<PAGE>   1

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                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 20-F

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

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES
    EXCHANGE ACT OF 1934 or

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

                For the fiscal year ended December 31, 1998, or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

       For the transition period from  ______________ to  ______________

                          Commission File No.: 1-4192

                                MFC BANCORP LTD.
             (Exact name of Registrant as specified in its charter)

                            YUKON TERRITORY, CANADA
                (Jurisdiction of incorporation or organization)

                 6 RUE CHARLES-BONNET, 1206 GENEVA, SWITZERLAND
                                (41 22) 818-2999
                    (Address and telephone number of office)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
                                      NONE

Securities registered or to be registered pursuant to Section 12(g) of the Act:

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

                        COMMON SHARES WITHOUT PAR VALUE
                                (Title of Class)

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

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                of the Act: NONE

     Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report:

                   12,056,623 COMMON SHARES WITHOUT PAR VALUE

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

     Indicate by check mark which financial statement item the Registrant has
elected to follow. Item 17 [ ] Item 18 [X]

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FORWARD-LOOKING STATEMENTS

     Statements in this report, to the extent that they are not based on
historical events, constitute forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995. These
statements appear in a number of different places in this report and include
statements regarding the intent, belief or current expectations of MFC Bancorp
Ltd., and its directors or officers, primarily with respect to the future market
size and future operating performance of MFC Bancorp Ltd. and its subsidiaries.
Forward-looking statements include, without limitation, statements regarding the
outlook for future operations, forecasts of future costs and expenditures,
evaluation of market conditions, the outcome of legal proceedings, the adequacy
of reserves, or other business plans. Investors are cautioned that any such
forward-looking statements are not guarantees and may involve risks and
uncertainties, and that actual results may differ from those in the
forward-looking statements as a result of various factors such as general
economic and business conditions, including changes in interest rates, prices
and other economic conditions; actions by competitors; natural phenomena;
actions by government authorities, including changes in government regulation;
uncertainties associated with legal proceedings; technological development;
future decisions by management in response to changing conditions; the ability
to execute prospective business plans; and misjudgments in the course of
preparing forward-looking statements.

     In this Form 20-F annual report, unless otherwise specified, all monetary
amounts are expressed in Canadian dollars. The following table sets out the
exchange rates, based on the noon buying rates in New York City for cable
transfers in foreign currencies, as certified for customs purposes by the
Federal Reserve Bank of New York, for the conversion of Canadian dollars into
United States dollars in effect at the end of the following periods, and the
average exchange rates (based on the average of the exchange rates on the last
day of each month in such periods) and the range of high and low exchange rates
for such periods:

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                                ----------------------------------------------
                                                 1998      1997      1996      1995      1994
                                                ------    ------    ------    ------    ------
<S>                                             <C>       <C>       <C>       <C>       <C>
End of period...............................    0.6504    0.6999    0.7301    0.7323    0.7128
High for period.............................    0.7105    0.7487    0.7513    0.7527    0.7632
Low for the period..........................    0.6714    0.6945    0.7235    0.7023    0.7103
Average for the period......................    0.6836    0.7221    0.7332    0.7286    0.7318
</TABLE>

     The information set forth in this Form 20-F annual report is as at December
31, 1998 unless an earlier or later date is indicated. On May 6, 1999, the noon
rate of exchange, as reported by the Federal Reserve Bank of New York, for the
conversion of Canadian dollars into United States dollars was U.S.$0.6870 per
Canadian dollar.

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                                MFC BANCORP LTD.

                                   FORM 20-F

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         PAGE NO.
                                                                         --------
<S>        <C>                                                           <C>
                                     PART I
ITEM 1.    DESCRIPTION OF BUSINESS.....................................      4
           The Company.................................................      4
           General.....................................................      4
           Business of the Company.....................................      4
ITEM 2.    DESCRIPTION OF PROPERTIES...................................      8
ITEM 3.    LEGAL PROCEEDINGS...........................................      9
ITEM 4.    CONTROL OF REGISTRANT.......................................     10
ITEM 5.    NATURE OF TRADING MARKET....................................     10
           Market Information..........................................     10
           Shareholder Distribution....................................     10
           Dividend Information........................................     10
ITEM 6.    EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY
           HOLDERS.....................................................     11
ITEM 7.    TAXATION....................................................     11
           Certain Canadian Federal Income Tax Consequences............     11
           Certain United States Federal Income Tax Consequences.......     12
ITEM 8.    SELECTED FINANCIAL DATA.....................................     14
ITEM 9.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS...................................     15
           Results of Operations.......................................     15
           Liquidity and Capital Resources.............................     17
           Foreign Currency............................................     18
           European Economic and Monetary Union........................     18
           Derivative Instruments......................................     19
           Year 2000...................................................     19
           Inflation...................................................     19
ITEM 9A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
           RISK........................................................     20
ITEM 10.   DIRECTORS AND OFFICERS OF THE REGISTRANT....................     21
ITEM 11.   COMPENSATION OF DIRECTORS AND OFFICERS......................     21
           Executive Compensation......................................     22
           Employment Agreements and Termination of Employment or
           Change of Control...........................................     22
ITEM 12.   OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR
           SUBSIDIARIES................................................     23
ITEM 13.   INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS..............     23
                                     PART II
ITEM 14.   DESCRIPTION OF SECURITIES TO BE REGISTERED..................     24
                                    PART III
ITEM 15.   DEFAULTS UPON SENIOR SECURITIES.............................     24
ITEM 16.   CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
           SECURITIES..................................................     24
                                     PART IV
ITEM 17.   FINANCIAL STATEMENTS........................................     25
ITEM 18.   FINANCIAL STATEMENTS........................................     25
ITEM 19.   FINANCIAL STATEMENTS AND EXHIBITS...........................     25
           SIGNATURES..................................................     52
</TABLE>

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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

THE COMPANY

     MFC Bancorp Ltd. ("MFC") was incorporated in June 1951 by letters patent
under the name "Canadian Javelin Foundries & Machine Works, Limited", continued
under the Canada Business Corporations Act in March 1980, and continued under
the Business Corporations Act (Yukon) in August 1996. It changed its name to
"Nalcap Holdings Inc." in August 1987, "Arbatax International Inc." in March
1996 and "MFC Bancorp Ltd." in February 1997.

     IN THIS DOCUMENT, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE "COMPANY"
REFERS TO MFC BANCORP LTD. AND ITS SUBSIDIARIES AND ALL REFERENCES TO MONETARY
AMOUNTS ARE IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED. SELECTED FINANCIAL
INFORMATION HAS ALSO BEEN PROVIDED IN U.S. DOLLARS FOR INFORMATIONAL PURPOSES
USING AN EXCHANGE RATE OF ONE CANADIAN DOLLAR BEING EQUAL TO U.S.$0.6504, BEING
THE FEDERAL RESERVE BANK OF NEW YORK RATE OF CONVERSION FOR CANADIAN DOLLARS TO
U.S. DOLLARS AS AT DECEMBER 31, 1998.

GENERAL

     The Company is in the financial services business specializing in private
and investment banking internationally and employs 35 people. It also conducts
proprietary investing activities for its own account.

     The Company's banking business is conducted by its wholly-owned subsidiary,
MFC Merchant Bank S.A. (the "Bank"), a licensed full-service Swiss bank based in
Geneva, Switzerland. The Bank's activities include private banking and
investment banking. Private banking focuses on asset management, securities
trading services and servicing the Bank's worldwide base of clients, including
corporations, small to mid-sized institutions and high net-worth individuals.
Investment banking services include providing finance and advisory services to
clients with respect to corporate finance transactions and underwriting
issuances of securities. The Bank does not engage in commercial or real estate
lending.

     The Company's proprietary investing activities consist of the Company using
its own resources and expertise to invest for its own account. These activities
concentrate on the identification and acquisition of control of undervalued
assets and the development and realization of the full potential thereof. The
Company seeks to acquire controlling interests in businesses or assets whose
intrinsic value is not properly reflected in their share price or value. The
Company invests globally with the objective of maximizing total return measured
through both long-term appreciation and recognized gains. Such investments are
not passive and the Company primarily seeks controlling interests in relation to
its investments. The Company's proprietary investing includes an indirect
interest in a mineral royalty (the "royalty interest").

     The Company was previously an approximately 92% owned subsidiary of Mercer
International Inc. ("Mercer"), which in June 1996, "spun-off" the Company to its
shareholders by way of a special stock dividend, as no significant synergies
existed between the Company's and Mercer's businesses. The spin-off resulted in
the Company becoming much more active and permitted the Company to focus its
attention and financial resources on its own corporate goals and business plans
without regard to the corporate objectives of its former parent.

BUSINESS OF THE COMPANY

BANKING

     MFC acquired the Bank in February 1997 for $27.4 million. In addition, MFC
agreed to pay the vendor an annual fee of between 0.25% to 0.50% of the assets
held under management by the Bank from certain clients at the time of sale and
retained by it during the first three years after closing, and 50% of any actual
Swiss tax savings realized by the Bank from the utilization of its initial tax
loss carry-forwards, if and when used.

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     In September 1997, the Company acquired Bank Rinderknecht AG ("BRA") for
$9.6 million. BRA, headquartered in Zurich, Switzerland, was active in private
banking and securities trading for Swiss and foreign customers since 1870. BRA
had been placed in liquidation by the Swiss Federal Banking Commission in August
1997.

     Following the acquisition of BRA, it was merged with the Bank under the
name MFC Merchant Bank S.A. The Bank subsequently rationalized the combined
operations, including transferring all administrative activities to Geneva,
Switzerland. Certain activities of BRA, such as securities trading on the Swiss
Stock Exchange, were discontinued.

     The acquisition of BRA broadened the Bank's customer base and increased its
assets under management. The acquisition has also provided the Bank with
substantial future tax benefits, including tax loss carry-forwards of
approximately $44.0 million.

     In the second quarter of 1997, the Company completed the acquisition of the
MFC Securities group of companies ("MFC Securities"), a bond trader based in
Zurich, Switzerland, for their approximate book value of $15.7 million plus a
contingent variable annual fee which is payable in cash or in common shares of
MFC, at the option of the vendors, and is based upon MFC Securities' future
net-after-tax profits.

     The Bank is a fully licensed Swiss Bank authorized to engage in deposit
taking and all forms of banking, including private, investment and commercial
banking. The Bank's principal activities focus on private banking (asset
management) and building and expanding its investment banking activities. The
Bank has not, and generally does not intend to, engage in commercial banking
activities such as commercial or real estate lending.

     The Bank's private banking activities include asset management, designing
and executing investment strategies, and providing administrative and brokerage
services for various clients, including institutions and high net-worth
individuals. The Bank offers a range of investment strategies which utilize
various products to service the investment management needs of its clients. The
Bank offers clients individually tailored solutions for achieving their specific
financial objectives. The Bank's services include placing fiduciary deposits in
the name of the Bank with major banks selected for their financial strength and
reliability and denominated in all major currencies with variable maturities,
providing foreign exchange facilities for clients, providing full brokerage and
securities execution services for clients buying and selling stocks, bonds and
other securities, and custodian services. The Bank also provides flexible
multi-currency credit facilities for clients who require leverage to enhance
investment strategies or seek additional liquidity. In such cases, acceptable
securities are used as collateral.

     The Bank's investment banking services include finance and advisory
services for corporate finance transactions and underwriting issues of
securities. The Bank counsels clients on business and financing strategy and the
execution of transactions that advance strategic goals, including mergers,
acquisitions, reorganizations and divestitures, and assists in structuring and
raising capital. The Bank is focusing on developing relationships with small to
mid-sized corporate clients with an international orientation in Europe, North
America and the Far East. To service such clients, the Bank is building its
marketing, trading and research capabilities.

     The Bank's sources of revenues are fees and commissions from private
banking and investment banking services, interest income and related trading
income. Private banking fees and commissions are earned by the Bank from
providing asset management services, brokerage of securities, futures and
options, as well as securities custody and clearing, fiduciary and agency, and
cash management services. Private banking fees are also earned from commitments
to extend credit, standby letters of credit and guarantees. Investment banking
fees are generated by providing strategic and financial advice and arranging
financing for clients, and include advisory and underwriting revenues. Interest
income is generated by the Bank through interest earned on the Bank's capital
and deposits and from "securities margin" loans to clients. The Company intends
to focus upon increasing the earnings generated by the Bank's services for
clients and the amount of client related income.

