCMIC will be subject to tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates. Distributions to ICCMIC's stockholders in any year in which
ICCMIC fails to qualify as a REIT will not be deductible by ICCMIC nor will
they be required to be made. In such event, to the extent of ICCMIC's current
and accumulated earnings and profits, all distributions to stockholders will
be taxable as ordinary income and, subject to certain limitations of the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, ICCMIC also
will be disqualified from taxation as a REIT for the four taxable years
following the year during which ICCMIC ceased to qualify as a REIT. It is not
possible to state whether in all circumstances ICCMIC would be entitled to
such statutory relief. See "--New Tax Legislation."

TAXATION OF TAXABLE U.S. STOCKHOLDERS

As long as ICCMIC qualifies as a REIT, distributions made to ICCMIC's
taxable U.S. stockholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will be taken into account by
such U.S. stockholders as ordinary income and will not be eligible for the
dividends received deduction generally available to corporations. As used
herein, the term "U.S. stockholder" means a holder of Common Stock that for
U.S. federal income tax purposes is (i) a citizen or resident of the U.S.,
(ii) a corporation, partnership, or other entity created or organized in or
under the laws of the U.S. or of any political subdivision thereof, (iii) an
estate whose income from sources without the United States is includible in
gross income for U.S. federal income tax purposes regardless of its connection
with the conduct of a trade or business within the United States, or (iv) any
trust with respect to which (A) a U.S. court is able to exercise primary
supervision over the administration of such trust and (B) one or more U.S.
fiduciaries have the authority to control all substantial decisions of the
trust. Distributions that are designated as capital gain dividends will be
taxed as long-term capital gains (to the extent they do not exceed ICCMIC's
actual net capital gain for the taxable year) without

126
<PAGE>

regard to the period for which the stockholder has held his Common Stock.
However, corporate stockholders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. See "--New Tax Legislation--Excess
Non-Cash Income." Distributions in excess of current and accumulated earnings
and profits will not be taxable to a stockholder to the extent that they do
not exceed the adjusted basis of the stockholder's Common Stock, but rather
will reduce the adjusted basis of such stock. To the extent that such
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a stockholder's Common Stock, such distributions will be
included in income as long-term capital gain (or short-term capital gain if
the Common Stock had been held for one year or less), assuming the Common
Stock is a capital asset in the hands of the stockholder. In addition, any
distribution declared by ICCMIC in October, November, or December of any year
and payable to a stockholder of record on a specified date in any such month
shall be treated as both paid by ICCMIC and received by the stockholder on
December 31 of such year, provided that the distribution is actually paid by
ICCMIC 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 ICCMIC. Instead, such losses would be
carried over by ICCMIC for potential offset against its future income (subject
to certain limitations). Taxable distributions from ICCMIC and gain from the
disposition of the Common Stock will not be treated as passive activity income
and, therefore, stockholders generally will not be able to apply any "passive
activity losses" (such as losses from certain types of limited partnerships in
which a stockholder is a limited partner) against such income. In addition,
taxable distributions from ICCMIC generally will be treated as investment
income for purposes of the investment interest limitations. Capital gains from
the disposition of Common Stock (or distributions treated as such), however,
will be treated as investment income only if the stockholder so elects, in
which case such capital gains will be taxed at ordinary income rates. ICCMIC
will notify stockholders after the close of ICCMIC's taxable year as to the
portions of the distributions attributable to that year that constitute
ordinary income or capital gain dividends.

ICCMIC's investment in MBS Interests and certain types of MBS may cause it
under certain circumstances to recognize phantom income and to experience an
offsetting excess of economic income over its taxable income in later years.
As a result, stockholders may from time to time be required to pay federal
income tax on distributions that economically represent a return of capital,
rather than a dividend. Such distributions would be offset in later years by
distributions representing economic income that would be treated as returns of
capital for federal income tax purposes. Accordingly, if ICCMIC receives
phantom income, its stockholders may be required to pay federal income tax
with respect to such income on an accelerated basis, i.e., before such income
is realized by the stockholders in an economic sense. Taking into account the
time value of money, such an acceleration of federal income tax liabilities
would cause stockholders to receive an after-tax rate of return on an
investment in ICCMIC that would be less than the after-tax rate of return on
an investment with an identical before-tax rate of return that did not
generate phantom income. For example, if an investor subject to an effective
income tax rate of 30% purchased a bond (other than a tax-exempt bond) with an
annual interest rate of 10% for its face value, his before-tax return on his
investment would be 10%, and his after-tax return would be 7%. However, if the
same investor purchased stock of ICCMIC at a time when the before-tax rate of
return was 10%, his after-tax rate of return on his stock might be somewhat
less than 7% as a result of ICCMIC's phantom income. In general, as the ratio
of ICCMIC's phantom income to its total income increases, the after-tax rate
of return received by a taxable stockholder of ICCMIC will decrease. ICCMIC
will consider the potential effects of phantom income on its taxable
stockholders in managing its investments.

If ICCMIC owns REMIC Residual Interests, it is possible that stockholders
would not be permitted to offset certain portions of the dividend income they
derive from ICCMIC with their current deductions or net operating loss
carryovers or carrybacks. The portion of a stockholder's dividends that would
be subject to this limitation would equal his allocable share of any Excess
Inclusion income derived by ICCMIC with respect to the REMIC Residual
Interests. ICCMIC's Excess Inclusion income for any calendar quarter will
equal the excess of its income from REMIC Residual Interests over its "daily
accruals" with respect to such REMIC Residual Interests for the calendar
quarter. Daily accruals for a calendar quarter are computed by allocating to
each day on which a REMIC Residual Interest is owned a ratable portion of the
product of (i) the "adjusted issue price" of the

127
<PAGE>

REMIC Residual Interest at the beginning of the quarter and (ii) 120% of the
long-term federal interest rate (adjusted for quarterly compounding) on the
date of issuance of the REMIC Residual Interest. The adjusted issue price of a
REMIC Residual Interest at the beginning of a calendar quarter equals the
original issue price of the REMIC Residual Interest, increased by the amount
of daily accruals for prior quarters and decreased by all prior distributions
to ICCMIC with respect to the REMIC Residual Interest. To the extent provided
in future Treasury regulations, the Excess Inclusion income with respect to
any REMIC Residual Interests owned by ICCMIC that do not have significant
value will equal the entire amount of the income derived from such REMIC
Residual Interests. Furthermore, to the extent that ICCMIC (or a qualified
REIT subsidiary) acquires or originates Mortgage Loans and uses those loans to
collateralize one or more multiple-class offerings of MBS for which no REMIC
election is made ("Non-REMIC Transactions"), it is possible that, to the
extent provided in future Treasury regulations, stockholders will not be
permitted to offset certain portions of the dividend income that they derive
from ICCMIC that are attributable to Non-REMIC Transactions with current
deductions or net operating loss carryovers or carrybacks. Although no
applicable Treasury regulations have yet been issued, no assurance can be
provided that such regulations will not be issued in the future or that, if
issued, such regulations will not prevent ICCMIC's stockholders from
offsetting some portion of their dividend income with deductions or losses
from other sources.

TAXATION OF STOCKHOLDERS ON THE DISPOSITION OF THE COMMON STOCK

In general, any gain or loss realized upon a taxable disposition of the
Common Stock by a stockholder who is not a dealer in securities will be
treated as long-term capital gain or loss if the Common Stock has been held
for more than one year and otherwise as short-term capital gain or loss.
However, any loss upon a sale or exchange of Common Stock by a stockholder who
has held such shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss to the extent of
distributions from ICCMIC required to be treated by such stockholder as long-
term capital gain. All or a portion of any loss realized upon a taxable
disposition of the Common Stock may be disallowed if other shares of Common
Stock are purchased within 30 days before or after the disposition.

CAPITAL GAINS AND LOSSES

A capital asset generally must be held for more than one year in order for
gain or loss derived from its sale or exchange to be treated as long-term
capital gain or loss. The highest marginal individual income tax rate is
39.6%, and the tax rate on long-term capital gains applicable to non-corporate
taxpayers is 28% for sales and exchanges of assets held for more than one year
but not more than eighteen months, and 20% for sales and exchanges of assets
held for more than eighteen months. Thus, the tax rate differential between
capital gain and ordinary income for non-corporate taxpayers may be
significant. In addition, the characterization of income as capital gain or
ordinary income may affect the deductibility of capital losses. Capital losses
not offset by capital gains may be deducted against a non-corporate taxpayer's
ordinary income only up to a maximum annual amount of $3,000. Unused capital
losses may be carried forward indefinitely by non-corporate taxpayers. All net
capital gain of a corporate taxpayer is subject to tax at ordinary corporate
rates. A corporate taxpayer can deduct capital losses only to the extent of
capital gains, with unused losses being carried back three years and forward
five years.

Recently enacted legislation (The Taxpayer Relief Act of 1997 (the "1997
Act")) reduces the maximum rate on long-term capital gains of non-corporate
taxpayers from 28% to 20% (10% for taxpayers in the 15% tax bracket). The
lower rates generally apply to sales or exchanges of capital assets occurring
after May 6, 1997. However, the reduced long-term capital gains rates are only
available for sales or exchanges of capital assets held for more than 18
months (or more than 12 months if the sale or exchange occurred after May 6,
1997 and before July 29, 1997). Any long-term capital gains from the sale or
exchange of depreciable real property that would be subject to ordinary income
taxation (i.e., "depreciation recapture") if it were treated as personal
property will be subject to a maximum tax rate of 25% instead of the 20%
maximum rate for gains taken into account after July 28, 1997. Also, under the
legislation, for taxable years beginning after December 31, 2000, the maximum
capital gains rates for assets which are held more than 5 years are 18% and 8%
(rather than 20%

128
<PAGE>

and 10%). These rates will generally only apply to assets for which the
holding period begins after December 31, 2000.

The capital gains provisions in the 1997 Act authorize the Service to issue
regulations (including regulations requiring reporting) applying the
provisions to any "pass-thru entity" including a REIT and interests in such an
entity. No assurance can be given concerning the content of any such
regulations. Generally, the determination of when gain is properly taken into
account will be made at the entity level.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

ICCMIC will report to its U.S. stockholders and to the Service the amount of
distributions paid during each calendar year, and the amount of tax withheld,
if any. Under the backup withholding rules, a stockholder may be subject to
backup withholding at the rate of 31% with respect to distributions paid
unless such holder (i) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with the applicable requirements of
the backup withholding rules. A stockholder who does not provide ICCMIC with
his correct taxpayer identification number also may be subject to penalties
imposed by the Service. Any amount paid as backup withholding will be
creditable against the stockholder's income tax liability. In addition, ICCMIC
may be required to withhold a portion of capital gain distributions to any
stockholders who fail to certify their nonforeign status to ICCMIC. The
Treasury Department issued proposed regulations in April 1996 regarding the
backup withholding rules as applied to Non-U.S. Stockholders. The proposed
regulations would alter the current system of backup withholding compliance
and are proposed to be effective for distributions made after December 31,
1997. See "--Taxation of Non-U.S. Stockholders."

TAXATION OF TAX-EXEMPT STOCKHOLDERS

Tax-exempt entities, including qualified employee pension and profit sharing
trusts and individual retirement accounts ("Exempt Organizations"), generally
are exempt from federal income taxation. However, they are subject to taxation
on their unrelated business taxable income ("UBTI"). While many investments in
real estate generate UBTI, the Service has issued a published ruling that
dividend distributions from a REIT to an exempt employee pension trust do not
constitute UBTI, provided that the shares of the REIT are not otherwise used
in an unrelated trade or business of the exempt employee pension trust. Based
on that ruling, amounts distributed by ICCMIC to Exempt Organizations
generally should not constitute UBTI. However, if an Exempt Organization
finances its acquisition of the Common Stock with debt, a portion of its
income from ICCMIC will constitute UBTI pursuant to the "debt-financed
property" rules. Furthermore, social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts, and qualified group
legal services plans that are exempt from taxation under paragraphs (7), (9),
(17) and (20), respectively, of Code section 501(c) are subject to different
UBTI rules, which generally will require them to characterize distributions
from ICCMIC as UBTI. In addition, in certain circumstances, a pension trust
that owns more than 10% of ICCMIC's stock is required to treat a percentage of
the dividends from ICCMIC as UBTI (the "UBTI Percentage"). The UBTI Percentage
is the gross income derived by ICCMIC from an unrelated trade or business
(determined as if ICCMIC were a pension trust) divided by the gross income of
ICCMIC for the year in which the dividends are paid. The UBTI rule applies to
a pension trust holding more than 10% of ICCMIC's stock only if (i) the UBTI
Percentage is at least 5%, (ii) ICCMIC qualifies as a REIT by reason of the
modification of the 5/50 Rule that allows the beneficiaries of the pension
trust to be treated as holding shares of ICCMIC in proportion to their
actuarial interests in the pension trust, and (iii) either (A) one pension
trust owns more than 25% of the value of ICCMIC's stock or (B) a group of
pension trusts individually holding more than 10% of the value of ICCMIC's
stock collectively owns more than 50% of the value of ICCMIC's stock. ICCMIC's
ownership limitations should prevent an Exempt Organization from owning more
than 10% of the value of ICCMIC's stock.

