INDUSTRIAL FUNDING CORP, 10-K, 1995-03-01

INDUSTRIAL FUNDING CORP
10-K, 1995-03-01
FINANCE LESSORS

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

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

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1994

Commission File No. 0-18071

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

INDUSTRIAL FUNDING CORP.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
OREGON 93-1013278
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or
organization)
</TABLE>

2121 S.W. BROADWAY
SUITE 100
PORTLAND, OREGON 97201
(Address of principal executive offices, including zip code)

903/228-1111
(Registrant's telephone number, including area code)

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation 8-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes _X_ No ____

The aggregate market value of the voting stock held by non-affiliates of the
Registrant at January 31, 1995 was 3,164,063.

<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS JANUARY 31, 1995
- -------------------------------- --------------------
<S> <C>
Class A, Without Par Value 1,875,000 shares
Class B, Without Par Value 5,825,000 shares
</TABLE>

The Index to Exhibits appears on Page 24.

Part III is incorporated by reference from the Annual Proxy Statement filed
in connection with the Annual Meeting of Shareholders to be held in 1995.

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<PAGE>
TABLE OF CONTENTS

<TABLE>
<C> <S> <C>
PART I

Item 1. Business -- General........................................................ 1
Nonperforming Portfolio.................................................... 1
Investment Activities...................................................... 2
Financing.................................................................. 2
Competition................................................................ 2
Employees.................................................................. 2
Management Information Systems............................................. 2
Historical Business Discussion............................................. 2
Item 2. Properties................................................................. 2
Item 3. Legal Proceedings.......................................................... 2
Item 4. Submission of Matters to a Vote of Security Holders........................ 3
Item 4.1. Executive Officers of Registrant........................................... 4

PART II

Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters.. 4
Item 6. Selected Financial Data.................................................... 5
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 6
Item 8. Financial Statements....................................................... 10
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................ 24

PART III

Item 10. Directors and Executive Officers of the Registrant......................... 24
Item 11. Executive Compensation..................................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and Management............. 24
Item 13. Certain Relationships and Related Transactions............................. 24

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............ 24
</TABLE>
<PAGE>
PART I

ITEM 1. BUSINESS.

GENERAL

Industrial Funding Corp. ("Industrial" or the "Company") is an Oregon
corporation organized in October 1989, which, through its subsidiary, Industrial
Leasing Corporation ("Industrial Leasing") services a nonperforming lease
portfolio through asset collection and disposition activities. Industrial also
manages an investment portfolio, collection of a note (the "Purchase Note")
received by the Company in part consideration for the sale of substantially all
of the Company's assets in May 1993 (the "Asset Sale"), and certain litigation
relating to reimbursement of legal costs associated with the defense of certain
securities class action lawsuits. After the Asset Sale, the Company
significantly changed its focus and business operations.

Prior to the Asset Sale, the Company provided small-ticket capital equipment
lease financing to smaller businesses. Industrial's lease portfolio was widely
diversified as to equipment type, lessee and location. The small-ticket leasing
market generally includes leases covering capital equipment with original cost
of up to $250,000 and with terms of three to five years. Industrial also owned
and managed a mid-ticket equipment leasing portfolio. Effective April 1989, the
Company ceased originating mid-ticket leases. Industrial conducted its lease
activity principally through four sales offices located on the West Coast of the
United States. These offices were closed prior to the Asset Sale.

As of November 30, 1994, the total assets of the Company were comprised of
the following: (i) $20.8 million in Cash and cash equivalents; (ii) $6.2 million
in Restricted cash; (iii) $6.6 million in Short-term investments; (iv) $9.5
million Purchase Note; and (v) $1 million in nonperforming and other assets.

On May 20, 1994, the Company's Board of Directors approved a Plan of
Dissolution and Complete Liquidation (the "Plan of Liquidation") for submission
to the shareholders of the Company. This Plan which provides for the liquidation
of all of the Company's assets, will be effective the date on which it is
approved by the shareholders. A Special Meeting of shareholders was scheduled
for August 18, 1994, but was adjourned due to the material financial
implications of the proposed settlement of the securities litigation. No date
has been set for the continuation of the Special Meeting.

IFC Holdings, Inc., an Ontario, Canada company and record owner of 100% of
the Class B Common Stock, which represents 75% of the ownership of the Company
and 96.8% of the outstanding Common Stock voting rights, has a sufficient number
of votes to approve the Plan of Liquidation, regardless of the vote of any other
shareholder. IFC Holdings, Inc. has provided the Company with a proxy for these
shares, to be voted by management in favor of approving the proposed Plan of
Liquidation, and, therefore approval of the Plan is assured.

As a result of the Board's approval of the Plan of Liquidation, the
Company's financial statements have been prepared on a liquidation basis of
accounting. Accordingly, assets are valued at their net estimated realizable
value, and liabilities include the estimated costs to carry out the Plan of
Liquidation.

NONPERFORMING PORTFOLIO

Prior to the Asset Sale the Company had a policy whereby those leases that
were either seriously delinquent or considered to be impaired were written down
to their estimated net realizable value. The revised balances were reflected as
nonperforming assets on the Company's balance sheet. These nonperforming assets
were specifically excluded from the Asset Sale.

Subsequent to the Asset Sale, the Company has continued to carry its
nonperforming portfolio at its estimated net realizable value. As of November
30, 1993, the balance of nonperforming assets was $3 million. As assets written
down to their estimated net realizable value cannot be written back up, in
compliance with Generally Accepted Accounting Principles, the Company has
applied all cash proceeds received to reduce the outstanding balance of the
nonperforming assets. During the year ended

1
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November 30, 1994, the Company, through the application of such cash proceeds,
has reduced the balance of these assets to zero. All subsequent recoveries have
been reflected in the Consolidated Statement of Changes in Net Assets in
Liquidation of the Company as Gains on nonperforming assets of $2 million for
the year ended November 30, 1994. Of this amount approximately $1 million was
derived from the sale of nonperforming assets which was completed on December 6,
1994.

INVESTMENT ACTIVITIES

The Company invests its financial resources primarily in securities issued
or guaranteed by the United States government, in mutual funds, or in
investments identified by investment advisors in conformity with the Company's
Investment Policy. Additionally, the Company generates interest income in
connection with the Purchase Note and from funds on deposit with banks.
Management and the Board of Directors review the performance of the investment
portfolio on a regular basis, determine that they are within the limitations
provided in its Investment Policy, and make investment decisions based upon
general government security market conditions.

FINANCING

Using proceeds of the Asset Sale, all of the Company's long-term debt was
repaid. The Company currently has no short-term or long-term debt facilities
available.

COMPETITION

Due to the change in the nature of the Company's business, Industrial no
longer competes in providing financial services of any kind.

EMPLOYEES

The Company had 7 employees at November 30, 1994. The Company believes that
its relationship with its employees is excellent.

MANAGEMENT INFORMATION SYSTEMS

Industrial maintains its accounting records using a personal computer based
general ledger software system. The Company had also contracted with Parrish
Financial Servicing Company, L.P. to provide specific software and database
services to manage its nonperforming portfolio. This contractual arrangement
concluded December 31, 1994 with the final disposition of the nonperforming
assets.

ITEM 2. PROPERTIES.

The Company's administrative office is located in a leased facility in
Portland, Oregon, comprising a total of approximately 6,000 square feet. The
lease has a two-year term expiring May 27, 1995.

ITEM 3. LEGAL PROCEEDINGS.

During 1994 and 1993, there was securities litigation pending against the
Company, Industrial Leasing, the Company's previous majority shareholder, First
City, and certain of its former affiliates and subsidiaries, certain directors,
certain former directors and officers, its Certified Public Accountants, and the
underwriters of the Company's December 8, 1989, initial public offering. The
class action lawsuits, WADE ET AL. V. INDUSTRIAL ET AL., filed January 1992, and
a related case BOWER ET AL. V. BELZBERG ET AL., which was filed February 1992,
alleged violations of federal securities laws. The Wade lawsuit also alleged
violations under California state law; however, these claims were dismissed by
the Court in January 1994. These lawsuits were filed in the United States
District Court for the Northern District of California (the "Court") and alleged
that plaintiffs were damaged as a result of alleged misstatements and omissions
in documents disseminated in connection with the Company's initial public
offering and subsequent communications and public filings through February 1991.
Damages of approximately $22.5 million plus prejudgment interest were alleged.

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On August 15, 1994 a preliminary agreement was reached to settle these
lawsuits. A settlement agreement was executed by the parties on October 7, 1994.
The settlement was approved by the Court on December 19, 1994 and became
effective January 19, 1995, at which time all claims were fully settled.

Under the terms of the settlement, the Company contributed $5 million,
without any presumption or admission of liability, of a total settlement of $10
million. The Company maintains that its litigation positions have merit, but has
agreed to the settlement to avoid the risk, exposure, and costs of further legal
proceedings.