     The Bank is subject to various Swiss regulatory requirements, including
capital requirements administered by the Swiss Federal Banking Commission (the
"Commission"). The Commission is the Bank's primary regulator and establishes
minimum capital requirements for the Bank. Failure to meet minimum
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capital requirements can initiate mandatory, and possibly additional
discretionary, actions by the regulator that, if undertaken, could have a direct
material effect on the Bank and the Company. Under risk-based capital adequacy
guidelines established by the regulator, banks in Switzerland must meet specific
capital guidelines that involve quantitative measures of assets, liabilities and
other off-balance sheet items, as calculated under Swiss regulatory accounting
practices. The Bank is required to file certain reports with the Commission and
is subject to examination. The Bank is subject to restrictions on loans and
extensions of credit to, and on certain other types of transactions with, the
Company and other affiliates. The Company believes that the Bank's capital is
sufficient for its current and reasonably foreseeable operations.

     The Bank places substantially all of the deposits it receives with other
major financial institutions on a fiduciary or trust basis. In such cases, the
Bank will earn a fee on the amount received by it from the counterparty. This is
in contrast to most North American banks, which generate revenue from the spread
between their cost of funds and the credit received. The Bank's fiduciary
deposits are off-balance sheet items which permit the Bank to generate revenues
without committing or tieing up significant amounts of its capital.

     The primary risks faced by the Bank are credit or counterparty risks,
market risks and transaction risks. The Bank has adopted comprehensive risk
management processes to facilitate, control and monitor risk taking. Further,
the Bank does not engage in certain businesses such as commercial, real estate
or consumer lending. The Bank only enters into derivative contracts to provide
products and services to clients and not for its own account.

     Credit risk arises from the possibility that counterparties may default on
their obligations to the Bank. These obligations can arise from placing
fiduciary deposits, the extension of credit in trading and investment
activities, and participation in payment and securities transactions on its own
behalf and as agent on behalf of clients. The Bank manages credit risk on an
individual transaction, counterparty level and on a portfolio basis. Credit
limits for clients and counterparties are established by the Bank's credit
officers and management with knowledge of the client's creditworthiness. In
addition, the Bank has established policies and limitations with respect to its
securities lending practices. At a portfolio level, exposure concentrations are
reviewed and monitored by the Bank's management. To reduce credit or
counterparty risk, the Bank only places fiduciary deposits with major banks
selected for their financial strength and reliability, and otherwise attempts
only to deal with creditworthy counterparties and obtain collateral where
appropriate.

     Transaction risks can arise from the Bank's investment banking activities
and relate to the risks of the proposed transaction. These risks include market
and credit risks associated with underwriting securities as well as risks
associated with the Bank's role in providing advisory services. The Bank manages
transaction risk through, among other things, allocating and monitoring its
capital requirements, only underwriting securities in circumstances where the
risk to the Bank's capital is minimal, careful screening of clients and
transactions, and engaging qualified personnel to manage transactions.

     Market risks relate to fluctuations in the liquidity of securities, as well
as volatility in market conditions generally. The markets for securities and
other related products are affected by many factors over which the Bank has
little or no control, including the financial performance and prospects of
specific companies and industries, world markets and economic conditions, the
availability of credit and capital, political events and perceptions of market
participants.

     In all areas of its business, the Bank operates in a highly competitive
environment. In Switzerland, the Bank faces competition from other banks, asset
managers and a range of non-bank financial institutions, many of which are
larger and better capitalized than the Bank. Internationally, the Bank faces
competition from investment banks and securities dealers.

PROPRIETARY INVESTING

     The Company's proprietary investing concentrates on the identification,
financing and acquisition of controlling interests in companies or assets whose
intrinsic values are not properly reflected in their share price or value. The
Company seeks to acquire interests in companies in which management believes its
expertise in financial restructuring and asset management can add value to the
Company's investment. In addition, from

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time to time, the Company acts as a bridge lender or provides interim financing
to companies pending reorganization or prior to going public to generate fee
income and in conjunction with its proprietary investment strategy. The Bank's
services also assist in identifying proprietary investing opportunities for the
Company, as such opportunities often develop through relationships with clients.
Proprietary investments are made and managed to maximize total return.

     A key strategic proprietary investment is the Company's royalty interest
which consists of an indirect interest in the Wabush Iron Ore Mine (the "Wabush
Mine") located in the Province of Newfoundland, Canada. It has provided an
uninterrupted source of fairly predictable revenue for over 30 years, which the
Company has utilized for, among other things, financing proprietary investments.

     The royalty interest consists of a mining sub-lease of the lands upon which
the Wabush Mine is situated that commenced in 1956 and expires in the year 2055.
The terms of the mining sub-lease do not provide for a renewal. Pursuant to the
royalty interest, the operators of the Wabush Mine pay royalties to the holder
based upon the amount of iron ore shipped from the Wabush Mine. Payments are
made quarterly on the 25th day of the month following the end of each calendar
quarter. The per tonne royalty amount increases or decreases with fluctuations
in the "world price" for iron ore pellets and the U.S. Iron and Steel Subgroup
Producer Price Index, subject to a minimum royalty amount of $0.75 per tonne.
Revenues from the royalty interest are subject to a minimum annual royalty of
$3.25 million and are dependent on both the price levels for iron ore and the
amount of iron ore shipped from the Wabush Mine.

     In fiscal 1998, 1997 and 1996, respectively, iron ore shipments from the
mine were 5.6 million, 5.7 million and 5.2 million tons, and gross revenues from
the royalty interest were $12.9 million, $13.1 million and $11.7 million.

     The royalty interest, which is stated on the Company's balance sheet at its
historical cost of $1.7 million, was independently appraised in 1998 at an
average of $30.0 million on a pretax basis using an 11% rate of return.

     Iron ore is typically sold either as a concentrate, whereby the iron ore is
in granular form, or as a pellet, whereby iron ore concentrate has been mixed
with a binding agent, formed into a pellet and then fired in a furnace. Iron ore
pellets can be charged directly into blast furnaces without further processing
and are primarily used to produce pig iron which is subsequently transformed
into steel. As such, the demand and, consequently, the pricing of iron ore is
dependent upon the raw material requirements of integrated steel producers.
Demand for blast furnace steel is in turn cyclical in nature and is influenced
by, among other things, the level of general economic activity. Given that the
operator of the Wabush Mine is owned by a consortium of steel producers,
production from the mine has been generally maintained at relatively consistent
levels.

     The Company originally acquired the royalty interest in 1956 and, in
January 1992, the Company assigned all of its beneficial interest to an
affiliate, Prada Holdings Ltd. ("Prada"), in exchange for preferred shares of
Prada. Legal title to the royalty interest is still held in the name of the
Company, and the Company is responsible for all administration, receipt of
payments, payment of taxes and other matters relating to the royalty interest.
The Prada preferred shares were amended in 1996 and have an annual dividend rate
based upon the anticipated revenues to be received by Prada from the royalty
interest. The Prada preferred shares are retractable by the Company and
redeemable by Prada at any time for an amount equal to the fair market value of
the royalty interest plus all accrued and unpaid dividends. In addition, Prada
is restricted from mortgaging, charging, leasing or otherwise dealing with the
royalty interest without the Company's prior written consent until such time as
at least 75% of the Prada preferred shares have been redeemed. To date, no Prada
preferred shares have been redeemed. At the time of assignment, Prada had
approximately $56 million in Canadian tax losses. The royalty interest currently
represents substantially all of the income of Prada. The Company indirectly owns
36% of the common shares of Prada. M.J. Smith, the President of the Company, is
also an officer and a director of Prada.

     Other proprietary investments include the Company's interest in 69% of the
common shares and all of the redeemable preferred shares of Logan International
Corp. ("Logan") acquired in 1996 at an aggregate cost of

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approximately $13.4 million. Logan holds a portfolio of undeveloped real estate
assets which are located in the Pacific Northwest region of the State of
Washington. On a substantial portion of the properties, the Company is
conducting pre-development work relating to infrastructure, rezoning,
subdivision and permitting. The Company does not intend to develop any of its
properties, but in certain instances may participate in development joint
venture arrangements as an interim step in the sale of a property and will
continue pre-development work on the properties to the extent necessary to
protect or enhance their value.

     The Company intends to divest or otherwise monetize its real estate assets
and utilize the proceeds in its merchant banking activities, such as acquiring
controlling interests in operating businesses. The Company may also seek to
exchange its real estate assets for equity interests. In order to accomplish
such acquisitions, the Company may engage in joint ventures with affiliated
companies.

     In 1996, MFC acquired approximately 35% of the outstanding common shares
and three million variable voting redeemable preferred shares (the "Preferred
Shares") of Drummond Financial Corporation ("Drummond") for an aggregate cost of
approximately $11.8 million. The Preferred Shares have variable voting rights
which result in MFC currently having approximately 49% (the "Threshold Amount")
of the voting power in Drummond. In the event that any party acquires a voting
interest in excess of the Threshold Amount, the Preferred Shares become fully
voting and MFC will have approximately 76% of the voting power in Drummond. In
1998, MFC acquired all of Drummond's outstanding bonds due April 1, 2008 in
consideration for U.S.$15.2 million of 8% Convertible Subordinated Bonds due
April 2008 of MFC (the "MFC Bonds"). The MFC Bonds are convertible into common
shares in the capital of MFC at a conversion price of U.S.$13.22 per common
share.

     The Company also has investments of approximately $6.8 million at December
31, 1998 relating to its insurance obligations with respect to Constitution
Insurance Company of Canada ("Constitution"), which the Company acquired in
1991. All of Constitution's insurance policies have expired and the Company
manages and administers its outstanding claims in the ordinary course. The
investment portfolio consists of short-term and long-term fixed interest debt
securities. The Company maintains certain key personnel, office premises and
computer systems in connection with its insurance business, as it has been
seeking other opportunities in the insurance industry.

COMPETITION

     The Company conducts its business in a global environment that is highly
competitive and unpredictable. The Company competes against brokerage firms,
investment banks, merchant banks and other investment managers, and the Bank
faces competition in Switzerland from other banks, asset managers and a range of
non-bank financial institutions and internationally from investment banks and
securities dealers. Many of the Company's competitors are national or
international companies with far greater resources, capital and access to
information than the Company. As a result, the Company may become involved in
transactions with more risk.

     Numerous variables may have a material effect on the Company's results or
operations. These variables include, but are not limited to: economic and market
conditions, including the liquidity of capital markets, the volatility of market
prices, rates and indices, the timing and volume of market activity, the
availability of capital, and inflation; political events, including legislative,
regulatory and other developments; competitive forces, including the ability to
attract and retain personnel; support systems; and investor sentiment.

ITEM 2.  DESCRIPTION OF PROPERTIES

     The Company's principal office is currently located in Geneva, Switzerland
and the Company also maintains offices in Zurich, Switzerland and Toronto,
Canada. All of the Company's premises are leased.

     The Company participates in the royalty interest through its ownership of
preferred shares of Prada issued in exchange for a beneficial interest in the
royalty interest. The royalty interest consists of a mining sublease and royalty
interest in the lands upon which the Wabush Mine is situated that commenced in
1956 and expires in the year 2055. The lessor is Knoll Lake Minerals Limited
("Knoll Lake") which holds a mining lease from

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<PAGE>   9

the Province of Newfoundland, Canada. The Company owns 39.5% of the outstanding
capital stock of Knoll Lake. The lease requires the payment of royalties to
Knoll Lake of $0.22 per ton on shipments of iron ore from the Wabush Mine. Knoll
Lake pays annual dividends to its shareholders equal to its royalties less
expenses and income taxes.

     The Company transferred its interest in the mining site and surface rights
to the Wabush Mine to the Wabush Iron Company Limited, which is owned by the
Interlake Iron Corporation, Inland Steel Company and Pickands, Mather & Company,
for a term co-extensive with the Company's original lease.

     Iron ore is shipped from the Wabush Mine to Pointe Noire, Quebec, Canada,
where it is pelletized. Geological studies done on the Wabush Mine to date have
estimated that the mine has iron ore deposits of approximately 713 million tons
averaging 34.5 fe. During 1996, 1997 and 1998, 5.2 million, 5.7 million and 5.6
million tons of iron ore, respectively, were shipped from the Wabush Mine.