Any dividends received by an Exempt Organization that are allocable to
Excess Inclusion will be treated as UBTI. In addition, ICCMIC will be subject
to tax at the highest marginal corporate rate on the portion of any Excess
Inclusion income derived by ICCMIC from REMIC Residual Interests that is
allocable to stock of

129
<PAGE>

ICCMIC held by Disqualified Organizations. Any such tax would be deductible by
ICCMIC against its income that is not Excess Inclusion income.

If ICCMIC derives Excess Inclusion income from REMIC Residual Interests, a
tax similar to the tax on ICCMIC described in the preceding paragraph may be
imposed on stockholders who are (i) pass-through entities (i.e., partnerships,
estates, trusts, regulated investment companies, REITs, common trust funds,
and certain types of cooperatives (including farmers' cooperatives described
in section 521 of the Code)) in which a Disqualified Organization is a record
holder of shares or interests and (ii) nominees who hold Common Stock on
behalf of Disqualified Organizations. Consequently, a brokerage firm that
holds shares of Common Stock in a "street name" account for a Disqualified
Organization may be subject to federal income tax on the Excess Inclusion
income derived from those shares.

The Treasury Department has been authorized to issue regulations regarding
issuances by a REIT of multiple-class mortgage-backed securities in non-REMIC
transactions. If such Treasury regulations are issued in the future allocating
ICCMIC's Excess Inclusion income from non-REMIC transactions pro rata among
its stockholders, some percentage of the dividends paid by ICCMIC would be
treated as UBTI in the hands of stockholders that are Exempt Organizations.
See "--Taxation of Taxable U.S. Stockholders."

TAXATION OF NON-U.S. STOCKHOLDERS

The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
stockholders (collectively, "Non-U.S. Stockholders") are complex and no
attempt will be made herein to provide more than a summary of such rules.
PROSPECTIVE NON-U.S. STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS
TO DETERMINE THE IMPACT OF FEDERAL, STATE, AND LOCAL INCOME TAX LAWS WITH
REGARD TO AN INVESTMENT IN THE COMMON STOCK, INCLUDING ANY REPORTING
REQUIREMENTS.

Distributions to Non-U.S. Stockholders that are not attributable to gain
from sales or exchanges by ICCMIC of U.S. real property interests and are not
designated by ICCMIC as capital gains dividends will be treated as dividends
of ordinary income to the extent that they are made out of current or
accumulated earnings and profits of ICCMIC. Such distributions ordinarily will
be subject to a withholding tax equal to 30% of the gross amount of the
distribution unless an applicable tax treaty reduces or eliminates that tax.
However, if income from the investment in the Common Stock is treated as
effectively connected with the Non-U.S. Stockholder's conduct of a U.S. trade
or business, the Non-U.S. Stockholder generally will be subject to federal
income tax at graduated rates, in the same manner as U.S. stockholders are
taxed with respect to such distributions (and also may be subject to the 30%
branch profits tax in the case of a Non-U.S. Stockholder that is a non-U.S.
corporation). ICCMIC expects to withhold U.S. income tax at the rate of 30% on
the gross amount of any such distributions made to a Non-U.S. Stockholder
unless (i) a lower treaty rate applies and any required form evidencing
eligibility for that reduced rate is filed with ICCMIC or (ii) the Non-U.S.
Stockholder files an IRS Form 4224 with ICCMIC claiming that the distribution
is effectively connected income. The Treasury Department issued proposed
regulations in April 1996 that would modify the manner in which ICCMIC
complies with the withholding requirements.

Any portion of the dividends paid to Non-U.S. Stockholders that is treated
as Excess Inclusion income will not be eligible for exemption from the 30%
withholding tax or a reduced treaty rate. In addition, if Treasury regulations
are issued in the future allocating ICCMIC's Excess Inclusion income from non-
REMIC transactions among its stockholders, some percentage of ICCMIC's
dividends would not be eligible for exemption from the 30% withholding tax or
a reduced treaty withholding tax rate in the hands of non-U.S. Stockholders.
See "--Taxation of Taxable U.S. Stockholders."

Distributions in excess of current and accumulated earnings and profits of
ICCMIC will not be taxable to a stockholder to the extent that such
distributions do not exceed the adjusted basis of the stockholder's Common
Stock, but rather will reduce the adjusted basis of such shares. To the extent
that distributions in excess of current

130
<PAGE>

and accumulated earnings and profits exceed the adjusted basis of a Non-U.S.
Stockholder's Common Stock, such distributions will give rise to tax liability
if the Non-U.S. Stockholder would otherwise be subject to tax on any gain from
the sale or disposition of his Common Stock, as described below. Because it
generally cannot be determined at the time a distribution is made whether or
not such distribution will be in excess of current and accumulated earnings
and profits, the entire amount of any distribution normally will be subject to
withholding at the same rate as a dividend. However, amounts so withheld are
refundable to the extent it is determined subsequently that such distribution
was, in fact, in excess of current and accumulated earnings and profits of
ICCMIC. In August 1996, the U.S. Congress passed the Small Business Job
Protection Act of 1996, which requires ICCMIC to withhold 10% of any
distribution in excess of ICCMIC's current and accumulated earnings and
profits. Consequently, although ICCMIC intends to withhold at a rate of 30% on
the entire amount of any distribution, to the extent that ICCMIC does not do
so, any portion of a distribution not subject to withholding at a rate of 30%
will be subject to withholding at a rate of 10%.

For any year in which ICCMIC qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges by ICCMIC of U.S. real property
interests (which includes certain interests in Real Property but does not
include Mortgage Loans or MBS) will be taxed to a Non-U.S. Stockholder under
the provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales of
U.S. real property interests are taxed to a Non-U.S. Stockholder as if such
gain were effectively connected with a U.S. business. Non-U.S. Stockholders
thus would be taxed at the normal capital gain rates applicable to U.S.
stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals).
Distributions subject to FIRPTA also may be subject to the 30% branch profits
tax in the hands of a non-U.S. corporate stockholder not entitled to treaty
relief or exemption. ICCMIC is required to withhold 35% of any distribution
that is designated by ICCMIC as a capital gains dividend. The amount withheld
is creditable against the Non-U.S. Stockholder's FIRPTA tax liability.

Gain recognized by a Non-U.S. Stockholder upon a sale of his Common Stock
generally will not be taxed under FIRPTA if ICCMIC is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by non-U.S. persons. However, because the Common Stock will be
publicly traded, no assurance can be given that ICCMIC will be or remain a
"domestically controlled REIT." In addition, a Non U.S. Stockholder that owns,
actually or constructively, 5% or less of the Company's stock throughout a
specified "look-back" period will not recognize the gain on the sale of his
stock taxable under FIRPTA if the shares are traded on an established
securities market. Furthermore, gain not subject to FIRPTA will be taxable to
a Non-U.S. Stockholder if (i) investment in the Common Stock is effectively
connected with the Non-U.S. Stockholder's U.S. trade or business, in which
case the Non-U.S. Stockholder will be subject to the same treatment as U.S.
stockholders with respect to such gain, or (ii) the Non-U.S. Stockholder is a
nonresident alien individual who was present in the U.S. for 183 days or more
during the taxable year and certain other conditions apply, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gains. If the gain on the sale of the Common Stock were to be subject
to taxation under FIRPTA, the Non-U.S. Stockholder would be subject to the
same treatment as U.S. stockholders with respect to such gain (subject to
applicable alternative minimum tax, a special alternative minimum tax in the
case of nonresident alien individuals, and the possible application of the 30%
branch profits tax in the case of non-U.S. corporations).

STATE AND LOCAL TAXES

ICCMIC or ICCMIC's stockholders may be subject to state and local tax in
various states and localities, including those states and localities in which
it or they transact business, own property, or reside. The state and local tax
treatment of the Company and its stockholders in such jurisdictions may differ
from the federal income tax treatment described above. Consequently,
prospective stockholders should consult their own tax advisors regarding the
effect of state and local tax laws upon an investment in the Common Stock.

131
<PAGE>

SALE OF THE COMPANY'S PROPERTY

Any gain realized by ICCMIC on the sale of any property held as inventory or
other property held primarily for sale to customers in the ordinary course of
its trade or business will be treated as income from a prohibited transaction
that is subject to a 100% penalty tax. Such prohibited transaction income also
may have an adverse effect upon ICCMIC's ability to satisfy the income tests
for REIT status. See "--Requirements For Qualification--Income Tests" above.
ICCMIC, however, does not presently intend to acquire or hold a material
amount of property that represents inventory or other property held primarily
for sale to customers in the ordinary course of ICCMIC's trade or business.

INVESTMENT IN FOREIGN ASSETS

ICCMIC may invest in foreign property or in mortgages secured by foreign
property. Investment in foreign property or in mortgages secured by foreign
property will not affect ICCMIC's status as a REIT for United States tax
purposes. Because foreign jurisdictions do not recognize REITs for their own
tax purposes, ICCMIC may be subject to tax based on activities in foreign
jurisdictions and on interest income received on mortgages secured by foreign
property. The payment of such foreign taxes by ICCMIC would not provide a
credit to ICCMIC's shareholders for U.S. tax purposes.

NEW TAX LEGISLATION

Under tax legislation recently enacted as part of the 1997 Tax Act, various
changes have been made to the tax treatment of REITs effective for taxable
years beginning after the date of enactment. In the case of ICCMIC, the
provisions will be effective beginning January 1, 1998. Set forth below is a
summary of these changes.

MAXIMUM NUMBER OF SHAREHOLDERS. Under the 1997 Tax Act, the rule that
disqualifies a REIT for any year in which the REIT failed to comply with
regulations to ascertain its ownership has been replaced with an intermediate
penalty for failing to do so. The penalty is $25,000 ($50,000 for intentional
violations) for any year in which the REIT did not comply with the ownership
regulations. The REIT will also be required, when requested by the IRS, to
send curative demand letters. In addition, a REIT that complied with the
regulations for ascertaining its ownership, and which did not know, or have
reason to know, that it was so closely held as to be classified as a personal
holding company would not be treated as a personal holding company.

DE MINIMIS TENANT SERVICE INCOME. Under the 1997 Tax Act, a REIT is
permitted to render a de minimis amount of impermissible services to tenants,
or to manage or operate property, and still treat amounts received with
respect to that property as rent, as long as the amount received with respect
to the impermissible services or management does not exceed one percent of the
REIT's gross income from the property. For these purposes, the services may
not be valued at less than 150 percent of the REIT's direct cost of the
services.

ATTRIBUTION OF OWNERSHIP. Under the 1997 Tax Act, for purposes of
determining whether a tenant is a "Related Party Tenant," a partner's
ownership only is attributed to a partnership if the partner owns 25% or more
of the capital or profits interests in that partnership.

CREDIT FOR TAX ON RETAINED CAPITAL GAINS. The 1997 Tax Act permits a REIT to
elect to retain and pay income tax on net long-term capital gains it received.
If a REIT makes this election, the REIT shareholders include in their income
as long-term capital gains their proportionate share of the long-term capital
gains as designated by the REIT. The shareholder is deemed to have paid the
shareholder's share of the tax, which could be credited or refunded to the
shareholder. The basis of the shareholder's shares is increased by the amount
of the undistributed long-term capital gains (less the amount of capital gains
tax paid by the REIT) included in the shareholder's long-term capital gains.

