================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-K
(Mark One)

[ X ]                ANNUAL REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                              for the period ended

                                December 31, 1995

[   ]              TRANSITION REPORT PURSUANT TO SECTION 13 OR
                           15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                                  for the transition period from


                 ____________________ To ______________________


                         Commission File Number: 1-8984


                              WEDGESTONE FINANCIAL
             (Exact Name of Registrant as Specified in its Charter)

        Massachusetts                                        04-26950000
(State or other jurisdiction                              (I.R.S. Employer
      of incorporation)                                Identification Number)

                            5200 N. Irwindale Avenue
                                    Suite 168
                           Irwindale, California 91706
                                 (818) 338-3555
    (Address, including zip code and telephone number, including area code of
                    registrant's principal executive offices)

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


           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                 Shares of Beneficial Interest, $1.00 par value

Indicate by check mark whether the registrant has (1) 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 such shorter period that the registrant was required
to file such  reports) and (2) has been subject to filing  requirements  for the
past 90 days.

                                [ X ] YES [ ] No

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

                                [ X ] YES [ ] No

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

                                [ X ] YES [ ] No

   Shares of Beneficial Interest Outstanding as of March 28, 1996: 21,885,668

                       Documents Incorporated by Reference
       Documents incorporated by reference in Part III of this Form 10-K:
        Definitive Proxy Statement to be filed pursuant to Regulation 14A

         Total number of pages in this document: 51 Exhibits at page: 39


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<PAGE>

                                     PART I


Items 1. and 2.    Business and Properties

A.       Introduction and Background

         Wedgestone Financial  ("Wedgestone" or the "Company"),  a Massachusetts
business  trust which was  organized  in 1980,  commenced  operations  as a real
estate investment trust under the Internal Revenue Code of 1986, as amended, and
continued  those  operations  through  December  31,  1991.  On August 9,  1991,
Wedgestone  filed a petition  with the United  States  Bankruptcy  Court for the
district of  Massachusetts  Eastern  Division  (the  "Bankruptcy  Court")  under
Chapter 11 of the United States  Bankruptcy  Code,  Case No.  91-16930-WCH  (the
"Bankruptcy  Proceeding").  Wedgestone's plan of reorganization (the "Plan") was
confirmed by the Bankruptcy Court on May 5, 1992.

         Under its  current  management,  Wedgestone  operates  in two  business
segments as follows:

                A) Automotive Products for the light duty truck aftermarket; and

                B) Real Estate and Lending activities.

         The business of the Automotive  Products segment is conducted primarily
through  Wedgestone's  wholly  owned  subsidiary,   Wedgestone  Automotive  Corp
("Wedgestone  Automotive"),  which, in turn,  wholly owns the  subsidiaries  Fey
Automotive  Products,  Inc.  ("Fey"),  St. James Automotive Corp ("St.  James"),
Sigma  Plating Co.,  Inc.  ("Sigma")  and  Hercules  Automotive  Products,  Inc.
("Hercules")  which was acquired on January 9, 1995. Fey and Sigma were acquired
on November 18, 1994,  and have been accounted for as a  put-together,  which is
similar to the pooling of  interest  method of  accounting.  As a result of this
accounting  treatment,  the table of Financial  Information Relating to Business
Segments that follows and other financial  statements contained herein have been
restated to include the balance sheets, results of operations and cash flows for
Fey and Sigma for all periods presented.
<TABLE>

                                         Financial Information Relating to Business Segments
                                                       (Amounts in Thousands)
<CAPTION>

                                                                                For the Years Ended December 31,

                                                                        1995                  1994                  1993
                                                                     ----------            ----------            -------
<S>                                                                     <C>                  <C>                   <C>    
Revenues:
      Automotive Products:
            Manufactured Products for Light Duty Trucks                 $39,970              $28,135               $23,897
            Contract Plating                                              3,680                3,179                 3,097
            All Other                                                     2,462                3,304                 2,478
                                                                       ---------             -------               -------
      Total                                                             $46,112              $34,618               $29,472
                                                                        =======              =======               =======
v
      Real Estate and Lending (a)                                           ---                  ---                   ---

Operating Income (Loss):
         Automotive Products                                            $ 3,259              $ 2,367               $   986
         Real Estate and Lending                                           (529)                (363)                 (433)
                                                                       ---------             -------               -------

Total                                                                   $ 2,730              $ 2,004               $   553
                                                                        =======              =======               =======

Identifiable Assets:
         Automotive Products                                            $17,228              $11,087               $ 9,555
         Real Estate and Lending                                          1,375                1,880                 1,818
                                                                       ---------             -------               -------

         Total Identifiable Assets                                      $18,603              $12,967               $11,372
                                                                        =======              =======               =======

<FN>

(a) Real Estate and Lending revenues are immaterial and reported with operating costs.
</FN>
</TABLE>

                                        1

<PAGE>

B.        Automotive Products Business Segment

         On November 18, 1994  ,Wedgestone  acquired the  Automotive  Segment of
Standun,  Inc.  ("Standun"),  which  consisted  of Sigma and the Fey  Automotive
Products division.  The assets of the Fey division were merged into Wedgestone's
wholly  owned  subsidiary  Fey  Automotive  Products,  Inc.  On January 9, 1995,
Wedgestone acquired substantially all of the assets of Hercules Bumpers, Inc., a
Georgia  company.  These  acquisitions,  along with  Wedgestone's  wholly  owned
subsidiary  St. James,  were placed under the common  ownership of  Wedgestone's
wholly owned subsidiary,  Wedgestone Automotive.  Collectively,  these companies
comprise the Automotive  Products  business  segment  which,  unless the context
otherwise requires, will be hereinafter referred to as Wedgestone Automotive.

         Wedgestone   Automotive   manufactures   and   distributes   automotive
aftermarket products for the light duty truck market. Principal products include
rear bumpers; tubular products such as grille guards, push bars, and step rails;
and various other related  aftermarket  products.  Additionally,  Sigma provides
contract chrome plating services to other unrelated parties.  Combined sales for
all products were  $46,112,000,  $34,618,000 and $29,472,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. Hercules, acquired in 1995, also
manufactures and markets bumpers for the light duty truck aftermarket,  reported
sales of $13,017,000  for its fiscal year ended September 30, 1994, and sales of
$10,993,000 for the year ended December 31, 1995. See Subsequent Events below.

The Company's automotive products are sold in the following markets:

         Traditional Aftermarket: This market includes new car dealerships, body
         shops,  speed  shops,  off-road  specialty  shops  and  van  and  truck
         converters.  Wedgestone  Automotive  reaches these customers through an
         established  network  of  warehouse   distributors,   jobbers,   dealer
         expediters and specialty wholesalers.

         Original  Equipment   Aftermarket:   Utilizing  products   specifically
         approved by truck  manufacturers  such as General Motors,  Chrysler and
         Nissan,  Wedgestone  Automotive ships directly into their  distribution
         channels in order to take advantage of factory  supported  sales of its
         truck accessories through dealer level service parts operations.

         Retail Aftermarket:  Wedgestone  Automotive reaches the retail consumer
         through  local,  regional and national  chains  dedicated to automotive
         products as well as independent  retailers whose stores support a large
         assortment of automotive product lines.

Significant Customers, Competitive Position, Intellectual Property

         There is no single customer whose purchases  exceeded 10% of Wedgestone
Automotive's  sales. The sectors of the automotive  industry in which Wedgestone
competes  are  extremely  competitive  and heavily  influenced  by policies  and
programs implemented by the OE Manufacturers. The companies servicing Wedgestone
Automotive's  markets with competing  products vary in size and capability  with
none dominating the market as a whole.  All such companies  compete on the basis
of product  design,  availability,  lead time,  price and  product  performance.
Wedgestone Automotive has no patents, trademarks,  franchises or concessions. It
markets its products under various  tradenames  including Fey, Tuff Bar,  Westin
and Hercules.

Raw Materials, Distribution, Inventories and Seasonality

         Raw materials are purchased  under  standard  industry  terms through a
number of  vendors  located  within  the  vicinity  of the plant  being  served.
Management   does  not  anticipate   any  shortages  of  materials.   Wedgestone
Automotive's  products are distributed  through the manufacturing  facilities in
California and Minnesota and further through distribution warehouses in Utah and
Texas since March 1996.

         Sales are primarily  serviced out of finished  goods  inventories.  For
this  reason,  inventories  are a material  portion of the  company's  operating
assets.  The  Company  schedules  manufacturing  to maintain  desired  inventory
levels. Order backlogs for Wedgestone Automotive Products totalled $1,500,000 as
of  December  31,  1995  as  compared  to  $500,000  as of  December  31,  1994.
Substantially,  all of this  growth  is due to the  growing  demand  for  Westin
products  manufactured  at St. James.  While the  automotive  aftermarket is not
considered  to be  seasonal,  it is subject  to the annual  effects of new model
introductions  and, as such,  business can increase in the fall after new models
are released and in the spring as dealers seek to move inventory in anticipation
of the next model year.


                                        2

<PAGE>


Subsequent Events

         On March 5, 1996,  Hercules closed its  manufacturing  plant in Pelham,
Georgia.   The  market  for  the  bumpers   produced  in  the  Pelham   facility
significantly  changed during 1995.  Historically,  a significant  percentage of
Hercules business was for sales to dealers of a domestic OE Manufacturer.  A new
program implemented by one of these manufacturers in late 1994 made it extremely
difficult  for  Hercules  to  remain   competitive   in  this  market   segment.
Accordingly,  Hercules  incurred a net loss of  $125,000  in 1995.  As a result,
management determined that closing the Pelham facility was appropriate. Hercules
is working with its senior  lender for an orderly  liquidation  of the assets in
Pelham.  While the final outcome is  uncertain,  the Company does not expect the
closure of the Pelham facility to have a material effect on 1996 operations.

<TABLE>

Subsidiary Operations; Employees, Facilities and Environmental

         As of March 15, 1996, Wedgestone  Automotive  manufactures its products
in several subsidiaries as follows:
<CAPTION>

         Facility                                   Square Footage             Employees                      Products
         --------                                   --------------             ---------                      ---------
<S>                                                    <C>                       <C>                <C>
Fey Automotive Products, Inc.                           89,000                   137                Bumpers, Step Rails &
                                                                                                    Related Products

St. James Automotive Corp.                              95,000                   103                Bumpers, Grille Guards, Step
                                                                                                    Bars & other Tublular Products

Sigma Plating Co., Inc.                                 26,000                    88                Intercompany and outside
                                                       -------                  ----                contract plating services
                                                       210,000                   328
                                                       =======                   ===
</TABLE>

         As  of  March  15,  1996,  the  manufacturing   employees  of  Fey  are
represented by a union whose contract expires in March 1996. Wedgestone believes
that its relations with all of its employees are satisfactory.

         Fey leases 89,000 square feet of manufacturing,  warehousing and office
space  located  in  Irwindale,  California,  approximately  30 miles east of Los
Angeles.  Fey also leases  distribution  warehouses in Salt Lake City,  Utah and
Fort Worth, Texas. The leases expire at various times through 2002.

         St. James leases a 95,000 square foot facility in St. James, Minnesota,
which is approximately 120 miles southwest of Minneapolis.  The lease obligation
extends  through  October 31, 1998. The lease contains a purchase option for the
facility.

         Sigma  owns a  26,000  square  foot  facility  on 3  acres  of  land in
LaPuente, California, approximately 25 miles east of Los Angeles.

         Hercules  owns a 280,000  square  foot  facility on 40 acres of land in
Pelham,  Georgia,  approximately  180 miles southwest of Atlanta.  Operations at
this plant were terminated on March 5, 1996, and decommissioning of the facility
is in process.

Environmental Matters

         St.  James,  Sigma and  Hercules  operate  chrome  plating  facilities.
Hazardous wastes generated by these operations are disposed in the normal course
for this type of  business.  Aqueous  wastes are treated at the facility to meet
applicable  regulatory  standards and then  discharged  to the public  treatment
works. Solid wastes and by-products are transported to a recycler for processing
and  destruction.  All current  activities at the  facilities are believed to be
within the operational  parameters of the required environmental permits and are
monitored both internally by facility  personnel and  periodically by regulatory
agencies.   In  anticipation  of  expanding  the  St.  James  facility  and  its
operations,  St. James  conducted  tests which revealed  possible  environmental
contamination  by a previous  operator/tenant.  St. James notified the principal
shareholder of the prior  operator,  who is also the landlord,  and the relevant
regulatory  authorities  of the test  results.  St.  James  has  been  partially
indemnified  from  costs  relating  to  potential   clean-up  by  the  principal
shareholder of the prior  operator and the landlord.  As a result of the closure
of its plant on March 5, 1996, Hercules is in the process of decommissioning its
plating line in Pelham, Georgia.


                                        3

<PAGE>

C.       Real Estate and Lending Segment

         Although its primary focus has shifted toward its  Automotive  Products
business  segment,  Wedgestone's  Real Estate and Lending  business  segment has
continued since emerging from bankruptcy in 1992.

Real Estate Acquired By Foreclosure

         Wedgestone  owns three  properties  that were acquired by  foreclosure.
They include four commercial condominiums in Peabody, Massachusetts; 59 acres of
undeveloped land in Bristol,  Connecticut; and approximately 21 acres of land in
Queens,  New York,  15 acres of which are below  water.  The Queens  property is
subject to litigation,  which  Wedgestone  originated,  relating to the original
loan.  Wedgestone is required to transfer for the benefit of the  pre-bankruptcy
creditors, 50% of the net proceeds received, if any, from this litigation.

Promissory Notes and Claims

         Wedgestone has an outstanding loan on one property, the aggregate value
of which totals approximately  $84,000 as of December 31, 1995, net of reserves.
Management  believes  that  current  reserves  recorded  against  this  loan are
adequate.

Genesis Plastics, Inc.

         On August 24, 1992,  Wedgestone  entered into a secured loan  agreement
(the "Loan") with Genesis Plastics,  Inc. ("Genesis"),  a plastics recycler. The
Loan, originally for borrowings of up to $1,000,000, was subsequently amended to
provide for  borrowings of up to $2,000,000  and over advances at the discretion
of Wedgestone.  Affiliated  parties of Wedgestone  agreed to purchase a pro rata
participation  in excess of $800,000 of the Loan.  Genesis had previously  filed
for protection  under Chapter 11 of the United States  Bankruptcy Code on August
24,  1994 and had been  unsuccessful  in its  efforts  to secure a buyer for its
Charleroi,  Pennsylvania  recycling facility.  Wedgestone held a senior security
interest in the  inventory,  receivables  and certain  equipment of Genesis.  On
November  29, 1995,  in  accordance  with its rights under the Loan,  Wedgestone
consented to the liquidation of the Genesis'  inventory and equipment of Genesis
through a public  auction.  As a result of this  action,  Wedgestone  recorded a
one-time loss of $697,000 in December 1995.