     The Wabush Mine is operated by an unincorporated joint venture consisting
of Wabush Iron Company Limited (U.S.A.), Steel Company of Canada Limited
(Canada) and Dominion Foundries & Steel Limited (Canada) (the "Consortium"),
which pays royalties to the holder of the royalty interest based upon the amount
of iron ore shipped from the Wabush Mine. These royalties are not to be less
than $3.25 million annually until the year 2055. In 1987, the royalty rate
specified in the base price was amended to require a base royalty rate of $1.685
per ton with escalations as defined by agreement. The prior agreement with the
Consortium with respect to renegotiating escalations to the base rate has
expired.

     The royalty interest is subject to an escalation tax that is payable to the
Province of Newfoundland, Canada based upon the amount of iron ore shipped from
the Wabush Mine and computed pursuant to the Mesabi Old Range Non-Bessemer ore
market price (the "Reference Price"). The escalation tax was $0.37 per ton in
each of 1996, 1997 and 1998. The Reference Price has ceased to be published and
the Company and the Government of Newfoundland are discussing possible
alternatives.

     The Company indirectly owns approximately 102 acres of undeveloped real
property which is annexed to the City of Gig Harbour, Washington, which is
located at the west end of the Tacoma Narrows Bridge from Tacoma, Washington. Of
the total acreage, 50 acres are now zoned for retail/commercial uses, 35 acres
for medium density (8 units per acre) residential use and 17 acres for business
parks/professional offices. The retail portion of the property is under an
option agreement for the development of a regional shopping centre. The Company
may develop all or part of the remaining land through partnerships, joint
ventures or other economic associations with local developers. The Company's
current involvement is limited to pre-development work, including infrastructure
(roads, sewer and water services), preliminary permits, market studies,
feasibility studies and related activities.

ITEM 3.  LEGAL PROCEEDINGS

     By notices of reassessment dated June 7, 1996, Revenue Canada reassessed
the Company for taxes with respect to its 1992, 1993 and 1994 taxations years,
asserting that additional taxable income is attributable to the Company with
respect to the royalty interest in those taxation years, resulting in additional
taxes due in the aggregate amount of approximately $9.8 million. In addition,
Revenue Canada reduced the Company's non-taxable loss for the 1993 taxation
year.

     The Company has appealed the reassessments to the Tax Court of Canada. The
Company is vigorously contesting Revenue Canada's position and believes that it
has a meritorious defense to Revenue Canada's claims. The Company believes that
there are sufficient tax losses available to offset the amount of additional
income being attributed to the Company by Revenue Canada.

     The Company is also subject to routine litigation incidental to its
business, but does not anticipate that the outcome of such litigation will have
a material adverse effect on its business or financial condition.

                                        9
<PAGE>   10

ITEM 4.  CONTROL OF REGISTRANT

     As at May 6, 1999, to the best of the Company's knowledge, no person owns
or controls 10% or more of the Company's common shares. The Company's officers
and directors, as a group, own or control, directly or indirectly, an aggregate
of 1,104,943 common shares and have options on 1,509,500 common shares,
representing approximately 19.3% of the Company's common shares on a fully
diluted basis.

ITEM 5.  NATURE OF TRADING MARKET

MARKET INFORMATION

     The Company's common shares are quoted on the Nasdaq National Market
("Nasdaq") under the symbol "MXBIF". The following table sets forth the
quarterly high and low sales prices of the Company's common shares on Nasdaq and
the OTC Bulletin Board (the "OTC"), for the periods indicated:

<TABLE>
<CAPTION>
                                                                     NASDAQ/OTC(1)
                                                                ------------------------
                                                                   HIGH          LOW
                                                                ----------    ----------
<S>                                                             <C>           <C>
1997
March 31....................................................    U.S.$ 7.50    U.S.$ 5.70
June 30.....................................................          8.75          5.45
September 30................................................         11.25          7.25
December 31.................................................         11.56          9.00
1998
March 31....................................................         14.06          9.88
June 30.....................................................         14.38          9.50
September 30................................................         10.31          5.88
December 31.................................................          9.25          4.69
1999
March 31....................................................          9.00          6.50
April 1 to May 6............................................          7.50          5.81
</TABLE>

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

(1) The Company's common shares were quoted on the OTC until May 1997.
    Thereafter, they were quoted on Nasdaq.

SHAREHOLDER DISTRIBUTION

     As of May 6, 1999, there were approximately 2,261 holders of record of the
Company's common shares and a total of 12,056,623 common shares were
outstanding. Approximately 10,763,926 or 89% of the Company's common shares are
held of record by 1,909 U.S. holders, including depositories and clearing
agencies.

DIVIDEND INFORMATION

     In 1997, the Company resolved to pay regular dividends on its common
shares, subject to, among other things, the availability of earnings and its
anticipated cash requirements. In June 1997, the Company paid its first dividend
in the amount of $0.01 per common share and, in June 1998, the Company paid a
dividend in the amount of U.S.$0.02 per common share. The actual timing, payment
and amount of future dividends paid by the Company will be determined by the
board of directors of the Company, based upon, among other things, the cash
flow, results of operations and financial condition of the Company, the need for
funds to finance ongoing operations and such other business considerations as
the board of directors of the Company considers relevant.

                                       10
<PAGE>   11

ITEM 6.  EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
         SECURITY HOLDERS

     There are presently no governmental laws, decrees or regulations in Canada
which restrict the export or import of capital, or which impose foreign exchange
controls or affect the remittance of interest, dividends or other payments to
non-resident holders of the Company's common shares. However, any remittances of
dividends to United States residents are subject to a 15% withholding tax (5% if
the beneficial owner of the dividends is a corporation owning at least 10% of
the voting shares of the Company) pursuant to Article X of the Canada-United
States Income Tax Convention (1980), as amended (the "Treaty"). See "ITEM 7.
Taxation".

     Except as provided in the Investment Canada Act (the "ICA"), there are no
limitations specific to the rights of non-Canadians to hold or vote the common
shares of the Company under the laws of Canada or the Yukon Territory, or in the
charter documents of the Company.

     The ICA requires non-Canadian persons or entities acquiring "control" (as
defined in the ICA) of a corporation carrying on business in Canada to either
notify, or file an application for review with, Investment Canada, the federal
agency created by the ICA. The ICA is applicable to, and Investment Canada will
review, transactions which result in the direct or indirect acquisition of
control of a Canadian business, where the gross value of corporate assets exceed
certain threshold levels (such thresholds being favourably varied for U.S.
citizens by legislation relating to the Canada-U.S. Free Trade Agreement) or
where the activity of the business is related to Canada's cultural heritage or
national identity. No change of voting control will be deemed to have occurred,
for purposes of the ICA, if less than one-third of the voting control of a
Canadian corporation is acquired by an investor.

     If an investment is reviewable under the ICA, an application for review in
the form prescribed is normally required to be filed with Investment Canada
prior to the investment taking place, and the investment may not be implemented
until the review has been completed and the Minister responsible for Investment
Canada is satisfied that the investment is likely to be of net benefit to
Canada. If the Minister is not satisfied that the investment is likely to be of
net benefit to Canada, the non-Canadian must not implement the investment, or if
the investment has been implemented, may be required to divest himself of
control of the business that is the subject of the investment.

ITEM 7.  TAXATION

CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES

     The Company considers that the following general summary fairly describes
the principal Canadian federal income tax consequences applicable to a holder of
common shares of the Company who is a resident of the United States, who is not
a resident of Canada and who does not use or hold, and is not deemed to use or
hold, his common shares of the Company in connection with carrying on a business
in Canada (a "non-resident holder").

     This summary is based upon the current provisions of the Income Tax
Act(Canada) (the "ITA"), the regulations thereunder and the current publicly
announced administrative and assessing policies of Revenue Canada, Taxation.
This description is not exhaustive of all possible Canadian federal income tax
consequences and does not take into account or anticipate any changes in law,
whether by legislative, governmental or judicial action.

     THE SUMMARY IS OF A GENERAL NATURE ONLY AND IT IS NOT INTENDED TO BE, AND
SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY HOLDER OR PROSPECTIVE
HOLDER OF COMMON SHARES OF THE COMPANY, AND NO OPINION OR REPRESENTATION WITH
RESPECT TO THE TAX CONSEQUENCES TO ANY HOLDER OR PROSPECTIVE HOLDER OF COMMON
SHARES OF THE COMPANY IS MADE. ACCORDINGLY, HOLDERS AND PROSPECTIVE HOLDERS OF
COMMON SHARES OF THE COMPANY SHOULD CONSULT WITH THEIR OWN TAX ADVISORS WITH
RESPECT TO THE INCOME TAX CONSEQUENCES TO THEM OF PURCHASING, OWNING AND
DISPOSING OF COMMON SHARES OF THE COMPANY.

                                       11
<PAGE>   12

DIVIDENDS

     Dividends paid on the common shares of the Company to a non-resident holder
will be subject to withholding tax. The Treaty provides that the ITA's standard
25% withholding tax rate is reduced to 15% on dividends paid on shares of a
corporation resident in Canada (such as the Company) to residents of the United
States, and also provides for a further reduction of this rate to 5% where the
beneficial owner of the dividends is a corporation resident in the United States
that owns at least 10% of the voting shares of the corporation paying the
dividend.

CAPITAL GAINS

     A non-resident holder is not subject to tax under the ITA in respect of a
capital gain realized upon the disposition of a share of the Company unless the
share represents "taxable Canadian property" to the holder thereof. The common
shares of the Company will be considered taxable Canadian property to a
non-resident holder if:

     (a)  the non-resident holder;

     (b)  persons with whom the non-resident holder did not deal at arm's
          length; or

     (c)  the non-resident holder and persons with whom he did not deal at arm's
          length,

owned not less than 25% of the issued shares of any class of the capital stock
of the Company at any time during the five year period preceding the disposition
of such shares. In the case of a non-resident holder to whom shares of the
Company represent taxable Canadian property and who is resident in the United
States, no Canadian taxes will generally be payable on a capital gain realized
on such shares by reason of the Treaty unless the value of such shares is
derived principally from real property situated in Canada.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

     The following is a general discussion of certain possible United States
Federal foreign income tax matters under current law, generally applicable to a
US Holder (as defined below) of common shares of the Company who hold such
shares as capital assets. This discussion does not address all relevant Federal
income tax matters and it does not address consequences peculiar to persons
subject to special provisions of Federal income tax law, such as those described
below as excluded from the definition of a US Holder. In addition, this
discussion does not cover any state, local or foreign tax consequences. See
"Certain Canadian Federal Income Tax Consequences" above.

     The following discussion is based upon the sections of the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, published Internal
Revenue Service ("IRS") rulings, published administrative positions of the IRS
and court decisions that are currently applicable, any or all of which could be
materially and adversely changed, possibly on a retroactive basis, at any time.
In addition, this discussion does not consider the potential effects, both
adverse and beneficial, of any recently proposed legislation which, if enacted,
could be applied, possibly on a retroactive basis, at any time.

     THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IT IS NOT
INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY
HOLDER OR PROSPECTIVE HOLDER OF COMMON SHARES OF THE COMPANY, AND NO OPINION OR
REPRESENTATION WITH RESPECT TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO ANY SUCH HOLDER OR PROSPECTIVE HOLDER IS MADE. ACCORDINGLY, HOLDERS AND
PROSPECTIVE HOLDERS OF COMMON SHARES OF THE COMPANY SHOULD CONSULT THEIR OWN TAX
ADVISORS ABOUT THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF
PURCHASING, OWNING AND DISPOSING OF COMMON SHARES OF THE COMPANY.

US HOLDERS

     As used herein, a "US Holder" includes a holder of common shares of the
Company who is a citizen or resident of the United States, a corporation created
or organized in or under the laws of the United States or of any political
subdivision thereof, any entity which is taxable as a corporation for US tax
purposes and any other person or entity whose ownership of common shares of the
Company is effectively connected with the
                                       12
<PAGE>   13

conduct of a trade or business in the United States. A US Holder does not
include persons subject to special provisions of Federal income tax law, such as
tax-exempt organizations, qualified retirement plans, financial institutions,
insurance companies, real estate investment trusts, regulated investment
companies, broker-dealers, non-resident alien individuals or foreign
corporations whose ownership of common shares of the Company is not effectively
connected with the conduct of a trade or business in the United States and
shareholders who acquired their shares through the exercise of employee stock
options or otherwise as compensation.