REPEAL OF 30-PERCENT GROSS INCOME REQUIREMENT. The 1997 Tax Act repeals the
rule that requires less than 30 percent of a REIT's income to be derived from
gain on the sale or other disposition of stock or securities

132
<PAGE>

held for less than one year, certain real property held less than four years,
and property that is sold or disposed of in a prohibited transaction.

EARNINGS AND PROFITS FROM NON-REIT YEARS. The 1997 Tax Act changes the
ordering rule for purposes of the requirement that newly-electing REITs
distribute earnings and profits that were accumulated in non-REIT years.

TREATMENT OF FORECLOSURE PROPERTY. The 1997 Tax Act lengthens the grace
period for foreclosure property from two years to the end of the third full
taxable year following the election, with the possibility that the IRS could
extend the grace period for three additional years. A REIT may revoke an
election to treat property as foreclosure property for any taxable year by
filing a revocation on or before its due date for filing its tax return.

PAYMENTS UNDER HEDGING INSTRUMENTS. The 1997 Tax Act treats income and gain
from all hedges that reduce the interest rate risk of REIT liability, and not
just from interest rate swaps and caps, as qualifying income under the 95%
gross income test.

EXCESS NON-CASH INCOME. The 1997 Tax Act (i) expands the class of excess
noncash items that are not subject to the 95% distribution requirement to
include income from the cancellation of indebtedness, and (ii) extends the
treatment of original issue discount and coupon interest as excess noncash
items to REITs that use an accrual method of accounting.

PROHIBITED TRANSACTION SAFE HARBOR. The 1997 Tax Act excludes from the
prohibited sales rules any property that was involuntarily converted.

SHARED APPRECIATION MORTGAGES. The 1997 Tax Act provides that interest
received on a shared appreciation mortgage is not subject to the tax on
prohibited transactions where the property subject to the mortgage is sold
within four years of the REIT's acquisition of the mortgage pursuant to a
bankruptcy plan of the mortgagor unless the REIT, when it acquired the
mortgage, knew or had reason to know that the property subject to the mortgage
would be sold in a bankruptcy proceeding.

REIT SUBSIDIARIES. The 1997 Tax Act permits any corporation wholly-owned by
a REIT to be treated as a qualified REIT subsidiary, regardless of whether the
corporation has always been owned by the REIT. If the REIT acquires an
existing corporation, the 1997 Tax Act treats such corporation as being
liquidated at the time of acquisition by the REIT and then reincorporated, so
that any pre-REIT built-in gains will be taxed. In addition, any pre-REIT
earnings and profits of the subsidiary must be distributed before the end of
the REIT's taxable year.

Until final regulations or other pronouncements are issued by the Service
concerning the foregoing provisions of the 1997 Act, there may be
uncertainties affecting the interpretation of such provisions and their effect
on a REIT in general and on ICCMIC specifically. No assurance can be given
that positions or actions taken by ICCMIC in reliance on the foregoing
provisions will not be challenged by the Service.

ERISA CONSIDERATIONS

The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
prohibited transaction provisions of section 4975 of the Code, that may be
relevant to a prospective purchaser of Common Stock (including, with respect
to the discussion contained in "--Status of ICCMIC under ERISA," to a
prospective purchaser that is not an employee benefit plan, another tax-
qualified retirement plan, or an individual retirement account ("IRA")). The
discussion contained herein does not purport to deal with all aspects of ERISA
or section 4975 of the Code that may be relevant to particular stockholders
(including plans subject to Title I of ERISA, other retirement plans and IRAs
subject to the prohibited transaction provisions of section 4975 of the Code,
and governmental plans or church

133
<PAGE>

plans that are exempt from ERISA and section 4975 of the Code but that may be
subject to state law requirements) in light of their particular circumstances.

The statements in this discussion are based on current provisions of ERISA
and the Code, existing and currently proposed regulations promulgated under
ERISA and the Code, the legislative history of ERISA and the Code, existing
administrative rulings of the Department of Labor ("DOL"), and reported
judicial decisions. No assurance can be given that future legislative,
judicial, or administrative actions or decisions, which may be retroactive in
effect, will not affect the accuracy of any statements in this Prospectus with
respect to transactions entered into or contemplated prior to the effective
date of such changes.

A FIDUCIARY MAKING THE DECISION TO INVEST IN THE COMMON STOCK ON BEHALF OF A
PROSPECTIVE PURCHASER THAT IS AN EMPLOYEE BENEFIT PLAN, A TAX-QUALIFIED
RETIREMENT PLAN, OR AN IRA SHOULD CONSULT HIS OWN LEGAL ADVISOR REGARDING THE
SPECIFIC CONSIDERATIONS ARISING UNDER ERISA, SECTION 4975 OF THE CODE, AND
STATE LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE OF THE COMMON STOCK
BY SUCH PLAN OR IRA.

EMPLOYEE BENEFIT PLANS, TAX-QUALIFIED RETIREMENT PLANS, AND IRAS

Each fiduciary of a pension, profit-sharing, or other employee benefit plan
(a "Plan") subject to Title I of ERISA should consider carefully whether an
investment in the Common Stock is consistent with his fiduciary
responsibilities under ERISA. In particular, the fiduciary requirements of
Part 4 of Title IB of ERISA require a Plan's investment to be (i) prudent and
in the best interests of the Plan, its participants, and its beneficiaries,
(ii) diversified in order to minimize the risk of large losses, unless it is
clearly prudent not to diversify, and (iii) permitted under the terms of the
Plan's governing documents (provided the documents are consistent with ERISA).
In determining whether an investment in the Common Stock is prudent for
purposes of ERISA, the appropriate fiduciary of a Plan should consider all of
the facts and circumstances, including whether the investment is reasonably
designed, as a part of the Plan's portfolio for which the fiduciary has
investment responsibility, to further the purposes of the Plan, taking into
consideration the risk of loss and opportunity for gain (or other return) from
the investment, and the diversification, cash flow, and projected return
relative to the funding requirements of the Plan's portfolio. The fiduciary of
a Plan or of an IRA should also take into account the possible recognition of
UBTI as discussed under "Federal Income Tax Considerations--Taxation of Tax-
Exempt Stockholders."

The persons making the investment decisions for an IRA or for a qualified
retirement plan that is not subject to Title I of ERISA because it is a
governmental or church plan or because it does not cover common law employees
(a "Non-ERISA Plan") should consider that such an IRA or Non-ERISA Plan may
only make investments that are permitted by the appropriate governing
documents and under applicable state law.

Fiduciaries of Plans and persons making the investment decision for an IRA
or other Non-ERISA Plan should consider the application of the prohibited
transaction provisions of ERISA and the Code in making their investment
decision. A "party in interest" or "disqualified person" with respect to an
Plan or with respect to a Plan (including a Non-ERISA Plan) or IRA subject to
section 4975 of the Code is subject to (i) an initial 15% excise tax on the
amount involved in any prohibited transaction involving the assets of the Plan
or IRA for each year or part thereof during which the transaction is not
corrected, and (ii) an excise tax equal to 100% of the amount involved if any
prohibited transaction is not corrected. A "party in interest" or
"disqualified person" includes any fiduciary or person providing services to a
Plan or IRA, the employer maintaining the Plan (and a direct or indirect 50%
or more owner of the employer), a union representing employees covered by a
Plan, and various individuals and entities related to any of the foregoing.
A "prohibited transaction" includes (subject to certain exceptions) any direct
sale or exchange of property, extension of credit, or furnishing of goods or
facilities, between a plan and the party in interest or disqualified person;
and also includes the use of plan assets for the benefit of a party in
interest or disqualified person, or a self-dealing or kickback transaction by
a fiduciary. If the disqualified person who engages in the transaction is the
individual on behalf of whom an IRA is

134
<PAGE>

maintained (or his beneficiary), the IRA will lose its tax-exempt status and
its assets will be deemed to have been distributed to such individual in a
taxable distribution (though no excise tax will be imposed) on account of the
prohibited transaction. In addition, a fiduciary who permits a Plan to engage
in a transaction that the fiduciary knows or should know is a prohibited
transaction may be liable to the Plan for any loss the Plan incurs as a result
of the transaction or for any profits earned by the fiduciary in the
transaction.

STATUS OF ICCMIC UNDER ERISA

The following section discusses certain principles that apply in determining
whether the fiduciary requirements of ERISA, and the prohibited transaction
provisions of ERISA and the Code, apply to an entity and to transactions by
the entity because one or more investors in the equity interests in the entity
is a Plan or is a Non-ERISA Plan or IRA subject to section 4975 of the Code. A
Plan fiduciary also should consider the relevance of those principles to
ERISA's prohibition on improper delegation of control over, or responsibility
for, "plan assets" and ERISA's imposition of co-fiduciary liability on a
fiduciary who participates in, permits (by action or inaction) the occurrence
of, or fails to remedy, a known breach by another fiduciary.

If the assets of the Company are deemed to be "plan assets" under ERISA, (i)
the prudence standards and other provisions of Part 4 of Title B of ERISA
would be applicable to any transactions involving the Company's assets, (ii)
persons who exercise any authority over the Company's assets, or who provide
investment advice to the Company, would (for purposes of the fiduciary
responsibility provisions of ERISA) be fiduciaries of each Plan that acquires
Common Stock, and transactions involving the Company's assets undertaken at
their direction or pursuant to their advice might violate their fiduciary
responsibilities under ERISA, especially with regard to conflicts of interest,
(iii) a fiduciary exercising his investment discretion over the assets of a
Plan to cause it to acquire or hold the Common Stock could be liable under
Part 4 of Title B of ERISA for transactions entered into by the Company that
do not conform to ERISA standards of prudence and fiduciary responsibility,
and (iv) certain transactions that the Company might enter into in the
ordinary course of its business and operations might constitute "prohibited
transactions" under ERISA and the Code.

Regulations of the DOL defining "plan assets" (the "Plan Asset Regulations")
generally provide that when a Plan or Non-ERISA Plan or IRA acquires a
security that is an equity interest in an entity, and the security is neither
a "publicly-offered security" nor a security issued by an investment company
registered under the Investment Company Act of 1940, the Plan's or Non-ERISA
Plan's or IRA's assets include both the equity interest and an undivided
interest in each of the underlying assets of the issuer of such equity
interest, unless one or more exceptions specified in the Plan Asset
Regulations are satisfied.

The Plan Asset Regulations define a publicly-offered security as a security
that is "widely-held," "freely transferable," and either part of a class of
securities registered under the Exchange Act, or sold pursuant to an effective
registration statement under the Securities Act (provided the securities are
registered under the Exchange Act within 120 days after the end of the fiscal
year of the issuer during which the offering occurred). The Common Stock is
being sold in an offering registered under the Securities Act and will be
registered under the Exchange Act. The Plan Asset Regulations provide that a
security is "widely held" only if it is part of a class of securities that is
owned by 100 or more investors independent of the issuer and of one another. A
security will not fail to be widely held because the number of independent
investors falls below 100 subsequent to the initial public offering as a
result of events beyond the issuer's control. The Company anticipates that
upon completion of this offering, the Common Stock will be "widely held."

The Plan Asset Regulations provide that whether a security is "freely
transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances. The Plan Asset Regulations further provide
that where a security is part of an offering in which the minimum investment
is $10,000 or less (as is the case with this offering), certain restrictions
ordinarily will not, alone or in combination, affect a finding that such
securities are freely transferable. The restrictions on transfer enumerated in
the Plan Asset Regulations as not affecting that finding include: (i) any
restriction on or prohibition against any transfer or assignment that would

135
<PAGE>

result in the termination or reclassification of an entity for federal or
state tax purposes, or that otherwise would violate any federal or state law
or court order, (ii) any requirement that advance notice of a transfer or
assignment be given to the issuer, (iii) any administrative procedure that
establishes an effective date, or an event (such as completion of an
offering), prior to which a transfer or assignment will not be effective, and
(iv) any limitation or restriction on transfer or assignment that is not
imposed by the issuer or a person acting on behalf of the issuer. The Company
believes that the restrictions imposed under the Charter on the transfer of
ICCMIC's stock will not result in the failure of the Common Stock to be
"freely transferable." The Company also is not aware of any other facts or
circumstances limiting the transferability of the Common Stock that are not
enumerated in the Plan Asset Regulations as those not affecting free
transferability. However, no assurance can be given that the DOL or the
Treasury Department could not reach a contrary conclusion.