In January 1993, Alex. Brown & Sons and Piper Jaffray, Inc., the
underwriters of the initial public offering, filed an action against the
Company, demanding that the Company pay the underwriters' attorney fees and
expenses associated with their defense of the securities litigation, in
accordance with the Underwriting Agreement between the Company and the
underwriters. The Court granted the underwriters' motion for summary judgment,
on July 9, 1993, and ordered the Company to pay the underwriters' legal costs as
they were incurred. The Company appealed this decision to the Court of Appeals.
In the interim, pending a decision regarding this appeal, the Company deposited
funds with the Court to cover these costs. As of November 30, 1994, the amount
on deposit with the court was $1.2 million, and is included in the Consolidated
Statement of Net Assets in restricted cash. Under the terms of the final
settlement of the securities litigation, this deposit was returned by the Court
to the Company on January 20, 1995.

In connection with the securities litigation, the Company has filed a
lawsuit against two insurance companies, demanding coverage against American
Home Assurance Company under a directors and officers liability policy in the
amount of approximately $5.0 million (Canadian), and against Continental
Insurance Company (Continental Insurance) under a general liability policy and
umbrella policy of approximately $4.0 million (Canadian) and $16.0 million
(Canadian), respectively. All claims against such insurers other than claims for
reimbursement against Continental Insurance were settled.

Continental Insurance has agreed to reimburse the Company for reasonable
defense fees and expenses. As of November 30, 1994, Continental Insurance has
advanced $1.6 million of legal fees which represents approximately 27 percent of
the total legal costs incurred to date by the Company in defense of the class
action lawsuit. The Company and Continental Insurance have agreed to negotiate
the amount of the remaining reimbursement. Both parties have further agreed to
submit the matter to binding arbitration if negotiations are not successful. The
Company has submitted approximately $5.9 million of fees and expenses for
reimbursement. Both parties have further agreed to submit the matter to binding
arbitration if negotiations are not successful.

The Company is also a defendant in various lawsuits resulting from normal
business activity. In the opinion of management, the disposition of all other
such litigation currently pending will not have a material effect on the net
assets or changes in net assets of the Company.

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

On April 27, 1994, the Company held its annual meeting and the shareholders
of the Company approved the following proposals: (i) the election of Messrs.
Alan R. Hibben, Brent S. Belzberg,

3
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Richard L. Doege, John J. Estok, and K. Peter Zech to the Board of Directors;
and (ii) the selection of Deloitte & Touche LLP as the Company's independent
certified public accountants. The table below shows the results of the
shareholder voting:

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
------------- --------- ---------
<C> <S> <C> <C> <C>
I) Election of Directors
Brent S. Belzberg 57,544,347 18,250 0
Richard L. Doege 57,544,347 18,250 0
John J. Estok (1) 57,544,347 18,250 0
Alan R. Hibben 57,544,347 18,250 0
K. Peter Zech 57,544,347 18,250 0

II) Approval of Independent Accountants 57,749,564 2,783 10,250
<FN>
- ------------------------
(1) Resigned effective January 6, 1995
</TABLE>

ITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT.

The name, age and current office of the executive officer of Industrial, who
is to serve until the next annual meeting of the Board of Directors or his early
resignation, are set forth below. Also indicated is the date when such person
commenced serving as an executive officer of Industrial.

<TABLE>
<CAPTION>
OFFICER
NAME AGE SINCE POSITION WITH THE COMPANY
- -------------------- --- ----------- ---------------------------------------------------------
<S> <C> <C> <C>
John J. Estok (1) 45 1991 President, Chief Executive Officer, Director
John W. Pitt 45 1994 Vice President of Finance, Chief Executive Officer
<FN>
- ------------------------
(1) Resigned effective January 6, 1995.
</TABLE>

PART II

ITEM 5. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS.

Industrial's Class A Common Stock is traded in the over-the-counter market
and reported on Nasdaq under the ticker symbol "IFDCA." On December 6, 1993, the
Company was informed by the National Association of Securities Dealers, that
pursuant to its bylaws, the Company did not meet the requirements to continue
inclusion under the Nasdaq National Market due to its failure to maintain a
sustained bid price of $1 per share during the preceding 6 month period. On
December 22, 1993, at the Company's request, it was removed from the National
Market, and included in the Nasdaq Small Capitalization Market.

The Company in the past has not paid dividends on its outstanding preferred
or common stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Distributions to Shareholders."

As of November 30, 1994, the accumulated but undeclared dividends with
respect to the preferred stock were $7.1 million. The Company redeemed its
preferred stock and paid accumulated dividends thereon on January 26, 1995.

4
<PAGE>
On November 30, 1994, there were approximately 103 holders of record of the
Class A Common Stock of Industrial.

CLASS A COMMON STOCK INFORMATION

<TABLE>
<CAPTION>
HIGH SALES LOW SALES
FOR THE QUARTERLY PERIOD ENDED PRICE PRICE
- --------------------------------------------------------------- ----------- -----------
<S> <C> <C>
November 30, 1994.............................................. $ 1.750 $ 1.688
August 31, 1994................................................ 1.688 1.250
May 31, 1994................................................... 1.375 1.250
February 28, 1994.............................................. 1.750 1.375

November 30, 1993.............................................. $ 1.000 $ 0.750
August 31, 1993................................................ 1.000 0.750
May 31, 1993................................................... 1.125 0.875
February 28, 1993.............................................. 1.375 1.125
</TABLE>

ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth, for the periods and dates indicated,
selected financial data derived from the financial statements of the Company.
This data should be read in conjunction with the financial statements of the
Company and related notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
---------------------------------------------------
1994 (GOING CONCERN BASIS)
(LIQUIDATION ---------------------------------------------------
BASIS)(7) 1993 1992 1991 1990
------------ --------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenue................................. $ 3,494 $ 10,323 $ 27,519 $ 40,221 $ 51,408
Income (loss) before income taxes (benefit)... (6,957)(6) (1,336) (14,084)(1) (34,381)(2) (7,548)(2)
Net income (loss)............................. (6,957) 1,299 (6,140) (21,144) (4,348)
Net income (loss) per share................... (1.18) (0.08) (1.07) (3.00) (0.58)
Cash dividends per common share............... 0.00 0.00 0.00 0.00 0.00
Weighted average common shares outstanding.... 7,500,000 7,500,000 7,500,000 7,500,000 7,458,000
BALANCE SHEET DATA:
Total assets.................................. $ 44,107 $ 44,595 $ 47,065(3) $ 266,455 $ 365,079
Long-term debt................................ 0 0 0(4) 205,062 176,934
Book value per common share................... 2.20 3.38 3.46 4.54 7.54
Redeemable preferred stock(5)................. 20,514 18,604 16,694 14,784 0
Common shareholders' equity................... 0 25,372 25,983 34,033 56,530
Net assets in liquidation..................... 16,505
CASH FLOW DATA:
Lease Volume
Small-ticket................................ $ 0 $ 2,733 $ 10,745 $ 22,112 $ 161,409
Mid-ticket.................................. 0 0 0 0 0
------------ --------- ------------ ------------ ------------
Total Lease volume........................ $ 0 $ 2,773 $ 10,745 $ 22,112 $ 161,409
------------ --------- ------------ ------------ ------------
------------ --------- ------------ ------------ ------------
<FN>
- ------------------------------
(1) In the fourth quarter of 1992, the Company reflected the sale of
substantially all of the assets of its wholly-owned subsidiary, Industrial
Leasing Corporation, and recorded a loss on sale of assets of $17.3
million.
(2) The Company continued to experience an increase in the level of
delinquencies in its small-ticket lease portfolio. Accordingly, a provision
for credit loss expense of $39.9 million and $19.1 million was recorded in
1991 and 1990, respectively, to adjust the allowance for credit loss to a
level management considered adequate at November 30, 1991 and 1990.
(3) In contemplation of the Asset Sale, $107.9 million of liabilities at
November 30, 1992 were reclassified to net assets held for sale. Total
assets would have been $155.0 million at November 30, 1992.
(4) $105.8 million of long-term debt was reclassified to net assets for sale at
November 30, 1992.
(5) The redeemable preferred stock is held by IFC Holdings, Inc., the majority
owner of the Company.
(6) Amount includes $3.6 million for estimated costs during the period of
liquidation and $5.0 million for litigation settlement.
(7) The Board of Directors approved a Plan of Liquidation on May 20, 1994. The
Company's Consolidated Financial Statements have been prepared on the
liquidation basis of accounting.
</TABLE>

5
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

The following is a discussion of the Company's financial condition and
results of operations. This discussion should be read in conjunction with the
audited financial statements appearing under Item 8 herein.