Environmental Matters

         Under  the  Comprehensive   Environmental   Response  Compensation  and
Liability Act of 1983, as amended  ("CERCLA"),  an owner or operator of property
(including, in certain circumstances, a lender who takes title by foreclosure or
who  participates  in the management of the property) may be liable to reimburse
the  federal  government  or a third  party for the cost of  cleaning  up oil or
hazardous  substances  found on the  property.  Many states in which  Wedgestone
conducts  business,  including  Massachusetts,  have  enacted  similar  statutes
("Superfund  Laws"),  under which an owner or operator of property  (including a
foreclosing  lender or a lender who actively  participates  in the management of
the property)  may be liable to reimburse the state  government or a third party
for clean-up  costs and to compensate the state or any other person for injuries
or damages  caused by oil or  hazardous-substance  contamination.  The liability
created by CERCLA and the state Superfund Laws is joint and several subject,  in
a limited number of cases, to certain defenses.

         A number of states in which  Wedgestone  conducts  business,  including
Massachusetts, also allow the state to impose a lien on the property of a liable
party as security for the payment of clean-up costs. Many of these jurisdictions
provide that this lien, at least as it pertains to the contaminated property, is
senior to all pre-existing liens.

         Accordingly,  if real estate  securing a Wedgestone  loan were found to
contain oil or hazardous substances,  enforcement of a state Superfund Law could
significantly  reduce the value of  Wedgestone's  lien. In the event real estate
owned or controlled by Wedgestone  pursuant to  foreclosure or exercise of other
remedies under its loan documents  were found to contain  hazardous  substances,
enforcement  of a  state  Superfund  Law or  CERCLA  could  potentially  require
expenditure of funds in amounts which may have a significant adverse impact upon
Wedgestone's earnings, capital expenditure requirements and liquidity.

Net Operating Loss

         Wedgestone  has a net operating  loss carry forward for federal  income
tax of approximately $43,000,000.

Item 3.    Legal Proceedings

Bankruptcy Claims


                                       4

<PAGE>

         On October  30,  1992,  a group  calling  itself the  "Equity  Security
Holders Committee of Wedgestone  Financial" (the "Committee")  filed a complaint
(the  "Complaint")  commencing  an  adversary  proceeding  in the United  States
Bankruptcy Court for the District of  Massachusetts.  On May 20, 1993, the Court
dismissed the adversary proceeding.  The Committee appealed the dismissal to the
District Court. The appeal was denied on August 17, 1994. The Committee appealed
to the United  States  Court of Appeals  for the First  Circuit.  The appeal was
denied on March 1, 1995.  The  Committee  requested  a  rehearing  by the United
States  Court  of  Appeals  for the  First  Circuit.  On  March  22,  1995,  the
Committee's request was denied.

Other

         On May 25, 1995, the United States Bankruptcy Court for the District of
Massachusetts (the "Court") issued an order establishing  rights and obligations
with  respect to the then one  remaining  outstanding  loan under  which  income
rights had been  granted  to  certain  Special  Income  Shareholders.  The order
released  Wedgestone from all obligations  regarding the loan and authorized the
Company  to  transfer  all  loan  documents  to the  Federal  Deposit  Insurance
Corporation.  In connection  with this order,  Wedgestone was directed to cancel
the Special  Income Shares subject to certain future  distribution  rights.  The
balance sheet and income statement  presentation  included in this Form 10-K has
been changed to reflect  this  cancellation.  A Mr.  Landers has appealed to the
Court.  On March 19,  1996,  Wedgestone  moved for  dismissal  of the appeal.  A
decision is pending.

Item 4.    Submission of Matters to a Vote of Security Holders

         Not applicable.

                                        5

<PAGE>



                                     PART II


Item 5.    Market for Registrant's Common Equity and Related Shareholder Matters

         Wedgestone's  shares of beneficial interest are currently traded in the
over-the-counter  market under the trading symbol  "WDGF".  The prices set forth
below represent trades between dealers,  without  adjustment for retail mark up,
mark down or commission,  and do not necessarily  represent actual transactions.
The  following  table  sets  forth the high and low bid  prices of  Wedgestone's
shares of beneficial interest for each quarter of 1995 and 1994.

                                      Market Price Range
                            -----------------------------------------------
                                   1995                          1994
                                   ----                          ----
         Quarter            High          Low             High          Low
         -------            ----          ---             ----          ---
         First               .48          .38              .05          .05
         Second              .56          .44              .07          .05
         Third               .52          .42              .15          .07
         Fourth              .31          .06             1.06          .06
                            -----------------------------------------------


         On March 28, 1996, the bid price of  Wedgestone's  shares of beneficial
interest was .22.

Record Holders

         On March 28,  1996,  there were 2,558  record  holders of  Wedgestone's
shares of beneficial interest. Also see Note 9 of the financial statements

Cash Dividends Declared and Paid Per Share

         There were no dividends declared or paid by Wedgestone on its shares of
beneficial  interest  for the  years  ended  December  31,  1991  through  1995.
Wedgestone  presently  intends to retain all  earnings  in  connection  with its
business payment of dividends in the future will be within the discretion of the
Board of Trustees and will depend upon,  among other  factors,  earnings and the
operating and financial condition of the business.

                                        6

<PAGE>

<TABLE>

Item 6.    Selected Financial Data

         The following selected financial data includes the automotive  products
segment  since  1992,  and have  been  derived  from  Wedgestone's  Consolidated
Financial  Statements  and  should be read in  conjunction  with the  Management
Discussion and Analysis and the  Consolidated  Financial  Statements and related
notes.  Prior to 1992,  Wedgestone's  operations  were  limited  to real  estate
lending and investing activities.

<CAPTION>

                                                                          Year Ended December 31,
                                             -------------------------------------------------------------------------------
                                                 1995         1994             1993              1992             1991
<S>                                          <C>               <C>              <C>               <C>           <C>          
Operating Data: (In Thousands)

         Net sales                           $46,112           $34,618          $29,472           $27,040        $     ---


         Income (loss)before
           extraordinary gain                  1,845             1,493             (116)           (1,677)         (11,066)

         Extraordinary gain from
           net liabilities discharged
           in bankruptcy proceeding              ---               ---              ---             9,029              ---
                                            --------           -------          -------           -------        ---------


         Net income (loss)                   $ 1,845           $ 1,493         ($   116)          $ 7,352       ($  11,066)
                                             =======           =======          =======           =======        =========

Per Share Data:

         Income (loss) before
           extraordinary gain                $  0.08           $  0.07         ($  0.01)         $ (0.10)        $   (1.75)

         Extraordinary gain                      ---               ---              ---              0.52               ---
                                            --------           -------          -------           -------        ---------

         Net income (loss)                   $  0.08           $  0.07          $ (0.01)          $  0.42        $   (1.75)
                                             =======           =======          =======           =======        =========

         Weighted average
           Shares outstanding             21,764,280        20,385,668       20,385,668        17,303,683        6,307,554
                                          ==========        ==========       ==========        ==========        =========


Balance Sheet Data:  (In Thousands)

         Working Capital                     $ 4,188           $ 3,418          $ 2,390           $ 1,872        $ (35,360)
                                             =======           =======          =======           =======        =========

         Total assets                        $21,398           $14,391          $11,530           $12,535        $  31,187
                                             =======           =======          =======           =======        =========
         Prepetition liabilities subject
             to compromise                      ---              ---               ---               ---         $  36,238
                                              =======           =======         =======           =======        =========

         Long-term debt                      $ 8,447           $ 5,676          $ 3,835           $ 2,905            ---
                                             =======           =======          =======           =======        =========

         Total shareholders' equity
           (deficiency in assets)            $ 5,747           $ 3,382          $ 2,558           $ 3,430        $  (6,676)
                                             =======           =======          =======           =======        =========

</TABLE>
                                        7

<PAGE>




Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations For the Years Ended December 31, 1995 and 1994

Background

         On  November  18,  1994,  Wedgestone  acquired  Fey and Sigma  from the
related party, Standun,  which has been accounted for as a put-together which is
similar to the pooling of interest  method of accounting.  This  transaction has
resulted in a re-statement of Wedgestone's  financial  statements to include the
historical  balance  sheets,  results of  operations  and cash flows for Fey and
Sigma for all  periods  presented.  On  January  9,  1995,  Wedgestone  acquired
substantially  all of the assets of Hercules  Bumpers,  Inc., a Georgia company.
The management  discussion  and analysis of financial  results that follows also
incorporates these companies.

Liquidity  and Capital Resources

         To date,  Wedgestone has financed its business  activities  through the
cash flow from  operations.  Additional  debt has been  incurred  primarily  for
working  capital  and  acquisitions.  See  Notes  7 and 10 to  the  Consolidated
Financial Statements.

         Cash flows from operations  totaling  $2,440,000  were  supplemented by
$617,000 in inventory  reductions in 1995.  Wedgestone  used  $1,016,000 of this
cash flow to reduce other accrued  expenses.  This resulted in $1,836,000 in net
cash  provided  by  operating  activities  in 1995  compared to $66,000 in 1994.
Wedgestone  invested  $926,000 in new  property  and  equipment  and $126,000 in
investment  real  estate  in  1995.  For  1995,  cash  flows  used in  financing
activities  totaled $198,000.  Borrowings under the revolving line of credit and
certain long-term debt totaled $836,000 and repayments of long-term debt totaled
$949,000.

         Wedgestone  has  borrowings  outstanding  from a related party totaling
$729,000  (the  "Rockaway  Loan") as of December 31, 1995,  which mature in July
1996.  Under  this  credit  agreement,  the  borrowings  are  collateralized  by
substantially all of the assets of the Company.

         In  connection  with  the  acquisition  of the  Automotive  Segment  of
Standun, Inc., Wedgestone,  through certain wholly-owned  subsidiaries,  entered
into  a  three-year  $7.5  million   revolving  credit  line  with  a  financial
institution.  The credit line provides for borrowings  (minimum borrowings of $4
million  are  required)   based  on  a  percentage  of  inventory  and  accounts
receivable.  Interest on the outstanding borrowings accrues at prime, plus 2.5%.
The agreement also includes  equipment term loans  approximating $1.4 million at
December 31, 1995. The agreement  contains  certain  covenants which require the
maintenance of minimum working capital and equity.

         In connection  with the  acquisition  of Hercules on January 9, 1995, a
wholly-owned  subsidiary of Wedgestone assumed certain debt currently consisting
of a term loan of $4.0 million,  and an industrial  revenue bond of $285,000 due
March 1, 1999.

         On March 5, 1996, Hercules closed its facility in Pelham, Georgia, as a
result of  unfavorable  market  conditions  for products  produced in the Pelham
facility.  Hercules is working with its senior lender for an orderly liquidation
of the assets in Pelham.  The Company  does not expect the closure of the Pelham
facility to have a material effect on 1996 operations.

         To  the  extent  that  Wedgestone  expands  its  operations  and  makes
additional  acquisitions,  it  will  need  to  obtain  additional  funding  from
institutional  lenders and other sources.  Wedgestone's ability to use equity in
obtaining  funding  may be  limited  by  its  desire  to  preserve  certain  tax
attributes including its net operating loss carry forwards.

Results Of Operations

Current Year Performance 1995 Compared to 1994

         Operating  income grew by 36% or  $726,000 in 1995 over 1994.  Hercules
accounted  for $487,000 or 67% of this  growth.  During the latter part of 1995,
the  performance of Hercules was  significantly  impacted by declining sales and
general market conditions due to direct OEM competition.

         Sales increased over 1994 by 33% or $11,494,000. Hercules accounted for
$10,993,000  of this  increase.  Gross profit  increased by  $3,450,000 in 1995.
Gross margin as a percent of sales was comparable to 1994 at  approximately  31%
of sales.


                                        8

<PAGE>


         Sales and Marketing costs increased  $1,437,000 in 1995,  $1,408,000 or
98% of which was  attributable  to Hercules.  Administrative  costs increased by
$1,287,000 in 1995, $913,000 or 71% of which was attributable to Hercules. Legal
and other acquisition fees related to the acquisition of the Standun  Automotive
Segment which were expensed for an additional $300,000 of this increase.

         Interest expense  increased by $854,000 in 1995,  $553,000 of which was
attributable to Hercules.  Amortization of loan origination fees and interest on
the note  payable  assumed in  connection  with the  acquisition  of the Standun
Automotive Segment accounted for the majority of the remainder of this increase.

         Other  expenses in 1995  include loan losses of $697,000 on the Genesis
Plastics loan.

         Income taxes in 1995  reflect a $1,258,000  benefit due to a $1,300,000
adjustment  to  the  Company's  valuation  reserve.  This  adjustment  is due to
management's expectations of the Company's ability to more fully utilize its net
operating  loss   carryforwards  due  to  the  Company's  more  recent  earnings
performance, excluding Hercules and the Genesis loan loss.

Prior Performance: 1994 Compared to 1993

         The  significant  increase  in  1994  operating  income  over  1993  is
primarily due to the performance of the Automotive  Products segment.  Sales for
this segment were 17.5% higher than in 1993.  This increase is due to the growth
of the  domestic  automotive  industry  and a growing  acceptance  of the Westin
product line  manufactured  at St. James.  The increase in revenues  enabled all
facilities to enhance their  utilization  of plant capacity and obtain a greater
return on fixed costs.  As a result of this and the continuing  efforts to lower
the Automotive  Products segment's overhead  structure,  gross margins increased
from 29% of sales in 1993 to 31% in 1994.

         In 1993,  significant  efforts  were made to  enhance  the  aftermarket
awareness of the Westin line of products manufactured in St. James. The market's
acceptance  of this line of  Grille  Guards,  Push  Bars,  Step  Rails and other
tubular  products in 1994,  was such that the growth of this line  accounted for
70% or $3,605,300 of the Company's $5,146,000 sales increase over 1993.

         Sales and marketing  expenses  increased by $668,000 in 1994 over 1993.
Of this amount,  $516,000 is due to variable  selling costs such as commissions,
packaging and freight which  increased due to the increase in sales from 1993 to
1994. To facilitate this increase in sales,  Wedgestone Automotive increased its
advertising and promotion expenditures in 1994 by $152,000.

         Administrative  expenses increased in 1994 due to $190,000 in legal and
accounting  costs  incurred  as a  result  of the  acquisition  of  the  Standun
Automotive Segment.

Accounting Pronouncements

         In  1995,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting  Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. The
principles  established  in the new statement  must be applied by the Company in
1996. Among other provisions, the statement changed current accounting practices
for the  evaluation of impairment of long-lived  assets.  Management has not yet
completed its analysis of the effect of adopting the new statement.