Assuming that the Common Stock will be "widely held" and that no other facts
and circumstances other than those referred to in the preceding paragraph
exist that restrict transferability of the Common Stock, the shares of Common
Stock should be publicly offered securities and the assets of the Company
should not be deemed to be "plan assets" of any Plan, IRA, or Non-ERISA Plan
that invests in the Common Stock.

136
<PAGE>

CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
AND REAL PROPERTY INVESTMENTS

The Company intends primarily to acquire Mortgage Loans and MBS Interests,
and also may acquire Real Property. The Company's return on Mortgage Loans it
acquires will depend upon, among other things, the ability of the servicer of
the Mortgage Loans to foreclose upon those Mortgage Loans in default and, if
it is the successful bidder at the foreclosure sale, thereafter to sell the
underlying Real Property. Moreover, the Company's return on MBS Interests also
depends upon the ability of the servicer of the mortgage loans underlying the
MBS Interests to foreclose upon such loans.

There are a number of legal considerations involved in the acquisition and
origination of Mortgage Loans, MBS Interests and Real Property, and the
foreclosure and sale of defaulted Mortgage Loans (whether individually or as
part of a series of mortgage-backed securities), or Real Property. The
following discussion provides general summaries of certain legal aspects of
Mortgage Loans and Real Property. Because such legal aspects are governed by
applicable state law (which laws vary from state to state), the summaries do
not purport to be complete, to reflect the laws of any particular state, or to
encompass the laws of all states. Accordingly, the summaries are qualified in
their entirety by reference to the applicable laws of the states where the
property is located.

GENERAL

Each Mortgage Loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in Real Property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the
prevailing practice and law in the state in which the related Mortgaged
Property is located. Mortgages, deeds of trust and deeds to secure debt are
herein collectively referred to as "mortgages." A mortgage creates a lien
upon, or grants a title interest in, the real property covered thereby, and
represents the security for the repayment of the indebtedness customarily
evidenced by a promissory note. The priority of the lien created or interest
granted will depend on the terms of the mortgage and, in some cases, on the
terms of separate subordination agreements or intercreditor agreements with
others that hold interests in the real property, the knowledge of the parties
to the mortgage and, generally, the order of recordation of the mortgage in
the appropriate public recording office. However, the lien of a recorded
mortgage generally will be subordinate to later-arising liens for real estate
taxes and assessments and other charges imposed under governmental police
powers.

TYPES OF MORTGAGE INSTRUMENTS

There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In contrast,
a deed of trust is a three-party instrument, among a trustor (the equivalent
of a borrower), a trustee to whom the real property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. Under a
deed of trust, the trustor grants the property, irrevocably until the debt is
paid, in trust and generally with a power of sale, to the trustee to secure
repayment of the indebtedness evidenced by the related note. A deed to secure
debt typically has two parties. The grantor (the borrower) conveys title to
the real property to the grantee (the lender), generally with a power of sale,
until such time as the debt is repaid. The mortgagee's authority under a
mortgage, the trustee's authority under a deed of trust and the grantee's
authority under a deed to secure debt are governed by the express provisions
of the related instrument, the law of the state in which the real property is
located, certain federal laws and, in some deed of trust transactions, the
directions of the beneficiary.

INTERESTS IN REAL PROPERTY

The interests in real property typically covered by a mortgage, deed of
trust or deed to secure debt is most often the fee simple estate in land and
improvements. However, such instruments may encumber other interests in real
property such a tenant's interest in the lease of land or improvements, or
both, and the leasehold estate created by such lease. An instrument covering
an interest in real property other than the fee estate requires special

137
<PAGE>

provisions in the instrument creating such interest or in the mortgage, deed
of trust or deed to secure debt, to protect the mortgagee against termination
of such interest before the mortgage, deed of trust or deed to secure debt is
paid.

LEASES AND RENTS

Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the borrower assigns to the
lender the borrower's right, title and interest as landlord under each lease
and the income derived therefrom, while (unless rents are to be paid directly
to the lender) retaining a revocable license to collect the rents for so long
as there is no default. If the borrower defaults, the license terminates and
the lender is entitled to collect the rents. Local law may require that the
lender take possession of the property, obtain a court-appointed receiver
and/or take some other enforcement action before becoming entitled to collect
the rents.

The potential payments from a property may be less than the periodic
payments due under the mortgage. For example, the net income that would
otherwise be generated from the property may be less than the amount that
would be needed to service the debt if the leases on the property are at
below-market rents, the market rents have fallen since the original financing,
vacancies have increased, or as a result of excessive or increased
maintenance, repair or other obligations to which a lender succeeds as
landlord.

CONDEMNATION AND INSURANCE

The form of the mortgage or deed of trust used by many lenders confers on
the mortgagee or beneficiary the right both to receive all proceeds collected
under any casualty insurance policy and all awards made in connection with any
condemnation proceedings, and to apply such proceeds and awards to any
indebtedness secured by the mortgage or deed of trust, in such order as the
mortgage or beneficiary may determine. Thus, in the event improvements on the
property are damaged or destroyed by fire or other casualty, or in the event
the property is taken by condemnation, the mortgagee or beneficiary under the
senior mortgage or deed of trust will have the prior right to collect any
insurance proceeds payable under a casualty insurance policy and any award of
damages in connection with the condemnation and to apply the same to the
indebtedness secured by the senior mortgage or deed of trust. Proceeds in
excess of the amount of senior mortgage indebtedness will, in most cases, be
applied to the indebtedness of a junior mortgage or trust deed to the extent
the junior mortgage or deed of trust so provides. The laws of certain states
may limit the ability of mortgagees or beneficiaries to apply the proceeds of
casualty insurance and partial condemnation awards to the secured
indebtedness. In such states, the mortgagor or trustor must be allowed to use
the proceeds of casualty insurance to repair the damage unless the security of
the mortgagee or beneficiary has been impaired. Similarly, in certain states,
the mortgagee or beneficiary is entitled to the award for a partial
condemnation of the real property security only to the extent that its
security is impaired.

FORECLOSURE

GENERAL. Foreclosure is a legal procedure that allows the lender to recover
its mortgage debt by enforcing its rights and available legal remedies under
the mortgage. If the borrower defaults in payment or performance of its
obligations under the note, mortgage or other loan documents, the lender
generally has the right to institute foreclosure proceedings to sell the real
property at public auction to satisfy the indebtedness.

Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and non-judicial foreclosure pursuant to a power of sale granted in the
mortgage instrument. Other foreclosure procedures are available in some
states, such as strict foreclosure, but they are either infrequently used or
available only in limited circumstances.

JUDICIAL FORECLOSURE. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, the action
is initiated by the service of legal pleadings upon all parties having

138
<PAGE>

a subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. A foreclosure action is subject to most of the
delays and expenses of other lawsuits if defenses are raised or counterclaims
are interposed, and sometimes requires several years to complete. When the
lender's right to foreclose is contested, the legal proceedings can be time-
consuming. Upon successful completion of a judicial foreclosure proceeding,
the court generally issues a judgment of foreclosure and appoints a referee or
other officer to conduct a public sale of the mortgaged property, the proceeds
of which are used to satisfy the judgment. Such sales are made in accordance
with procedures that vary from state to state.

PUBLIC SALE. A third party may be unwilling to purchase a mortgaged property
at a public sale following judicial foreclosure because of the difficulty in
determining the value of such property at the time of sale, due to, among
other things, redemption rights which may exist and the possibility of
physical deterioration of the property during the foreclosure proceedings. For
these reasons, it is common for the lender to purchase the mortgaged property
for an amount equal to or less than the underlying debt and accrued and unpaid
interests plus the expenses of foreclosure. Generally, state law controls the
amount of foreclosure costs and expenses which may be recovered by a lender.
Thereafter, subject to the mortgagors right in some states to remain in
possession during a redemption period, if applicable, the lender will become
the owner of the property and have both benefits and burdens of ownership of
the mortgaged property. For example, the lender will have the obligation to
pay debt service on any senior mortgages, to pay taxes, obtain casualty
insurance and make such repairs at its own expense as are necessary to render
the property suitable for sale. The costs of operating and maintaining a
commercial or multifamily residential property may be significant and may be
greater than the income derived from that property.

NON-JUDICIAL FORECLOSURE/POWER OF SALE. Foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale pursuant to a power of
sale typically granted in the deed of trust. A power of sale also may be
contained in any other type of mortgage instrument if applicable law so
permits. A power of sale under a deed of trust allows a non-judicial public
sale to be conducted generally following a request from the beneficiary/lender
to the trustee to sell the property upon default by the borrower and after
notice of sale is given in accordance with the terms of the mortgage and
applicable state law. The borrower or junior lienholder may then have the
right, during a reinstatement period required in some states, to cure the
default by paying the entire actual amount in arrears (without regard to the
acceleration of the indebtedness), plus the lender's expenses incurred in
enforcing the obligation. In other states, the borrower or the junior
lienholder is not provided a period to reinstate the loan, but has only the
right to pay off the entire debt to prevent the foreclosure sale. Generally,
state law governs the procedure for public sale, the parties entitled to
notice, the method of giving notice and the applicable time periods.

EQUITABLE LIMITATIONS ON ENFORCEABILITY OF CERTAIN PROVISIONS. United States
courts have traditionally imposed general equitable principles to limit the
remedies available to lenders in foreclosure actions. These principles are
generally designed to relieve borrowers from the effects of mortgage defaults
perceived as harsh or unfair. Relying on such principles, a court may alter
the specific terms of a loan to the extent it considers necessary to prevent
or remedy an injustice, undue oppression or overreaching, or may require the
lender to undertake affirmative actions to determine the cause of the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate borrowers who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose in the case of a non-monetary default, such as a failure
to adequately maintain the mortgaged property or an impermissible further
encumbrance of the mortgaged property.

Even if the lender is successful in the foreclosure action and is able to
take possession of the property, the costs of operating and maintaining a
multifamily or commercial property may be significant and may be greater than
the income derived from that property. The costs of management and operation
of those mortgaged properties which are hotels, motels, restaurants, nursing
homes, convalescent homes or hospitals may be particularly significant because
of the expertise, knowledge and with respect to nursing or convalescent homes,

139
<PAGE>

regulatory compliance, required to run such operations and the effect which
foreclosure and a change in ownership may have with respect to consent
requirements and on the public's and the industry's (including franchisors')
perception of the quality of such operations. The lender also commonly will
obtain the services of a real estate broker and pay the broker's commission in
connection with the sale or lease of the property. Depending upon market
conditions, the ultimate proceeds of the sale of the property may not equal
the lender's investment in the property. Moreover, because of the expenses
associated with acquiring, owning and selling a mortgaged property, a lender
could realize an overall loss on a mortgage loan even if the mortgaged
property is sold at foreclosure, or resold after it is acquired through
foreclosure, for an amount equal to the full outstanding principal amount of
the loan plus accrued interest.

The holder of a junior mortgage that forecloses on a mortgaged property does
so subject to senior mortgages and any other prior liens, and may be obliged
to keep senior mortgage loans current in order to avoid foreclosure of its
interest in the property. In addition, if the foreclosure of a junior mortgage
triggers the enforcement of a "due-on-sale" clause contained in a senior
mortgage, the junior mortgagee could be required to pay the full amount of the
senior mortgage indebtedness or face foreclosure.

POST-SALE REDEMPTION. In a majority of states, after sale pursuant to a deed
of trust or foreclosure of a mortgage, the borrower and foreclosed junior
lienors are given a statutory period in which to redeem the property. In some
states, statutory redemption may occur only upon payment of the foreclosure
sale price. In other states, redemption may be permitted if the former
borrower pays only a portion of the sums due. In some states, the borrower
retains possession of the property during the statutory redemption period. The
effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property because the exercise of a right of
redemption would defeat the title of any purchaser through a foreclosure.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has expired. In some states, including California, a post-
sale statutory right of redemption may exist following a judicial foreclosure,
but not following a trustee's sale under a deed of trust.