Subsequent to the Asset Sale, the Company made collection on its
nonperforming assets and the Purchase Note, has invested its financial
resources, and managed the legal proceedings against the Company. During 1994,
the Company continued the collection of the nonperforming leases which had been
excluded from the Asset Sale. On December 6, 1994 the remaining nonperforming
assets were sold at public auction. The combined proceeds received through
collection efforts and the auction for fiscal 1994 was $4.1 million, resulting
in gains of $2.0 million for the period.

In September 1993, the Company's Board of Directors initiated a review of
strategic alternatives available to the Company as a result of the Asset Sale.
On May 20, 1994, the Company's Board of Directors unanimously approved for
submission to the holders of the Common Stock of the Company a Plan of
Dissolution and Complete Liquidation of Industrial. A special meeting of
shareholders to approve the Plan was called for August 18, 1994. This meeting
was adjourned as a result of developments in the Company's securities litigation
to allow the Company to provide additional information to its shareholders
regarding those developments. As a result of the settlement of this securities
litigation, the Company presently intends to submit the Plan for approval to the
shareholders at its annual meeting of shareholders.

As a result of the Board's approval of the Plan of Liquidation, the
Financial Statements have been prepared on a liquidation basis of accounting.
Accordingly, assets have been valued at their estimated net realizable value and
liabilities include the estimated costs to carry out the Plan of Liquidation.
The net adjustment at May 31, 1994 required to convert from a going concern
(historical cost) basis to a liquidation basis of accounting was a decrease in
the carrying value of net assets of $4.2 million which was included in the
Consolidated Statement of Changes in Net Assets in Liquidation. This decrease in
the carrying value of net assets is principally a result of recognizing and
recording estimated costs to carry out the Plan. In compliance with Generally
Accepted Accounting Principles, the Company has not included in this reserve
future revenues from interest, investment income, or any other miscellaneous
income. The Consolidated Balance Sheet as of November 30, 1993 and the
Consolidated Statements of Income for 1993 and 1992 have been prepared using the
historical cost (going concern) basis of accounting on which the Company has
previously reported its financial condition and its results of operations.

The conversion of the Company's assets and liabilities to the liquidation
basis of accounting has required significant estimates and judgments by
management of the Company. A summary of the Plan of Liquidation, and the
significant judgments and estimates made, are described below.

The Plan of Liquidation calls for the orderly liquidation of the Company
over a five year period from the effective date of the Plan. The period may be
shortened or lengthened if this is deemed to be in the best interest of the
shareholders. The Company may engage in transactions as may be appropriate to
complete its liquidation, including the sale, exchange, or other disposition of
all or any part of its remaining assets for cash, shares, bonds, or other
securities or property, or any combination of the foregoing. Prior to the
distributions of the assets of the Company to its shareholders, the Company will
invest its financial resources. The Company will also discharge or otherwise
provide for its liabilities and obligations.

The Company has made the following assumptions in the valuation of the
assets and liabilities of the Company on the liquidation basis of accounting.

1. Short-term investments are carried at their estimated market value.
No accrual has been made for future income or loss on investments except for
any unrealized gains or losses that existed at November 30, 1994.

6
<PAGE>
2. NOTES RECEIVABLE. The Company has the intent and ability to hold
this receivable, acquired in connection with the Asset Sale, to maturity,
which is May 27, 1996. No valuation allowance is deemed necessary. Interest
income will be recognized when earned, calculated at the stated rate of 6
percent per annum.

3. Nonperforming assets are carried at their net estimated realizable
value. Bad debt recoveries of $41,000 and auction proceeds of $948,000 were
received in December 1994 and are reflected in the financial statements as
of November 30, 1994.

4. Preferred stock dividends were accreted through November 30, 1994.
The Company redeemed the preferred stock and accumulated dividends on
January 26, 1995 for a total of $20.8 million, including $297,000 in
dividends accreted subsequent to November 30, 1994.

5. The Reserve for estimated costs during the period of liquidation
represent management's estimate of costs to be incurred to liquidate the
company. Major considerations and assumptions are as follows:

a) Nonperforming assets were sold at auction as of December 15, 1994

b) Estimated administrative costs have been accrued through May 21,
1996, the anticipated date of the final payment on the note receivable.
No costs have been accrued subsequent to May 1996, as the Company
currently anticipates all significant outstanding matters will be
resolved by that time.

6. The Reserve for the litigation settlement represents the amount paid
by the Company subsequent to November 30, 1994 to settle its share of the
securities litigation outstanding against the Company, pursuant to the
settlement agreement which was finalized as of January 19, 1995.

All of the above assumptions may be subject to change based on changes in
facts or circumstances.

RESULTS OF OPERATIONS

FISCAL 1994 COMPARED TO FISCAL 1993

As a result of the Asset Sale on May 27, 1993, results of operations are not
comparable with the results of the preceding fiscal year. Revenues since May 28,
1993 consisted primarily of earnings on investments, interest earned on the
Purchase Note, and gains on the nonperforming assets. Net selling, general and
administrative expenses since May 28, 1993 consisted primarily of payroll and
collection expenses and costs to defend the securities litigation.

Total revenue for fiscal 1994 was $3.5 million, which consisted principally
of gain on the nonperforming assets, in addition to interest, dividend, and
other revenue and losses on short-term investments compared to $10.3 million in
1993 which consisted mainly of net lease revenue, gain on sale of equipment and
other income prior to May 27, 1993, in addition to interest and short-term
investment income and losses after that date.

Total expenses, excluding the liquidation settlement and estimated costs
during liquidation, for fiscal 1994 were $1.8 million as compared to $11.7
million for fiscal 1993. The Company had no interest expense after the Asset
Sale. The loss on the sale of assets for 1993 reflected additional closing costs
and adjustments made to the Purchase Note for the Asset Sale.

The Company's Net Assets in Liquidation were reduced by $5.0 million to
provide for the settlement of the securities litigation and $3.6 million for the
estimated costs to implement the Plan of Liquidation.

FISCAL 1993 COMPARED TO FISCAL 1992

As a result of the Asset Sale on May 27, 1993, results of operations are not
comparable with the results of the preceding fiscal year. Revenue for the period
of May 28, 1993 through November 30,

7
<PAGE>
1993 consisted primarily of earnings on short-term investments and interest
earned on the Purchase Note. Net selling, general and administrative expenses
for the same period consisted primarily of payroll and collection costs and
costs to defend the securities litigation.

Total revenue, which consisted of net lease revenue, gain on sale of
equipment and other income and losses prior to the completion of the Asset Sale
on May 27, 1993, in addition to interest and dividend income after that date,
was $10.3 million in 1993, compared to $27.5 million a year earlier.

Total expenses for fiscal 1993 were $11.7 million as compared to $41.6
million a year earlier. Since all of the Company's senior and subordinated debt
was retired at the close of the Asset Sale, the Company had no interest expense
after May 27, 1993. Total expenses included a loss on sale of assets for the
period ended November 30, 1993, of $1.3 million, as compared to $17.3 million
for fiscal 1992. The loss on sale reflected additional closing costs and the
adjustment made to the Purchase Note.

The Asset Sale resulted in a loss for tax purposes. The Company determined
that it had adequate net operating loss carryforwards and other deductions such
that no income tax liability would result. Consequently, the Company eliminated
$2.7 million in deferred tax obligations associated with the assets sold, and
reported net income for the fiscal year ended November 30, 1993 of $1.3 million
compared to a loss of $6.1 million a year earlier. After accreting dividends for
the Preferred Stock, the Company reported a loss per common share of $0.08 for
the period ended November 30, 1993, compared to a loss of $1.07 per share a year
earlier.

LIQUIDITY AND CAPITAL RESOURCES

The Company has no short-term or long-term debt facilities available. The
Company believes that its present cash and cash equivalents, short-term
investments, together with the future collection of its Note Receivable will
allow it to implement the Plan of Liquidation and manage the collection of its
claims against Continental Insurance for the recovery of legal costs.

As of November 30, 1994, the Company maintained cash and short-term
investments sufficient to pay the Series A Cumulative Preferred Stocks
accumulated dividends and to redeem all of the outstanding shares, on January
26, 1995.

DISTRIBUTIONS TO SHAREHOLDERS

Although it is unable to predict the amount or timing of distributions to
holders of the Company's Common Stock if the Plan of Liquidation is approved by
the Company's shareholders, the Company presently estimates the total
distributions may range from $2.22 to $2.75 per share based upon an analysis of
the presently known assets and estimated liabilities of the Company. The
distribution estimate range assumes the collection by the Company of all
principal and interest under the Purchase Note, and the accuracy of the
Company's assumptions regarding its reserve for estimated costs during the
period of liquidation.