FOREIGN TAX CREDIT

     A US Holder who pays (or has withheld from distributions) Canadian income
tax with respect to the ownership of common shares of the Company may be
entitled, at the option of the US Holder, to either a deduction or a tax credit
for such foreign tax paid or withheld. Generally, it will be more advantageous
to claim a credit because a credit reduces United States Federal income taxes on
a dollar-for-dollar basis, while a deduction merely reduces the taxpayer's
income subject to tax. This election is made on a year-by-year basis and
generally applies to all foreign income taxes paid by (or withheld from) the US
Holder during that year. There are significant and complex limitations which
apply to the credit, among which is the general limitation that the credit
cannot exceed the proportionate share of the US Holder's United States income
tax liability that the US Holder's foreign source income bears to his or its
worldwide taxable income. In determining the application of this limitation, the
various items of income and deduction must be classified into foreign and
domestic sources. Complex rules govern this classification process. There are
further limitations on the foreign tax credit for certain types of income such
as "passive income", "high withholding tax interest", "financial services
income", "shipping income", and certain other classifications of income. The
availability of the foreign tax credit and the application of the limitations on
the credit are fact specific and holders and prospective holders of common
shares of the Company should consult their own tax advisors regarding their
individual circumstances.

PASSIVE FOREIGN INVESTMENT CORPORATION

     The Company does not believe that it is a passive foreign investment
corporation (a "PFIC"). If a US Holder disposes of shares in a PFIC, any
resultant gain will be subject to a tax that is determined by apportioning the
gain pro rata over the entire holding period of the shares. The amount of gain
that is apportioned to the current year, and to any pre-1987 holding period, is
included in the US Holder's current income.

     The tax on the amount apportioned to any prior years beginning with 1987 is
calculated using the highest tax rate in each applicable year. In addition,
interest compounded daily is charged on the tax due for each prior year from the
due date of the return for the respective year to the due date for the current
year. The interest rate is set quarterly. The US Holder's current year tax is
increased by the special tax and interest on amounts apportioned to prior years.

     A US Holder can avoid this special tax and interest charge by making a
permanent election to treat a PFIC as a "qualified electing fund" and to report
in each year thereafter such shareholder's pro rata share of the ordinary
earnings and net capital gains of a PFIC. If the election is not made in the
first year that the US Holder owns the shares, a special election would have to
be made to cleanse the effect of the prior year's holding periods.

     These rules apply similarly to distributions from a PFIC that would be
considered excess distributions. Complex rules govern the determination of
applicable gains and excess distributions, the calculation of the amounts
allocated pro rata to prior years, the resultant tax and applicable interest,
and the qualified electing fund elections whether as pedigreed or non-pedigreed.
Holders and prospective holders of common shares of a PFIC should consult their
own tax advisors regarding their individual circumstances.

                                       13
<PAGE>   14

ITEM 8.  SELECTED FINANCIAL DATA

     The following table summarizes selected consolidated financial data for the
Company prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). In addition, certain information is presented in
order to show the difference which would result from the application of United
States generally accepted accounting principles ("US GAAP"). The information in
the table was extracted from the more detailed consolidated financial statements
and related notes included herein and should be read in conjunction with such
financial statements and with the information appearing under the heading, "ITEM
9. Management's Discussion and Analysis of Financial Condition and Results of
Operations".

CANADIAN GAAP

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                        ------------------------------------------------------
                                          1998        1997        1996       1995       1994
                                        --------    --------    --------    -------    -------
                                             (in thousands, other than per share amounts)
<S>                                     <C>         <C>         <C>         <C>        <C>
Revenues..............................  $123,310    $ 86,060    $ 75,467    $26,329    $27,015
Net income (loss).....................    30,235      23,617      13,994     (1,235)     5,383
Net income (loss) per share
  Basic(1)............................      2.48        1.95        1.52      (0.15)      0.67
  Fully diluted(1)....................      2.20        1.79        1.37      (0.15)      0.67
Total assets..........................   249,782     226,890     160,368     73,551     90,188
Debt..................................    40,091      41,602      42,937         --        190
Shareholders' equity..................   154,396     120,156      91,516     51,383     51,320
Cash dividends(2).....................       369         106          --         --         --
</TABLE>

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

(1) All amounts have been adjusted to reflect a 1 to 1.5 stock split effected in
    March 1996.

(2) Paid on the Company's common shares.

US GAAP

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                        ------------------------------------------------------
                                          1998        1997        1996       1995       1994
                                        --------    --------    --------    -------    -------
                                             (in thousands, other than per share amounts)
<S>                                     <C>         <C>         <C>         <C>        <C>
Revenues..............................  $118,842    $ 83,138    $ 72,094    $26,329    $27,015
Net income (loss).....................    31,922      12,365      13,329     (1,600)     8,556
Net income (loss) per share
  Basic(1)............................      2.62        1.07        1.45      (0.20)      0.96
  Diluted(1)..........................      2.42        1.00        1.41      (0.20)      0.96
Total assets..........................   241,202     223,528     173,597     77,711     97,586
Debt..................................    40,091      41,602      42,937         --        190
Shareholders' equity..................   146,969     112,721      95,331     58,416     58,718
Cash dividends(2).....................       369         106          --         --         --
</TABLE>

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

(1) All amounts have been adjusted to reflect a 1 to 1.5 stock split effected in
    March 1996.

(2) Paid on the Company's common shares.

                                       14
<PAGE>   15

ITEM 9.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     The following discussion and analysis of the financial condition and
results of operations of the Company for the three years ended December 31, 1998
should be read in conjunction with the consolidated financial statements and
related notes included in this annual report.

     The Company's financial statements included herein were prepared in
accordance with Canadian GAAP. For a reconciliation of the Company's financial
statements included herein to US GAAP, see Note 19 to the said financial
statements.

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

RESULTS OF OPERATIONS

     The Company operates in the financial services business, specializing in
private and investment banking internationally. It also engages in proprietary
investing for its own account. The Company conducts its banking activities
through its wholly-owned subsidiary, MFC Merchant Bank S.A., which was acquired
in February 1997.

     The Company's results of operations may be materially affected by market
fluctuations and economic factors. In addition, the Company's results of
operations have been and may continue to be affected by many factors of a global
nature, including economic and market conditions, the availability of capital,
the level and volatility of equity prices and interest rates, currency values
and other market indices, technological changes, the availability of credit,
inflation and legislative and regulatory developments. The Company's results of
operations may also be materially affected by competitive factors. Competition
includes firms traditionally engaged in private and investment banking such as
banks and investment dealers, along with other sources such as insurance
companies, mutual fund groups, on-line service providers and other companies
offering financial services in Europe and globally.

     The following is a summary of the Company's revenues by geographic region
for the fiscal years ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                1998       1997       1996
                                                              --------    -------    -------
                                                                      (in thousands)
<S>                                                           <C>         <C>        <C>
Canada......................................................  $ 31,392    $29,043    $39,460
Switzerland.................................................    88,237     30,925         --
United States...............................................     3,681     26,092     36,007
                                                              --------    -------    -------
                                                              $123,310    $86,060    $75,467
                                                              ========    =======    =======
</TABLE>

     The following table provides certain selected financial information for the
Company for each quarter of 1998:

<TABLE>
<CAPTION>
                                                                     1998
                                              ---------------------------------------------------
                                              DECEMBER 31    SEPTEMBER 30    JUNE 30     MARCH 31
                                              -----------    ------------    --------    --------
                                                 (in thousands, other than per share amounts)
<S>                                           <C>            <C>             <C>         <C>
Revenues....................................   $ 43,185        $ 26,230      $ 21,100    $ 32,795
Expenses....................................     31,458          21,239        14,332      25,753
Net income..................................     11,377           5,046         6,852       6,960
Fully diluted earnings per share............       0.80            0.39          0.51        0.52
Total assets................................    249,782         266,580       226,253     235,610
Shareholders' equity........................    154,396         141,837       128,657     125,413
</TABLE>

                                       15
<PAGE>   16

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

     In 1998, the Company's revenues increased by approximately 43.3% to $123.3
million from $86.1 million in 1997, primarily due to increased banking and
financial services fees. Banking and financial services fees increased by 41.8%
in 1998 from 1997, as a result of the inclusion of the results of the Bank for
the full year. The acquisition of the Bank resulted in the Company generating
revenues from operations such as brokerage commissions, foreign exchange trading
fees, asset management and related fees and banking fees generated from placing
customer deposits on a fiduciary basis with counterparties. The increase in
revenue resulted primarily from an increase in the amount of assets under
management and higher revenues from corporate finance advisory services.
Revenues from investments increased by 56.5% in the current year from 1997, as a
result of greater trading activities. The Company's investment portfolio remains
principally invested in investment grade securities.

     Expenses increased to $92.8 million in 1998 from $61.2 million in 1997,
primarily as a result of higher revenues. General and administrative expenses
increased to $19.4 million in 1998 from $12.4 million in 1997, primarily due to
the inclusion of the results of the Bank for the full year and higher revenues.
Interest expense decreased to $4.8 million in 1998 from $5.1 million in 1997,
primarily due to a decrease in amounts borrowed during the year.

     In 1998, net earnings were $30.2 million or $2.48 per share on a basic
basis ($2.20 per share on a fully diluted basis). Net earnings in 1998 included
$8.1 million on the purchase of debt securities. In 1997, net earnings were
$23.6 million or $1.95 per share on a basic basis ($1.79 per share on a fully
diluted basis). Net earnings in 1997 included $2.9 million on the purchase of
debt securities. Increased revenues from banking and financial services
contributed to improved earnings in 1998, which were partially offset by
increased expenses related to investment securities and higher general and
administrative expenses.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

     In 1997, the Company's revenues increased by 14% to $86.1 million from
$75.5 million in 1996, primarily due to increased financial services fees.
Financial services fees increased to $26.8 million in the current year from $4.5
million in the comparative period, as a result of the inclusion of the results
of the Bank, BRA and MFC Securities. In 1997, as a result of its acquisitions,
the Company generated revenues from new operations, such as brokerage
commissions, spread income from Eurobond dealing, foreign exchange trading fees,
asset management and related fees and banking fees generated from the placing of
customer deposits on a fiduciary basis with counterparties. The majority of the
increase in revenue is directly related to the amount of assets under management
at the Bank, which increased significantly throughout 1997 as a result of
internal growth and the acquisition of BRA. The acquisition of the Bank also
significantly increased the Company's revenues from corporate finance advisory
services.

     Sales and purchases of investment securities provided revenues and expenses
of $48.0 million and $40.6 million, respectively, in 1997, compared to $57.0
million and $44.4 million, respectively, in 1996, primarily due to modifications
in the Company's short-term investment strategy in its treasury operations. The
Company's investment portfolio remains principally invested in investment grade
securities. Real estate sales decreased to $4.5 million in 1997, compared to
$7.2 million in 1996, as a result of reduced activity in the Company's real
estate operations. In 1997, the Company focused on the development of its
banking operations.

     Interest revenues increased to $6.2 million in the current year from $5.0
million in 1996, primarily as a result of the Company's investment strategy and
the interest generated by the Bank's securities lending facilities. In the
current period, other revenues decreased to $0.6 million from $1.8 million in
1996.

     Costs and expenses decreased marginally to $61.2 million in the year ended
December 31, 1997 from $61.3 million in the same period of 1996, primarily as a
result of the decrease in securities activities. General and administrative
expenses increased to $12.4 million in the current period from $7.6 million in
the same period of 1996, primarily as a result of the inclusion of the results
of the Bank, BRA and MFC Securities in

                                       16
<PAGE>   17

1997. General and administrative expenses included one-time expenditures related
to the rationalization of BRA, the relocation of the Bank's offices, and
upgrades to the Bank's computer systems.

     Interest expense decreased to $5.1 million during the year ended December
31, 1997 from $6.1 million in the same period of 1996, primarily as a result of
a decrease in amounts borrowed during the year.

     In 1997, net earnings were $23.6 million or $1.95 per share on a basic
basis ($1.79 per share on a fully diluted basis), including earnings of $2.9
million on the extinguishment of indebtedness, compared to net earnings of $14.0
million or $1.52 per share on a basic basis ($1.37 per share on a fully diluted
basis) in 1996, including earnings of $3.4 million on the extinguishment of
indebtedness.