         In 1995, the FASB also issued SFAS No. 123,  Accounting for Stock-Based
Compensation, which will be effective for the Company beginning January 1, 1996.
SFAS  No.  123  requires  expanded   disclosures  of  stock-based   compensation
arrangements  with employees and encourages (but does not require)  compensation
cost to be  measured  based on fair  value  of the  equity  instrument  awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes  compensation  cost  based  on the  intrinsic  value  of  the  equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation  awards to employees and will disclose the required pro
forma effect on net income and earnings per share.

                                        9

<PAGE>


Item 8.   Consolidated Financial Statements and Supplementary Data


                      WEDGESTONE FINANCIAL AND SUBSIDIARIES

                                      INDEX



                                                                            Page
                                                                            ----
          Financial Statements   

                                Independent Auditor's Report                 11

                                Consolidated Balance Sheets as of
                                  December 31, 1995, and December
                                  31, 1994.                                  12

                                Consolidated Statements of Operations
                                  for the years ended December 31,
                                  1995, 1994, and 1993.                      13

                                Consolidated Statements of
                                  Shareholders' Equity for the years
                                  ended December 31, 1995, 1994,and 1993.    14

                                Consolidated Statements of Cash
                                  Flow for the years ended
                                  December 31, 1995, 1994 and 1993.          15


                                Notes to Consolidated Financial
                                  Statements.                                16



                                       10

<PAGE>


INDEPENDENT AUDITORS' REPORT


To  the  Board  of  Trustees  and  Shareholders  of  Wedgestone   Financial  and
Subsidiaries:

We have  audited the  accompanying  consolidated  balance  sheets of  Wedgestone
Financial  and  Subsidiaries  as of  December  31, 1995 and 1994 and the related
consolidated  statements of operations,  shareholders' equity and cash flows for
each of the three years in the period ended  December 31, 1995.  Our audits also
included the consolidated  financial  statement schedules listed in the index at
Item 14. These financial  statements and financial  statement  schedules are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,   the  financial   position  of  Wedgestone   Financial  and
Subsidiaries  as of  December  31,  1995  and  1994,  and the  results  of their
operations, and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted  accounting  principles.
Also, in our opinion,  such consolidated  financial  statement  schedules,  when
considered in relation to the basic consolidated financial statements taken as a
whole,  present  fairly  in all  material  respects  the  information  set forth
therein.






Deloitte & Touche LLP
Los Angeles, California
March 27, 1996


                                       11

<PAGE>



<TABLE>



                                           WEDGESTONE FINANCIAL AND SUBSIDIARIES
                                                CONSOLIDATED BALANCE SHEETS

                                             AS OF DECEMBER 31, 1995 and 1994

                                         (Amounts in Thousands--except share data)

<CAPTION>


                                                                                        1995                1994
                                                                                   -------------        --------
<S>                                                                                  <C>                  <C>       
ASSSETS (Note 7)

Current Assets:
Cash                                                                                 $    365             $    179
Accounts and other receivable - (net of allowances of $256 and
   $202 in 1995 and 1994, respectively)                                                 6,057                4,452
Inventories (Note 4)                                                                    4,123                3,610
Prepaid expenses and other assets                                                         371                  194
Deferred income taxes (Note 8)                                                            476                  316
                                                                                     --------             --------
  Total Current Assets                                                                 11,392                8,751

Notes receivable - net (Note 6)                                                            84                  735
Real estate acquired by foreclosure - net (Note 6)                                      1,091                  965
Property, plant and equipment - net (Note 5)                                            4,694                2,510
Goodwill                                                                                  550                  217
Deferred income taxes (Note 8)                                                          2,114                  974
Other assets                                                                            1,473                  239
                                                                                     --------             --------
                                                                                       10,006                5,640
                                                                                      --------             --------

  Total Assets                                                                       $ 21,398             $ 14,391
                                                                                     ========             ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Revolving and current portion of long-term debt (Note 7)                             $  2,305             $  1,032
Accounts payable                                                                        3,308                2,975
Accrued payroll and related expenses                                                      611                  400
Other accrued expenses                                                                    980                  926
                                                                                     --------             --------
  Total Current Liabilities                                                             6,475                5,333

Long-term debt (Note 7)                                                                 8,447                5,676
                                                                                      --------             --------
  Total liabilities                                                                    15,651               11,009

Commitments and contingencies (Notes 10 and 12)

Shareholders' Equity:  (Notes 9 and 11)

Shares of Beneficial Interest - par value $1.00 per
  share:  authorized -- unlimited shares;
  issued and outstanding -- 21,885,668 shares and 20,385,668
  at December 31, 1995 and 1994, respectively                                          21,886               20,386
Additional paid-in capital                                                             31,396               32,376
Accumulated deficit                                                                   (47,535)             (49,380)
                                                                                     --------             --------
  Total Shareholders' Equity                                                            5,747                3,382
                                                                                     --------             --------

  Total  Liabilities and Shareholders' Equity                                        $ 21,398             $ 14,391
                                                                                     ========             ========



<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>

                                       12

<PAGE>

<TABLE>




                      WEDGESTONE FINANCIAL AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

                  (Amounts in Thousands--except per share data)


<CAPTION>

                                                                         1995               1994            1993
                                                                    --------------     --------------  ---------
<S>                                                                      <C>              <C>              <C>    
Net sales                                                                $46,112          $34,618          $29,472

Cost of sales                                                             31,747           23,703           20,935
                                                                        ---------        ---------        --------
Gross profit                                                              14,365           10,915            8,537


Selling, general and administrative expenses (Note 3)                     11,635            8,911            7,984
                                                                        ---------       ----------       ---------
Operating income                                                           2,730            2,004              553


Goodwill amortization                                                        106               44               43
Interest expense (Note 7)                                                  1,340              486              415
Other expense (Note 6)                                                       697              ---              ---
                                                                        ---------       ----------       ---------
Income before taxes                                                          587            1,474               95


Provision (benefit) for income taxes (Note 8)                             (1,258)             (19)             211
                                                                         --------      -----------      ----------

Net income (loss)                                                        $ 1,845          $ 1,493            ($116)
                                                                        =========        ========        ==========

Net income (loss) per share: (Note 1)

  Share of Beneficial Interest                                              $.08             $.07            ($.01)
                                                                        =========        ========        ==========

Weighted average number of shares outstanding:

  Shares of Beneficial Interest                                           21,764           20,386            20,386
                                                                        =========        =========        =========

<FN>



                 See notes to consolidated financial statements.
</FN>
</TABLE>

                                                            13

<PAGE>

<TABLE>


                      WEDGESTONE FINANCIAL AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

                             (Amounts in Thousands)


<CAPTION>

                                                                                Additional
                                                       Shares of beneficial      paid-in      Accumulated
                                                               interest          capital        deficit           Total
                                                       ----------------------   ----------     ----------         -------
                                                       Shares        Amount
                                                       -------      --------     
<S>                                                    <C>          <C>           <C>           <C>               <C>   
Balance at January 1, 1993                             20,386       $20,386       $33,800       ($50,757)         $3,429

Distributions to Standun                                                             (755)                          (755)

Net loss                                                                                            (116)           (116)
                                                       ------       -------       -------       --------         -------

Balance at December 31, 1993                           20,386        20,386        33,045        (50,873)          2,558

Distributions to Standun                                                           (1,109)                        (1,109)

Increase in tax basis of assets (Note 8)                                              440                            440

Net Income                                                                                         1,493           1,493
                                                       ------       -------       -------       --------         -------

Balance at December 31, 1994                           20,386        20,386        32,376        (49,380)          3,382

Issuance of shares of beneficial interest to
  secure third party debt guarantee (Note 1)            1,200         1,200          (840)                           360

Issuance of shares of beneficial interest in
  exchange for acquisition services (Note 3)              200           200          (140)                            60

Issuance of shares of beneficial interest to
  pay off outstanding debt (Note 1)                       100           100                                          100

Net income                                                                                         1,845           1,845
                                                       ------       -------       -------       --------         -------
Balance at December 31, 1995                           21,886       $21,886       $31,396       ($47,535)        $ 5,747
                                                       ======       =======       =======       =========        =======



<FN>

                 See notes to consolidated financial statements.
</FN>
</TABLE>

                                       14

<PAGE>

<TABLE>

                      WEDGESTONE FINANCIAL AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW

              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

                             (Amounts in Thousands)

<CAPTION>

                                                                                1995            1994           1993
                                                                            ------------    ------------    -------
<S>                                                                            <C>            <C>             <C>   
Cash Flows from Operating Activities:
Net income (loss)                                                              $ 1,845        $ 1,493         ($116)
  Adjustments to reconcile net income (loss) to net
    cash provided by operating activities:
    Provision for loan losses                                                      ---             71            89
    Write-off of note receivable                                                   697            ---           ---
    Depreciation and amortization                                                1,198            829           602
    Deferred income taxes                                                       (1,300)          (681)           44
    Gain on disposal of assets (net)                                               ---            (10)          (23)

Changes in assets and liabilities:
    Accounts and other receivables                                                (109)          (832)         (504)
    Inventories                                                                    617            (25)          485
    Prepaid expenses and other current assets                                     (177)           (62)          (24)
    Accrued payroll and related expenses                                           211             99            40
    Other accrued expenses                                                      (1,016)           570          (241)
    Accounts payable                                                               333            555          (320)
    Other assets                                                                  (463)          (153)          ---
    Other liabilities                                                              ---         (1,788)          195
                                                                               -------        -------         -----
Net cash provided by operating activities                                        1,836             66           227
                                                                               -------        -------         -----

Cash Flows from Investing Activities:
    Proceed from sale of real estate and equipment                                 ---             87           264
    Proceeds from repayment of mortgage notes receivable                             1             51             2
    Notes receivable                                                               ---            ---           (25)
    Acquisition costs paid                                                        (401)           ---           ---
    Capital expenditures                                                          (926)          (575)         (179)
    Investment in real estate                                                     (126)          (172)         (119)
                                                                               -------        -------         -----
Net cash used in investing activities                                           (1,452)          (609)          (57)
                                                                               -------        -------         -----

Cash Flows from Financing Activities:
    Distributions to Standun                                                       ---           (801)         (755)
    Repayment of term debt                                                        (949)          (362)         (285)
    Deferred financing fees paid                                                   (85)
    Repayment of participation arrangements                                        ---            ---            (3)
    Borrowings on long term debt                                                   635            192           493
    Net borrowings on revolving debt                                               201          1,666           365
                                                                               -------        -------         -----
Net cash provided by (used in) financing activities                               (198)           695          (185)
                                                                               -------        -------         -----
Net Increase in Cash                                                               186            152           (15)

Cash at Beginning of Period                                                        179             27            42
                                                                               -------        -------         -----

Cash at End of Period                                                          $   365        $   179         $  27
                                                                               =======        =======         =====



<FN>
                See notes to consolidated financial statements.

</FN>
</TABLE>
                                       15

<PAGE>





                      WEDGESTONE FINANCIAL AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              For the Years Ended December 31, 1995, 1994 and 1993


NOTE 1.     Background and Basis of Presentation

         Background - Wedgestone  Financial  ("Wedgestone" or the "Company") was
formed in 1980 as a real  estate  investment  trust  ("REIT")  and, on August 9,
1991, filed for bankruptcy.  Wedgestone's  plan of  reorganization  (the "Plan")
became effective on August 3, 1992.

         Under the guidance of its current  management,  Wedgestone  operates in
two  business  segments,   Automotive  Products  and  Real  Estate  and  Lending
activities.  The automotive  segment  manufactures  and  distributes  automotive
aftermarket  products for the light duty truck market.  Its  principal  products
include rear bumpers;  tubular  products such as grille  guards,  push bars, and
step rails;  and various  other  related  aftermarket  products.  The  Company's
automotive  products are marketed in traditional,  original equipment and retail
automotive   aftermarkets.   As  of  March  15,  1996,  the  automotive  segment
manufactures  and sells its products at two locations in California,  and one in
Minnesota. Sales are also made from distribution centers in Texas and Utah.

         Although its primary focus has shifted toward its  Automotive  Products
business  segment,  Wedgestone's  Real Estate and Lending  business  segment has
continued  since  emerging  from  bankruptcy  in  1992.  Wedgestone  owns  three
properties  that were  acquired by  foreclosure.  The  aggregate  value,  net of
reserves,  is approximately  $1,091,000 as of December 31, 1995.  Wedgestone has
outstanding loans on one property,  net of reserves, of approximately $84,000 as
of December 31, 1995.

         Acquisitions   -  Since  May  1992,   Wedgestone   has  acquired  three
manufacturing operations. In June 1992, Wedgestone acquired St. James Automotive
Corp. ("St.  James") in exchange for 6,795,220 shares of beneficial  interest of
Wedgestone  and accounted for this  acquisition  as a purchase.  On November 18,
1994,  Wedgestone acquired the Automotive Segment of Standun,  Inc. ("Standun"),
which  consisted  of the Fey  Automotive  Products  Division  ("Fey")  and Sigma
Plating  Co.,  Inc.  ("Sigma") in exchange for  6,795,223  shares of  beneficial
interest  of  Wedgestone  and the  assumption  of  approximately  $1,104,000  of
outstanding  debt due to related  parties of both  Wedgestone  and Standun,  and
certain  other  liabilities.  The  shareholders  of Standun  owned,  directly or
indirectly,  approximately  48% of Wedgestone prior to the acquisition and, as a
result, this acquisition was accounted for as a "put-together"  which is similar
to the pooling of interest method of accounting. As a result of the acquisition,
Standun  now  owns 31% of the  outstanding  shares  of  beneficial  interest  of
Wedgestone.  On January 9, 1995  Wedgestone  acquired  substantially  all of the
assets of Hercules Bumpers, Inc. ("Hercules"). The purchase price for the assets
acquired was the assumption of certain debt and other liabilities  approximating
$5.1  million.  In  addition,  certain  debt is  being  guaranteed  jointly  and
severally by Charles W. Brady  ("Brady"),  the former  principal  shareholder of
Hercules,   and  Chattahoochee   Leasing  Corporation   ("CLC"),  a  corporation
controlled by Brady. In exchange for this guarantee, Brady received a promissory
note in the amount of $300,000 and 1,200,000  shares of  beneficial  interest of
Wedgestone.  In  consideration  for an agreement to pay a liability of Hercules,
CLC received a promissory  note for $100,000 which was secured by 100,000 shares
of beneficial  interest of Wedgestone.  In June, 1995, the Company exercised its
right under the CLC  Agreement  and acquired the note by issuing these shares to
CLC. See Subsequent Events (Note 14).

         The following  supplemental pro forma  information has been prepared as
though the  acquisition  of  Hercules  had  occurred  at  January  1, 1994:  (In
Thousands)

                                                                Year ended
                                                              December 31, 1994
                                                              ------------------
        Net Sales                                                $46,891
        Net Income                                               $ 1,188
        Net Income per Share of Beneficial Interest              $   .05


         The pro  forma Net  Sales,  Net  Income,  and Net  Income  per Share of
Beneficial Interest for the year ended December 31, 1995 would not be materially
different than the actual results presented.