ANTI-DEFICIENCY LEGISLATION. Any multifamily and commercial Mortgage Loans
acquired by the Company are likely to be nonrecourse loans, as to which
recourse in the case of default will be limited to the property and such other
assets, if any, that were pledged to secure the mortgage loan. However, even
if a mortgage loan by its terms provides for recourse to the borrower's other
assets, a lender's ability to realize upon those assets may be limited by
state law. For example, in some states (including California), a lender cannot
obtain a deficiency judgment against the borrower following sale under a deed
of trust by non-judicial means. Other statutes (including those of California)
may require the lender to exhaust the security afforded under a mortgage
before bringing a personal action against the borrower. In certain other
states, the lender has the option of bringing a personal action against the
borrower on the debt without first exhausting such security; however, in some
of those states, the lender, following judgment on such personal action, may
be deemed to have elected a remedy and thus may be precluded from foreclosing
upon the security. Consequently, lenders in those states where such an
election of remedy provision exists may choose to proceed first against the
security. Finally, other statutory provisions (including those of California),
designed to protect borrowers from exposure to large deficiency judgments that
might result from bidding at below-market values at the foreclosure sale,
limit any deficiency judgment to the excess of the outstanding debt over the
fair market value of the property at the time of the sale.

COOPERATIVES. Mortgage loans may be secured by a security interest on the
borrower's ownership interest in shares, and the proprietary leases
appurtenant thereto (or cooperative contract rights), allocable to cooperative
dwelling units that may be vacant or occupied by non-owner tenants. Such loans
are subject to certain risks not associated with mortgage loans secured by a
lien on the fee estate of a borrower in real property. Such a loan typically
is subordinate to the mortgage, if any, on the cooperative's building which,
if foreclosed, could extinguish the equity in the building and the proprietary
leases of the dwelling units derived from ownership of the shares of the
cooperative. Further, transfer of shares in a cooperative are subject to
various regulations as well as to restrictions (including transfer
restrictions) under the governing documents of the cooperative, and the shares
may be canceled in the event that associated maintenance charges due under the
related proprietary leases are not paid. Typically, a recognition agreement
between the lender and the cooperative provides, among other

140
<PAGE>

things, the lender with an opportunity to cure a default under a proprietary
lease but such recognition agreements may not have been obtained in the case
of all the mortgage loans secured by cooperative shares (or contract rights).

Under the laws applicable in many states, "foreclosure" on cooperative
shares is accomplished by a sale in accordance with the provisions of Article
9 of the Uniform Commercial Code as enacted in that state (the "UCC") and the
security agreement relating to the shares. Article 9 of the UCC requires that
a sale be conducted in a "commercially reasonable" manner, which may be
dependent upon, among other things, the notice given to the debtor and the
method, manner, time, place and terms of the sale. Article 9 of the UCC
provides that the proceeds of the sale will be applied first to pay the costs
and expenses of the sale and then to satisfy the indebtedness secured by the
lender's security interest. A recognition agreement, however, generally
provides that the lender's right to reimbursement is subject to the right of
the cooperative to receive sums due under the proprietary leases.

CALIFORNIA REAL PROPERTY LAWS

Mortgage Loans secured by Mortgaged Properties located in California will be
subject to California real property laws, which differ in certain material
respects from the laws of many other states.

ONE-FORM-OF-ACTION RULE. A lender's ability to obtain a personal judgment
against a borrower on a note secured by real property in California generally
is restricted by California's one-form-of-action rule, which requires that any
lawsuit to recover on a debt or other obligation secured by a deed of trust or
mortgage on real property located in California must be an action to foreclose
that deed of trust or mortgage, thus generally prohibiting a direct action on
the debt or obligation or the exercise of other rights by the holder of that
deed of trust or mortgage prior to exhausting its real property collateral.
The one-form-of-action rule also (i) requires a lender, if it initiates a
judicial action to foreclose on its real property collateral (rather than
pursuing foreclosure through nonjudicial power of sale), to exhaust all
collateral security for the debt in that action, and (ii) limits a lender's
set-off rights.

ANTI-DEFICIENCY AND FAIR VALUE STATUTES. A lender's recourse to a borrower's
other assets following judicial foreclosure or a trustee's sale pursuant to a
private power of sale of real property collateral in California that secures a
debt or other obligation generally will be limited by the anti-deficiency
provisions of California law. Among other things, a lender typically cannot
obtain a deficiency judgment upon a note secured by a deed of trust or
mortgage on real property located in California (i) after the sale of that
property through the exercise of a private power of sale contained in such
deed of trust or mortgage, or (ii) after the foreclosure sale of real property
if the deed of trust or mortgage on the real property secures a purchase-money
loan. Under California's fair value statutes, in cases in which the holder of
the loan would be permitted to recover a deficiency the amount of a deficiency
generally will be limited to the amount by which the total indebtedness
exceeds the fair value of the foreclosed property at the time of sale. Under
the fair value statutes, a holder of the note must apply to the court within
three months after date of the foreclosure sale to obtain a deficiency,
following which the court shall determine the fair value of the real property
collateral.

GROUND LEASE RISKS

Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with Mortgage Loans
secured by a fee estate. The most significant of these risks is that the
ground lease creating the leasehold estate could terminate, leaving the
leasehold mortgagee without its security. The ground lease may terminate if,
among other reasons, the ground lessee breaches or defaults in its obligations
under the ground lease or there is a bankruptcy of the ground lessee or the
ground lessor. This risk may be minimized if the ground lease contains certain
provisions protective of the mortgagee, but the ground leases that secure
Mortgage Loans may not contain some of these protective provisions.

141
<PAGE>

DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS

Notes and mortgages may contain provisions that obligate the borrower to pay
a late charge or additional interest if payments are not timely made, and in
some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges that a lender may collect from a borrower
for delinquent payments. Certain states also limit the amounts that a lender
may collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.

DUE ON SALE AND DUE ON ENCUMBRANCE

Certain of the Mortgage Loans may contain due on sale and due on encumbrance
clauses. These clauses generally provide that the lender may accelerate the
maturity of the loan if the mortgagor sells or otherwise transfers or
encumbers the mortgaged property. The enforceability of due on sale clauses
has been subject of legislation or litigation in many states and, in some
cases, the enforceability of these clauses has been limited or denied.
However, with respect to certain loans, the Garn-St. Germain Depository
Institutions Act of 1982 pre-empts state constitutional, statutory and case
law that prohibits the enforcement of due on sale clauses and permits lenders
to enforce these clauses in accordance with their terms subject to certain
limited exceptions.

SUBORDINATE FINANCING

When a mortgagor encumbers mortgaged property with one or more junior liens,
the senior lender is subjected to additional risk. First, the mortgagor may
have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and
the senior loan does not, a mortgagor may be more likely to repay sums due on
the junior loan than those on the senior loan. Second, acts of the senior
lender that prejudice the junior lender can cause the senior lender to lose
its priority. For example, if the mortgagor and the senior lender agree to
increase the principal amount of or the interest rate payable on the senior
loan, the senior lender may lose its priority to the extent any existing
junior is harmed or the mortgagor is additionally burdened. Third, if the
mortgagor defaults on the senior loan and/or any junior loan or loans, the
existence of junior loans and the action taken by junior lenders can impair
the security available to the senior lender and can interfere with or delay
the taking of action by the senior lender.

ACCELERATION ON DEFAULT

Some of the Mortgage Loans may include "Debt--Acceleration" clauses, which
permit the lender to accelerate the full debt upon a monetary or nonmonetary
default of the mortgagor. The courts of all states will enforce clauses
providing for acceleration in the event of a material payment default after
giving effect to any appropriate notices. Such courts, however, may refuse to
foreclose on a mortgage or deed of trust when an acceleration of the
indebtedness would be inequitable or unjust under the circumstances or would
render the acceleration unconscionable. Furthermore, in some states, the
mortgagor may avoid foreclosure and reinstate an accelerated loan by paying
only the defaulted amounts and the costs and attorneys' fees incurred by the
lender in collecting such defaulted payments.

CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTY

The real property securing the Mortgage Loans will be subject to compliance
with various federal, state and local statutes and regulations. Failure to
comply (together with an inability to remedy any such failure) could result in
material diminution in the value of the Mortgaged Properties which could,
together with the possibility of limited alternative uses for a particular
property (e.g., a nursing home or convalescent home or hospital), result in
the failure to realize the full principal amount of the related Mortgage Loan.
Mortgages on properties which are owned by a mortgagor under a condominium
form of ownership are subject to declarations, bylaws and other regulations of
the condominium association. Mortgaged properties which are hotels or motels
may present additional risks in that hotels and motels are typically operated
pursuant to franchise, management and operating

142
<PAGE>

agreements which may be terminated by the operator, and the transferability of
the hotel's operating liquor and other licenses to the entity acquiring the
hotel either through purchases or foreclosure is subject to the peculiarities
of local law requirements. In addition, mortgaged properties which are
multifamily residential properties may be subject to rent control laws, which
could impact the future cash flows of such properties.

APPLICABILITY OF USURY LAWS

Title V of the Depository Institutions Deregulation and Monetary Control Act
of 1980 ("Title V") provides that state usury limitations shall not apply to
certain types of residential (including multifamily) first mortgage loans
originated by certain lenders after March 31, 1980. Title V authorized any
state to reimpose interest rate limits by adopting, before April 1, 1983, a
law or constitutional provision that expressly rejects application of the
federal law. In addition, even where Title V is not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on mortgage loans covered by Title V. Certain states have taken action
to reimpose interest rate limits and/or to limit discount points or other
charges.

BANKRUPTCY LAWS

Operation of Title 11 of the United States Code, as amended (the "Bankruptcy
Code"), and related state laws may interfere with or affect the ability of a
lender to realize upon collateral and/or to enforce a deficiency judgment. For
example, under the Bankruptcy Code, virtually all actions (including
foreclosure actions and deficiency judgment proceedings) to collect a debt are
automatically stayed upon the filing of the bankruptcy petition and, often, no
interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences thereof caused by such automatic stay can
be significant. Also, under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a junior lien holder or may stay the senior
lender from taking action to foreclose out such junior lien.

Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender are met, the amount and terms of a
mortgage loan secured by a lien on property of the debtor may be modified
under certain circumstances. For example, the outstanding amount of the loan
may be reduced to the then-current value of the property (with a corresponding
partial reduction of the amount of lender's security interest) pursuant to a
confirmed plan or lien avoidance proceeding, thus leaving the lender a general
unsecured creditor for the difference between such value and the outstanding
balance of the loan. Other modifications may include the reduction in the
amount of each scheduled payment, by means of a reduction in the rate of
interest and/or an alteration of the repayment schedule (with or without
affecting the unpaid principal balance of the loan), and/or by an extension
(or shortening) of the term to maturity.

Federal bankruptcy law also may have the effect of interfering with or
affecting the ability of the secured lender to enforce the borrower's
assignment of rents and leases related to the mortgaged property. Under
section 362 of the Bankruptcy Code, the lender will be stayed from enforcing
the assignment, and the legal proceedings necessary to resolve the issue could
be time-consuming, with resulting delays in the lender's receipt of the rents.
In addition, the Bankruptcy Code has been amended to provide that a lender's
perfected pre-petition security interest in leases, rents and hotel revenues
continues in the post-petition leases, rents and hotel revenues, unless a
bankruptcy court orders to the contrary "based on the equities of the case."

In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor
under the related mortgage loan to the owner of such mortgage loan. Payments
on long-term debt may be protected from recovery as preferences if they are
payments in the ordinary course of business made on debts incurred in the
ordinary course of business. Whether any particular payment would be protected
depends upon the facts specific to a particular transaction.

A trustee in bankruptcy, in some cases, may be entitled to collect its costs
and expenses in preserving or selling the mortgaged property ahead of payment
to the lender. In certain circumstances, a debtor in bankruptcy may have the
power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general

143
<PAGE>

principles of equity also may provide a mortgagor with means to halt a
foreclosure proceeding or sale and to force a restructuring of a mortgage loan
on terms a lender would not otherwise accept. Moreover, the laws of certain
states also give priority to certain tax liens over the lien of a mortgage or
deed of trust. Under the Bankruptcy Code, if the court finds that actions of
the mortgagee have been unreasonable, the lien of the related mortgage may be
subordinated to the claims of unsecured creditors.