LIQUIDITY AND CAPITAL RESOURCES

     The following table is a summary of selected financial information
concerning the Company for the periods indicated:

<TABLE>
<CAPTION>
                                                    DECEMBER 31,                        DECEMBER 31,
                                            ----------------------------      --------------------------------
                                               1998             1997              1998               1997
                                            -----------      -----------      -------------      -------------
                                            (U.S. Dollars in thousands,       (Canadian Dollars in thousands,
                                              other than percentages)             other than percentages)
<S>                                         <C>              <C>              <C>                <C>
Cash and cash equivalents................    $ 25,398         $ 29,544          $ 38,871           $ 42,222
Securities...............................      50,309           52,863            76,998             75,546
Total assets.............................     163,203          158,765           249,782            226,890
Debt.....................................      26,195           29,110            40,091             41,602
Shareholders' equity.....................     100,878           84,078           154,396            120,156
Return on equity.........................       25.2%            25.8%             25.2%              25.8%
</TABLE>

     The Company maintains a high level of liquidity, with a substantial amount
of assets held in cash and cash equivalents, highly liquid marketable securities
and customer loans collateralized by marketable securities. The highly liquid
nature of these assets provides the Company with flexibility in managing its
business and financing. This liquidity is used by the Company in client related
services where the Company acts as a financial intermediary for third parties
and in the Company's own proprietary investing activities.

     At December 31, 1998, the Company's cash and cash equivalents were $38.9
million, compared to $42.2 million at December 31, 1997. At December 31, 1998,
the Company had securities of $77.0 million, compared to $75.5 million at
December 31, 1997.

     The Company views return on equity to be an important measure of its
performance, in the context of both the particular business environment in which
the Company operates and its peer group's results. In 1998 and 1997,
respectively, the Company's return on equity was approximately 25%. The Company
manages its capital position based upon, among other things, business
opportunities, capital availability and rates of return, together with internal
capital policies and regulatory requirements.

     The Company continues to explore potential acquisition opportunities as a
means of expanding its business. Such opportunities may involve acquisitions
which are material in size and may require the raising of additional capital.

OPERATING ACTIVITIES

     Operating activities used cash of $1.0 million in 1998, compared to $21.4
million in 1997. In 1998, an increase in receivables used cash of $14.1 million,
primarily as a result of securities trading activities of clients. A decrease in
accounts payable and accrued expenses used cash of $12.0 million in 1998. During
the current year, the Company recognized a gain of $8.1 million on the purchase
of debt securities. The Company expects to generate sufficient cash flow from
operations to meet its working capital requirements.

                                       17
<PAGE>   18

INVESTING ACTIVITIES

     Investing activities in 1998 used cash of $1.6 million, compared to
providing cash of $74.5 million in 1997. In 1998, a net increase in loans used
cash of $0.2 million, compared to a net decrease in loans providing cash of
$32.4 million in 1997. In 1998, purchases of subsidiaries used cash of $0.7
million. In 1997, the purchase of the Bank, MFC Securities and BRA, net of cash
acquired, provided cash of $41.5 million. In 1998, the Company invested
approximately $1.2 million to upgrade its computer systems, including purchasing
computer hardware and software, conducting performance and security testing, and
testing for Year 2000 compliance.

FINANCING ACTIVITIES

     Net cash used by financing activities was $4.9 million in 1998, compared to
$29.6 million in 1997. Net borrowings provided cash of $10.4 million in 1998,
compared to net debt repayments using cash of $2.0 million in 1997. In 1998, a
net decrease in deposits used cash of $10.1 million, compared to $31.2 million
in 1997. The net purchase of common shares in 1998 used cash of $4.7 million,
compared to issuances of common shares providing cash of $4.1 million in 1997.
The Company paid a dividend of $0.4 million in 1998, compared to $0.1 million in
1997, to its common shareholders.

FOREIGN CURRENCY

     Substantially all of the Company's operations are conducted in
international markets and its consolidated financial results are subject to
foreign currency exchange rate fluctuations, in particular, those in
Switzerland.

     The Company translates foreign assets and liabilities into Canadian dollars
at the rate of exchange on the balance sheet date. Revenues and expenses are
translated at the average rate of exchange prevailing during the period.
Unrealized gains or losses from these translations are recorded as shareholders'
equity on the balance sheet and do not affect the net earnings of the Company.

     Since substantially all of the Company's revenues are received in Swiss
francs, the financial position of the Company for any given period, when
reported in Canadian dollars, can be significantly affected by the exchange rate
for Swiss francs prevailing during that period. In the year ended December 31,
1998, the Company reported approximately a net $9.1 million foreign exchange
translation gain and, as a result, the cumulative foreign exchange translation
gain increased to $10.5 million at December 31, 1998 from $1.4 million at
December 31, 1997.

     As both the Company's principal sources of revenues and expenses are in
Swiss francs, the Company does not currently enter into any currency hedging
arrangements for exchange rate fluctuations.

     Based upon the period average exchange rate in 1998, the Canadian dollar
decreased by approximately 5.0% in value against the Swiss Franc since December
31, 1997.

EUROPEAN ECONOMIC AND MONETARY UNION

     The Economic and Monetary Union ("EMU") has replaced the national
currencies of eleven participating European countries with a single European
currency, the Euro. The Euro was launched on January 1, 1999 when the European
Central Bank assumed monetary policy for the participating nations. During a
transition period, until the national currencies from the participating members
are withdrawn from circulation (July 2002 at the latest), such currencies will
continue to exist but only as fixed denominations of the Euro.

     The Company's financial services business is primarily based in
Switzerland. Although Switzerland is not a participating member country of the
EMU and did not adopt the Euro, the Company commenced preparations for the
introduction of the Euro in 1998 and implemented modifications to its
information and technology systems and programs in order to prepare for the
transition. Preparations included modifications to the Company's computer
systems and programs and coordination with clients and other counterparties to
ensure a smooth transition to the Euro. The Company was able to successfully
transact business in the Euro beginning on January 1, 1999. Costs associated
with modifications and other preparations necessary to prepare

                                       18
<PAGE>   19

for the transition to the Euro were not material and were funded through
operating cash flow and expensed in the period in which they were incurred.

     The Company anticipates that the introduction of the Euro will result in
greater cross-border transparency and will have a significant impact on European
financial markets. The Euro is expected to present business opportunities for
all participants in the European financial markets, including the Company.

DERIVATIVE INSTRUMENTS

     Derivatives are financial instruments, the payments of which are linked to
the prices, or relationships between prices, of securities or commodities,
interest rates, currency exchange rates or other financial measures. Derivatives
are designed to enable parties to manage their exposure to interest rates and
currency exchange rates, and security and other price risks. The Company uses
derivatives to provide products and services to clients and not for its own
account.

YEAR 2000

     Many of the world's computer systems currently record years in a two-digit
format. If not addressed, these computer systems may be unable to properly
interpret dates beyond the year 1999, which could lead to business disruptions
and is commonly referred to as the "Year 2000" issue. The Company has conducted
a comprehensive review and testing of all significant applications that may
require modification to ensure Year 2000 compliance.

     The Company's systems have been determined to be Year 2000 compliant. The
Company's Year 2000 testing has been audited and confirmed by a third-party
auditor. The Company is in the process of finalizing a contingency action plan
in the event of non-compliance on January 1, 2000, which is expected to be
completed around mid-1999.

     In addition, the Company is closely monitoring the Year 2000 compliance
status of its most critical business relationships with customers and other
counterparties. The Company surveys and communicates with counterparties,
intermediaries and vendors with whom it has important financial and operational
relationships to determine the extent to which they are vulnerable to the Year
2000 issue.

     There are a number of risks associated with the Year 2000 issue, including
the failure of the Company's computer and non-information technology systems.
Such failures could have a material adverse effect on the Company and could
result in system malfunctions, incorrect or incomplete transaction processing
and the inability to reconcile financial records and trading positions and
balances with counterparties. Further, even if the Company addresses all of its
Year 2000 issues, it can be adversely affected by failures of third parties to
address their own Year 2000 issues. The failure of third parties, with whom the
Company has financial operational relationships, to remediate their computer and
non-information technology systems in a timely matter could result in a material
adverse effect to the Company, including through business interruptions or
shutdown or financial losses.

     Based upon its current information, management of the Company has
determined that the Year 2000 issue will not pose significant operational
problems for its computers. The total cost to the Company of Year 2000
compliance activities has not been and is not currently anticipated to be
material to its financial position or results of operations in any given year.
The costs and the dates on which the Company plans to complete Year 2000
modification and testing are based on management's best estimates, which were
derived utilizing numerous assumptions of future events. The Company's
expectations are based on the assumption that there will be no general failure
of external, local or international systems (such as power, communications
systems, securities exchanges, central banks and various governmental regulatory
bodies) necessary for the ordinary conduct of business. However, there can be no
assurance that these estimates will be achieved and actual results could differ
materially from those anticipated.

INFLATION

     The Company does not believe that inflation has had a material impact on
revenues or income over the past three fiscal years.

                                       19
<PAGE>   20

ITEM 9A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to market risks from changes in interest rates,
foreign currency exchange rates and equity prices which may affect its results
of operations and financial condition. The Company manages these risks through
internal risk management policies which are administered by management
committees. The Company does not enter into derivative contracts for its own
account to hedge against these risks.

INTEREST RATE RISK

     Fluctuations in interest rates may affect the fair value of financial
instruments sensitive to interest rates. An increase in interest rates may
decrease the fair value and a decrease in interest rates may increase the fair
value of such financial instruments. The Company's financial instruments which
may be sensitive to interest rate fluctuations are investments and debt
obligations. The following table provides information about the Company's
exposure to interest rate fluctuations for the carrying amount of financial
instruments that may be sensitive to such fluctuations as at December 31, 1998
and expected cash flows from these instruments:

<TABLE>
<CAPTION>
                                                                 EXPECTED FUTURE CASH FLOW
                             CARRYING    FAIR     --------------------------------------------------------
                              VALUE      VALUE     1999      2000     2001     2002     2003    THEREAFTER
                             --------   -------   -------   ------   ------   ------   ------   ----------
                                                            (in thousands)
<S>                          <C>        <C>       <C>       <C>      <C>      <C>      <C>      <C>
Investments(1).............  $44,937    $45,536   $27,742   $2,358   $1,532   $   --   $8,099    $ 5,805
Debt obligations(2)........   22,834     20,550        --       --       --       --       --     20,550
</TABLE>

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

(1) Investments consist of debt securities.

(2) Debt obligations consist of the MFC Bonds which mature on March 31, 2008 and
    bear interest at 8% per annum.

FOREIGN CURRENCY EXCHANGE RATE RISK

     The reporting currency of the Company is the Canadian dollar. The Company
holds financial instruments primarily denominated in U.S. dollars and Swiss
francs. A depreciation of such currencies against the Canadian dollar will
decrease the fair value and an appreciation of such currencies against the
Canadian dollar will increase the fair value of such financial instruments. The
Company's financial instruments which may be sensitive to foreign currency
exchange rate fluctuations are investments, loans, deposits and debt
obligations. The following table provides information about the Company's
exposure to foreign currency exchange rate fluctuations for the carrying amount
of financial instruments that may be sensitive to such fluctuations as at
December 31, 1998 and expected cash flows from these instruments:

<TABLE>
<CAPTION>
                                                                 EXPECTED FUTURE CASH FLOW
                            CARRYING    FAIR     ---------------------------------------------------------
                             VALUE      VALUE     1999      2000     2001     2002     2003     THEREAFTER
                            --------   -------   -------   ------   ------   ------   -------   ----------
                                                            (in thousands)
<S>                         <C>        <C>       <C>       <C>      <C>      <C>      <C>       <C>
Investments(1)............  $68,350    $67,737   $48,389   $  957   $   --   $   --   $ 8,099    $10,292
Loans(2)..................   49,526     49,526    40,726       --       --       --     8,800         --
Deposits(3)...............   25,124     25,124    19,759    5,365       --       --        --         --
Debt obligations(4).......   40,091     37,807     2,533       --       --       --    14,724     20,550
</TABLE>

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

(1) Investments consist of debt securities and equity securities, both of which
    are primarily denominated in U.S. dollars and Swiss francs.

(2) Loans are denominated in U.S. dollars or Swiss francs.

(3) Deposits consist of cash deposits with the Bank.

(4) Debt obligations consist of the MFC Bonds and other debt, all of which are
    denominated in U.S. dollars.