The timing and amounts of such distributions will depend upon the receipt by
the Company of payments of principal and interest under the Purchase Note. As of
November 30, 1994, the Purchase Note had a remaining principal balance of $9.5
million. In accordance with its terms, the remaining principal balance and
interest are payable on May 27, 1995, November 27, 1995 and May 27, 1996.
Additionally, the timing and amounts will be affected by the amount of defense
costs reimbursed by Continental Insurance, the accuracy of the Company's
assumptions regarding its Reserve for estimate costs during the period of
liquidation, the absence of additional liabilities, and determinations regarding
reserves to be established in connection with unknown liabilities. The amount of
any distribution may vary from current estimates and the timing of any
distribution may depend upon a number of factors beyond the control of the
Company.

8
<PAGE>
ITEM 8. FINANCIAL STATEMENTS.

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Industrial Funding Corp.

We have audited the accompanying consolidated statement of net assets
(liquidation basis) of Industrial Funding Corp. and its subsidiary as of
November 30, 1994, and the related consolidated statements of changes in net
assets in liquidation and cash flows for the year then ended. In addition, we
have audited the accompanying consolidated balance sheet of Industrial Funding
Corp. and its subsidiary as of November 30, 1993, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the two
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

As discussed in Note 2 to the financial statements, the Board of Directors
of Industrial Funding Corp. approved a plan of liquidation in 1994, and the
Company commenced liquidation shortly thereafter. As a result, the Company
changed its basis of accounting from the going concern basis to the liquidation
basis.

In our opinion, such consolidated financial statements present fairly, in
all material respects, (1) the net assets (liquidation basis) of Industrial
Funding Corp. and its subsidiary at November 30, 1994, (2) the changes in their
net assets in liquidation and cash flows for the year then ended, (3) their
financial position at November 30, 1993, and (4) the results of their operations
and their cash flows for the two years then ended, in conformity with generally
accepted accounting principles on the bases described in the preceding
paragraph.

As discussed in Note 11 to the financial statements, the Company redeemed
the Series A cumulative preferred stock and paid all accrued dividends thereon
on January 26, 1995; all remaining nonperforming assets were sold by auction on
December 6, 1994; and litigation relating to alleged violations of federal
securities laws, in which the Company was a defendant, was settled on January
19, 1995.

DELOITTE & TOUCHE LLP

Portland, Oregon
February 14, 1995

9
<PAGE>
INDUSTRIAL FUNDING CORP.

CONSOLIDATED STATEMENT OF NET ASSETS (LIQUIDATION BASIS)
AS OF NOVEMBER 30, 1994

AND CONSOLIDATED BALANCE SHEET (GOING CONCERN BASIS)
AS OF NOVEMBER 30, 1993

ASSETS

<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30,
1994 1993
------------ --------------
(LIQUIDATION (GOING CONCERN
BASIS) BASIS)
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Cash and cash equivalents.......................................................... $ 20,754 $ 6,586
Restricted cash.................................................................... 6,175 800
Short-term investments............................................................. 6,569 18,260
Note receivable.................................................................... 9,521 15,869
Nonperforming assets............................................................... 989 3,025
Other assets....................................................................... 99 55
------------ --------------
TOTAL........................................................................ $ 44,107 $ 44,595
------------ --------------
------------ --------------

LIABILITIES

Accounts payable and accrued liabilities........................................... $ 661 $ 619
Reserve for litigation settlement.................................................. 5,000 --
Reserve for estimated costs during the period of liquidation....................... 1,427 --
------------ --------------
Total liabilities.............................................................. 7,088 619

COMMITMENTS AND CONTINGENCIES

REDEEMABLE PREFERRED STOCK
Series A Cumulative Preferred Stock (without par value, 10,000,000 shares
authorized, 134,310 shares issued and outstanding -- at redemption and
liquidation value of $100 per share and accumulated dividends).................. 20,514 18,604
------------ --------------
Total Liabilites and Redeemable Preferred Stock................................ 27,602 19,223

SHAREHOLDERS' EQUITY:
Common stock:
Class A (20,000,000 no par value shares authorized, 1,875,000 outstanding)..... -- 20,381
Class B (10,000,000 no par value shares authorized, 5,625,000 outstanding)..... -- 27,831
Accumulated deficit.............................................................. -- (22,840)
------------ --------------
Total shareholders' equity..................................................... -- 25,372
------------ --------------
TOTAL........................................................................ 27,602 $ 44,595
------------ --------------
--------------
NET ASSETS IN LIQUIDATION.................................................... $ 16,505
------------
------------
</TABLE>

See Notes to Consolidated Financial Statements.

10
<PAGE>
INDUSTRIAL FUNDING CORP.

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION, 1994
CONSOLIDATED STATEMENTS OF INCOME, 1993 AND 1992

See Notes to Consolidated Financial Statements.

11
<PAGE>
INDUSTRIAL FUNDING CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (GOING CONCERN BASIS)

<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
------------------------------------------------------
CLASS A CLASS B RETAINED
PREFERRED COMMON COMMON EARNINGS
STOCK STOCK STOCK (DEFICIT) TOTAL
--------- --------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 30, 1991............................ $ 14,784 $ 20,381 $ 27,831 $ (14,179) $ 34,033
Preferred stock dividends accreted.................. 1,910 -- -- (1,910) (1,910)
Net income.......................................... -- -- -- (6,140) (6,140)
--------- --------- --------- ---------- ---------
BALANCE, NOVEMBER 30, 1992............................ 16,694 20,381 27,831 (22,229) 25,983
Preferred stock dividends accreted.................. 1,910 -- -- (1,910) (1,910)
Net income.......................................... -- -- -- 1,299 1,299
--------- --------- --------- ---------- ---------
BALANCE, NOVEMBER 30, 1993............................ $ 18,604 $ 20,381 $ 27,831 $ (22,840) $ 25,372
--------- --------- --------- ---------- ---------
--------- --------- --------- ---------- ---------
</TABLE>

During the year ended November 30, 1994 the Company changed to the
liquidation basis of accounting as explained in Note 2. -- Plan of Dissolution
and Complete Liquidation. The presentation format used in 1993 and 1992 is,
therefore, no longer applicable. The effect of the changes of adopting the
liquidation basis is reflected in the Consolidated Statement of Changes in Net
Assets in Liquidation.

See Notes to Consolidated Financial Statements.

12
<PAGE>
INDUSTRIAL FUNDING CORP.

CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
FOR THE YEARS ENDED NOVEMBER 30,
-------------------------------------------
1994 1993 1992
----------- -------------- --------------
(LIQUIDATION (GOING CONCERN (GOING CONCERN
BASIS) BASIS) BASIS)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTVITIES:
Net income (loss)...................................................... $ (6,957) $ 1,299 $ (6,140)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization........................................ -- 1,807 7,303
Provision for credit losses.......................................... -- 54 215
Gain on sale of equipment............................................ -- (1,102) (2,630)
Increase in restricted cash.......................................... (5,375) (800)
Gain on nonperforming portfolio...................................... (2,040) -- --
Loss on sale of short-term investments............................... 519
Unrealized loss on short-term investments............................ 17 210 --
Increase in reserve for estimate costs during liquidation............ 1,427 -- --
Increase in reserve for litigation settlement........................ 5,000 -- --
(Increase) decrease in other assets.................................. (44) 176 1,057
Increase (decrease) in accounts payable and other liabilities........ 42 (2,659) (588)
Decrease in deferred income taxes.................................... -- (2,057) (7,093)
Decrease in income taxes payable..................................... -- -- (250)
Loss on sale of assets............................................... -- 1,328 17,316
Other................................................................ (48) (15) 172
----------- -------------- --------------
Total adjustments.................................................... (502) (3,058) 15,502
----------- -------------- --------------
Net cash provided by (used in) operating activities.................... (7,459) (1,759) 9,362
----------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments received on lease receivables....................... -- 27,697 73,206
Payments received on sale of equipment................................. -- 11,239 24,654
Payments received on nonperforming assets.............................. 4,124 -- --
Purchase of short-term investments..................................... (19,933) (18,470) --
Payments received on sale of short-term investments.................... 31,088 -- --
Principal payment received on note receivable.......................... 6,348 3,174 --
Cash received on sale of assets (Net of $12,829 cash sold)............. -- 7,356 --
Purchase of equipment to be financed................................... -- (2,773) (10,745)
Initial direct costs -- deferred....................................... -- (130) (885)
Purchase of property and equipment..................................... -- (81) (143)
----------- -------------- --------------
Net cash provided by investing activities.............................. 21,627 28,012 86,087
----------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt................................... -- (44,311) (99,264)
Deferred financing costs............................................... -- -- (1,168)
Decrease (increase) in restricted cash................................. -- 23,478 (5,526)
----------- -------------- --------------
Net cash used in financing activities.................................. 0 (20,833) (105,958)
----------- -------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................... 14,168 5,420 (10,509)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......................... 6,586 1,166 11,675
----------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................... $ 20,754 $ 6,586 $ 1,166
----------- -------------- --------------
----------- -------------- --------------
SUPPLEMENTAL DISCLOSURES:
Interest paid.......................................................... -- $ 3,890 $ 13,917
Income taxes refunded.................................................. -- 650 600
Non-cash -- preferred stock dividends accreted......................... $ 1,910 1,910 1,910
Non-cash -- note receivable from sale of assets........................ -- 19,043 --
</TABLE>

See Notes to Consolidated Financial Statements.