The Company's acquisition of real property, particularly REO Property, may
be affected by many of the considerations applicable to mortgage loan lending.
For example, the Company's acquisition of certain property at foreclosure sale
could be affected by a borrower's post-sale right of redemption. In addition,
the Company's ability to derive income from real property will generally be
dependent on its receipt of rent payments under leases of the related
property. The ability to collect rents may be impaired by the commencement of
a bankruptcy proceeding relating to a lessee under such lease. Under the
Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a
lessee results in a stay in bankruptcy against the commencement or
continuation of any state court proceeding for past due rent, for accelerated
rent, for damages or for a summary eviction order with respect to a default
under the lease that occurred prior to the filing of the lessee's petition. In
addition, the Bankruptcy Code generally provides that a trustee or debtor-in-
possession may, subject to approval of the court, (i) assume the lease and
retain it or assign it to a third party or (ii) reject the lease. If the lease
is assumed, the trustee or debtor-in-possession (or assignee, if applicable)
must cure any defaults under the lease, compensate the lessor for its losses
and provide the lessor with "adequate assurance" of future performance. Such
remedies may be insufficient, and any assurances provided to the lessor may,
in fact, be inadequate. If the lease is rejected, the lessor will be treated
as an unsecured creditor with respect to its claim for damages for termination
of the lease. The Bankruptcy Code also limits a lessor's damages for lease
rejection to the rent reserved by the lease (without regard to acceleration)
for the greater of one year, or 15%, not to exceed three years, of the
remaining term of the lease.

FORFEITURES IN DRUG AND RICO PROCEEDINGS

Federal law provides that property owned by persons convicted of drug-
related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations Act ("RICO") can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the
"Crime Control Act"), the government may seize the property even before
conviction. The government must publish notice of the forfeiture proceeding
and may give notice to all parties "known to have an alleged interest in the
property," including the holders of mortgage loans.

A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at
the time of execution of the mortgage, "reasonably without cause to believe"
that the property was used in, or purchased with the proceeds of, illegal drug
or RICO activities.

ENVIRONMENTAL RISKS

GENERAL. The Company will be subject to environmental risks when taking a
security interest in real property, as well as when it acquires any real
property. Of particular concern may be properties that are or have been used
for industrial, manufacturing, military or disposal activity. Such
environmental risks include the risk of the diminution of the value of a
contaminated property or, as discussed below, liability for the costs of
compliance with environmental regulatory requirements or the costs of clean-up
or other remedial actions. These compliance or clean-up costs could exceed the
value of the property or the amount of the lender's loan. In certain
circumstances, a lender could determine to abandon a contaminated mortgaged
property as collateral for its loan rather than foreclose and risk liability
for compliance or clean-up costs.

CERCLA. The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), imposes strict liability on
present and past "owners" and "operators" of

144
<PAGE>

contaminated real property for the costs of clean-up. A secured lender may be
liable as an "owner" or "operator" of a contaminated mortgaged property if
agents or employees of the lender have become sufficiently involved in the
management of such mortgaged property or the operations of the borrower. Such
liability may exist even if the lender did not cause or contribute to the
contamination and regardless of whether the lender has actually taken
possession of a mortgaged property through foreclosure, deed in lieu of
foreclosure or otherwise. The magnitude of the CERCLA liability at any given
contaminated site is a function of the actions required to address adequately
the risks to human health and the environment posed by the particular
conditions at the site. As a result, such liability is not constrained by the
value of the property or the amount of the original or unamortized principal
balance of any loans secured by the property. Moreover, under certain
circumstances, liability under CERCLA may be joint and several--i.e., any
liable party may be obligated to pay the entire cleanup costs regardless of
its relative contribution to the contamination.

The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996
(the "1996 Lender Liability Act") provides for a safe harbor for secured
lenders from CERCLA liability even though the lender forecloses and sells the
real estate securing the loan, provided the secured lender sells "at the
earliest practicable, commercially reasonable time, at commercially reasonable
terms, taking into account market conditions and legal and regulatory
requirements." Although the 1996 Lender Liability Act provides significant
protection to secured lenders, it has not been construed by the courts and
there are circumstances in which actions taken could expose a secured lender
to CERCLA liability. And, the transferee from the secured lender is not
entitled to the protections enjoyed by a secured lender. Hence, the
marketability of any contaminated real estate continues to be suspect.

CERTAIN OTHER FEDERAL AND STATE LAWS. Many states have environmental clean-
up statutes similar to CERCLA, and not all those statutes provide for a
secured creditor exemption. In addition, underground storage tanks are
commonly found on a wide variety of commercial and industrial properties.
Federal and state laws impose liability on the owners and operators of
underground storage tanks for any cleanup that may be required as a result of
releases from such tanks. These laws also impose certain compliance
obligations on the tank owners and operators, such as regular monitoring for
leaks and upgrading of older tanks. The Company may become a tank owner or
operator and subject to compliance obligations and potential cleanup
liabilities, either as a result of becoming involved in the management of a
site at which a tank is located or, more commonly, by taking title to such a
property. Federal and state laws also obligate property owners and operators
to maintain and, under some circumstances, to remove asbestos-containing
building materials and lead-based paint. As a result, the presence of these
materials can increase the cost of operating a property and thus diminish its
value. In a few states, transfers of some types of properties are conditioned
upon cleanup of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed in lieu of
foreclosure or otherwise, may be required to clean up the contamination before
selling or otherwise transferring the property.

Beyond statute-based environmental liability, there exist common law causes
of action (for example, actions based on nuisance or on toxic tort resulting
in death, personal injury or damage to property) related to hazardous
environmental conditions on a property.

SUPERLIEN LAWS. Under the laws of many states, contamination of a property
may give rise to a lien on the property for clean-up costs. In several states,
such a lien has priority over all existing liens, including those of existing
mortgages. In these states, the lien of a mortgage may lose its priority to
such a "superlien."

ADDITIONAL CONSIDERATIONS. The cost of remediating environmental
contamination at a property can be substantial. To reduce the likelihood of
exposure to such losses, the Company will not acquire title to a Mortgaged
Property or take over its operation unless, based on an environmental site
assessment prepared by a qualified environmental consultant, it has made the
determination that it is appropriate to do so. The Company expects that it
will organize a special purpose subsidiary to acquire any environmentally
contaminated real property.

145
<PAGE>

ENVIRONMENTAL SITE ASSESSMENTS. In addition to possibly allowing a lender to
qualify for the innocent landowner defense (See "--CERCLA"), environmental
site assessments can be a valuable tool in anticipating, managing and
minimizing environmental risk. They are commonly performed in many commercial
real estate transactions.

Environmental site assessments vary considerably in their content and
quality. Even when adhering to good professional practices, environmental
consultants will sometimes not detect significant environmental problems
because an exhaustive environmental assessment would be far too costly and
time-consuming to be practical. Nevertheless, it is generally helpful in
assessing and addressing environmental risks in connection with commercial
real estate (including multifamily properties) to have an environmental site
assessment of a property because it enables anticipation of environmental
problems and, if agreements are structured appropriately, can allow a party to
decline to go forward with a transaction.

AMERICANS WITH DISABILITIES ACT

Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers that are
structural in nature from existing places of public accommodation to the
extent "readily achievable." In addition, under the ADA, alterations to a
place of public accommodation or a commercial facility are to be made so that,
to the maximum extent feasible, such altered portions are readily accessible
to and usable by disabled individuals. The "readily achievable" standard takes
into account, among other factors, the financial resources of the affected
site, owner, landlord or other applicable person. In addition to imposing a
possible financial burden on the borrower in its capacity as owner or
landlord, the ADA may also impose such requirements on a foreclosing lender
who succeeds to the interest of the borrower as owner or landlord.
Furthermore, since the "readily achievable" standard may vary depending on the
financial condition of the owner or landlord, a foreclosing lender who is
financially more capable than the borrower of complying with the requirements
of the ADA may be subject to more stringent requirements than those to which
the borrower is subject.

SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940

Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's mortgage loan (including a mortgagor who is in
reserve status and is called to active duty after origination of the mortgage
loan), may not be charged interest (including fees and charges) above an
annual rate of 6% during the period of such mortgagor's active duty status,
unless a court orders otherwise upon application of the lender. Because the
Relief Act applies to mortgagors who enter military service after origination
of the related mortgage loan, no information can be provided as to the number
of Mortgage Loans that may be affected by the Relief Act. Application of the
Relief Act would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on certain
Mortgage Loans. In addition, the Relief Act imposes limitations that would
impair the ability of a servicer to foreclosure on an affected Mortgage Loan
during the mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter.

146
<PAGE>

USE OF PROCEEDS

Upon completion of this Offering, the Company will use approximately $163
million (approximately 39% of the net proceeds of the Offering) plus accrued
interest to purchase the Initial Investments. The purchase price for the
Initial Investments was based on certain assumptions made with respect to the
potential net cash flows to be generated by the Initial Investments. See
"Initial Investments," "Yield Considerations Regarding the Company's
Investments" and "Risk Factors-- Conflicts of Interest in the Business of the
Company May Result in Decisions of the Company That Do Not Fully Reflect the
Interests of the Stockholders of the Company." Pending investment, the balance
of the net proceeds (approximately $254 million, or $317 million if the
underwriters' over-allotment option is exercised) will be invested temporarily
in short-term, readily marketable interest-bearing securities and held by the
Company until used to acquire Real Estate Related Assets as provided herein.
See "Operating Policies and Objectives."

The Company intends to supplement the proceeds of this Offering through
securitization and collateralization of its portfolios of Mortgage Loans. The
Company's strategy is to sell the senior classes, retaining the subordinated
interests therein for its portfolio. The Company intends to pledge certain of
its assets, including its Mortgage Loans and MBS Interests, as collateral for
the purchase of additional Mortgage Loans and MBS Interests. The Company
intends to leverage its portfolio through borrowings, generally through the
use of loans secured by both Mortgage Loans and MBS Interests in the Company's
portfolio, reverse repurchase agreements, bank credit facilities, warehouse
lines of credit on pools of Real Property and Mortgage Loans, Mortgage Loans
on Real Property, and other borrowings. The Company also may issue debt
securities and additional equity securities.

147
<PAGE>

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below (the
"Underwriters"), and each of the Underwriters, including those for whom
Friedman, Billings, Ramsey & Co., Inc. and Jefferies & Company, Inc. are
acting as representatives (the "Representatives"), has severally agreed to
purchase from the Company, the number of shares of Common Stock offered hereby
and set forth below opposite its name.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Friedman, Billings, Ramsey & Co., Inc. .................. 12,150,000
Jefferies & Company, Inc. ............................... 12,150,000
Bear, Stearns & Co. Inc. ................................ 300,000
Cowen & Company.......................................... 300,000
Credit Suisse First Boston Corporation................... 300,000
Goldman, Sachs & Co. .................................... 300,000
Lehman Brothers Inc. .................................... 300,000
J.P. Morgan Securities Ltd. ............................. 300,000
NationsBanc Montgomery Securities, Inc. ................. 300,000
PaineWebber Incorporated................................. 300,000
Prudential Securities Incorporated....................... 300,000
Smith Barney Inc. ....................................... 300,000
Advest, Inc. ............................................ 150,000
William Blair & Company, L.L.C. ......................... 150,000
Brean Murray & Co., Inc. ................................ 150,000
Crowell, Weedon & Co. ................................... 150,000
Dabney/Resnick/Imperial LLC.............................. 150,000
Dominick & Dominick, Incorporated........................ 150,000
Equitable Securities Corporation......................... 150,000
EVEREN Securities, Inc. ................................. 150,000
Fahnestock & Co. Inc. ................................... 150,000
Gerard Klauer Mattison & Co., Inc. ...................... 150,000
Legg Mason Wood Walker, Incorporated..................... 150,000
McDonald & Company Securities, Inc. ..................... 150,000
The Ohio Company......................................... 150,000
Piper Jaffray Inc. ...................................... 150,000
The Seidler Companies Incorporated....................... 150,000
Stifel, Nicolaus & Company Incorporated.................. 150,000
Sutro & Co. Incorporated................................. 150,000
Tucker Anthony Incorporated.............................. 150,000
----------
Total.................................................. 30,000,000
==========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to purchase all the shares of Common Stock offered
hereby if any are purchased.

The Underwriters propose initially to offer the shares of Common Stock
directly to the public at the public offering price set forth on the cover
page of this Prospectus and to certain dealers at such offering price less a
concession not to exceed $0.63 per share of Common Stock. The Underwriters may
allow and such dealers may reallow a concession not to exceed $0.10 per share
of Common Stock to certain other dealers. After the shares of Common Stock are
released for sale to the public, the public offering price and other selling
terms may be changed by the Underwriters.