EQUITY PRICE RISK

     Changes in trading prices of equity securities may affect the fair value of
equity securities or the fair value of other securities convertible into equity
securities. An increase in trading prices will increase the fair value and a
decrease in trading prices will decrease the fair value of equity securities or
instruments convertible into equity securities. The Company's financial
instruments which may be sensitive to fluctuations in equity prices are
investments and debt obligations. The following table provides information about
the Company's exposure

                                       20
<PAGE>   21

to fluctuations in equity prices for the carrying amount of financial
instruments sensitive to such fluctuations and expected cash flows from these
instruments:

<TABLE>
<CAPTION>
                                                                 EXPECTED FUTURE CASH FLOW
                            CARRYING    FAIR     ---------------------------------------------------------
                             VALUE      VALUE     1999      2000     2001     2002     2003     THEREAFTER
                            --------   -------   -------   ------   ------   ------   -------   ----------
                                                            (in thousands)
<S>                         <C>        <C>       <C>       <C>      <C>      <C>      <C>       <C>
Investments(1)............  $32,061    $31,790   $25,143   $   --   $   --   $   --   $    --    $ 6,647
Debt obligations(2).......   22,834     20,550        --       --       --       --        --     20,550
</TABLE>

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

(1) Investments consist of equity securities.
(2) Debt obligations consist of the MFC Bonds which are convertible into common
    shares of the Company at a fixed price. A change in the price of the
    Company's common shares may affect the fair value of the MFC Bonds.

ITEM 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

     The Company's Articles provide for three classes of directors with
staggered terms. Each director holds office until the expiry of his term or
until his successor is elected or appointed, unless his office is earlier
vacated in accordance with the Bylaws of the Company or with the provisions of
the Business Corporations Act (Yukon). At each annual meeting of the Company, a
class of directors is elected to hold office for a three year term. Successors
to the class of directors whose terms expire are identified as being of the same
class as the directors they succeed and are elected to hold office for a term
expiring at the third succeeding annual meeting of shareholders. A director
appointed or elected to fill a vacancy on the board of directors holds office
for the unexpired term of his predecessor. Officers of the Company serve at the
discretion of the board of directors of the Company.

     The following table sets out certain information concerning the directors
and executive officers of the Company:

<TABLE>
<CAPTION>
                                                                                 DATE OF          EXPIRATION
                                                                               COMMENCEMENT        OF TERM
                                                                              OF OFFICE WITH    OF OFFICE WITH
NAME                                 PRESENT POSITION WITH THE COMPANY         THE COMPANY       THE COMPANY
----                                 ---------------------------------        --------------    --------------
<S>                                  <C>                                      <C>               <C>
Michael J. Smith...................  Director and                                  1986              1999
                                     President                                     1996
Roy Zanatta........................  Director and                                  1996              1999
                                     Secretary                                     1996
Sok Chu Kim........................  Director                                      1996              2001
Oq-Hyun Chin.......................  Director                                      1994              2001
Julius Mallin......................  Director                                      1994              2000
M. Y. Ho...........................  Principal Accounting Officer                  1994
</TABLE>

ITEM 11.  COMPENSATION OF DIRECTORS AND OFFICERS

     During the fiscal year ended December 31, 1998, the Company paid an
aggregate of $1,005,883 in cash compensation to its directors and officers. This
amount does not take into account incentive stock options granted to or
exercised by such directors and officers or other non-cash compensation, as more
particularly described below. No other funds were set aside or accrued by the
Company during the fiscal year ended December 31, 1998 to provide pension,
retirement or similar benefits for directors or officers of the Company pursuant
to any existing plan provided or contributed to by the Company.

     The Company is required, under applicable securities legislation in Canada,
to disclose to its shareholders details of compensation paid to certain of its
executive officers. The following fairly reflects material information regarding
compensation paid thereto.

                                       21
<PAGE>   22

EXECUTIVE COMPENSATION

     The following table provides a summary of compensation paid during each of
the last three fiscal years of the Company to its Chief Executive Officer and to
the other executive officers of the Company who received a combined salary and
bonus during the fiscal year ended December 31, 1998 in excess of $100,000 (the
"Named Executives"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
===============================================================================================================================
                                                                                          LONG TERM
                                                   ANNUAL COMPENSATION(1)                COMPENSATION
                                      -----------------------------------------------------------------------
                                                                                            AWARDS
                                                                                       SECURITIES UNDER
                       FISCAL YEAR                                    OTHER ANNUAL         OPTIONS              ALL OTHER
 NAME AND PRINCIPAL       ENDED               SALARY         BONUS    COMPENSATION         GRANTED             COMPENSATION
      POSITION         DECEMBER 31,             ($)           ($)         ($)                (#)                   ($)
-------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>            <C> <C>               <C>       <C>            <C>                  <C>  <C>          <C>
 Michael J. Smith          1998               221,876       231,365          --             77,000                   --
 President and Chief       1997               157,814            --          --                 --                   --
 Executive Officer         1996               168,205            --          --            577,500                   --
-------------------------------------------------------------------------------------------------------------------------------
 Roy Zanatta               1998               192,500       101,222          --             60,000                   --
 Secretary and             1997               137,900            --          --             65,000                5,000
 Director                  1996                85,700            --          --             65,000(2)                --
-------------------------------------------------------------------------------------------------------------------------------
 Claudio Morandi(3)        1998               117,010       101,222          --             75,000                   --
                           1997               157,732        67,871          --             65,000                   --
===============================================================================================================================
</TABLE>

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

(1) On a cash basis, unless otherwise stated.

(2) These options were cancelled during the 1996 fiscal year.

(3) Mr. Morandi commenced employment with the Company in May 1997. His
    compensation for fiscal 1997 is presented on an annualized basis.

EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT OR CHANGE OF CONTROL

     Mr. Smith entered into an employment agreement with the Company dated as of
July 1, 1994. The agreement generally provides, subject to certain termination
provisions, for the continued employment of Mr. Smith for a period of 36 months
with automatic one month renewals, so that the agreement at all times has a
remaining term of 36 months. The agreement provides for an annual base salary
and other compensation to be paid to Mr. Smith as determined by the Board. The
agreement contains change in control provisions pursuant to which, if a change
in control (as defined in the agreement) occurs, Mr. Smith may only be
discharged for cause. In the event he is terminated without cause or resigns for
good reason (as defined in the agreement) within 18 months of the change in
control, Mr. Smith shall be entitled to a severance payment of three times his
annual salary under the agreement and all unvested rights in any stock option or
other benefit plan applicable to him shall vest in full. If Mr. Smith is
terminated without cause or resigns for good reason after 18 months of the
change in control, he shall be entitled to a severance payment of a
proportionate amount based on the length of time remaining in the term of the
agreement of three times his annual salary under the agreement and all unvested
rights in any stock option or other benefit plan applicable to him shall vest in
full. In addition, Mr. Smith will continue to receive equivalent benefits as
were provided at the date of termination for the remaining term of the
agreement.

     Mr. Zanatta entered into an employment agreement with the Company on
February 24, 1997. The agreement generally provides for a base salary and other
compensation, including the granting of incentive stock options, to be paid to
Mr. Zanatta as determined by the Board. The agreement provides that Mr.
Zanatta's employment with the Company may be terminated upon 12 months notice.
In addition, Mr. Zanatta entered into an employment agreement with a subsidiary
of the Company on February 24, 1997. This agreement provides for a base salary
and other compensation to be paid to Mr. Zanatta and further provides that Mr.
Zanatta's employment with the subsidiary may be terminated upon 90 days notice.

                                       22
<PAGE>   23

ITEM 12.  OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

     As at the date hereof, the Company has outstanding incentive stock options
entitling the Chief Executive Officer and other Named Executives to acquire an
aggregate of 772,000 common shares of the Company at an exercise price of
U.S.$6.90 per share in respect of options to purchase 450,000 shares expiring
October 11, 2001 and U.S.$6.00 per share in respect of options to purchase
77,000 shares expiring October 28, 2003 held by the Chief Executive Officer, and
U.S.$7.25 per share in respect of options to purchase 110,000 shares expiring
July 25, 2002 and U.S.$6.00 per share in respect of options to purchase 135,000
shares expiring October 28, 2003 held by the other Named Executives.

OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR

     The following table sets forth the grant of incentive stock options to the
Named Executives of the Company with respect to common shares of the Company
during the fiscal year ended December 31, 1998:

<TABLE>
<CAPTION>
===========================================================================================================================

                                                                                   MARKET VALUE OF
                           SECURITIES        % OF TOTAL                              SECURITIES
                             UNDER             OPTIONS                               UNDERLYING
                            OPTIONS          GRANTED TO      EXERCISE OR BASE      OPTIONS ON THE
                            GRANTED         EMPLOYEES IN           PRICE            DATE OF GRANT
  NAME                        (#)          FINANCIAL YEAR      ($/SECURITY)         ($/SECURITY)        EXPIRATION DATE
---------------------------------------------------------------------------------------------------------------------------
<S>                       <C>            <C>                <C>                  <C>                 <C>
  MICHAEL J. SMITH            77,000           10.3%             U.S.$6.00            U.S.$5.94         October 28, 2003
---------------------------------------------------------------------------------------------------------------------------
  ROY ZANATTA                 60,000            8.0%             U.S.$6.00            U.S.$5.94         October 28, 2003
---------------------------------------------------------------------------------------------------------------------------
  CLAUDIO MORANDI             75,000           10.0%             U.S.$6.00            U.S.$5.94         October 28, 2003
===========================================================================================================================
</TABLE>

AGGREGATED OPTIONS/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL
YEAR AND FINANCIAL YEAR-END OPTION/SAR VALUES

     The following table sets forth securities acquired on exercise during the
most recently completed fiscal year and the value of the options held at
December 31, 1998 by the Named Executives of the Company:

<TABLE>
<CAPTION>
=========================================================================================================================

                                                                     UNEXERCISED              VALUE OF UNEXERCISED
                                 SECURITIES         AGGREGATE        OPTIONS AT              IN-THE-MONEY OPTIONS AT
                                 ACQUIRED ON          VALUE       DECEMBER 31, 1998             DECEMBER 31, 1998
                                  EXERCISE          REALIZED            (#)                           ($)
  NAME                              (#)                ($)     EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE(1)
-------------------------------------------------------------------------------------------------------------------------
<S>                             <C>             <C>           <C>                           <C>
  MICHAEL J. SMITH                     Nil             Nil            527,000/Nil               U.S.$1,241,875/Nil
-------------------------------------------------------------------------------------------------------------------------
  ROY ZANATTA                          Nil             Nil            125,000/Nil                U.S.$309,375/Nil
-------------------------------------------------------------------------------------------------------------------------
  CLAUDIO MORANDI                   20,000         175,943            120,000/Nil                U.S.$318,750/Nil
=========================================================================================================================
</TABLE>

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

(1) The closing price of the Company's common shares on December 31, 1998 on
    Nasdaq was U.S.$9.125.

ITEM 13.  INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

     Other than as disclosed herein, to the best of the Company's knowledge,
there have been no material transactions since January 1, 1998 to which the
Company was or is a party and in which a director or officer of the Company, or
any relative or spouse of any director or officer, or any relative of such
spouse who has the same home as such person or who is a director or officer of
any subsidiary of the Company, has or will have a direct or indirect material
interest, nor were any directors or officers of the Company, or any associates
of such directors or officers, indebted to the Company or any of its
subsidiaries during this period.

                                       23
<PAGE>   24

                                    PART II

ITEM 14.  DESCRIPTION OF SECURITIES TO BE REGISTERED

     Not applicable.

                                    PART III

ITEM 15.  DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 16.  CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR
          REGISTERED SECURITIES

     On March 31, 1998, the Company issued U.S.$15.2 million in principal amount
of MFC Bonds. The MFC Bonds will mature on April 1, 2008, are general unsecured
obligations of MFC subordinated in right to the prior payment of all Senior
Indebtedness (as defined in the indenture governing the MFC Bonds), pay interest
at a rate of 8% per annum and are convertible at any time prior to maturity or
the fifth business day prior to redemption into common shares of the Company at
U.S.$13.22 per common share, as provided for in the indenture governing the MFC
Bonds.

                                       24
<PAGE>   25

                                    PART IV

ITEM 17.  FINANCIAL STATEMENTS

     Not applicable.

ITEM 18.  FINANCIAL STATEMENTS

     See "ITEM 19. Financial Statements and Exhibits" for financial statements
filed as part of this annual report.

ITEM 19.  FINANCIAL STATEMENTS AND EXHIBITS

(a) FINANCIAL STATEMENTS AND SCHEDULES:

1.   Independent Auditors' Report on the consolidated financial statements of
     the Company as at December 31, 1998, 1997 and 1996.