                                       16

<PAGE>

         Basis  of   Presentation   and  Principles  of   Consolidation   -  The
accompanying   consolidated  financial  statements  include  the  operations  of
Wedgestone and give  retroactive  effect to the acquisition of Fey and Sigma for
all  periods  presented.  As  a  result,  the  financial  position,  results  of
operations and cash flows are presented as if Wedgestone, Fey and Sigma had been
consolidated for all periods presented.  The consolidated  statements of changes
in Wedgestone's shareholders' equity reflect the Wedgestone shares of beneficial
interest  issued  to  effect  the  Fey and  Sigma  acquisition  as if they  were
outstanding for all periods presented.  The results of operations and cash flows
presented include the results of operations and cash flows of Hercules since its
date of acquisition.

         The  consolidated   financial   statements   include  the  accounts  of
Wedgestone  and its wholly  owned  subsidiaries.  All  significant  intercompany
transactions have been eliminated in consolidation.


NOTE 2.    Summary of Significant Accounting Policies

Inventories - Inventories  are stated at the lower of cost or market,  with cost
being determined by the FIFO (first-in, first-out) method of accounting.

Property,  Plant,  and  Equipment - Property,  plant and equipment are stated at
cost.  Expenditures that materially  increase the life of the related assets are
capitalized and  maintenance  and repairs are charged to expense.  The costs and
related  accumulated  depreciation  applicable to property,  plant and equipment
which are sold or retired are removed from the accounts, and any gain or loss is
included in income.

Depreciation  and  Amortization - Wedgestone uses the  straight-line  method for
depreciating  property,  plant and equipment over their estimated  useful lives.
Buildings and  improvements  are depreciated  from 5 to 40 years,  machinery and
equipment  from 3 to 10 years,  furniture  and fixtures  from 3 to 5 years,  and
leasehold  improvements are amortized over the terms of the respective leases or
the life of the improvements, whichever is shorter.

Goodwill - The Company  reviews the  recoverability  of goodwill to determine if
there has been any permanent  impairment.  This assessment is performed based on
the estimated  undiscounted future cash flows from operating activities compared
with the carrying value of intangible  assets.  If the undiscounted  future cash
flows are less than the carrying value, a write-down would be recorded, measured
by the amount of the  difference.  Accumulated  amortization  was  $106,000  and
$44,000 for the years ended December 31, 1995 and 1994 respectively.

Income Taxes - Deferred tax assets and deferred tax liabilities  reflect the tax
consequences  in future  years of  differences  between  the income tax bases of
assets and liabilities and the corresponding  bases used for financial reporting
purposes.  The  measurement  of  deferred  tax assets is adjusted by a valuation
reserve,  if necessary,  so that the net tax benefits are recognized only to the
extent that they will more likely than not be realized.

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

Fair Value of Financial Instruments -

         Cash,  Accounts  Receivable and Accounts Payable - The carrying amounts
         approximate  fair  value  because  of the  short  maturities  of  these
         instruments.

         Revolving Line of Credit - The carrying amount  approximates fair value
         because the interest rate is based on variable reference rates.

         Long-Term  Debt  (excluding  revolving  line of credit) - The  carrying
amount of long-term debt approximates fair value.

Concentration of Credit Risk - Financial  instruments  which subject the Company
to credit risk consist  primarily of accounts  receivable.  This risk is reduced
due to the number of  customers  and their  geographic  dispersion.  The Company
performs ongoing credit  evaluations of its customers and maintains an allowance
for potential credit losses.

Notes  Receivable  - Notes  receivable  are  recorded  at the  lower  of cost or
estimated net realizable value.


                                       17

<PAGE>

Real Estate  Acquired by  Foreclosure - Real estate  acquired by  foreclosure is
recorded at the lower of cost or estimated net realizable  value.  Estimated net
realizable  value is generally  the  estimated  selling price which the property
will bring if placed on the open  market  allowing a  reasonable  time to find a
willing buyer.

Income/Loss  Per  Share  of  Beneficial  Interest  -  Income/loss  per  share of
beneficial interest is calculated based on weighted average outstanding shares.

Accounting  Pronouncements - In 1995, the Financial  Accounting  Standards Board
(FASB)  issued  Statement  of  Financial  Accounting  Standards  (SFAS) No. 121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be Disposed of. The principles  established in the new statement must be applied
by the Company in 1996. Among other  provisions,  the statement  changed current
accounting  practices for the  evaluation  of  impairment of long-lived  assets.
Management  has not yet completed its analysis of the effect of adopting the new
statement.

                 In 1995,  the FASB also  issued SFAS No.  123,  Accounting  for
Stock-Based  Compensation,  which will be  effective  for the Company  beginning
January 1, 1996.  SFAS No. 123  requires  expanded  disclosures  of  stock-based
compensation  arrangements  with employees and encourages (but does not require)
compensation  cost to be measured  based on fair value of the equity  instrument
awarded. Companies are permitted,  however, to continue to apply APB Opinion No.
25,  which  recognizes  compensation  cost based on the  intrinsic  value of the
equity instrument awarded. The Company will continue to apply APB Opinion No. 25
to its stock  based  compensation  awards to  employees  and will  disclose  the
required pro forma effect on net income and earnings per share.

NOTE 3.    Related Parties

         St. James has a five year consulting agreement with PSG Associates,  an
affiliate  of the  former  owners of St.  James  (who are also  affiliated  with
Wedgestone),  to provide  advisory  services  to St.  James with  respect to its
operations, expansion and financing activities at a minimum rate of $125,000 per
year plus  reimbursement of expenses.  St. James paid $125,000 to PSG Associates
for each of the years ended December 31, 1995, 1994 and 1993, respectively.

         In connection with the acquisition of the Automotive Segment of Standun
Inc.,  Resource  Holdings  Associates and PFG Corp.  ("PFG"),  both of which are
controlled by certain Wedgestone  shareholders,  received a fee of $225,000,  in
February 1995.

         In  connection  with  the  Hercules   acquisition,   Resource  Holdings
Associates and PFG received a fee of $220,000 consisting of $160,000 and 200,000
shares of beneficial  interest of  Wedgestone  at a valuation  price of $.30 per
share.

         On January 25, 1995,  Hercules  entered into a five year agreement with
PFG and Wedgestone Partners, an affiliate of the aforementioned shareholders, to
provide advisory services to Hercules with respect to its operations,  expansion
and financing  activities at an aggregate amount of $175,000 per year.  $175,000
was included in the 1995 general and administrative expenses for this agreement.

         On January 12,  1993,  as  amended,  Wedgestone  entered  into a credit
facility with Rockaway 605 Corp.  ("Rockaway")  pursuant to which Wedgestone was
permitted to borrow up to a maximum of $300,000  with  additional  over advances
available at the discretion of the lender to fund  Wedgestone's  working capital
needs  and those of its  subsidiaries.  As a  requirement  of the  financing  to
purchase the Automotive Segment, Wedgestone paid Rockaway $25,000 to release its
lien  on  the   stock  of  St.   James  and   certain   of   Wedgestone's   real
estate.Wedgestone  also  agreed  to  issue  Rockaway  transferable  warrants  to
purchase  225,000 shares of beneficial  interest of Wedgestone at $.25 per share
if the loan was not paid by March 31,  1995.  As of  December  31,  1995,  these
warrants had not yet been issued. As of December 31, 1995, Rockaway had advanced
$429,000 in excess of the funding  agreement.  The Rockaway Loan is secured by a
pledge  of all of the  stock  of  Wedgestone's  direct  subsidiaries  and  notes
receivable. Rockaway is a real estate holding company which is controlled by the
former shareholders of St. James. The loan is due in July 1996.

                                       18

<PAGE>

NOTE 4.  Inventories

         Inventories consist of the following:  (In Thousands)

                                                  December 31,
                                          1995                  1994
                                         ------               ------
            Finished goods               $1,984               $2,398
            Work in progress              1,137                  783
            Raw materials                 1,370                  712
                                         ------               ------
                                          4,491                3,893
            Less allowances of             (368)                (283)
                                         ------               ------
                                         $4,123               $3,610
                                         ======               ======

NOTE 5.  Property, Plant and Equipment

         The components of property,  plant and equipment  were as follows:  (In
         Thousands)

                                                               December 31,
                                                         1995              1994
                                                       -------          -------
            Buildings and leasehold improvements       $ 2,331          $ 1,080
            Land                                           556              500
            Machinery and equipment                      8,305            6,878
            Furniture and fixtures                       1,213              960
                                                       -------          -------
                                                        12,405            9,418
            Accumulated depreciation and amortization   (7,711)          (6,908)
                                                        ------          --------
            Net property, plant and equipment          $ 4,694          $ 2,510
                                                       ========         =======


NOTE 6.    Real Estate and Lending

         On August 24, 1992,  Wedgestone  entered into a secured loan  agreement
(the "Loan") with  Genesis  Plastics,  Inc.  ("Genesis").  The Loan,  as amended
provided for borrowings of up to $2,000,000 with over advances at the discretion
of the lender.  As of December 31, 1992,  the former  shareholders  of St. James
indirectly agreed to purchase a pro rata  participation in the Loan in excess of
$800,000. As of December 31, 1994, $1,619,000 had been advanced to Genesis under
the participation agreement.  Genesis, had previously filed for protection under
Chapter II of the United States  Bankruptcy Code on August 24, 1994 and had been
unsuccessful  in its efforts to secure a buyer for its  Charleroi,  Pennsylvania
recycling facility. Wedgestone held a senior security interest in the inventory,
receivables  and  certain  equipment  of  Genesis.  On  November  29,  1995,  in
accordance  with its rights under the loan  agreement  with Genesis,  Wedgestone
consented to the liquidation of the Genesis'  inventory and equipment  through a
public auction. As a result of this action,  Wedgestone recorded a one time loss
relating to this loan of $697,000 in December 1995.
<TABLE>

         The balance in notes receivable was as follows:  (In Thousands)
<CAPTION>

                                                                               December 31,
                                                                       1995                  1994
                                                                     --------             --------
          <S>                                                        <C>                  <C>
          Other Notes                                                $    84                   85
          Principal -- Genesis Loan                                      ---              $ 2,419
          Participation due to third party -- Genesis Loan               ---               (1,619)
          Allowance for losses -- Genesis Loan                           ---                 (150)
                                                                     --------             --------
                                                                     $    84              $   735
                                                                     ========             =======
</TABLE>

         The balance of real estate acquired by foreclosure was as follows:  (In
Thousands)

                                                       December 31,
                                                 1995                  1994
                                               -------              --------
          Gross investment                      $7,649               $7,523
          Writedown                             (6,558)              (6,558)
                                               -------              --------
          Net                                   $1,091              $   965
                                                =======             =======
                                       19

<PAGE>

<TABLE>

         NOTE 7.    Revolving Credit Line and Long Term Debt

         Revolving  credit lines and long-term  debt consisted of the following:
(In Thousands)

<CAPTION>
                                                                                           December 31,
                                                                                       1995              1994
                                                                                     --------          --------
             <S>                                                                     <C>               <C>
             Revolving credit line with The CIT Group, Inc.,
                interest at prime plus 2.5%, payable November 1997                   $ 3,576           $ 3,553

             Revolving credit line with NationsBank of Georgia,
               Interest at prime, payable January 2000                                 3,662             ---

             Term loan with The CIT Group, Inc.,  interest at prime plus
                2.5%, payable in monthly installments of
                $19,892 with a balloon payment due November 1997                         935             1,174

             Term loan with The CIT Group, Inc.,  interest at prime plus
                2.5%, payable in monthly installments of
                $9,000 with a balloon payment due March 2000                             459             ---

             Notes payable to Fifth  Avenue  Partners,  interest  at 9%,
                payable in monthly installments of $22,917 through
                December 31, 1999                                                        921             1,104

             Notes payable to Rockaway 605 Corp.
                interest at 15%, payable July, 1996 (See Note 3)                         729               684

             Notes payable to Charles Brady, interest at 8%
                payable in four equal annual installments starting January 1997          300             ---

             Notes payable to C.E. Westin, 0% interest rate, currently due
                and payable                                                               70                70

             Other                                                                       100               123
                                                                                      -------           -------

                       Total                                                          10,752             6,708

             Less current portion of long-term
                debt and capital lease obligations                                    (2,305)           (1,032)
                                                                                     -------           -------

             Total long-term debt and capital
                  lease obligations                                                  $ 8,447           $ 5,676
                                                                                     =======           =======
</TABLE>


         The  contractual  payments of principal  on  long-term  debt are due as
follows:  $2,305,000 in 1996, $5,692,000 in 1997, $1,427,000 in 1998, $1,195,000
in 1999, and $107,000 in 2000, and $26,000 thereafter.

         On  November  18,  1994,  in  connection  with the  acquisition  of the
Automotive  Segment,  Wedgestone,  through  its wholly  owned  subsidiaries  Fey
Automotive  Products,  Inc.,  Sigma Plating Co.,  Inc. and St. James  Automotive
Corp., entered into a three-year,  $7.5 million credit facility,  which provides
for a revolving credit line and term loan with CIT, and which is  collateralized
by substantially all of the assets of these  subsidiaries.  There was a facility
fee of 1% of the maximum credit line  associated  with  procurement of the loan.
The  agreement  provides for  borrowings  based on a percentage of inventory and
receivables and includes an equipment term loan, at the lender's prime rate plus
2.5% (11% at December 31, 1995 and 1994).

         The agreement  contains certain covenants which require  maintenance of
minimum working capital and equity levels. There is a minimum borrowing required
of $4,000,000 under the agreement.

         On January 8, 1995, in connection with the acquisition of substantially
all of the assets of  Hercules  Bumpers,  Inc.,  Wedgestone,  through its wholly
owned subsidiary,  Hercules  Automotive  Products,  Inc. entered into a one year
$4.0 million

                                       20

<PAGE>

revolving credit line with NationsBank of Georgia which is collateralized by the
real property,  receivables,  inventory and certain  equipment at Hercules.  The
agreement  provides  for  borrowings  based on a  percentage  of  inventory  and
receivables.  Under the terms of the  agreement,  in January 1996, the revolving
credit line was  converted to a $4.0  million term loan due in 48 equal  monthly
installments starting February 1996. See Subsequent Events (Note 14).

         Wedgestone  assumed a note associated with the termination of Standun's
management  agreement with Fifth Avenue Partners,  a related party of Wedgestone
and Standun,  in the amount of $1,104,000 in conjunction with the acquisition of
the Automotive Segment (See Note 1).

         Wedgestone   has  included  in  its  short-term   obligations   $70,000
representing a note payment to C. E. Westin which was to have been made in 1992.
St.  James  exercised  its  right  of  indemnification  under  an  environmental
liability letter and withheld part of the payment.