13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Industrial Funding Corp. ("Industrial" or the "Company"), a majority owned
subsidiary of IFC Holdings Inc. ("IFC Holdings"), was incorporated in October
1989, as a holding company formed for the purpose of owning Industrial Leasing
Corporation ("Industrial Leasing"). During 1992, First City Realty Investment
Corp. ("FCRIC"), the Company's previous majority shareholder, transferred all of
its interest in the Company to IFC Holdings. The accompanying consolidated
financial statements include all of the accounts of the Company and its
wholly-owned subsidiary. All significant intercompany transactions and accounts
have been eliminated in consolidation.

Until May 27, 1993, the business of the Company was providing capital
equipment lease financing to small businesses. At that time, the Company
completed a sale of substantially all of the assets of Industrial Leasing (the
"Asset Sale"), to ILC Acquisition Corp., a wholly-owned subsidiary of Parrish
Equipment Partner L.P. ("Parrish"), in a transaction approved by shareholders of
the Company on May 17, 1993.

Subsequent to the Asset Sale, Company activities include collection of the
remaining assets, investment of its financial resources, and the management of
legal proceedings against the Company.

The Company has adopted the liquidation basis of accounting as of May 20,
1994. This basis of accounting is considered appropriate when the Company has
adopted a plan of liquidation and liquidation appears imminent, the Company is
no longer viewed as a going concern and the net realizable value of the
Company's assets are reasonably determinable. Under this basis of accounting,
assets and liabilities are stated at their estimated net realizable value and
estimated costs of liquidating the Company are provided to the extent they are
reasonably determinable.

The Company's Plan of Dissolution and Complete Liquidation (the "Plan of
Liquidation") (see NOTE 2. -- Plan of Dissolution and Complete Liquidation)
provides for the liquidation of all of the Company's assets. In connection with
the adoption of the liquidation basis of accounting, the Company has accrued
what management believes are reasonable estimates of costs to liquidate its
remaining assets and to defend legal claims. The actual costs may differ
significantly depending on a number of factors, including the length of time it
takes to dispose of and the amount received for the remaining assets and the
holding costs associated therewith, and the resolution of the claims against the
Company's insurance carriers for reimbursement of legal fees and expenses
related to the security litigation. Estimated cost to liquidate are reflected in
the Consolidated Statement of Net Assets as "Reserve for estimated costs during
the period of liquidation".

The Consolidated Financial Statements for 1993 and 1992 were prepared on a
going concern basis of accounting which contemplated the realization of assets
and the satisfaction of liabilities in the normal course of business. The 1994
Consolidated Financial Statements were prepared on the liquidation basis of
accounting. The effects of adopting the Plan of Liquidation are explained in
NOTE 2. -- Plan of Dissolution and Complete Liquidation.

NOTE 2. PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION
The Board of Directors of the Company approved the Plan of Liquidation, on
May 20, 1994, for submission to the shareholders of the Company. A Special
Meeting of Shareholders was scheduled for August 18, 1994, for shareholders to
consider approval of the Plan of Liquidation. However, on August 15, 1994, the
Company reached a preliminary agreement to settle the securities class action
lawsuits pending against the Company. (See NOTE 8. -- Commitments and
Contingencies). Due to the material financial implications of this proposed
settlement, the Special Meeting was adjourned to enable the Company to revise
the Proxy Statement, and provide its shareholders with additional information
concerning the terms of the proposed settlement. No date has been set for the
continuation of the Special Meeting.

14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION (CONTINUED)
The Plan of Liquidation will be effective the date on which it is approved
by the shareholders. IFC Holdings Inc., record owner of 100% of the Company's
Class B Common Stock, which represents 75% of the ownership of the Company and
of 96.8% of the outstanding Common Stock voting rights, has a sufficient number
of votes to approve the Plan of Liquidation, regardless of the vote of any other
shareholder. IFC Holdings has provided the Company with a proxy for those
shares, to be voted by management in favor of the proposed Plan of Liquidation,
and, consequently, approval of the Plan of Liquidation is assured.

As a result of the Board's approval of the Plan of Liquidation, the
Company's 1994 Consolidated Financial Statements have been prepared on a
liquidation basis of accounting. Accordingly, assets are valued at their
estimated net realizable value, and liabilities include the estimated costs to
carry out the Plan of Liquidation.

The net adjustment at May 31, 1994 required to convert from the going
concern (historical cost) basis to the liquidation basis of accounting was a
decrease in the carrying value of net assets of $4.2 million which was included
in the Consolidated Statement of Changes in Net Assets in Liquidation. This
decrease in the carrying value of net assets is principally a result of
recording estimated costs associated with carrying out the Plan of Liquidation.
For the period from June 1, 1994 to November 30, 1994, the Company reduced the
Reserve for estimated costs during the period of liquidation by $529,000,
reflecting accrued legal fees which are not expected to be incurred of $975,000
and estimated liabilities in excess of previous estimates of $446,000.

Under the liquidation basis, the Company has accrued future liabilities
associated with carrying out the Plan of Liquidation (see assumptions below).
The Company has not reflected future revenues from interest income or income
associated with investment activities as such income will be recognized when
realized.

The Consolidated Balance Sheet as of November 30, 1993, and the Consolidated
Statements of Income for the years ended November 30, 1993 and 1992 have been
prepared using the going concern (historical cost) basis of accounting which the
Company has previously used to report its financial condition and results of
operations.

The conversion of the Company's assets and liabilities from the going
concern (historical cost) basis to the liquidation basis of accounting has
required the determination of significant estimates and judgments by management
of the Company. A summary of the Plan of Liquidation, and of the significant
estimates and judgments made, are described below.

The Plan of Liquidation calls for an orderly liquidation of the Company over
a five year period from the effective date of the Plan. This period may be
shortened or lengthened if it is deemed to be in the best interest of the
shareholders. The Company may engage in transactions as may be appropriate to
complete its liquidation, including the sale, exchange, or other disposition of
all or part of its remaining assets for cash, shares, bonds, or other security
or property, or any combination of the foregoing. Prior to distributions of the
assets of the Company to its shareholders, the Company will invest its financial
resources and will discharge or otherwise provide for all of its known
liabilities and obligations.

The Company has made the following assumptions in the valuation of the
assets and liabilities of the Company on the liquidation basis of accounting:

1) SHORT-TERM INVESTMENTS are carried at their estimated market value. No
accrual has been made for future income or loss on investments except for
unrealized gains or losses that existed on November 30, 1994.

15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION (CONTINUED)
2) NOTE RECEIVABLE. The Company has the intent and ability to hold this
receivable, acquired in connection with the Asset Sale, to maturity,
which is May 27, 1996. No valuation allowance is deemed necessary.
Interest income will be recognized when earned, calculated at the stated
rate of 6% per annum.

3) NONPERFORMING ASSETS are carried at their estimated net realizable
value. Bad debt recoveries of $41,000 and auction proceeds of $948,000
were received in December 1994 and are reflected in the carrying value as
of November 30, 1994.

4) PREFERRED STOCK DIVIDENDS are accreted through November 30, 1994. The
Company redeemed the preferred stock and accumulated dividends on January
26, 1995 for a total of $20.8 million, which includes $297,000 in
dividends accreted subsequent to November 30, 1994.

5) RESERVE FOR ESTIMATED COSTS DURING THE PERIOD OF LIQUIDATION represents
management estimates of costs to be incurred in the future to liquidate
the company. Major considerations and assumptions are as follows:

a) Nonperforming assets were sold at auction as of December 15, 1994

b) Administrative costs have been accrued through May 31, 1996, the
anticipated date of the final payment on the note receivable. No
costs have been accrued subsequent to May 1996, as the Company
currently anticipates that all significant outstanding matters will
be resolved by that time.

6) RESERVE FOR THE LITIGATION SETTLEMENT represents the amount paid by the
Company subsequent to November 30, 1994 to settle its share of the
securities litigation outstanding against the Company, pursuant to a
settlement agreement which was finalized as of January 19, 1995.

All of the above assumptions may be subject to change as facts emerge and
circumstances change.