2.   Consolidated Balance Sheets at December 31, 1998 and 1997 (audited).

3.   Consolidated Statements of Income for the years ended December 31, 1998,
     1997 and 1996 (audited).

4.   Consolidated Statements of Changes in Shareholders' Equity for the years
     ended December 31, 1998, 1997 and 1996 (audited).

5.   Consolidated Statements of Cash Flows for the years ended December 31,
     1998, 1997 and 1996 (audited), together with Notes to Financial Statements.

6.   Independent Auditors' Report on Financial Statement Schedules.

7.   Financial Statement Schedules:

     I     Condensed Financial Information of Registrant.

     III   Supplementary Insurance Information.

     IV    Reinsurance.

     VI    Supplemental Information Concerning Property -- Casualty Insurance
           Operations.

                                       25
<PAGE>   26

                          INDEPENDENT AUDITORS' REPORT

To the Shareholders
MFC Bancorp Ltd.

     We have audited the consolidated balance sheets of MFC Bancorp Ltd. and
Subsidiaries as at December 31, 1998 and 1997, and the consolidated statements
of income, changes in shareholders' equity and cash flows for the years ended
December 31, 1998, 1997 and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.

     In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1998 and 1997, and the results of its operations and its cash flows for the
years ended December 31, 1998, 1997 and 1996, in accordance with Canadian
generally accepted accounting principles, which differ from United States
generally accepted accounting principles as described in Note 19 to the
consolidated financial statements.

/s/ PETERSON SULLIVAN, P.L.L.C.

April 30, 1999
Seattle, Washington

                                       26
<PAGE>   27

                       MFC BANCORP LTD. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1997
                                 (IN THOUSANDS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                          U.S. DOLLARS         CANADIAN DOLLARS
                                                       (INFORMATION ONLY)    --------------------
                                                              1998             1998        1997
                                                       ------------------    --------    --------
<S>                                                    <C>                   <C>         <C>
Cash and cash equivalents..........................         $ 25,398         $ 38,871    $ 42,222
Securities.........................................           50,309           76,998      75,546
Loans..............................................           35,975           55,059      44,658
Receivables........................................           29,163           44,634      20,515
Property held for sale.............................            3,684            5,639       6,339
Notes receivable...................................               --               --       8,832
Excess cost of net assets acquired.................           12,098           18,516      20,037
Premises and equipment.............................            1,980            3,031       3,073
Prepaid and other..................................            4,596            7,034       5,668
                                                            --------         --------    --------
                                                            $163,203         $249,782    $226,890
                                                            ========         ========    ========

                              LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits...........................................         $ 16,416         $ 25,124    $ 31,090
Accounts payable and accrued expenses..............           18,138           27,759      31,234
Debt...............................................           26,195           40,091      41,602
                                                            --------         --------    --------
     Total liabilities.............................           60,749           92,974     103,926
Minority interests.................................            1,576            2,412       2,808
Shareholders' Equity
  Class A preferred stock, without par value,
     redeemable and convertible into common shares;
     authorized unlimited number
  Series 1, nonvoting and retractable; authorized
     140,000 shares; none issued and outstanding at
     December 31, 1998 and 1997....................               --               --          --
  Series A, nonvoting and retractable; authorized
     140,000 shares; none issued and outstanding at
     December 31, 1998 and 1997....................               --               --          --
Common stock, without par value; authorized
  unlimited number; 12,056,623 and 12,323,250
  issued and outstanding at December 31, 1998 and
  1997, respectively...............................           42,931           65,706      70,368
Cumulative translation adjustment..................            6,843           10,475       1,439
Retained earnings..................................           51,104           78,215      48,349
                                                            --------         --------    --------
                                                             100,878          154,396     120,156
                                                            --------         --------    --------
                                                            $163,203         $249,782    $226,890
                                                            ========         ========    ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                   statements
                                       27
<PAGE>   28

                       MFC BANCORP LTD. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                   (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

<TABLE>
<CAPTION>
                                                 U.S. DOLLARS              CANADIAN DOLLARS
                                              (INFORMATION ONLY)    ------------------------------
                                                     1998             1998       1997       1996
                                              ------------------    --------    -------    -------
<S>                                           <C>                   <C>         <C>        <C>
Financial services revenue................         $83,121          $123,310    $86,060    $75,467
Expenses
  Financial services......................          46,276            68,650     43,658     47,676
  General and administrative..............          13,051            19,361     12,368      7,558
  Interest expense........................           3,216             4,771      5,140      6,114
                                                   -------          --------    -------    -------
                                                    62,543            92,782     61,166     61,348
                                                   -------          --------    -------    -------
     Income before income taxes...........          20,578            30,528     24,894     14,119
Recovery of (provision for) income
  taxes...................................            (419)             (622)    (1,195)        47
                                                   -------          --------    -------    -------
                                                    20,159            29,906     23,699     14,166
Minority interest.........................             222               329        (82)      (172)
                                                   -------          --------    -------    -------
     Net income...........................         $20,381          $ 30,235    $23,617    $13,994
                                                   =======          ========    =======    =======
Earnings per share
  Basic...................................         $  1.67          $   2.48    $  1.95    $  1.52
                                                   =======          ========    =======    =======
  Fully diluted...........................         $  1.49          $   2.20    $  1.79    $  1.37
                                                   =======          ========    =======    =======
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                   statements
                                       28
<PAGE>   29

                       MFC BANCORP LTD. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                        (CANADIAN DOLLARS, IN THOUSANDS)
<TABLE>
<CAPTION>
                                                      PREFERRED STOCK
                                         ------------------------------------------
                                              SERIES 1               SERIES A              COMMON STOCK
                                         -------------------   --------------------   ----------------------
                                         NUMBER OF             NUMBER OF               NUMBER OF               RETAINED
                                          SHARES     AMOUNT     SHARES      AMOUNT      SHARES       AMOUNT    EARNINGS
                                         ---------   -------   ---------   --------   -----------   --------   --------
<S>                                      <C>         <C>       <C>         <C>        <C>           <C>        <C>
Balance at December 31, 1995...........        --    $   --          --    $     --     5,319,294   $ 40,143   $11,240
Net income.............................        --        --          --          --            --         --    13,994
Shares issued for cash.................    54,800     4,383     137,000      12,832            --         --        --
Shares issued for conversion of
 preferred shares......................   (54,800)   (4,383)         --          --     1,096,000      4,383        --
Shares issued for exercise of stock
 options...............................        --        --          --          --       335,000        690        --
Shares issued for conversion of
 debentures............................        --        --          --          --       857,143      8,233        --
Extinguishment of liabilities under
 plan of arrangement...................        --        --          --          --           (18)        --        --
Three-for-two stock split..............        --        --          --          --     2,810,897         --        --
Translation adjustment.................        --        --          --          --            --         --        --
                                          -------    -------   --------    --------   -----------   --------   -------
Balance at December 31, 1996...........        --        --     137,000      12,832    10,418,316     53,449    25,234
Net income.............................        --        --          --          --            --         --    23,617
Shares issued for conversion of
 preferred shares......................        --        --    (137,000)    (12,832)    1,522,222     12,832        --
Shares issued for exercise of stock
 options...............................        --        --          --          --        10,000        104        --
Shares issued for cash.................        --        --          --          --       372,712      3,983        --
Dividends paid on preferred shares.....        --        --          --          --            --         --      (396)
Dividends paid on common shares........        --        --          --          --            --         --      (106)
Translation adjustment.................        --        --          --          --            --         --        --
                                          -------    -------   --------    --------   -----------   --------   -------
Balance at December 31, 1997...........        --        --          --          --    12,323,250     70,368    48,349
Net income.............................        --        --          --          --            --         --    30,235
Shares issued for conversion of
 bonds.................................        --        --          --          --         1,946         40        --
Shares issued for exercise of stock
 options...............................        --        --          --          --       218,500      2,275        --
Shares issued for cash.................        --        --          --          --        12,927        129        --
Repurchase of shares...................        --        --          --          --      (500,000)    (7,106)       --
Dividends paid on common shares........        --        --          --          --            --         --      (369)
Translation adjustment.................        --        --          --          --            --         --        --
                                          -------    -------   --------    --------   -----------   --------   -------
Balance at December 31, 1998...........        --    $   --          --    $     --    12,056,623   $ 65,706   $78,215
                                          =======    =======   ========    ========   ===========   ========   =======

<CAPTION>

                                         CUMULATIVE
                                         TRANSLATION
                                         ADJUSTMENT     TOTAL
                                         -----------   --------
<S>                                      <C>           <C>
Balance at December 31, 1995...........    $    --     $ 51,383
Net income.............................         --       13,994
Shares issued for cash.................         --       17,215
Shares issued for conversion of
 preferred shares......................         --           --
Shares issued for exercise of stock
 options...............................         --          690
Shares issued for conversion of
 debentures............................         --        8,233
Extinguishment of liabilities under
 plan of arrangement...................         --           --
Three-for-two stock split..............         --           --
Translation adjustment.................          1            1
                                           -------     --------
Balance at December 31, 1996...........          1       91,516
Net income.............................         --       23,617
Shares issued for conversion of
 preferred shares......................         --           --
Shares issued for exercise of stock
 options...............................         --          104
Shares issued for cash.................         --        3,983
Dividends paid on preferred shares.....         --         (396)
Dividends paid on common shares........         --         (106)
Translation adjustment.................      1,438        1,438
                                           -------     --------
Balance at December 31, 1997...........      1,439      120,156
Net income.............................         --       30,235
Shares issued for conversion of
 bonds.................................         --           40
Shares issued for exercise of stock
 options...............................         --        2,275
Shares issued for cash.................         --          129
Repurchase of shares...................         --       (7,106)
Dividends paid on common shares........         --         (369)
Translation adjustment.................      9,036        9,036
                                           -------     --------
Balance at December 31, 1998...........    $10,475     $154,396
                                           =======     ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                   statements
                                       29
<PAGE>   30

                       MFC BANCORP LTD. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                        (CANADIAN DOLLARS, IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               1998        1997        1996
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Cash flows from operating activities
  Net income...............................................  $ 30,235    $ 23,617    $ 13,994
  Adjustments for:
     Amortization of excess purchase cost..................     1,521       1,574         531
     Depreciation..........................................       385         202         315
     Provision (recovery) for credit losses................    (1,527)      1,087        (167)
     Gain on debt..........................................    (8,113)     (2,922)     (3,373)
     Decrease (increase) in securities.....................     2,096      17,067     (11,329)
     Decrease (increase) in receivables....................   (14,129)     (5,569)     21,326
     Decrease in properties held for sale..................     1,124       2,135       3,804
     Decrease in accounts payable and accrued expenses.....   (12,003)    (57,508)     (9,324)
     Other.................................................      (541)     (1,066)       (284)
                                                             --------    --------    --------
Cash flows from operating activities.......................      (952)    (21,383)     15,493
Cash flows from investing activities
  Net decrease (increase) in loans.........................      (169)     32,426       1,561
  Purchases of subsidiaries, net of cash acquired..........      (742)     41,522      12,040
  Increase in deposit on acquisition.......................        --          --     (25,942)
  Other....................................................      (702)        544          --
                                                             --------    --------    --------
Cash flows from investing activities.......................    (1,613)     74,492     (12,341)
Cash flows from financing activities
  Net decrease in deposits.................................   (10,123)    (31,209)         --
  Debt repayments..........................................    (5,064)    (12,835)     (5,803)
  Borrowings...............................................    15,415      10,845         835
  Issuance (repurchase) of common shares, net..............    (4,703)      4,090          --
  Issuance of preferred shares.............................        --          --      17,215
  Dividends paid...........................................      (369)       (502)         --
  Other....................................................       (41)         --         690
                                                             --------    --------    --------
Cash flows from financing activities.......................    (4,885)    (29,611)     12,937
Exchange rate effect on cash and cash equivalents..........     4,099       1,161          --
                                                             --------    --------    --------
Increase (decrease) in cash and cash equivalents...........    (3,351)     24,659      16,089
Cash and cash equivalents, beginning of year...............    42,222      17,563       1,474
                                                             --------    --------    --------
Cash and cash equivalents, end of year.....................  $ 38,871    $ 42,222    $ 17,563
                                                             ========    ========    ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                   statements
                                       30
<PAGE>   31

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The consolidated financial statements and accompanying notes have been
    prepared in conformity with generally accepted accounting principles
    applicable in Canada. The notes are stated in Canadian dollars, as rounded
    to the nearest thousand (except per share amounts).