NOTE  8.    Income Taxes

         Wedgestone  previously  operated  as a  real  estate  investment  trust
("REIT") under certain  sections of the Internal  Revenue Code.  Wedgestone lost
its REIT status when it emerged from  bankruptcy  in August  1992,  and as such,
income will be taxed at the  Wedgestone  level.  Wedgestone  currently has a net
operating loss carry forward of approximately $43,000,000 for federal Income tax
purposes. These losses expire in various years from 2004 to 2008.

         The  Automotive  Segment  filed a  consolidated  income tax return with
Standun for the year ended  December 31, 1993 and for the period January 1, 1994
through date of acquisition,  November 18, 1994.  Income tax expense of $385,713
and  $211,384  for the years  ended  December  31,  1994 and 1993  respectively,
represent income taxes on the Automotive  Segment's  taxable income had it filed
on a separate return basis. Had the acquisition  taken place at the beginning of
each of these years,  these taxes would have been absorbed by  Wedgestone's  net
operating loss. For the year ended December 31, 1995,  $42,000  represents state
income taxes  currently due and payable in the states in which the  subsidiaries
do not file consolidated returns with Wedgestone.

         In connection  with the  acquisition of the Automotive  Segment,  a tax
benefit of $440,000 which was  attributable  to the increase in tax basis of the
Automotive Segment's assets was allocated to additional paid-in capital.

         The provision for income taxes consists of the following components:

                                        1995             1994             1993
                                      ------            -----            ------

   Current                            $   42            $ 662            $  167
   Deferred                              168               76              (164)
   Change in Valuation Allowance      (1,468)            (757)              208
                                      ------            -----            ------

                                     ($1,258)          ($  19)           $  211
                                      ======            =====            ======

<TABLE>

    Deferred tax assets were comprised of the following:

<CAPTION>
                                                                             1995                1994
                                                                           --------            ------
    <S>                                                                     <C>                 <C>    
    Net operating loss carry forward                                        $14,627             $14,790
    Accruals/Reserves                                                           476                 534
    Depreciation                                                                340                 287
    Basis difference on automotive segment assets acquired                      440                 440
    Basis difference in real estate                                             542                 542
                                                                           ----------           --------
    Total deferred tax assets                                                16,425              16,593
    Less:  Valuation allowance                                              (13,835)            (15,303)
                                                                           ----------           --------
    Net deferred tax assets                                                   2,590               1,290

    Less current deferred tax assets                                           (476)               (316)
                                                                           ----------           --------

    Noncurrent deferred tax assets                                          $ 2,114             $   974
                                                                          ==========          =========
</TABLE>

                                       21

<PAGE>

<TABLE>

          The following is a reconciliation between the income taxes computed at
the Federal statutory rate and the provision for income taxes:

<CAPTION>
                                                           1995          1994            1993
                                                           ----          ----            ----
                  <S>                                    <C>            <C>             <C>   
                  Income taxes computed at the
                      Federal statutory rate               34.00%         34.00%          34.00%
                  State income taxes net of
                      Federal benefit                       6.00%          6.00%           6.00%
                  Other                                    (4.12%)        10.06%         (35.98%)
                  Change in valuation allowance          (215.19%)       (51.34%)        218.84%
                                                         ---------       --------        -------
                                                         (214.31%)       ( 1.28%)        222.86%
                                                         ========        =======         ======
</TABLE>

NOTE 9.    Special Income Shares

          Prior to 1990, in connection with  Wedgestone's  acquisition of all of
the net assets of Wedgestone  Participation Mortgage Trust ("WPMT"),  Wedgestone
issued 593,676 shares of beneficial  interest and 565,406 Special Income Shares.
The Special Income Shares  evidenced a share of all income which was earned from
the contingent-appreciation  and gross-rental-increase  portions of the mortgage
loans  acquired  from WPMT, of which none remained at December 31, 1995 and were
not entitled to share in any other  Wedgestone  income or assets.  There were no
accrued earnings associated with special income shares for 1995, 1994 or 1993.

          On May 25, 1995, the United States  Bankruptcy  Court for the District
of  Massachusetts  issued an order  establishing  rights  and  obligations  with
respect to the then one remaining outstanding loan under which income rights had
been  granted  to  certain  Special  Income  Shareholders.  The  order  released
Wedgestone from all obligations regarding the loan and authorized the Company to
transfer all loan documents to the Federal  Deposit  Insurance  Corporation.  In
connection with this order, Wedgestone was directed to cancel the Special Income
Shares  subject to certain  future  distribution  rights.  The balance sheet and
income statement presentation reflect this cancellation.


NOTE 10.    Commitments and Contingencies

         Wedgestone is obligated  under  various  cancelable  and  noncancelable
operating leases for manufacturing  facilities,  machinery and equipment.  These
leases expire  annually  through  August 31, 2002.  Future  minimum annual lease
commitments are:

             1996                                      $   904,000
             1997                                          745,000
             1998                                          664,000
             1999                                          396,000
             2000                                          368,000
             Thereafter                                    594,000
                                                          --------
             Total minimum lease payments               $3,671,000
                                                        ==========

         Total  net  rental  expense  under the terms of  various  building  and
equipment  leases was $980,000,  $1,069,000  and  $1,010,000 for the years ended
December 31, 1995,  1994 and 1993,  respectively.  There is a purchase option in
the  St.  James  manufacturing   facility  lease  in  the  amount  of  $500,000,
exercisable  at  any  time  upon   repayment  of  the  mortgages   which  expire
concurrently  with the sub-lease on October 31, 1998. St. James owes  consulting
fees to C. E. Westin in the amount of $58,095 as of December 31, 1995.

Note 11.    Stock Option and Profit Sharing Plans

         During 1995,  Wedgestone  created the  Wedgestone  Financial 1995 Stock
Option Plan (the "Option  Plan"),  which became  effective on December 15, 1995.
Officers, other key employees and significant  non-employees who are responsible
for or contribute to the management, growth and/or profitability of the business
of  Wedgestone  are eligible to be granted  stock options under the Option Plan.
The Option Plan replaces and  supersedes a former stock option plan  established
in 1994.

         The optionees  under the Option Plan will be selected from time to time
by the Committee (a group of individuals  appointed by the Trustees).  The stock
options  granted under the Option Plan may be of two types:  (i) Incentive Stock
Options

                                       22

<PAGE>

and (ii) Non-Qualified Stock Options.  The option price per share of stock under
a stock option will be  determined  by the  Committee at the time of grant.  The
option price with  respect to an  incentive  stock option shall not be less than
100% of the fair market value of the Wedgestone  stock on the date of the option
grant.  The option price with respect to a non-qualified  stock option shall not
be less than 85% of the fair market value of the stock on the date of the option
grant.  The stock  options can be exercised at such times as  determined  by the
Committee. The stock which is acquired through the exercise of the stock option,
is required to be held for investment and not for resale or other  distribution.
Wedgestone has reserved  1,000,000 shares of its stock to be used for the Option
Plan.  As of December 31, 1995,  995,000  options  were  granted,  and none were
exercised.

Changes  in the  number of shares  subject  to  options  during  the year  ended
December 31, 1995 are summarized as follows:


                                                                      1995
                                                                     -------
              Outstanding at beginning of year                        ---
              Options granted at $ .25 share                         995,000

              Options exercised                                       ---
              Options cancelled or expired                            ---
                                                                     -------
              Outstanding at end of year                             995,000
                                                                     =======



              Two outside directors were each granted 15,000 warrants to acquire
shares of beneficial  interest in  Wedgestone  at an exercise  price of $.25 per
warrant share.  The warrants may be exercised at any time from the date of grant
until October 31, 1997.  The warrants or the warrant  shares may not be disposed
of or encumbered, except in accordance with certain provisions of the Securities
Act of 1933. As of December 31, 1995, none of the warrants were exercised.

              There  were  no  contributions   to  Wedgestone's   former  401(k)
Profit-Sharing  Plan ("Profit  Plan") for the year ended  December 31, 1993. The
Profit Plan was liquidated in July 1993, and the assets were  distributed to the
plan participants.

              In January 1995, the Company established the Wedgestone Automotive
Corp  Retirement  Savings Plan (the  "Retirement  Plan").  The  Retirement  Plan
provides that all eligible employees of the Company who have attained the age of
21, have  completed one year of  employment  and are not subject to a collective
bargaining  agreement  are  permitted to contribute up to 15% of their salary to
the  Retirement  Plan.  The  Company  makes  contributions  on  behalf  of  each
participant of a matching  amount up to an employee  contribution  of 2% of such
employee's  salary.  Employees are fully vested at all times with respect to all
employee contributions to the Retirement Plan.

              The  contributions  to  Wedgestone's  Retirement Plan for the year
ended December 31, 1995 were $8,300.

NOTE 12.    Litigation

Bankruptcy Claims

              On October 30, 1992, a group calling  itself the "Equity  Security
Holders Committee of Wedgestone  Financial (the  "Committee")  filed a complaint
(the  "Complaint")  commencing  an  adversary  proceeding  in the United  States
Bankruptcy Court for the District of  Massachusetts.  On May 20, 1993, the Court
dismissed the proceeding.  The Committee  appealed the dismissal to the District
Courts and it was denied.  The  Committee  appealed to the First  Circuit and on
March 1, 1995, the appeal was denied. The Committee requested a rehearing by the
Court of Appeals for the First Circuit.  On March 22, 1995, the Court denied the
petition for rehearing.

Other

              On May 25,  1995,  the  United  States  Bankruptcy  Court  for the
District of Massachusetts  issued an order  establishing  rights and obligations
with respect to the one remaining outstanding loan under which income rights had
been  granted  to  certain  Special  Income  Shareholders.  The  order  released
Wedgestone from all obligations regarding the loan and authorized the Company to
transfer all loan documents to the Federal  Deposit  Insurance  Corporation.  In
connection with this order, Wedgestone was directed to cancel the Special Income
Shares  subject to certain  future  distribution  rights.  The balance sheet and
income statement  presentation included in this registration has been changed to
reflect this cancellation.


                                       23

<PAGE>

<TABLE>


NOTE 13.    Segment Information

              Wedgestone  principally  operates  in two  industries:  Automotive
products  and real  estate and  lending.  The  Automotive  Segment  manufactures
aftermarket automotive accessories which are sold and distributed throughout the
United  States.  The real  estate  activities  include  the  sale of  properties
previously acquired by foreclosure.


Financial Data By Business Segment: (In Thousands)
<CAPTION>

                                                                        For the Years Ended December 31,
                                                             1995                     1994                      1993
                                                             ----                     ----                      ----
<S>                                                        <C>                       <C>                       <C>    
Revenue:

Automotive Products                                        $46,112                   $34,618                   $29,472
                                                           ========                  ========                  =======


Income (Loss):

Automotive Products                                         $3,259                    $2,367                      $986
Real Estate and Lending                                       (529)                     (363)                     (433)
                                                           --------                  --------                    ------

   Total Operating Income                                    2,730                     2,004                       553

Other Expenses including taxes                               (885)                      (511)                     (669)
                                                           --------                  --------                    ------

Net Income (Loss)                                           $1,845                    $1,493                     ($116)
                                                            =======                   =======                    ======


Identifiable Assets:

Automotive Products                                       $ 17,228                  $ 11,087                  $  9,555
Real Estate and Lending                                      1,375                     1,880                     1,818
                                                          --------                  --------                  --------
Total Identifiable Assets                                   18,603                    12,967                    11,372

Corporate Assets                                             2,795                     1,424                       158
                                                          --------                  --------                  --------

Total Consolidated Assets                                 $ 21,398                  $ 14,391                  $ 11,530
                                                          =========                 ========                  ========


Capital Expenditures:

Automotive Products                                        $   926                   $   575                  $    179
                                                        ===========               ===========                =========


Depreciation:

Automotive Products                                        $ 1,092                  $    785                  $    559
                                                         ==========               ===========                =========
</TABLE>


NOTE 14.    Subsequent Events

         On March 5, 1996,  Hercules closed its  manufacturing  plant in Pelham,
Georgia.   The  market  for  the  bumpers   produced  in  the  Pelham   facility
significantly  changed during 1995.  Historically,  a significant  percentage of
Hercules business was for sales to dealers of a domestic OE Manufacturer.  A new
program implemented by one of these manufacturers in late 1994 made it extremely
difficult for Hercules to remain  competitive in this market  segment.  Hercules
incurred a net loss of $125,000 in 1995. As a result, management determined that
closing the Pelham facility was appropriate. Hercules is working with its senior
lender for an  orderly  liquidation  of the  assets in  Pelham.  While the final
outcome is  uncertain,  the  Company  does not expect the  closure of the Pelham
facility to have a material effect on 1996 operations.

                                       24

<PAGE>


NOTE 15.    Supplemental Cash Flow Information

         Cash paid during the year for:
                                 (In Thousands)

                                1995               1994               1993
                                ----               ----               ----

         Interest             $1,334                $561               $496
         Income Taxes         $  287                $567               $167


 Supplemental Schedule of Non-Cash Investing and Financing Activities

         During 1994, Standun  transferred land and buildings of $795,000 to the
Automotive Segment.

         In  connection  with  the  acquisition  of the  Automotive  Segment  in
November 1994,  Wedgestone  assumed a note  associated  with the  termination of
Standun's management agreement with a related party in the amount of $1,104,086.

         On January 9, 1995 Wedgestone acquired  substantially all of the assets
of Hercules Bumpers,  Inc.  ("Hercules") which manufactures and distributes rear
bumpers for both domestic and foreign light duty trucks.  The purchase price for
the assets  acquired was the  assumption  of certain debt and other  liabilities
approximating  $5.1  million.  In  addition,  certain  debt is being  guaranteed
jointly and severally by Charles W. Brady ("Brady"),  the principal  shareholder
of Hercules,  and  Chattahoochee  Leasing  Corporation  ("CLC"),  a  corporation
controlled by Brady. In exchange for this guarantee, Brady received a promissory
note in the amount of $300,000 and 1,200,000  shares of  beneficial  interest of
Wedgestone.  In  consideration  for an agreement to pay a liability of Hercules,
CLC received a promissory  note for $100,000 which was secured by 100,000 shares
of beneficial  interest of Wedgestone.  In June, 1995, the Company exercised its
right under the CLC  Agreement  and acquired the note by issuing these shares to
CLC. See Subsequent Events (Note 14).

         In  connection  with  the  Hercules   acquisition,   Resource  Holdings
Associates and PFG received a fee of $220,000 consisting of $160,000 and 200,000
shares of beneficial  interest of  Wedgestone  at a valuation  price of $.30 per
share.