NOTE 3. SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING FOR LEASES. Prior to the Asset Sale, for financial reporting
purposes, the Company's leases were classified as direct financing leases and
were accounted for in accordance with Statement of Financial Accounting
Standards No. 13. -- "Accounting for Leases".

REVENUE RECOGNITION. For its mid-ticket leases, the Company has recognized
the related unearned Income as lease revenue over the term of the lease by the
interest method. For its small-ticket portfolio the Company recognized unearned
lease income by the sum-of-the-months digits method on leases booked has prior
to September 1, 1989 and by the interest method on leases booked subsequent to
that date. Revenue was recognized on an accrual basis for both lease categories.

INITIAL DIRECT COSTS OF LEASES. Prior to the Asset Sale, the Company
deferred certain initial direct costs of originating leases and recognized these
costs over the lives of the related leases as a reduction of their yields.

NON-ACCRUAL LEASES. Prior to the Asset Sale, the Company ceased income
recognition when a lease receivable became 90 days past due, or when other
conditions adversely affected collectibility of the receivable.

NONPERFORMING ASSETS. Nonperforming assets consist primarily of equipment
held for sale or equipment repossessed, leases which are more than 180 days past
due, and lease deficiencies which represent the remaining balance due to the
Company after proceeds from equipment sales have been applied to the outstanding
lease receivable. The nonperforming assets are valued at their estimated net
realizable value.

16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SHORT-TERM INVESTMENTS. Short-term investments consisted of Treasury Bills
and U.S. Government Agency Securities at November 30, 1994, recorded at market
value, which is lower than cost and of mutual funds at November 30, 1993,
recorded at the lower of average cost or market. Aggregate net unrealized
investment losses are included in the Consolidated Statement of Changes in Net
Assets in Liquidation and the Consolidated Statement of Income.

CONSOLIDATED STATEMENT OF CASH FLOW. For purposes of reporting cash flows,
cash and cash equivalents includes cash in banks and temporary investments with
an original maturity of three months or less.

ACCOUNTING FOR INCOME TAXES. Under Federal income tax laws, the Company is
not part of a controlled group and files its tax return separately.

Effective December 1, 1993, the Company prospectively adopted Statement of
Financial Accounting Standards No. 109. -- Accounting for Income Taxes. The
effects of adopting this Statement were not material.

NOTE 4. SHORT-TERM INVESTMENTS

At November 30, 1994 and 1993, short-term investments consist of the
following:

<TABLE>
<CAPTION>
MARKET CARRYING
COST VALUE VALUE
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
November 30, 1994
U.S. Government Agency Securities.................................... $ 2,685 $ 2,627 $ 2,627
U.S. Government Treasury Bills....................................... 3,901 3,942 3,942
November 30, 1993
MUTUAL FUNDS:
U.S. Government Agency Securities.................................... $ 15,917 $ 15,720 $ 15,720
U.S. Government Treasury Bills....................................... 2,553 2,540 2,540
</TABLE>

At November 30, 1994, short-term investments with an original cost of
$6,586,000 were recorded at market. Mutual funds at November 30, 1993 with an
original cost of $18,470,000 were recorded at the lower of average cost or
market. To reduce the carrying amount of the short-term investments to market,
the Company recorded a valuation allowance of $17,000 at November 30, 1994 and
of $210,000 at November 30, 1993 with a corresponding charge to net income.

At November 30, 1994 and 1993, gross unrealized losses were $17,000 and
$210,000, respectively.

NOTE 5. NOTE RECEIVABLE
As part of the sale of substantially all of Industrial Leasing's assets to
ILC Acquisition Corp., on May 27, 1993, the Company received a note in the
amount of $19,043,000 bearing interest at 6 percent per annum. The note is
payable in equal semi-annual installments of $3,174,000, plus accrued interest,
through May 27, 1996.

NOTE 6. RESTRICTED CASH
Restricted cash of $6,176,000 at November 30, 1994 consists of collateral
for the underwriters' defense costs for the securities litigation and for funds
required to settle the Company's share of this litigation. Of this balance,
$1,174,000 and $800,000 as of November 30, 1994 and 1993 respectively, represent
security to support underwriters' defense costs as ordered by the U.S. District
Court for the Northern District of California. The remainder of $5,000,000 was
placed in escrow pursuant to the preliminary agreement to settle the securities
litigation. (See NOTE 8. -- Commitments and Contingencies).

17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7. INCOME TAXES
The difference between taxes calculated at the federal statutory tax rate
and the recorded tax benefit was as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
NOVEMBER 30,
----------------------
1994 1993 1992
---- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Statutory federal tax rate.............................. 34 % 35% 34%
Computed federal income tax benefit..................... -- $ (468) $(4,789)
Adjustment in tax resulting from:
Allocation of purchase price.......................... -- -- (47)
Elimination of deferred taxes previously provided..... (2,057) (2,685)
Other................................................. -- (70) --
---- ------- -------
Federal income tax benefit.............................. -- (2,595) (7,521)
State income tax benefit, net of federal income tax
benefit................................................ -- (40) (423)
---- ------- -------
Total income tax benefit................................ -- $(2,635) $(7,944)
---- ------- -------
---- ------- -------
</TABLE>

Income tax benefit consists of the following:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
NOVEMBER 30,
----------------------
1994 1993 1992
---- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Taxes currently provided:
Federal............................................... -- -- --
State................................................. -- -- --
Deferred income taxes:
Leasing income recognition differences................ -- (2,635) (7,557)
Other................................................. -- -- (387)
---- ------- -------
Total income tax benefit................................ -- $(2,635) $(7,944)
---- ------- -------
---- ------- -------
</TABLE>

The Company has determined that it has adequate net operating loss carry
forwards and other deductions that no future income tax liability is
anticipated. As all timing differences were eliminated as a result of the Asset
Sale in 1993, the Company reviewed its deferred tax obligations and concluded
that no future income tax obligations existed as of November 30, 1993.
Consequently, the results of the year ended November 30, 1993, include the
reversal of all outstanding deferred tax obligations previously recorded.

As discussed in NOTE 1. -- Organization and Basis of Presentation, during
1992 the Company's previous majority shareholder transferred all of its interest
in the Company to IFC Holdings. This resulted in a change in ownership for
federal and state income tax purposes, which could limit the use in future years
of net operating losses and other tax credit carry forwards. The amount which
will be usable in any one year is limited to the value of the Company at the
time of the change in ownership multiplied by the interest rate on federal
long-term exempt securities at that date. At November 30, 1994 the Company had
$37 million of net operating loss carry forwards, which are not expected to be
utilized by the Company, expiring in the years 2007 through 2009.

NOTE 8. COMMITMENTS AND CONTINGENCIES
On August 20, 1994, the Company established a reserve in the amount of $5.0
million as its share of the settlement of the securities lawsuits previously
filed against the Company, Industrial Leasing, the Company's previous majority
shareholder First City and certain of its former affiliates and subsidiaries,
certain directors, certain former directors and officers, its certified public
accountants,

18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
and the underwriters of the December 8, 1989, initial public offering. The class
action lawsuits, WADE ET. AL. V. INDUSTRIAL ET. AL., filed January 1992, and a
related case BOWER ET. AL. V. BELZBERG ET. AL., filed February 1992, alleged
violations of federal securities laws. The WADE lawsuit also alleged violations
under California state law. These lawsuits were filed in the United States
District Court for the Northern District of California, and alleged that
plaintiffs were damaged as a result of alleged misstatements and omissions in
documents disseminated in connection with the Company's initial public offering
and subsequent communications and public filings through February 1991. Damages
of approximately $22.5 million plus prejudgement interest were alleged.

On August 15, 1994 a preliminary agreement was reached to settle these
lawsuits. A settlement agreement was executed by the parties on October 7, 1994.
The settlement was approved by the Court on December 19, 1994 and became
effective January 19, 1995, at which time all claims were fully settled.

In connection with the securities litigation, the Company has filed a
lawsuit against two insurance companies, demanding coverage against American
Home Assurance Company under a directors and officers liability policy in the
amount of approximately $5.0 million (Canadian), and against The Continental
Insurance Company (Continental Insurance) under a general liability policy and
umbrella policy of approximately $4.0 million (Canadian) and $16.0 million
(Canadian), respectively.

Continental Insurance has agreed to reimburse the Company for reasonable
defense fees and expenses. As of November 30, 1994, Continental Insurance has
advanced $1.6 million of legal costs which represents approximately 27 percent
of the total legal costs incurred to date by the Company in defense of the class
action lawsuit. The Company and Continental Insurance have agreed to negotiate
the amount of the remaining reimbursement. Both parties have further agreed to
submit the matter to binding arbitration if negotiations are not successful. The
Company has submitted approximately $5.9 million of fees and expenses for
reimbursement to Continental Insurance. Any additional reimbursements from
Continental Insurance will be recorded as income when received.