148
<PAGE>

At the request of the Company, the Underwriters have reserved 2,970,000
shares of Common Stock for sale to Imperial Credit at the initial public
offering price set forth on the cover page of this Prospectus net of any
underwriting discounts or commissions, up to 500,000 shares of Common Stock
for sale to certain directors, officers and employees of the Company, the
Manager and Imperial Credit and members of their respective immediate families
at the initial public offering price net of any underwriting discounts or
commissions and up to 250,000 shares of Common Stock for sale to certain
persons at the initial public offering price. The number of shares of Common
Stock available for sale to the general public will be reduced to the extent
such persons purchase such reserved shares. Any reserved shares which are not
so purchased will be offered by the Underwriters to the general public on the
same basis as the other shares offered hereby. Imperial Credit has advised the
Company that it intends to purchase the shares reserved for sale to it.

The Company has granted to the Underwriters an option exercisable during the
30-day period beginning with the date hereof to purchase, at the initial
public offering price less underwriting discounts and commissions, up to an
additional 4,500,000 shares of Common Stock for the sole purpose of covering
over-allotments, if any. To the extent that the Underwriters exercise such
option, each Underwriter will be committed, subject to certain conditions, to
purchase a number of the additional shares of Common Stock proportionate to
such Underwriter's initial commitment.

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

Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price has been determined by negotiation
between the Company and the Representatives. Among the factors considered in
making such determination were the history of, and the prospects for, the
industry in which the Company will compete, an assessment of the skills of the
Manager and the Company's prospects for future earnings, the general
conditions of the economy and the securities market and the prices of
offerings by similar issuers. There can, however, be no assurance that the
price at which the shares of Common Stock will sell in the public market after
this Offering will not be lower than the price at which they are sold by the
Underwriters.

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

Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for or purchase the Common Stock. As an exception to these
rules, the Representatives are permitted to engage in certain transactions
that stabilize the price of the Common Stock. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price
of the Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives
may reduce that short position by purchasing Common Stock in the open market.
The Representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described above.

The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group
members who sold such shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.

149
<PAGE>

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Representatives will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.

The Company and its directors and executive officers have agreed not to
offer, sell or contract to sell or otherwise dispose of any Common Stock
without the prior consent of Friedman Billings, Ramsey & Co., Inc. for a
period of 120 days from the date of this Prospectus.

Imperial Credit has agreed not to offer, sell or contract to sell or
otherwise dispose of the Common Stock purchased by it pursuant to the
reservation described above without the prior consent of the Representatives
for a period of two years from the date of Closing, provided that the Manager
continues to serve as manager of the Company during such period. Imperial
Credit owns a one percent interest in Dabney/Resnick/Imperial LLC ("DRI") and
has purchased a warrant to acquire an additional 48% interest in DRI, a member
of the underwriting syndicate for the Offering.

The Common Stock has been approved for listing on the Nasdaq National
Market, subject to official notice of issuance, under the symbol "ICMI." The
Representatives have advised the Company that they intend to make a market in
the Common Stock upon completion of this Offering. The Representatives will
have no obligation to make a market in the Common Stock, however, and may
cease market making activities, if commenced, at any time.

LEGAL MATTERS

The validity of the Common Stock offered in the Offering will be passed upon
for the Company by Sonnenschein Nath & Rosenthal, Los Angeles, California, and
for the Underwriters by Hunton & Williams, Richmond, Virginia. Sonnenschein
Nath & Rosenthal will be relying as to matters of Maryland law on the opinion
of Piper & Marbury L.L.P. Cadwalader, Wickersham & Taft will provide certain
legal services on behalf of the Company in connection with the Offering. Mr.
Norbert M. Seifert, Senior Vice President of the Company and the Manager, was
a partner at the law firm of Sonnenschein Nath & Rosenthal and resigned from
the law firm in September 1997.

EXPERTS

The balance sheet of Imperial Credit Commercial Mortgage Investment Corp. as
of July 31, 1997 has been included in this Prospectus and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

THE COMPANY

The Company has filed with the Commission a Registration Statement (of which
this Prospectus forms a part) under the Securities Act with respect to the
Common Stock offered pursuant to the Prospectus. This Prospectus contains
summaries of the material terms of the documents referred to herein and
therein, but does not contain all of the information set forth in the
Registration Statement pursuant to the rules and regulations of the
Commission. For further information, reference is made to such Registration
Statement and the exhibits thereto. Such Registration Statement and exhibits
as well as reports and other information filed by ICCMIC can be inspected
without charge and copied at prescribed rates at the public reference
facilities maintained by the Commission at the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
Regional Offices located as follows: Chicago Regional Office, Citicorp Center,
Suite 1400,

150
<PAGE>

500 West Madison Street, Chicago, Illinois 60661-2511; and New York Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048. The
Commission maintains a Web site that contains reports, proxy, and information
statements and other information regarding registrants that file
electronically with the Commission. The Web site is located at
http://www.sec.gov.

The Company will be required to file reports and other information with the
Commission pursuant to the Exchange Act. In addition to applicable legal
requirements, if any, holders of Common Stock will receive annual reports
containing information regarding the business and performance of the Company,
including audited financial statements with a report thereon by the Company's
independent certified public accountants, and quarterly reports containing
unaudited financial information for each of the first three quarters of each
fiscal year.

IMPERIAL CREDIT

Imperial Credit files reports and other information with the Commission
pursuant to the Exchange Act. Additional information about Imperial Credit,
therefore, may be inspected or copied at the public reference facilities
maintained by the Commission at the locations mentioned above.

151
<PAGE>

GLOSSARY OF TERMS

Except as otherwise specified or as the context may otherwise require, the
following terms used herein shall have the meanings assigned to them below.
All terms in the singular shall have the same meanings when used in the plural
and vice-versa.

"1996 Lender Liability Act" shall mean the Asset Conservation, Lender
Liability and Deposit Insurance Act of 1996.

"ADA" shall mean the Americans with Disabilities Act of 1990, as amended.

"Affiliate" shall mean (i) any person directly or indirectly owning,
controlling, or holding, with power to vote ten percent or more of the
outstanding voting securities of such other person, (ii) any person ten
percent or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held, with power to vote, by such other
person, (iii) any person directly or indirectly controlling, controlled by, or
under common control with such other person, (iv) any executive officer,
director, trustee or general partner of such other person, and (v) any legal
entity for which such person acts as an executive officer, director, trustee
or general partner. The term "person" means and includes any natural person,
corporation, partnership, association, limited liability company or any other
legal entity. An indirect relationship shall include circumstances in which a
person's spouse, children, parents, siblings or mothers-, fathers-, sisters-
or brothers-in-law is or has been associated with a person.

"Average Invested Assets" shall mean the average of the aggregate book value
of the assets of the Company (including all of ICCMIC's direct and indirect
subsidiaries), before reserves for depreciation or bad debts or other similar
noncash reserves, computed by taking the daily average of such values during
such period.

"Balloon Mortgage Loan" shall mean a Mortgage Loan that is not fully
amortizing over its term to maturity and requires a substantial principal
payment at stated maturity.

"Bankruptcy Code" shall mean Title 11 of the United States Code, as amended.

"Beneficiary" shall mean the beneficiary of the Trust.

"Board of Directors" shall mean the Board of Directors of ICCMIC.

"Bylaws" shall mean the Bylaws of ICCMIC.

"CERCLA" shall mean the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.

"Charter" shall mean the corporate charter of ICCMIC and amendments thereto,
as filed pursuant to MGCL.

"Closing" shall mean the closing of the Offering.

"Closing Date" shall mean the date of the Closing.

"Closing Price" shall mean the average of the high bid and low asked prices
in the over-the-counter market, as reported by The Nasdaq Stock Market.

"CMBS" shall mean commercial or multifamily MBS.

"CMO or CMO Bonds" shall mean collateralized mortgage obligations.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

152
<PAGE>

"Commission" shall mean the Securities and Exchange Commission.

"Common Stock" shall mean the Common Stock, par value $0.0001 per share, of
ICCMIC.

"Company" shall mean Imperial Credit Mortgage Investment Corp., a Maryland
corporation, together with its subsidiaries, unless the context indicates
otherwise.

"Construction Loan" shall mean a loan the proceeds of which are to be used
to finance the costs of construction or rehabilitation of Real Property.

"Control Share Acquisition" shall mean the acquisition of control shares,
subject to certain exceptions.

"Control shares" shall mean voting shares of stock which, if aggregated with
all other such shares of stock previously acquired by the acquirer or in
respect of which the acquirer is able to exercise or direct the exercise of
voting power (except solely by virtue of a revocable proxy), would entitle the
acquirer to exercise voting power in electing directors within one of the
following ranges of voting power: (1) one-fifth or more but less than one-
third, (2) one-third or more but less than a majority, or (3) a majority or
more of all voting power; but "control shares" shall not include shares the
acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval.

"Crime Control Act" shall mean the Comprehensive Crime Control Act of 1984.

"Directors" means the members of ICCMIC's Board of Directors.

"Distressed Mortgage Loans" shall mean Subperforming Mortgage Loans and
Nonperforming Mortgage Loans.

"Distressed Real Properties" shall mean REO Properties and other
underperforming or otherwise distressed real property.

"DRI" shall mean Dabney/Resnick/Imperial, LLC.

"DSCR" shall mean debt service coverage ratio, which is, for any period of
time with respect to a Mortgage Loan, the ratio of (i) the net operating
income derived from the Mortgaged Property securing such Mortgage Loan during
that period of time, to (ii) the amount of principal and interest due under
such Mortgage Loan during that period of time.

"DOL" shall mean the Department of Labor.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.

"Excess Inclusion" shall have the meaning specified in section 860E(c) of
the Code.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

"Exempt Organizations" shall mean tax-exempt entities, including, but not
limited to, charitable organizations, qualified employee pension and profit
sharing trusts and individual retirement accounts.

"FIRPTA" shall mean the Foreign Investment in Real Property Tax Act of 1980.

"FMAC" shall mean Franchise Mortgage Acceptance Company, LLC.

"Funds From Operations" shall mean net income (computed in accordance with
GAAP), excluding gains (or losses) from debt restructuring or sales of
property, plus depreciation and amortization on real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures.

153
<PAGE>

"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.

"Guidelines" shall mean guidelines that set forth general parameters for the
Company's investments, borrowings and operations.

"HUD" shall mean the Department of Housing and Urban Development.

"IBC" shall mean Imperial Business Credit, Inc.

"ICCMIC" shall mean Imperial Credit Commercial Mortgage Investment Corp.

"ICCMSC" shall mean Imperial Credit Commercial Mortgage Securitization Corp.

"Imperial Credit" shall mean Imperial Credit Industries, Inc.

"Independent Director" shall mean a director who (a) does not own greater
than a de minimus interest in the Manager or any of its Affiliates, and (b)
within the last two years, has not (i) directly or indirectly been employed by
the Manager or any of its Affiliates, (ii) been an officer or director of the
Manager or any of its Affiliates, (iii) performed services for the Manager or
any of its Affiliates, or (iv) had any material business or professional
relationship with the Manager or any of its Affiliates.

"Initial Investments" shall mean the Mortgage Loans and MBS Interests, which
are to be acquired from SPB and Imperial Credit immediately following the
Closing.

"Interested Stockholder" shall mean any person who beneficially owns 10% or
more of the voting power of a corporation's shares or an affiliate of a
corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
then outstanding voting stock of a corporation.

"Inverse IO" shall mean a class of MBS that is entitled to no (or only
nominal) distributions of principal, but is entitled to interest at a floating
rate that varies inversely with a specified index.

"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended.

"IO" shall mean a class of MBS that is entitled to no (or only nominal)
distributions of principal.

"IRA" shall mean an individual retirement account.

"Lease" shall mean, with respect to each Mortgaged Property or Real
Property, the agreement pursuant to which the borrower rents and leases to the
lessee and the lessee rents and leases from the borrower, such Mortgaged
Property or Real Property.

"LIBOR" shall mean the London Interbank Offering Rate for U.S. Dollar
deposits.

"Management Agreement" shall mean an agreement or agreements between the
Company and the Manager pursuant to which the Manager performs various
services for the Company.

"Manager" shall mean Imperial Credit Commercial Asset Management
Corporation.

"Market Price" shall mean the average of the Closing Price for the five
consecutive Trading Days ending on such date.

"MBS" shall mean mortgage-backed securities (including CMBS and RMBS).

"MBS Interests" shall mean interests in CMBS and RMBS.