         In  connection  with the  January  9,  1995  acquisition  of  Hercules,
Wedgestone assumed liabilities to acquire assets as follows:


           Accrued expenses                                          $1,094,021
           Revolver and other debt                                    3,957,024
                                                                      ---------
           Total liabilities assumed                                 $5,051,225
                                                                      =========

           Receivables, inventories and other assets                 $2,990,855
           Property, Plant and Equipment                              2,060,370
                                                                      ---------
           Total assets acquired                                     $5,051,225
                                                                      =========

                                       25

<PAGE>

                                    PART III

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

         None.
<TABLE>

Item 10.    Trustees and Executive Officers of the Registrant

         The  following  table sets forth  certain  information  concerning  the
trustees,  executive  officers and other management  personnel of Wedgestone and
its subsidiaries as of March 29, 1996:
<CAPTION>

      Name                           Age         Position
      ----                           ---         ---------
      <S>                             <C>        <C>
      Jeffrey S. Goldstein            50         Trustee, President, Treasurer and Secretary -  Wedgestone Financial
      John C. Shaw                    42         Trustee - Wedgestone Financial
      Jeffrey A. Oberg                41         Trustee - Wedgestone Financial
      John J. Doran                   46         Trustee - Wedgestone Financial
      David L. Sharp                  44         Chief Executive Officer - Wedgestone Automotive Corp
      Eric H. Lee                     41         Chief Financial Officer, Treasurer / Secretary - Wedgestone Automotive Corp
      Lawrence R. Wasielewski         52         Sr. Vice President, Sales/Marketing - Wedgestone Automotive Corp
      Paul W. Westerhoff              45         Sr. Vice President, Operations - Wedgestone Automotive Corp
</TABLE>

         Jeffrey  S.  Goldstein  has served as  President  of  Wedgestone  since
October 1, 1992, and has served as a Trustee since June 16, 1992.  Additionally,
Mr.  Goldstein  has served as President of Rockaway  605 Corp.  since 1989.  Mr.
Goldstein  joined Rockaway 605 Corp. for the purpose of  reorganizing  Rockaway.
Mr. Goldstein also performs consulting services for Air Wisconsin Airlines Corp.
From  1985 to 1989,  Mr.  Goldstein  served  as  Executive  Vice  President  and
Treasurer of Kane  Industries.  From 1979 to 1985, Mr.  Goldstein served as Vice
President and Treasurer of Arkay Packaging Corp.

         John C. Shaw has served as a Trustee since November, 1992. Mr. Shaw has
served as a  Managing  Director  of  Resource  Holdings  Ltd.,  a New York based
private  merchant banking firm, since 1983. Mr. Shaw is a member of the Board of
Directors of National Capital  Management  Corp., a publicly traded  corporation
with specialty finance, real estate and industrial operations.

         Jeffrey A. Oberg has served as a Trustee since October 1994.  Mr. Oberg
has served as a Managing  Director of KPMG Marwick since August 1995.  Mr. Oberg
previously served as Senior Vice President Finance and Corporate  Development at
United States Banknote  Corporation  from January 1994 through July 1995, and as
Vice  President  Finance and  Corporate  Development  from February 1991 through
December 1993. Prior to February 1991, Mr. Oberg served as Vice President in the
Investment Banking Division at The First Boston Corporation.

         John J. Doran has served as a Trustee since October 1994.  For the past
ten years, Mr. Doran served as President of Citizens Medical  Corporation and as
a consultant to Medco  Containment  Services,  Inc. Mr. Doran is a member of the
Board of Directors of Sandwich CoOp. Bank, a publicly traded company.

         David L.  Sharp  was hired as Chief  Executive  Officer  of  Wedgestone
Automotive  Corp upon  acquisition  of the  Automotive  Segment  from Standun on
November 18, 1994.  Mr.  Sharp has been with the Standun  companies  since 1979,
where he has  served  in  various  positions  with  Standun's  subsidiaries  and
divisions.  From 1989 until the  acquisition,  Mr.  Sharp served as President of
Standun and the Fey Automotive Products Division.

         Eric H.  Lee was  hired  as  Chief  Financial  Officer,  Treasurer  and
Secretary of  Wedgestone  Automotive  Corp upon  acquisition  of the  Automotive
Segment  from  Standun  on  November  18,  1994.  From  January  1994  until the
acquisition,  Mr.  Lee  served as Chief  Financial  Officer  of  Standun  and as
Controller of the Fey Automotive  Products division from February 23, 1993 until
January  1994.  Prior to Mr. Lee's  employment at Standun,  he occupied  various
management positions within the electronics industry, the latest being President
and Chief Operating Officer of Synthane Taylor, a subsidiary of Alco Industries.

                                       26

<PAGE>

         Lawrence  R.   Wasielewski  was  hired  as  Senior  Vice  President  of
Sales/Marketing of Wedgestone Automotive Corp upon acquisition of the Automotive
Segment from Standun on November 18, 1994. Mr. Wasielewski began employment with
the Fey  Automotive  Products  division  in June  1992,  where he served as Vice
President  of  Sales/Marketing.  Prior  to  his  employment  with  Standun,  Mr.
Wasielewski   occupied   various  senior   management   positions  with  Tenneco
Automotive, a division of Tenneco, Inc.

         Paul W.  Westerhoff was hired as Senior Vice President of Operations of
Wedgestone  Automotive  Corp upon  acquisition  of the  Automotive  Segment from
Standun on November 18, 1994. Mr. Westerhoff has been with the Standun companies
since November 1984, and has held various positions within the Company.

         Mr.  Goldstein,  as the  sole  officer  of  Wedgestone,  serves  at the
pleasure of the Board of  Trustees  and each of the  Trustees  serve until their
successors are elected and qualified at the next annual meeting of  Wedgestone's
Shareholders.

         All trustees are reimbursed for their reasonable out-of-pocket expenses
incurred in connection with attendance at Board meetings. Wedgestone compensates
its trustees at a rate of $2,000 per quarter and $200 per meeting.  All trustees
and  officers  are  serving  a  current  term of  office  that  continues  until
Wedgestone's   next  annual  meeting  of  shareholders.   There  are  no  family
relationships among any of the executive officers or trustees of Wedgestone.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

         Section  16(a)  of  the  Securities   Exchange  Act  of  1934  requires
Wedgestone's officers and directors and persons who own more than ten percent of
a  registered  class of  Wedgestone's  equities  securities,  to file reports of
ownership on Form 3 and changes in ownership on Forms 4 or 5 with the Securities
and Exchange Commission (the "Commission") and the NASDAQ System. Such officers,
directors and ten percent  shareholders  are also  required by the  Commission's
rules to furnish Wedgestone with copies of all Section 16(a) forms they file.

         Based solely on its review of the copies of such forms  received by it,
or written  representation  from  certain  reporting  persons that no Form 5 was
required  for such  persons,  Wedgestone  believes  that  during  the year ended
December  31, 1995,  all Section  16(a) filing  requirements  applicable  to its
officers, directors and ten percent shareholders were complied with.

         Wedgestone's  Audit Committee is comprised of John J. Doran and Jeffrey
A. Oberg.  Wedgestone's  Compensation  Committee  is comprised of John J. Doran,
Jeffrey  A.  Oberg  and  John C.  Shaw.  Wedgestone's  Executive  Committee,  is
comprised of John C. Shaw and Jeffrey S. Goldstein.  These individuals will hold
their respective positions until the appointment of their respective successors.

                                       27

<PAGE>


Item 11.  Executive Compensation

         The three components of the Company's  executive  officer  compensation
program are base salary,  annual  incentive  compensation  in the form of a cash
bonus  and  long-term  incentive  compensation  in the  form of  stock  options.
Executive officers are also entitled to various benefits including participation
in the Company's  medical,  life insurance and long-term  disability plans which
are generally available to employees of the Company. The Compensation  Committee
of the Board of Trustees  consisting  of two outside  trustees and the Company's
Chairman,  is responsible for the evaluation and approval of the compensation of
Wedgestone Financial officers.
<TABLE>

         The following tabulation gives information with respect to remuneration
paid to each of the five highest paid  executive  officers of Wedgestone and its
subsidiaries for the years 1995, 1994, and 1993.

<CAPTION>

                                                        SUMMARY COMPENSATION


                                                   Year           Salary             Bonus          Options        Benefits
                                                   ----          --------            ------         -------        ---------
<S>                                                <C>           <C>           <C>      <C>         <C>          <C>     <C>
Jeffrey S. Goldstein, President                    1995          $160,200      $       -0-          85,000       $      -0-
 Wedgestone Financial                              1994           120,000              -0-              -0-             -0-
                                                   1993           120,000              -0-              -0-             -0-


David L. Sharp, Chief Executive Officer            1995           114,750           34,000          251,500           8,712
  Wedgestone Automotive Corp                       1994           110,000           48,000              -0-          12,673
                                                   1993           106,844           22,000              -0-           9,546


Eric H. Lee, Chief Financial Officer               1995            95,000           26,000          160,000           8,678
 Wedgestone Automotive Corp                        1994            88,000           34,000              -0-           9,775
                                                   1993           62,208(a)            -0-              -0-           3,588


Lawrence R. Wasielewski, Sr. Vice President,       1995            97,000           26,000          160,000           8,586
  Sales/Marketing                                  1994            88,000           34,000              -0-           9,270
  Wedgestone Automotive Corp                       1993            80,750              -0-              -0-           1,746


Paul W. Westerhoff, Sr. Vice President,            1995            92,000           26,000          185,000           8,618
 Operations                                        1994            88,000           34,000              -0-           9,775
 Wedgestone Automotive Corp                        1993            88,000           12,500              -0-           8,394

<FN>
-----------------------------------------------------


(a)  Individual's compensation shown is for a partial year of employment.
</FN>
</TABLE>

Mr.  Goldstein was first employed by Wedgestone on October 1, 1992,  when he was
elected President. Messrs. Sharp, Lee, Wasielewski, and Westerhoff were hired as
executive officers of Wedgestone  Automotive Corp upon Wedgestone's  acquisition
of the  Automotive  Segment from Standun on November  18, 1994.  Their  salaries
above represent the annual compensation  received as employees of Wedgestone and
Standun.



                                       28

<PAGE>

<TABLE>


The  following  table  shows,  for  those   individuals  named  in  the  Summary
Compensation table, information concerning stock options granted during the year
ended December 31, 1995.
<CAPTION>


                                                        Option Grants in 1995

                                  Options      % of Total        Exercise  Expiration Potential Realizable Value(2)
                                 Granted(1)    Granted in 1995   Price      Date(1)            5%         10%
                                 ----------    ---------------   -----      -------            --         ---
<S>                               <C>             <C>            <C>         <C>            <C>         <C>    
Jeffrey S. Goldstein               85,000          8.5%          $.25        9/22/99        $25,500     $31,450
David L. Sharp                    251,500         25.2%           .25        9/22/99         75,450      93,055
Eric H. Lee                       160,000         16.1%           .25        9/22/99         48,000      59,200
Lawrence R. Wasielewski           160,000         16.1%           .25        9/22/99         48,000      59,200
Paul W. Westerhoff                185,000         18.6%           .25        9/22/99         55,500      68,450
<FN>
--------------------------------------------


(1) Options indicated vest and become  exercisable over a two-year period ending
December 31, 1996 based on the optionee's continued employment with the Company.

(2)  Potential   Realizable  Value  at  assumed  Annual  Rates  of  Stock  Price
Appreciation for Option terms at rates of 5% and 10% is information  mandated by
the  Securities  and Exchange  Commission  and does not  represent the Company's
estimate or projection of the future price of its shares of Beneficial Interest.
</FN>
</TABLE>

<TABLE>
No executive  officer  exercised  options during 1995. The following  table sets
forth,  for each of the  executive  officers  named in the Summary  Compensation
Table, the year-end value of unexercised options.

<CAPTION>

                                                 Aggregated Option Exercises in 1995
                                                     and Year-End Option Values

                                                 Number of                             Value of Unexercised
                                            Unexercised Options                        In-The-Money Options
                                                At Year-End                               At-Year-End
                                                ------------                              ------------
                                     Exercisable        Unexercisable              Exercisable        Unexercisable
                                     -----------        -------------              -----------        -------------
<S>                                   <C>                <C>                         <C>                <C>
Jeffrey S. Goldstein                   56,700            28,300                      $0                 $0
David L. Sharp                        167,700            83,800                       0                  0
Eric H. Lee                           106,700            53,300                       0                  0
Lawrence R. Wasielewski               106,700            53,300                       0                  0
Paul W. Westerhoff                    123,300            61,700                       0                  0
</TABLE>

Compensation Committee Interlocks and Insider Participation

         During Fiscal 1995, the Compensation Committee of the Board of Trustees
of the Company  was  comprised  of John J.  Doran,  Jeffrey A. Oberg and John C.
Shaw.  None of the  members  of the  Compensation  Committee  has  ever  been an
employee  or  officer  of the  Company  or any of  its  subsidiaries,  with  the
exception  of Mr.  Shaw who is the  Chairman  of the Board but does not  receive
compensation for acting in such capacity.  Mr. Shaw,  however,  is a significant
equity holder in PSG Associates,  which provides financial and advisory services
to St. James and  Hercules,  subsidiaries  of the Company.  In Fiscal 1995,  the
Company paid PSG  Associates  $125,000 in  connection  with such services to St.
James.  The Trust will pay PSG  Associates  $125,000 for  financial and advisory
services rendered to St. James for the current fiscal year.  Otherwise,  none of
the  members  of the  Compensation  Committee  has  any  relationship  requiring
disclosure  under any  paragraph of Item 404 or in Item  402(j)(3) of Regulation
S-K promulgated by the Commission.


                                       29

<PAGE>

          REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF TRUSTEES

         The following is the report of the Compensation  Committee of the Trust
(the "Committee") on executive compensation for Fiscal 1995.

         Compensation Philosophy.  The Committee believes that it is in the best
interests of the Shareholders for the Company to attract,  maintain and motivate
top quality management personnel, especially its executive officers, by offering
and maintaining a competitive  compensation package that exhibits an appropriate
relationship  between  executive pay and the creation of stockholder  value. The
general  philosophy  of the  committee  is to integrate  (i) adequate  levels of
annual base  compensation;  (ii) annual cash bonuses and equity  awards based on
achievement of short-term corporate and individual  performance goals, such that
executive compensation levels will be higher in years in which performance goals
are achieved or exceeded; and (iii) equity awards, to ensure that management has
a  continuing  stake in the long term success of the Company and return of value
to its stockholders.

         In November 1994, the Company acquired the assets of the Fey Automotive
division  of Standun,  Inc. In  connection  with this  acquisition,  the Company
formed a  wholly-owned  subsidiary,  Wedgestone  Automotive  Corp, and hired the
senior management of the Fey Automotive  division (the "Executive  Group").  The
Executive  Group  included Mr. Sharp as Chief  Executive  Officer of  Wedgestone
Automotive  Corp, Mr. Lee as Chief  Financial  Officer of Wedgestone  Automotive
Corp, Mr. Wasielewski as Senior Vice President of Sales of Wedgestone Automotive
Corp,  and Mr.  Westerhoff as Senior Vice  President of Operations of Wedgestone
Automotive Corp. In connection with the  acquisition,  the Company agreed to pay
salary and benefit amounts to the members of the Executive Group consistent with
their prior salary and benefits at Standun, Inc.