The Company had noncancellable operating leases for office space. The cost
to terminate these leases has been recorded as part of the loss on sale of
assets at November 30, 1992.

19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company entered into a noncancellable operating lease for office space
on May 27, 1993. This lease expires on May 27, 1995. Future minimum lease
payments under this lease are $41,000 for the year ended November 30, 1995.
Total rent expense was as follows:

<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C>
November 30, 1994........................................................................ $ 87
November 30, 1993........................................................................ 369
November 30, 1992........................................................................ 450
</TABLE>

NOTE 9. SHAREHOLDERS' EQUITY
COMMON AND PREFERRED STOCK. The Company's authorized capital consists of
20,000,000 shares of Class A Common Stock, without par value, 10,000,000 shares
of Class B Common Stock, without par value, and 10,000,000 shares of preferred
stock, without par value. The Class A Common Stock has one vote per share and
the Class B Common Stock has 10 votes per share.

In March 1991, the Company issued 134,310 shares of the Series A Cumulative
Preferred Stock ("Shares") of the Company to FCRIC for $10,000,000 in cash and
the forgiveness of $3,431,000 of indebtedness owed by the Company arising from
federal income taxes of the Company paid by FCRIC in fiscal years ended prior to
November 30, 1990. Under the terms of the issuance, cash dividends on these
Shares accreted quarterly at a rate of $14.22 per share per annum. These
dividends are cumulative. The Company may, at anytime and at its option, redeem
all or any part of the shares at a redemption price of $100 per share plus all
accreted and unpaid dividends. The holder of the redeemable preferred stock may,
at its option, redeem the stock after March 15, 1996. In the event of any
liquidation, whether voluntary or otherwise, each holder is entitled to receive
an amount of $100 per share plus all accumulated but unpaid dividends before any
distribution shall be made to the holders of the common stock. The Shares are
not convertible into any other securities of the Company, including Class A or
Class B Common Stock. The accumulated preferred stock dividends totaled $7.1
million, $5.2 million, and $3.3 million as of November 30, 1994, 1993 and 1992,
respectively. On January 26, 1995, the Shares and accumulated dividends were
redeemed for $20.8 million including $297,000 of dividends accreted subsequent
to November 30, 1994.

STOCK OPTION PROGRAMS. In October 1989, the Company adopted two stock
option plans for selected key executives and employees and directors,
authorizing options to acquire 450,500 shares of Class A Common Stock. In April
1992, the directors' plan was amended and an additional 72,000 shares of stock
were authorized for a total of 100,000 shares available under this plan. At
November 30, 1994, the total shares Class A Common Stock authorized for issuance
under the plans was 522,500.

There are six different vesting plans within both stock options plans. The
following sets forth the activity relating to the stock options granted under
the plans.

20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9. SHAREHOLDERS' EQUITY (CONTINUED)
OPTIONS OUTSTANDING UNDER THE 1989 PLANS

<TABLE>
<CAPTION>
NUMBER OF
SHARES EXERCISE PRICE
---------- -----------------
<S> <C> <C>
Outstanding at 11/30/92.................................................. 493,000 $0.75 - $12.25
Granted during Fiscal year 1993.......................................... 0
Canceled during Fiscal year 1993......................................... (223,000) $1.13 - $12.25
----------
Outstanding at 11/30/93.................................................. 270,000 $0.75 - $1.19
----------
----------
Granted during Fiscal year 1994.......................................... 0
Canceled during Fiscal year 1994......................................... 0
----------
Outstanding at 11/30/94.................................................. 270,000 $0.75 - $1.19
----------
----------
Exercisable at 11/30/93.................................................. 270,000 $0.75 - $1.19
Exercisable at 11/30/94.................................................. 270,000 $0.75 - $1.19
</TABLE>

In October 1989, the Company also adopted a stock option plan for key
executives authorizing options to acquire 135,000 shares of Class B Common
Stock. These options were canceled and no options are outstanding as of November
30, 1994.

NOTE 10. PENSION PLAN
Industrial Leasing had a Savings and Profit Sharing Plan covering
substantially all employees. The plan provided for employees to contribute up to
10 percent of their salary to the plan under Section 401(k) of the Internal
Revenue Code, and the Company could match up to 3 percent of the employee's
compensation. The plan was terminated effective December 31, 1992, and, as a
result, all Company contributions were 100 percent vested. The plan was fully
funded and all benefits were distributed in 1993. The impact of the plan
termination on the financial statements was not material. The total plan
expenses were $9,000, and $38,000, for the years ended November 30, 1993 and
1992, respectively.

NOTE 11. SUBSEQUENT EVENTS
All remaining nonperforming assets were sold at auction December 6. 1994.
See NOTE 2. -- Plan of Dissolution and Complete Liquidation.

The class action lawsuits, WADE ET AL V. INDUSTRIAL ET AL, and the related
case BOWER ET AL V. BELZBERG ET AL, were settled effective January 19, 1995. See
NOTE 8. -- Commitments and Contingencies.

The Company redeemed its Series A Cumulative Preferred Stock and accumulated
dividends January 26, 1995. See NOTE 2. -- Plan of Dissolution and Complete
Liquidation.

21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12. QUARTERLY INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
------------ --------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1994
Revenues...................................................... $ 363 $ 194 $ 1,434 $ 1,503
Income (loss) before income taxes (benefit)................... (582) (4,842 (1) (2,588)(2) 1,055(3)
Net income (loss)............................................. (582) (4,842 (1) (2,588)(2) 1,055(3)
Net income (loss) per common share............................ (0.14) (0.71) (0.41) 0.08
1993
Revenues...................................................... $ 5,439 $ 3,915 $ 484 $ 485
Income (loss) before income taxes (benefit)................... 888 (265) (1,233) (726)
Net income (loss)............................................. 588 2,311 (1,031) (569)
Net income (loss) per common share............................ 0.01 0.24 (0.20) (0.13)
<FN>
- ------------------------
(1) Includes a $4,200,000 initial charge to change to the liquidation basis of
accounting.

(2) Includes a charge of $5,000,000 for the Company's share of the settlement
of the securities litigation. This charge is partially offset by an
adjustment in the Reserve for estimated costs during the period of
liquidation.

(3) Includes auction proceeds of $948,000 and bad debt recoveries related to
the sale of nonperforming assets in December 1994.
</TABLE>

22
<PAGE>
MANAGEMENT'S REPORT

To the Shareholders of Industrial Funding Corp.:

The management of Industrial Funding Corp. has prepared and is responsible
for the financial statements and related financial data contained in this
report. The financial statements were prepared in accordance with generally
accepted principles and by necessity include certain amounts determined using
management's best estimate and judgments.

The financial statements have been audited by independent accountants who
were appointed by the Board for fiscal 1994. Their audit was made in accordance
with generally accepted auditing standards and included a review of internal
accounting controls, for the purpose of providing a basis for reliance thereon
in connection with their audit of the financial statements.

Management of the Company has established and maintains an internal control
structure that provides reasonable assurance as to the integrity and reliability
of the financial statements, the protection of assets from unauthorized use or
disposition and the prevention and detection of fraudulent financial report. The
concept of reasonable assurance is based on the recognition that the cost of a
system of internal control must be related to the benefit derived. The internal
control structure is continually monitored for compliance.

The Board of Directors, through its Audit Committee, is responsible for
reviewing and monitoring the financial statements and accounting practices. The
Audit Committee meets annually with management and the independent accountants
to ensure that each is properly discharging its duties. Independent accountants
have full and free access to, and meet with the Audit Committee, with or without
the presence of management.

JOHN PITT

--------------------------------------
VICE PRESIDENT FINANCE AND CHIEF
EXECUTIVE OFFICER

February 28, 1995

23
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

No information is required to be reported under this item.

PART III

Certain information required by Part III is omitted from this Report in that
the Registrant will file a definitive proxy statement pursuant to Regulation 14
(the "Annual Proxy Statement") no later than 120 days after the end of the
fiscal year covered by this Report, and certain information included therein is
incorporated herein by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information concerning the Company's directors required by this Item is
incorporated by reference to the Company's Annual Proxy Statement.

The information concerning the Company's executive officers required by this
Item is incorporated by reference to the Section in Part 1, Item 4.1 hereof
entitled "Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item is incorporated by reference to the
Company's Annual Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this Item is incorporated by reference to the
Company's Annual Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item is incorporated by reference to the
Company's Annual Proxy Statement.

PART IV

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

(a) List of Documents Filed.

(1) Financial statements, Industrial Funding Corp. (included in Item 8).

Independent Auditor's Report dated February 14, 1995.

Consolidated statement of net assets (Liquidation basis) November 30,
1994.

Consolidated balance sheet November 30, 1993.