154
<PAGE>

"Mezzanine Loan" shall mean a loan secured by a lien on Real Property that
is subordinate to a lien on such Real Property securing another loan.

"MGCL" shall mean the Maryland General Corporation Law.

"Mortgage Collateral" shall mean mortgage pass-through securities or pools
of whole loans securing or backing a series of MBS.

"Mortgage Loan" shall mean a mortgage loan held by the Company or a mortgage
loan underlying a series of MBS, as the context indicates.

"Mortgaged Property" shall mean the real property securing a Mortgage Loan.

"NAREIT" shall mean the National Association of Real Estate Investment
Trusts, Inc.

"Net Income" shall mean the income of the Company as reported for federal
income tax purposes before the Manager's incentive compensation, net operating
loss deductions arising from losses in prior periods and the deduction for
dividends paid, plus the effects of adjustments, if any, necessary to record
hedging and interest transactions in accordance with generally accepted
accounting principles.

"Non-ERISA Plan" shall mean a plan that does not cover common law employees.

"Nonperforming Mortgage Loans" shall mean multifamily and commercial
mortgage loans for which the payment of principal and interest is more than 90
days delinquent.

"Non-REMIC Residual Interests" shall mean Mortgage Loans subject to CMO
debt.

"Offering" shall mean the offering of Common Stock hereby.

"Offering Price" shall mean the initial offering price per share to the
public of the Common Stock offered hereby as set forth on the cover page of
the Company's final prospectus.

"OID" shall mean original issue discount.

"Option Plan" shall mean a plan which provides for options to purchase
Common Stock of the Company.

"Other Assets" shall mean real or personal property or interests therein
acquired by the Company that are other than Real Estate Related Interests.

"Ownership Limitation" shall mean the restriction on ownership (or deemed
ownership by virtue of the attribution provisions of the Code) of (a) more
than 9.9% of the outstanding shares of Common Stock by any stockholder, or (b)
more than 9.9% of the shares of any series of Preferred Stock by any
stockholder.

"Pass-Through Certificates" shall mean interests in trusts, the assets of
which are primarily mortgage loans.

"Plan" shall mean a pension, profit-sharing or other employee benefit plans
subject to Title I of ERISA.

"PO" shall mean a class of MBS that is entitled to no distributions of
interest.

"Preferred Stock" shall mean the preferred stock of the Company.

"Pricing Date" shall mean the date of the pricing of the Common Stock
pursuant to the Offering.

"Prohibited Owner" shall mean the record holder of the shares of Common
Stock or Preferred Stock that are designated as Shares-in-Trust.

"Qualifying Interests" shall mean mortgages and other liens on and interests
in real estate.

"Real Estate Related Assets" shall mean Mortgage Loans, MBS Interests and
Real Property.

155
<PAGE>

"Real Property" shall mean multifamily, commercial and other real property.

"Realized Losses" shall mean, generally, the aggregate amount of losses
realized on loans that are liquidated and losses on loans due to fraud,
mortgagor bankruptcy or casualty.

"REIT" shall mean real estate investment trust, as defined in section 856 of
the Code.

"Related Party Tenant" shall mean a tenant of ICCMIC or, if it is formed,
the Operating Partnership in which ICCMIC owns 10% or more of the ownership
interests, taking into account both direct ownership and constructive
ownership.

"REMIC" shall mean real estate mortgage investment conduit, as defined in
section 860D of the Code.

"REMIC Residual Interest" shall mean a class of MBS that is designated as
the residual interest in one or more REMICs.

"Rent" shall mean rent received by the Company from tenants of Real Property
owned by the Company.

"REO Property" shall mean real property acquired at foreclosure (or by deed
in lieu of foreclosure).

"RICO" shall mean the Racketeer Influenced and Corrupt Organizations Act, 18
U.S.C.A. (S) 1961, et seq.

"RMBS" shall mean a series of one- to four-family residential MBS.

"Rule 144" shall mean the rule promulgated under the Securities Act that
permits holders of restricted securities as well as affiliates of an issuer of
the securities, pursuant to certain conditions and subject to certain
restrictions, to sell their securities publicly without registration under the
Securities Act.

"Securities Act" shall mean the Securities Act of 1933, as amended.

"Service" shall mean the Internal Revenue Service.

"Shares-in-Trust" shall mean shares of Common Stock or Preferred Stock the
purported transfer of which would result in a violation of the Ownership
Limitation, result in the stock of ICCMIC being held by fewer than 100
persons, result in ICCMIC being "closely held," or cause ICCMIC to own 10% or
more of the ownership interests in a tenant of the Company's Real Property.

"SPB" shall mean Southern Pacific Bank, formerly known as Southern Pacific
Thrift & Loan Association or SPTL.

"Special Servicing" shall mean servicing of defaulted mortgage loans,
including oversight and management of the resolution of such mortgage loans by
modification, foreclosure, deed in lieu of foreclosure or otherwise.

"SPTL" shall mean Southern Pacific Thrift & Loan Association.

"Sub IO" shall mean an IO with characteristics of a subordinated MBS
Interest.

"Subperforming Mortgage Loans" shall mean multifamily and commercial
mortgage loans for which default is likely or imminent.

"Ten-Year U.S. Treasury Rate" shall mean the arithmetic average of the
weekly average yield to maturity for actively traded current coupon U.S.
Treasury fixed interest rate securities (adjusted to constant maturities of
ten years) published by the Federal Reserve Board during a quarter, or, if
such rate is not published by the Federal Reserve Board, any Federal Reserve
Bank or agency or department of the federal government selected by the
Company.

"Term Loans" shall mean multifamily and commercial term mortgage loans.

156
<PAGE>

"Title V" shall mean Title V of the Depository Institutions Deregulation and
Monetary Control Act of 1980.

"Trading Day" shall mean any day other than a Saturday, a Sunday or a day on
which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.

"Treasury Regulations" shall mean the income tax regulations promulgated
under the Code.

"Trust" shall mean a trust created in the event of an impermissible transfer
of shares of Common Stock.

"Trustee" shall mean a trustee of the Trust.

"UBTI" shall mean unrelated business taxable income.

"UBTI Percentage" shall mean the gross income derived by the Company from an
unrelated trade or business divided by the gross income of the Company for the
year in which the dividends are paid.

"UCC" shall mean the Uniform Commercial Code.

"Underwriters" shall mean Friedman, Billings, Ramsey & Co., Inc. and
Jefferies & Company, Inc. and each of the underwriters for whom Friedman,
Billings, Ramsey & Co., Inc. and Jefferies & Company, Inc. are acting as
representatives.

"Underwriting Agreement" shall mean the agreement pursuant to which the
Underwriters will underwrite the Common Stock.

157
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors of
Imperial Credit Commercial Mortgage Investment Corp.:

We have audited the accompanying balance sheet of Imperial Credit Mortgage
Investment Corp. (the "Company") as of July 31, 1997. This balance sheet is
the responsibility of the Company's management. Our responsibility is to
express an opinion on this balance sheet 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 Imperial Credit Mortgage
Investment Corp. as of July 31, 1997, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Los Angeles, California
July 31, 1997

F-1
<PAGE>

IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.

BALANCE SHEET

JULY 31, 1997

<TABLE>
<S> <C>
Cash.................................................................... $1,500
------
Total assets.......................................................... $1,500
======
Stockholders' equity:
Common stock, $0.001 par value. Authorized 500,000,000 shares, 100
shares issued and outstanding........................................ --
Paid-in capital....................................................... $1,500
------
Total stockholders' equity.......................................... $1,500
======
</TABLE>

See accompanying notes to balance sheet.

F-2
<PAGE>

IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.

NOTES TO BALANCE SHEET

JULY 31, 1997

NOTE 1--ORGANIZATION

Imperial Credit Commercial Mortgage Investment Corp. (the "Company") was
incorporated in Maryland on July 31, 1997 and was initially capitalized on
such date through the sale of 100 shares of Common Stock for $1,500. The
Company will seek to acquire multifamily and commercial Mortgage Loans and MBS
interests and other Real Property.

The Company's sole activity through July 31, 1997, consisted of the
organization and start-up of the Company. Accordingly, no statement of
operations is presented.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Income Taxes

The Company will elect to be taxed as a real estate investment trust under
the Internal Revenue Code. As a result, the Company will not be subject to
federal income taxation at the corporate level to the extent it distributes
annually its predistribution taxable income of at least 95% of its real estate
investment trust taxable income so distributable.

Income Recognition

Income and expenses are to be recorded on the accrual basis of accounting.

NOTE 3--TRANSACTIONS WITH AFFILIATES

The Company intends to enter into a Management Agreement (the "Management
Agreement") with Imperial Credit Asset Management Corporation (the "Manager"),
a wholly-owned subsidiary of Imperial Credit, under which the Manager will
advise the Company on various facets of its business and manage its day-to-day
operations, subject to the supervision of the Company's Board of Directors.
The Manager will receive a base management fee of 1% per annum of Average
Invested Assets, payable quarterly, and a quarterly incentive fee in an amount
equal to (A) 25% of the dollar amount by which (1)(a) Funds from Operations
(before the incentive fee) of Company per share of Common Stock (based on the
weighted average number of shares outstanding) plus (b) gains (or minus
losses) from debt restructuring and sales of property per share of Common
Stock (based on the weighted average number of shares outstanding), exceed (2)
an amount equal to (a) the weighted average of the price per share at the
initial public offering and the prices per share at any secondary offerings by
the Company multiplied by (b) the Ten-Year U.S. Treasury Rate plus five
percent per annum multiplied by (B) the weighted average number of shares of
Common Stock outstanding during such quarter.

The Company intends to adopt a stock option plan to provide a means of
incentive compensation for the Manager, whereby the Manager will be granted an
option to purchase shares of Common Stock in the Company in an amount equal to
10% of the shares outstanding following the Company's initial public offering,
exercisable at the initial public offering price (assuming the Underwriters
exercise in full their over-allotment option). One third of the Manager's
options will be exercisable on each of the first three anniversaries of the
Closing Date of the initial public offering.

The Company further intends to issue Common Stock to Imperial Credit,
concurrent with the closing of the initial public offering, at the initial
public offering price net of any underwriting discounts and commissions.
Moreover, with a substantial portion of the net proceeds of the initial public
offering, the Company intends to purchase Mortgage Loans and MBS Interests
from Southern Pacific Thrift & Loan Association ("SPTL"), a wholly-owned
subsidiary of Imperial Credit.

NOTE 4--PUBLIC OFFERING OF COMMON STOCK

The Company is in the process of filing a Registration Statement for sale of
up to 23,000,000 shares of Common Stock. Contingent upon the consummation of
the public offering, the Company will be liable for organization and offering
expenses in connection with the sale of the shares of Common Stock offered.

F-3
<PAGE>

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

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY
THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAW-
FUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPEC-
TUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IM-
PLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSE-
QUENT TO THE DATE HEREOF.

------------
SUMMARY TABLE OF CONTENTS
------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 1
Organization and Relationships............................................ 9
Risk Factors.............................................................. 10
Operating Policies and Objectives......................................... 25
Management of Operations.................................................. 41
The Company............................................................... 51
Distribution Policy....................................................... 54
Yield Considerations Related to the Company's Investments................. 54
Initial Investments....................................................... 58
Yield Considerations Related to the Initial MBS Interests................. 93
Servicing of Mortgage Loans............................................... 105
Capitalization............................................................ 110
Management's Discussion and Analysis of Liquidity and Capital Resources... 110
Description of Capital Stock.............................................. 111
Certain Provisions of Maryland Law and of ICCMIC's Charter and Bylaws..... 115
Common Stock Available for Future Sale.................................... 117
Federal Income Tax Considerations......................................... 118
ERISA Considerations...................................................... 133
Certain Legal Aspects of Mortgage Loans and Real Property Investments..... 137
Use of Proceeds........................................................... 147
Underwriting.............................................................. 148
Legal Matters............................................................. 150
Experts................................................................... 150
Additional Information.................................................... 150
Glossary of Terms......................................................... 152
Independent Auditor's Report.............................................. F-1
</TABLE>

UNTIL NOVEMBER 10, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, 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 UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

30,000,000 SHARES

[LOGO OF IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.]

COMMON STOCK

------------
PROSPECTUS
------------

FRIEDMAN, BILLINGS, RAMSEY & CO., INC.

JEFFERIES & COMPANY, INC.

OCTOBER 16, 1997

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