         The elements of the Committee's integrated  compensation philosophy and
the  application  of  these  philosophies  during  Fiscal  1995,   including  in
connection with the hiring of the Executive Group, are summarized as follows:

         Base  Compensation   Levels.   Although  the  Committee  believes  that
performance-based  pay  elements  should be a key  element  in the  compensation
packages for its executive officers, the Company must maintain base compensation
levels  commensurate  with other comparable  companies in its industry with whom
the Company competes for management personnel (the "Comparable Companies").

         The Comparable  Companies  selected by the Company are those automotive
supply companies that have production and marketing  strategies similar to those
of the  Company,  which  are  similar  to the  Company  and  which  compete  for
executives in the same markets as the Company.

         Although the process of setting base compensation levels often reflects
subjective factors,  such as leadership,  commitment,  attitude and motivational
effect, the Committee also considers  objective factors,  such as achievement of
performance goals (primarily profitability of the areas over which the executive
has management  responsibility),  level of responsibility  and prior experience.
The  Committee  believes  that the overall  compensation  paid to the  Company's
executive  officers for the last year was competitive with overall  compensation
paid by the Comparable Companies for similar positions.

         Performance-Based Compensation. The Company provides executive officers
with the following performance-based compensation programs:

         o        Cash Bonuses.  Cash bonuses may be earned if certain specified
                  performance goals are achieved.

         o        Stock  Options.   Options  may  be  granted  pursuant  to  the
                  Wedgestone  Financial  1995  Stock  Option  Plan (the  "Option
                  Plan") at an exercise  price equal to or greater than the fair
                  market value of the stock on the date of the grant.  The value
                  of the options is related  directly to the market price of the
                  stock and,  accordingly  to the long-term  performance  of the
                  Company.

         An aggregate of 841,500 options were granted to the Company's executive
officers in 1995 under the Option Plan. The number of options  granted was based
on the executive's length of service and level of responsibility in the Company.


                                       30

<PAGE>



         Compensation  of  Chief  Executive   Officer.   Mr.   Goldstein's  base
compensation  for 1995 was $160,200  and has been set at $175,000 for 1996.  The
Committee  believes that Mr.  Goldstein's  base salary in 1995 was comparable to
that of other chief  executives  in the industry in which the Company  competes.
Mr.  Goldstein  did not  receive  a bonus in 1995,  but was  granted  an  option
exercisable for 85,000 shares at an exercise price of $ .25 per share.

                                     John J. Doran, Chairman
                                     Jeffrey A. Oberg
                                     John C. Shaw

                                     Members of the Compensation Committee

Profit Sharing, Stock Option Plans and Warrants

         During 1995,  Wedgestone  created the  Wedgestone  Financial 1995 Stock
Option Plan (the "Option  Plan").  The Option Plan became  effective on December
15, 1995. The total number of shares of Wedgestone  stock reserved and available
for  distribution  under  the  Option  Plan is  1,000,000.  Officers,  other key
employees and significant non-employees who are responsible for or contribute to
the management,  growth and/or  profitability  of the business of Wedgestone are
eligible to be granted  stock  options  under the Option  Plan.  The Option Plan
replaces and  supersedes a former stock  option plan  established  in 1994.  The
optionees  under  the  Option  Plan  will be  selected  from time to time by the
Committee (a group of not less than three  persons  appointed by the  Trustees).
The  stock  options  granted  under the  Option  Plan may be of two  types:  (i)
Incentive Stock Options and (ii) Non-Qualified  Stock Options.  The option price
per share of stock under a stock option will be  determined  by the Committee at
the time of grant.  The option price with  respect to an incentive  stock option
shall not be less than 100% of the fair market value of the Wedgestone  stock on
the date of the option grant.  The option price with respect to a  non-qualified
stock  option  shall  not be less  than  85% of the  fair  market  value  of the
Wedgestone  stock on the date of the  option  grant.  The stock  options  can be
exercised  at such times as  determined  by the  Committee.  The stock  which is
acquired  through the  exercise  of the stock  option is required to be held for
investment and not for resale or other  distribution.  The options and the stock
are non-transferable. As of March 28, 1996, 995,000 shares have been granted.

         Two outside directors, Mr. John J. Doran and Mr. Jeffrey A. Oberg, were
each  granted  15,000  warrants  to acquire  shares of  beneficial  interest  in
Wedgestone at an exercise price of $.25 per warrant  share.  The warrants may be
exercised  at any time  from  the date of grant  until  October  31,  1997.  The
warrants or the warrant shares may not be disposed of or  encumbered,  except in
accordance  with certain  provisions  of the Security Act. As of March 26, 1996,
none of the warrants have been exercised.

         All former Profit Sharing, Stock Option and 401(k) Profit Sharing Plans
were terminated  pursuant to the bankruptcy plan of  reorganization in 1992. The
401(k)  Profit  Sharing Plan was  liquidated  as of July 21, 1993 and the assets
were  distributed  to the  plan  participants.  In  January  1995,  the  Company
established  the  Wedgestone   Automotive  Corp  Retirement  Savings  Plan  (the
"Retirement  Plan"). The Retirement Plan provides that all eligible employees of
the  Company  who  have  attained  the age of 21,  have  completed  one  year of
employment  and  are  not  subject  to a  collective  bargaining  agreement  are
permitted to contribute up to 15% of their salary to the  Retirement  Plan.  The
Company makes  contributions  on behalf of each participant of a matching amount
up to an employee  contribution of 2% of such employee's  salary.  Employees are
fully  vested at all times with  respect to all  employee  contributions  to the
Retirement Plan.

                                       31

<PAGE>

<TABLE>

Item 12.    Security Ownership of Certain Beneficial Owners and Management

         The following table shows, as of December 31, 1995, certain information
known to Wedgestone  regarding  security holders of Wedgestone who may be deemed
to be the beneficial owners of 5% or more of each class of Wedgestone's shares.
<CAPTION>


                                                                  Beneficial Shares
                                                      --------------------------------------------
                                                      Amount and Nature of              Percent of
Name and Address of Beneficial Owners                 Beneficial Ownership                 Class
-------------------------------------                 --------------------              ----------
<S>                                                       <C>                               <C>  
Standun, Inc.                                             6,795,223                         31.0%
201 S. Hindry Avenue
Inglewood, CA  90301

JCS Management Co., Inc.                                  8,525,756(1)                      39.0%
520 Madison Avenue, 40th Floor
New York, NY  10022

PFG Corporation                                           1,863,865(2)                       8.5%
235 Sunrise Boulevard
Palm Beach, FL  33480

RAB Management Corp.                                      1,730,531(3)                       7.9%
520 Madison Avenue, 40th Floor
New York, NY  10022

JMS Holdings Co., Inc.                                    1,730,531(4)                       7.9%
520 Madison Avenue, 40th Floor
New York, NY  10022

Charles Brady                                             1,300,000(5)                       5.9%
1315 Peachtree Street N.E. Suite 300
Atlanta, GA  30309
<FN>
------------------------------------------------
(1)   Mr. John C. Shaw is the  president and sole  shareholder  of this company.
      6,795,223  of  these  shares  are  held  by  Standun.   Resource  Holdings
      Associates  owns 62.5% of the stock of Standun  and Mr.  Shaw is  managing
      director of the general partner of Resource Holdings Associates.

(2)   Mr. James J. Pinto is the president and sole  shareholder of this company.
      PFG owns 37.5% of Standun, Inc.

(3)   Mr Richard A.  Bartlett  is the  president  and sole  shareholder  of this
      company.

(4)   Mr.  Jerry  M.  Seslowe  is the  president  and sole  shareholder  of this
      company.

(5)   Includes  100,000 shares held by  Chattahoochee  Leasing  Corporation,  an
      affiliate of Mr. Brady.
</FN>
</TABLE>

                                       32

<PAGE>

<TABLE>
Security Ownership of Management

         The  following  tables  show,  as of  December  31,  1995,  based  upon
information  supplied  by the  Trustees  and  officers  of  Wedgestone  and  its
subsidiaries,  the amount and nature of ownership of  Wedgestone  Shares of each
Trustee of Wedgestone and of all Trustees and officers as a group.

<CAPTION>
                                                     Amount and Nature of        Percent of
         Name                                       Beneficial Ownership           Class
         ----                                       ----------------------       ----------
         <S>                                                <C>                      <C>  
         John C. Shaw                                       8,525,756(1)             37.3%
         Jeffrey A. Oberg                                      15,000(2)                 *
         John J. Doran                                         15,000(2)                 *
         Jeffrey S. Goldstein                                  85,000(3)                 *
         David L. Sharp                                       251,500(4)              1.1%
         Eric H. Lee                                          160,000(5)                 *
         Lawrence R. Wasielewski                              160,000(6)                 *
         Paul W. Westerhoff                                   185,000(7)                 *

         All trustees and officers as a group
         (eight persons, all above-named)                   8,836,156                38.6%
                                                            =========                =====
<FN>
-----------------------------------------------------
*   Represents less than 1%

(1)   See Footnote (1) under Security Ownership of Certain Beneficial Owners.
(2)   Represents an option that is immediately  exercisable  to purchase  15,000
      shares.
(3)   Includes  an  option   granted  to  Mr.   Goldstein  that  is  immediately
      exercisable to purchase 56,600.
(4)   Includes an option granted to Mr. Sharp that is immediately exercisable to
      purchase 167,600 shares.
(5)   Includes an option granted to Mr. Lee that is  immediately  exercisable to
      purchase 106,600 shares.
(6)   Includes  an  option  granted  to  Mr.  Wasielewski  that  is  immediately
      exercisable to purchase 106,600 shares.
(7)   Includes  an  option  granted  to  Mr.   Westerhoff  that  is  immediately
      exercisable to purchase 123,400 shares.
</FN>
</TABLE>

Item 13.    Certain Relationships and Related Transactions

         The Automotive Segment was purchased from Standun,  which is indirectly
owned  and/or  controlled  by Resource  Holdings  Associates  and PFG Corp.  The
managing  directors of Resource  Holdings Ltd. (the general  partner of Resource
Holdings  Associates) and PFG Corp are former shareholders of St. James. Each of
the  managing  directors  owns  directly  or  indirectly  in excess of 5% of the
outstanding  shares of Wedgestone.  In connection with the acquisition,  Standun
now owns 31.5% of  Wedgestone.  Wedgestone  assumed a note  associated  with the
termination  of Standun's  management  agreement with Fifth Avenue  Partners,  a
related  party of  Wedgestone  and  Standun,  in the  amount  of  $1,104,086  in
conjunction  with the  acquisition.  The note is payable  monthly with  interest
calculated  in arrears at 9% per annum over the five years  ending  December 31,
1999.

         St. James has a Consulting  Agreement with PSG Associates  entered into
on January 10, 1992 ( prior to its acquisition by Wedgestone).  Pursuant to this
Agreement,  PSG Associates has agreed to provide advisory  services to St. James
with respect to its operations,  expansion and financing activities at a minimum
rate of $125,000 per year plus reimbursement of expenses. Mr. Shaw, a trustee of
the Company,  is a  significant  equity  holder in PSG  Associates,  through JCS
Holdings  Corp.  ("JCS") as is each of PFG Corp.,  JMS Holdings  Corp.,  and RAB
Management  Corp.  (the former St. James  shareholders).  During 1995,  1994 and
1993, St. James paid $125,000 per year, to PSG  Associates  under this contract.
For the years 1996 and 1997,  St.  James is  required  to pay to PSG  Associates
$125,000 annually, pursuant to this Agreement.

         On January 12, 1993, as amended, Wedgestone entered into a secured, one
year  credit  facility  due July 1996 with Rockaway pursuant to which Wedgestone
is permitted to borrow up to a maximum to $300,000 with additional over advances
available at the discretion of the lender to fund  Wedgestone's  working capital
needs and those of its  subsidiaries.  The contractual  rate of interest on this
Loan is  fifteen  percent  (15%) per annum  and  there was a  commitment  fee of
$4,500,  payable  upon  initial  funding  and  an  extension  fee of  $5,000  in
connection  with the amendment in 1994. The Rockaway Loan is secured by a pledge
of  substantially  all of the stock of Wedgestone's  subsidiaries,  its personal
assets and notes receivables.  As of December 31, 1995,  Wedgestone had borrowed
$300,000  pursuant to this facility and Rockaway  advanced  amounts in excess of
the agreement of $429,000.  Rockaway is a real estate  holding  company which is
controlled by former St. James

                                       33

<PAGE>

shareholders.  The former St. James  shareholders  are entitled to substantially
all of the economic benefits of Rockaway. Mr. Goldstein,  who is president and a
trustee of Wedgestone, is the president of Rockaway.

         In  connection  with  the  Hercules   acquisition,   Resource  Holdings
Associates and PFG received a fee of $220,000 consisting of $160,000 and 200,000
shares of beneficial  interest of  Wedgestone  at a valuation  price of $.30 per
share.


                                       34

<PAGE>

                                     PART IV

Item 14.    Exhibits, Financial Statements, Schedules, and Reports on Form 10-K

         (a) Set forth below are consolidated  financial  statements,  financial
statement  schedules  and exhibits  filed as part of this Annual  Report on Form
10-K.

           1.      Consolidated Financial Statements

                   Reference  is made to the  index  of  consolidated  financial
                   statements and supplementary data on page 10.

           2.      Financial Statement Schedules

                   Schedule II, Valuation and Qualifying Accounts, Schedule III,
                   Real Estate and  Accumulated  Depreciation  and  Schedule IV,
                   Mortgage  Loans on Real Estate  appear on pages 39 through 41
                   hereof. All other schedules are not included because they are
                   not applicable.

           3.      Exhibits

                   The following  Exhibits are filed as part of, or incorporated
                   by reference into this report:



           Exhibit No.

           (2)      (i)    The Merger  Agreement with St. James Automotive Corp.
                           into a subsidiary of Wedgestone  as  contemplated  in
                           Wedgestone's  Plan of  Reorganization  dated  May 29,
                           1992  (Filed as  Exhibit 2 to Form 8-K filed June 15,
                           1992 and incorporated herein by reference).

                   (ii)    The   Asset   Sale   Agreement   between   Wedgestone
                           Financial,    Wedgestone    Automotive   Corp.,   Fey
                           Automotive  Products,  Inc. and Standun,  Inc.  dated
                           October  28,  1994  (Filed  as  Exhibit 1 to Form 8-K
                           filed  October  28, 1994 and  incorporated  herein by
                           reference).