Consolidated statement of change in net assets in liquidation
November 30, 1994.

Consolidated statements of income for the two years ended
November 30, 1993.

Consolidated statements of shareholders' equity for the two
years ended November 30, 1993.

Consolidated statements of cash flows for the three
years ended November 30, 1994.

Notes to consolidated financial statements.

(2) Schedules supporting consolidated financial statements:

Independent Auditors' Report.

Schedule VIII. Valuation and qualifying accounts for the year ended
November 30, 1992.

All other schedules have been omitted because of the absence of
conditions under which they are required or because the required
information is included elsewhere in the financial statements.

24
<PAGE>
(3) EXHIBITS. These exhibits indicated by an asterisk (*) are incorporated
by reference to the same exhibit number unless otherwise noted as follows: (A)
incorporated herein by reference to Registration Statement on Form S-1 filed on
October 27, 1989 and amended on December 5, 1989 (File No. 33-31784)); (B)
incorporated herein by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1990 as filed March 11, 1991; (C)
incorporated herein by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1990 as filed February 28, 1992; (D)
incorporated herein by reference to the Company's Report on Form 8 as filed May
5, 1992; (E) incorporated herein by reference to the Company's Report on Form
10-K for the period ended November 30, 1992, as filed February 25, 1993; (F)
incorporated herein by reference to the Company's Report on Form 10-K for the
period ended November 30, 1993, as filed February 23, 1994.

<TABLE>
<C> <S>
3.1* (A) Form of Restated Articles of Incorporation of the Company.
3.2* (A) Form of Bylaws of the Company.
4.1* (D) Restructuring Agreement dated as of February 24, 1992, by and among Industrial
Leasing Corporation, the Purchasers of the Original Note Agreements, the Term
Lenders, the Commercial Paper Lenders, and the Subordinated Lender.
4.2* (C) Statement of Designation of Series and Determination of Rights and Preference
of Series A Cumulative Preferred Stock dated March 15, 1991 (Exhibit 4.8.)
4.3* (E) Amendment to Restructuring Agreement dated January 11, 1993.
10.1* (A) Interest Rate and Currency Exchange Swap Agreement dated October 18, 1989, by
and between Industrial Leasing Corporation and Algemene Bank Nederland, N.V.
(Exhibit 10.3.)
10.2* (A) Revolving Credit and Term Agreement dated as of March 8, 1988, by and between
First City Credit Corp. ("FCC") and First Bank, as amended by Amendment No. 1
thereto dated as of May 31, 1989 and Amendment No. 2 thereto dated as of
October 20, 1989, as assumed, agreed to and accepted by the Company, as further
amended by a letter agreement, dated October 23, 1989. (Exhibit 10.12.)
10.3* (A) Consent and Waiver Agreement regarding Revolving Credit and Term Loan Agreement
dated as of October 20, 1989, among FCC, First City Equipment Finance Corp.,
First City Equipment Credit Corp., RNB Leasing, Inc., the Company and First
Bank (Exhibit 10.13.)
10.4* (A) Consolidated, Amended and Restated Security Agreement dated as of October 20,
1989, by FCC, the Washington Subsidiaries, the Company and First Bank (Exhibit
10.14.)
10.5* (A) Security Agreement dated as of October 20, 1989, by the Company in favor of
First Bank. (Exhibit 10.15.)
10.6* (B) Office Lease dated June 15, 1990, by and between A. L. McCormick, as landlord,
and the Company, as tenant, for the Company's headquarters in Portland, Oregon.
(Exhibit 10.16.)
10.7* (A) Industrial Funding Corp. 1989 Stock Option Plan. (Exhibit 10.18.)
10.8* (E) Industrial Funding Corp. Amended Directors' Nonqualified Stock Option Plan.
10.9* (A) Form of Incentive Stock Option Agreement. (Exhibit 10.32.)
10.11* (A) Form of Non-Qualified Stock Option Agreement. (Exhibit 10.33.)
10.12* (B) Interest Rate Swap Agreement dated as of June 30, 1987, by and between
Industrial Leasing Corporation and First Bank. (Exhibit 10.35.)
10.13* (C) Employment agreement from the Company to John J. Estok dated November 8, 1991.
(Exhibit (10.26.)
10.14* (C) Industrial Funding Corp. 1992 Savings and Profit Sharing Plan. (Exhibit 10.27.)
</TABLE>

25
<PAGE>
<TABLE>
<C> <S>
10.15* (E) Industrial Funding Corp. Agreement of Purchase and Sale of Assets. (Exhibit
10.18.)
10.16* Revised employment agreement from the Company to John J. Estok dated July 1,
1993.
10.17* Lease agreement of the Company related to its primary operating facilities in
Portland, Oregon dated May 27, 1993.
11.1 Exhibit 11.1 is a statement of computation of per share earnings that includes
the preferred stock dividend amount.
22.1* (A) Schedule of Subsidiaries.
23.1* Independent Auditor's consent related to Form S-8, Registration Statement No.
33-63514 as filed with the Securities and Exchange Commission on May 28, 1993.
</TABLE>

(b) Reports on Form 8-K

There were no reports on Form 8-K for the fourth quarter ended November
30, 1994.

26
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Portland, State of Oregon, on February 27, 1995.

INDUSTRIAL FUNDING CORP.

/s/ JOHN PITT

--------------------------------------
John Pitt
VICE PRESIDENT FINANCE AND
CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on February 27, 1995, on
behalf of the Registrant and in the capacities indicated.

SIGNATURES TITLE
- ----------------------------------- -------------------------

/s/ BRENT S. BELZBERG
- ----------------------------------- Chairman of the Board of
Brent S. Belzberg Directors

/s/ RICHARD L. DOEGE
- ----------------------------------- Director
Richard L. Doege

/s/ ALAN R. HIBBEN
- ----------------------------------- Director
Alan R. Hibben

/s/ K. PETER ZECH
- ----------------------------------- Director
K. Peter Zech

27
<PAGE>
INDEPENDENT AUDITORS' REPORT

Industrial Funding Corp.

We have audited the consolidated financial statements of Industrial Funding
Corp. and subsidiary as of November 30, 1994 and 1993, and for each of the three
years in the period ended November 30, 1994, and have issued our report thereon
dated February 14, 1995, which report includes explanatory paragraphs relating
to a change in the basis of accounting from the going concern basis to the
liquidation basis and to subsequent events; such consolidated financial
statements and report are included elsewhere in this Form 10-K. Our audits also
included the consolidated financial statement schedule of Industrial Funding
Corp. and subsidiary, listed in Item 14. This consolidated financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Portland, Oregon
February 14, 1995

28
<PAGE>
INDUSTRIAL FUNDING CORP.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
NOVEMBER 30,
1992
-------------
(DOLLARS IN
THOUSANDS)
<S> <C>
ALLOWANCE FOR CREDIT LOSS:
Balance at beginning of period.......................... $ 30,363
Provision charged to expense............................ 215
Write-offs of receivables to their net realizable value,
net of recoveries...................................... (18,700)
Transfer to net assets held for sale.................... (11,878)
-------------
Balance at end of period.............................. $ 0
-------------
-------------
</TABLE>

29
<PAGE>
EXHIBIT 11.1

INDUSTRIAL FUNDING CORP.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED NOVEMBER 30,
-------------------------------------------
1994 1993 1992
----------- -------------- --------------
<S> <C> <C> <C>
LIQUIDATION GOING CONCERN GOING CONCERN
BASIS BASIS BASIS
----------- -------------- --------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE
DATA)
Net income (loss)............................................. $ (6,957) $ 1,299 $ (6,140)
----------- -------------- --------------
Cumulative preferred stock dividend........................... (1,910) (1,910) (1,910)
Earnings (loss) on common stock............................... $ (8,867) $ (611) $ (8,050)
Average number of common shares outstanding................... 7,500,000 7,500,000 7,500,000
----------- -------------- --------------
Earnings (loss) per common share.............................. $ (1.18) $ (0.08) $ (1.07)
----------- -------------- --------------
----------- -------------- --------------
</TABLE>

<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated State of Net Assets as of November 30, 1994 and the Consolidated
Statement of Income and Changes in Net Assets for the Year Ended November 30,
1994, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> DEC-01-1993
<PERIOD-END> NOV-30-1994
<CASH> 26,929
<SECURITIES> 6,569
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,107
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 44,107
<CURRENT-LIABILITIES> 7,088
<BONDS> 0
<COMMON> 0<F1>
20,514
0
<OTHER-SE> 16,505<F1>
<TOTAL-LIABILITY-AND-EQUITY> 44,107
<SALES> 0
<TOTAL-REVENUES> 3,494
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,957)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,957)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,957)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> (1.18)
<FN>
<F1>Company is filing under the liquidation basis of accounting.
</FN>

</TABLE>