                  (iii)    First  Amendment to Asset Sale Agreement  between Fey
                           Automotive  Products,  Inc. and Standun,  Inc.  dated
                           November  17,  1994  (Filed as  Exhibit 2 to Form 8-K
                           filed  December  1, 1994 and  incorporated  herein by
                           reference).

                   (iv)    Asset  Sale  Agreement  between  Hercules  Automotive
                           Products, Inc. (a subsidiary of Wedgestone Financial)
                           and Hercules  Bumpers,  Inc.  dated December 23, 1994
                           (Filed as  Exhibit 1 to Form 8-K  filed  January  23,
                           1995 and incorporated herein by reference).

                    (v)    Letter  Amendment  to Asset  Sale  Agreement  between
                           Hercules  Automotive  Products,   Inc.  and  Hercules
                           Bumpers,  Inc.  dated  December  23,  1994  (Filed as
                           Exhibit  2 to Form 8-K  filed  January  23,  1995 and
                           incorporated herein by reference).

           (3)      (i)    Amendment and Restatement of Declaration of Trust and
                           Appointment of Trustees and Acceptance of Appointment
                           of  Trustees  dated June 15, 1992 (Filed as Exhibit 3
                           to Form 8-K on June 26, 1992 and incorporated  herein
                           by reference).

           (4)      (i)    Specimen   certificate   for  shares  of   beneficial
                           interest, $1.00 par value (Filed as Exhibit 1 to Form
                           S-11   Registration   Statement   No.   2-66921   and
                           incorporated herein by reference).

                   (ii)    Specimen certificate for Special Income Shares (Filed
                           as Exhibit 4(b) to Form S-14  Registration  Statement
                           No. 2-98006 and incorporated herein by reference).

         (10)       (i)    Letter of Intent between Wedgestone Financial and PSG
                           Holdings Corp.,  d/b/a St. James Automotive (Filed as
                           Exhibit C to First  Amended of  Reorganization  which
                           was filed as Exhibit 2(ii) to Form 8-K filed February
                           12, 1992 and incorporated herein by reference).

                                       35

<PAGE>



                   (ii)    Term note for $1,000,000 from Genesis Plastics, Inc.,
                           to Wedgestone  Financial (Filed as an exhibit to Form
                           8-K Report  dated  August 24,  1992 and  incorporated
                           herein by reference).

                  (iii)    Loan and  Security  Agreement  dated  August 24, 1992
                           between  Genesis   Plastics,   Inc.,  and  Wedgestone
                           Financial  for loan  (Filed as an exhibit to Form 8-K
                           Report dated August 24, 1992 and incorporated  herein
                           by reference).

                   (iv)    Unconditional  Secured Guaranty dated August 24, 1992
                           between  Nicon   Holdings,   Inc.,   and   Wedgestone
                           Financial  for loan  (Filed as an exhibit to Form 8-K
                           Report dated August 24, 1992 and incorporated  herein
                           by reference).

                    (v)    Unconditional  Guaranty dated August 24, 1992 between
                           Nicon  Holdings,  Inc., and Wedgestone  Financial for
                           loan  (Filed as an exhibit  to Form 8-K Report  dated
                           August   24,   1992  and   incorporated   herein   by
                           reference).

                   (vi)    Stock Exchange  Agreement and Plan of  Reorganization
                           dated August 24, 1992 between Nicon  Plastics,  Inc.,
                           and Wedgestone Financial (Filed as an exhibit to Form
                           8-K Report  dated  August 24,  1992 and  incorporated
                           herein by reference).

                  (vii)    Loan   Participation   and  Sharing  Agreement  dated
                           December 17, 1992 between  Wedgestone  Financial  and
                           JCS  Holdings  Corp.,   RAB  Management   Corp.,  JMS
                           Holdings Corp., and PFG Corp. (Filed as an exhibit to
                           Form  10-K  filed  March  31,  1993 and  incorporated
                           herein by reference).

                 (viii)    Loan and Security  Agreement  dated  January 12, 1993
                           between  Wedgestone  Financial and Rockaway 605 Corp.
                           (Filed as an  exhibit  to Form 10-K  filed  March 31,
                           1993 and incorporated herein by reference).

                   (ix)    Amendment    dated   January   15,   1994   of   Loan
                           Participation  and Security  Agreement  dated January
                           12, 1993 between  Wedgestone  Financial  and Rockaway
                           605 Corp.  (Filed as an  exhibit  to Form 10-K  filed
                           April 13, 1994 and incorporated herein by reference).

                    (x)    Court approved  motion by IRP releasing  guarantee of
                           indebtedness owed to Charles Sullivan in exchange for
                           the right to  purchase  Wedgestone's  one acre parcel
                           and  IRP's   assignment   of  it's  50%  interest  in
                           Wedgestone's New York property to Wedgestone.  (Filed
                           as an exhibit to Form 10-K filed  April 13,  1994 and
                           incorporated herein by reference).

                   (xi)    Amendment dated November 1, 1994 of Loan and Security
                           Agreement  dated January 12, 1993 between  Wedgestone
                           Financial and Rockaway 605 Corp. (Filed as an exhibit
                           to Form 10-K filed  March 30,  1995 and  incorporated
                           herein by reference).

                  (xii)    Registration  Rights Agreement between Standun,  Inc.
                           and  Wedgestone  Financial  dated  November  18, 1994
                           (Filed as  Exhibit 3 to Form 8-K  filed  December  1,
                           1994 and incorporated herein by reference).

                 (xiii)    The  Wedgestone  Financial  1994  Stock  Option  Plan
                           effective September 24, 1994. (Filed as an exhibit to
                           Form  10-K  filed  March  30,  1995 and  incorporated
                           herein by reference).

                  (xiv)    Promissory Note between Standun,  Inc. and 5th Avenue
                           Partners  dated  November  17,  1994  and  Assignment
                           Agreement,  assigning  the  note  to  Fey  Automotive
                           Products,  Inc.  (Filed  as an  exhibit  to Form 10-K
                           filed  March  30,  1995 and  incorporated  herein  by
                           reference).

                   (xv)    Revolving   Credit  Line   between   Fey   Automotive
                           Products, Inc., Sigma Plating Co., Inc. and St. James
                           Automotive  Corp.  and  The  CIT  Group,  Inc.  dated
                           November 18,  1994.(Filed  as an exhibit to Form 10-K
                           filed  March  30,  1995 and  incorporated  herein  by
                           reference).

                  (xvi)    Credit   Enhancement   Agreement  of  Charles  Brady,
                           Chattahoochee   Leasing  Corporation  and  Wedgestone
                           Financial  dated  January 8, 1995 (Filed as Exhibit 3
                           to Form 8-K filed  January 23, 1995 and  incorporated
                           herein by reference).

                                       36
<PAGE>

                 (xvii)    Promissory Note between Charles W. Brady and Hercules
                           Automotive  Products,  Inc.  dated  January  8,  1995
                           (Filed as  Exhibit 4 to Form 8-K  filed  January  23,
                           1995 and incorporated herein by reference).

                (xviii)    Promissory   Note   between   Chattahoochee   Leasing
                           Corporation and Hercules  Automotive  Products,  Inc.
                           dated January 8, 1995 (Filed as Exhibit 5 to Form 8-K
                           filed  January  23, 1995 and  incorporated  herein by
                           reference).

                  (xix)    The  Wedgestone  Financial  1995  Stock  Option  Plan
                           effective December 15, 1995 (Filed herewith).

         (21)              Subsidiaries of Registrant:

                           Wedgestone   College   Point   Corp.,   a  New   York
                           corporation
                           Bristol Village Inc., a Connecticut corporation
                           MWF  Corp.,  a  Delaware  corporation  LIP  Corp.,  a
                           Massachusetts corporation
                           St. James Automotive, a Delaware corporation
                           Wedgestone Automotive Corp., a Delaware corporation
                           Fey Automotive Products, Inc., a Delaware corporation
                           Sigma  Plating Co.,  Inc.,  a California  corporation
                           Hercules  Automotive   Products,   Inc.,  a  Delaware
                           corporation


          Note:            Wedgestone  Financial has eight  consolidated  wholly
                           owned  subsidiaries  operating in the United  States.
                           Wedgestone College Point Corp., Bristol Village Inc.,
                           MWF Corp.,  and LIP Corp.  own real  estate  acquired
                           from a borrower.  See Schedule III to this report for
                           a  description  of the real estate so  acquired.  St.
                           James Automotive Corp.,  Wedgestone Automotive Corp.,
                           Fey   Automotive   Products,   Inc.,   and   Hercules
                           Automotive  Products,  Inc.  manufacture  light  duty
                           truck  aftermarket  accessories.  Sigma  Plating Co.,
                           Inc. operates an electroplating facility.

          (27)             Financial Data Schedule (Filed herewith).

         (b)  Reports on Form 8-K

              The Company  filed a report on Form 8-K dated  December  11, 1995,
              with respect to a loss in connection with the Genesis loan.

                                       37

<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.

                                             WEDGESTONE FINANCIAL



Date:    March 27, 1996
                                             By: /s/   Jeffrey S. Goldstein,
                                                --------------------------------
                                                           President




Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report has been signed below the following  persons on behalf of the  registrant
and in the capacities and on the dates indicated.



Date:    March 27, 1996                      By: /s/ John C. Shaw
                                                 ----------------
                                                       Trustee


Date:    March 27, 1996                      By:/s/ Jeffrey A. Oberg
                                                --------------------
                                                       Trustee


Date:    March 27, 1996                      By:/s/ John J. Doran
                                                -----------------
                                                       Trustee


Date:    March 27, 1996                      By:/s/ Jeffrey Goldstein
                                                ----------------------
                                                       Trustee



The name "Wedgestone  Financial" (formally Wedgestone Realty Investors Trust) is
the  designation  of The Trustees  under a Declaration  of Trust dated March 12,
1980, as amended,  and in accordance  with such  Declaration  of Trust notice is
hereby  given that all persons  dealing with  Wedgestone  Financial by so acting
acknowledge and agree that such persons must look solely to Wedgestone  property
for the enforcement of any claims against Wedgestone  Financial and that neither
The Trustees,  officers,  employees, agents nor shareholders assume any personal
liability for claims against Wedgestone or obligations entered into on behalf of
Wedgestone Financial, and that the respective properties shall not be subject to
claims of any other person in respect of any such liability.


                                       38

<PAGE>

<TABLE>


Schedule II - Valuation in Qualifying Accounts: (Amounts in Thousands)

<CAPTION>

                                                              Additions
                                                       -----------------------
                                          Balance        Charged      Charged                      Balance
                                       at beginning    to costs &    to other                     at end
        Description         Year      of the Year        expenses     accounts     Deductions   of the year
        -----------         ----      -------------    ----------    ---------     ----------   ------------
<S>                         <C>             <C>            <C>         <C>        <C>                 <C>
Allowance for
 Doubtful Accounts          1993            144             99                    (115)(1)            128
                            1994            128             94                     (20)(1)            202
                            1995            202             21         272(6)     (239)(1)            256

Inventory Reserve           1993            398             24                    (377)(2)            105
                                                                                    60 (3)
                            1994            105            187          83(5)     (113)(4)            283
                                                                                    21 (3)
                            1995            283            (16)        230(6)      (22)(2)            368
                                                                                  (107)(4)

<FN>

(1)     Net Charge-off of bad debts
(2)     Write off of obsolete inventory
(3)     Sale of obsolete inventory for scrap
(4)     Physical inventory adjustment
(5)     Transfer to Warranty Accrual to bring account to zero
(6)     Liability assumed in connection with Hercules acquisition
</FN>
</TABLE>

                                       39

<PAGE>

<TABLE>


Schedule III - Real Estate and Accumulated Depreciation:  (Amounts in Thousands)

<CAPTION>

                                                   Gross Amount at End of Period
                                             ----------------------------------------
                                                             Buildings &                        Date
                   Description                  Land          Improvements     Total           Acquired
    ----------------------------------------   -------      --------------    -------         ----------
    <S>                                      <C>                <C>           <C>               <C>  
    Land

       Connecticut                           $   128            $0            $   128           10/88
       New York                                7,027             0              7,027            5/90


    Residential Properties

       Northeastern Massachusetts                494                              494           10/89
                                               ------           ------          ------

         Total Real Estate                    $7,649            $0             $7,649
                                              ======        ========           ======



                                                1995              1994          1993
                                               ------           ------          ------

    Balance at beginning of period             $7,523           $7,905         $10,118

    Additions during the period:
       Improvements/Carrying costs                126              174             119
                                                ------           ------          ------

                                                  126              174             117
                                               ------           ------          ------

                                                7,649            8,079          10,237


    Deductions during the period
       Sales                                                       556           2,332
       Write-off of real estate held
       Depreciation
       Legal Settlement
       Transferred to IRP
                                               ------           ------          ------
                                                ---                556           2,332
                                               ------           ------          ------

    Balance at end of year                     $7,649           $7,523          $7,905
                                               ======           ======          ======


<FN>
    See Note 6.
</FN>
</TABLE>

                                       40

<PAGE>


<TABLE>

Schedule IV -- Mortgage Loans on Real Estate: (Amounts in Thousands)

<CAPTION>

                                                                                                      Principal
                                                                                                       Amount of
                               Interest      Final           Periodic       Face        Carrying      Loans Subject
                                Rate At      Maturity        Payment     Amount of     Amount of     to Delinquent
          Property Type         12/31/95       Date          Term        Mortgages     Mortgages     Prin/Interest
          -------------        -----------   --------       --------     ---------     ---------     --------------
<S>                                <C>     <C>                <C>             <C>          <C>              <C>
MORTGAGE LOANS
Earning:
   First Mortgage Loans:
      Residential                  8.00%   June, 2011         (1)             168          84(2)            $0
                                                                            --------     --------       ------
TOTAL MORTGAGE LOANS                                                          168           84              $0
                                                                            ========     ========       ======

LONG TERM NOTES
TOTAL LONG TERM NOTES                                                          ---          ---            $0
                                                                            ========     ========       ======
<FN>
--------------------------------------------
(1)   Interest due monthly, principal due monthly over 15 years starting June 1996.
(2)   A reserve of $85,000 has been applied against this loan
</FN>
</TABLE>

<TABLE>

Changes in Mortgage Loans and Long Term Notes:
<CAPTION>
                                                                1995          1994          1993
                                                              --------      --------      ------
<S>                                                            <C>           <C>           <C> 
Balance at beginning of period                                 $735          $857          $921
Additions during period
   New Mortgage Loans
   Increase to existing mortgage loans                                                       25
                                                                ---           ---            25
                                                           -----------   -----------   --------
                                                               $735          $857          $946

Deductions during period
   Collections of principal                                       1            51
   Cost of mortgages transferred to IRP
   Reserve for loan loss                                        650            71            89
                                                            ----------    ----------     ------
                                                                651           122            89
                                                            ----------     ---------     ------

Balance at end of year                                          $84          $735           $857
                                                            ==========     =========      ======

</TABLE>



                                       41