    Nature of Operations

    The Company is in the financial services industry which includes merchant
    banking, proprietary investing, lending, and insurance activities. These
    activities are managed as a unit.

    Basis of Consolidation

    The consolidated financial statements include the accounts of the Company
    and its subsidiaries. All significant intercompany accounts and transactions
    have been eliminated.

    Acquisitions of subsidiaries have been accounted for using the purchase
    method. The difference between the cost of a subsidiary and its fair value
    is amortized on the straight-line method over the estimated benefit period
    estimated at 15 to 40 years unless a writedown is required to reflect an
    other than temporary decline in value. However, no writedowns of excess cost
    have been deemed necessary on any of the Company's acquisitions based on
    management's review of the related business, taking into account associated
    risks. Acquired subsidiaries are consolidated from the effective dates of
    acquisition.

    Cash and Cash Equivalents

    Cash and cash equivalents include highly liquid investments with original
    maturities of three months or less and are generally interest bearing. These
    assets are recorded at cost which approximates market. The Company regularly
    maintains cash balances in other financial institutions in excess of insured
    limits. Interest paid on a cash basis was $3,433, $5,732 and $5,804 for the
    years ended December 31, 1998, 1997 and 1996, respectively. Income tax
    amounts paid were $377 and $783 during 1998 and 1997, respectively, and were
    nominal in 1996.

    Securities

    Trading account securities, held by the Company's banking subsidiary, are
    stated at estimated current market value with the unrealized gain or loss
    included in the results of operations. Short-term securities held by
    non-bank subsidiaries are carried at the lower of aggregate cost or
    estimated current market value.

    Long-term investment securities held by non-bank subsidiaries are purchased
    with the original intention to hold the securities to maturity or until
    market conditions render alternative investments more attractive. Equity
    securities are stated at cost and debt securities at amortized cost unless
    there has been an other than temporary decline in value, at which time the
    security is written down and the unrealized loss is recognized in the
    determination of net income. Realized gains or losses on sales of securities
    are determined based on the specific cost basis.

    Loans

    Loans are stated net of allowances for credit losses, accrued interest,
    reimbursable expenses and unamortized loan fees.

    Loans are classified as impaired when there is no longer reasonable
    assurance of the timely collection of principal and interest. Whenever a
    contractual payment is 90 days past due, loans are automatically classified
    as impaired unless they are fully secured and in the process of collection.
    When a loan is deemed impaired, its carrying amount is reduced to its
    estimated realizable amount, measured by discounting the expected future
    cash flows at the effective interest rate in the loan or, as a practical
    expedient, based on a loan's observable market price or the fair value of
    collateral if the loan is collateral dependent. In subsequent periods, any
    increase in the carrying value of the loan is credited to the provision for
    credit losses. Impaired loans are returned to performing status when there
    is no longer reasonable doubt regarding timely collection of principal and
    interest, all amounts in arrears including interest have been collected, and
    all charges for loan impairment have been reversed. Where a portion of a
    loan is written off and the remaining balance is restructured, the new loan
    is carried on the accrual basis when there is no longer any reasonable doubt
    regarding collectibility of principal and interest, and payments are not 90
    days past due. Collateral is obtained for loans (and other receivables) if,
    based on an evaluation of credit-worthiness, it is considered necessary for
    the overall borrowing facility.

    Assets acquired in satisfaction of loans are recorded at the lesser of their
    fair value at the date of transfer or the carrying value of the loan. Any
    excess of the carrying value of the loan over the fair value of the assets
    acquired is written off. Operating results and gains and losses on disposal
    of such assets are treated as write-offs and recoveries.

                                       31
<PAGE>   32
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

    Interest income from loans is recognized when earned using the interest
    method unless the loan is classified as impaired at which time recognition
    of interest income ceases. Interest on impaired loans is credited to the
    carrying value of the loan when received. Fees relating to lending
    activities, net of related expenses, are deferred and recognized over the
    term of the loan using the interest method.

    Allowance for Credit Losses

    The Company's allowance for credit losses is maintained at an amount
    considered adequate to absorb estimated credit-related losses. The allowance
    reflects management's best estimate of the losses in the Company's credit
    portfolio and judgments about economic conditions. These estimates and
    judgments could change in the near-term, and could result in a significant
    change to the allowance currently recognized. Credit losses arise primarily
    from loans but may also relate to other credit instruments such as
    guarantees and letters of credit. The allowance for credit losses is
    increased by provisions which are charged to income and reduced by
    write-offs net of any recoveries.

    Specific provisions are established on a loan-by-loan basis. A general
    provision is established to absorb potential credit losses attributable to
    the deterioration of credit quality on aggregate exposures for which
    specific provisions cannot yet be determined. A country risk provision may
    be made based on exposures in less developed countries and on management's
    overall assessment of the underlying economic conditions in those countries.
    However, no country risk provision has been considered necessary.

    Write-offs are generally recorded after all reasonable restructuring or
    collection activities have taken place and there is no realistic prospect of
    recovery.

    Derivatives

    The Company's banking subsidiary's customers use derivatives to manage their
    market risk exposures and are composed of forward foreign exchange
    contracts. At December 31, 1998, there were no unfavorable positions which
    could affect the banking subsidiary. The Company's banking subsidiary does
    not enter into derivative transactions for its own account and neither the
    Company nor its non-bank subsidiaries have derivatives.

    Property Held for Sale

    Property held for sale consists of real estate which is stated at the lower
    of cost or net realizable value as determined by management based on current
    market conditions in the same geographic region. None of the properties held
    for sale at December 31, 1998, are the result of foreclosure on loan
    collateral.

    Premises and Equipment

    Premises and equipment used in the Company's operations are stated at cost.
    Depreciation is recorded on the straight-line basis over the estimated
    useful lives of the assets.

    Insurance Accounting

    The Company has an insurance subsidiary which is engaged in administrating
    and paying claims. The subsidiary accrues estimated losses, claims and
    settlement expenses based on individual claims outstanding, and an amount
    for losses incurred but not reported based on past experience, net of
    salvage, subrogation recoveries, and reinsurance. These estimates may change
    but management believes that any changes would not be material.

    The insurance subsidiary seeks to reduce loss by reinsuring certain levels
    of risk with reinsurers. Amounts recoverable from reinsurers are estimated
    in a manner consistent with the claim liability associated with the
    reinsured policy. Reinsurance contracts do not relieve the subsidiary from
    its obligations to pay policyholders. Failure of reinsurers to honor their
    obligations could result in losses. The subsidiary evaluates the financial
    condition of its reinsurers and minimizes its exposure by using several
    reinsurers at each level of reinsured risk.

    Estimated reinsurance recoverable on unpaid losses was $1,587 in 1998 and
    $1,960 in 1997. Recorded recoveries amounted to $712, $483 and $1,314 in
    1998, 1997 and 1996, respectively, on claims incurred. Accounts receivable
    include amounts due from reinsurers of $462 and $178 and accrued expenses
    include $448 and $534 due to reinsurers as of December 31, 1998 and 1997,
    respectively.

    Foreign Currency Translation

    The Company translates foreign assets and liabilities of its self-sustaining
    foreign subsidiaries at the rate of exchange at the balance sheet date.
    Revenues and expenses have been translated at the average rate of exchange
    throughout the year. Unrealized gains or losses from these conversions are
    included in the equity section of the balance sheet. Realized gains or
    losses have been included in general and administrative expenses in the
    statements of income. The translation adjustments did not recognize the
    effect of income tax because the Company expects to reinvest the amounts
    indefinitely.
                                       32
<PAGE>   33
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

    Deferred Income Taxes

    Deferred income taxes are provided on transactions recognized in different
    periods for financial reporting and income tax purposes.

    Stock Based Compensation

    The Company follows the intrinsic value based method of accounting for
    compensation resulting from the granting of stock options. No compensation
    expense has been recognized for the granting of options because the exercise
    price of the options approximates the market price for the common shares at
    the grant date.

    Earnings Per Common Share

    Basic earnings per common share is computed by dividing income available to
    common shareholders by the weighted average number of common shares
    outstanding in the period. Fully diluted earnings per common share takes
    into consideration common shares outstanding (computed under basic earnings
    per share) and potentially dilutive common shares.

    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.

    New Accounting Standard

    During 1997, the Canadian Institute of Chartered Accountants adopted
    Accounting Recommendation Section 3465, "Income Taxes". Section 3465 will
    require that a future income tax liability or asset be recognized whenever
    recovery or settlement of the carrying amount of an asset or liability would
    generate future income tax outflows or reductions. This standard is
    effective for years beginning on or after January 1, 2000. The Company has
    not determined the effect, if any, this standard may have on these
    consolidated financial statements.

NOTE 2.  ACQUISITIONS

    The Company acquired all of the outstanding shares of several entities
    during 1997. The following is a summary of each transaction:

    Lehman Brothers Bank (Suisse) SA was acquired effective February 3, 1997,
    for $27,421 in cash. The name was changed to MFC Merchant Bank SA. The
    banking subsidiary is located in Geneva, Switzerland, does not have any
    branches or own other subsidiaries, and is subject to the rules and
    regulations of the Swiss Federal Banking Commission. The fair value of the
    assets acquired was $31,035 and liabilities assumed were $10,478. Additional
    contingent consideration may become payable based on deposits and securities
    retained, reductions in applicable Swiss income tax and a percent of certain
    fees earned by the Bank. During 1998, $298 in contingent payments were made,
    however, any additional contingent consideration is not currently
    determinable.

    On September 23, 1997, the Company acquired Bank Rinderknecht AG, which was
    located in Zurich, Switzerland, for $9,569 in cash. The fair value of assets
    acquired amounted to $128,230 and liabilities assumed were $120,979.
    Subsequent to acquisition, this entity was merged into MFC Merchant Bank SA.

    On June 30, 1997, the Company completed its acquisition of the Robabond AG
    group, which is located in Zurich, Switzerland, for $15,748 in cash and
    securities. The fair value of the assets acquired amounted to $17,538 and
    liabilities assumed were $3,051. The name was changed to MFC Securities
    (Schweiz) AG. The Company is obligated to pay contingent amounts to the
    selling shareholders based on a variable percent of net income until 2001.
    The contingent amounts may be paid either in cash or common shares, at
    market value, at the election of the selling shareholders. During 1998, $444
    was paid as contingent consideration under the MFC Securities (Schweiz) AG
    group purchase agreement. Any future contingent amounts are not presently
    determinable.

                                       33
<PAGE>   34
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3.  SECURITIES

<TABLE>
<CAPTION>
                                                                                  TERM TO MATURITY
                                                                   ----------------------------------------------
                                                                                                 TOTAL CARRYING
                                                                                                      VALUE
                                                                   WITHIN      1-5      5-10    -----------------
                                                                   1 YEAR     YEARS    YEARS     1998      1997
                                                                   -------   -------   ------   -------   -------
    <S>                                                            <C>       <C>       <C>      <C>       <C>
    Bank trading account securities:
      Debt......................................................   $21,133   $    --   $   --   $21,133   $22,446
      Equity securities.........................................     8,068        --       --     8,068     1,601
                                                                   -------   -------   ------   -------   -------
      Total bank trading account securities.....................    29,201        --       --    29,201    24,047
    Non-bank securities:
      Term deposits.............................................       594        --       --       594     5,547
      Debt......................................................     5,502    11,540    6,168    23,210    23,280
      Preferred shares..........................................     8,884        --       --     8,884     4,034
      Common shares.............................................    15,109        --       --    15,109    18,638
                                                                   -------   -------   ------   -------   -------
      Total non-bank securities.................................    30,089    11,540    6,168    47,797    51,499
                                                                   -------   -------   ------   -------   -------
    Total securities............................................   $59,290   $11,540   $6,168   $76,998   $75,546
                                                                   =======   =======   ======   =======   =======
</TABLE>

<TABLE>
<CAPTION>
                                                               UNREALIZED GAINS AND LOSSES ON
                                                        BANK TRADING ACCOUNT AND NON-BANK SECURITIES
                               -----------------------------------------------------------------------------------------------
                                                    1998                                             1997
                               ----------------------------------------------   ----------------------------------------------
                                            GROSS        GROSS      ESTIMATED                GROSS        GROSS      ESTIMATED
                               CARRYING   UNREALIZED   UNREALIZED    MARKET     CARRYING   UNREALIZED   UNREALIZED    MARKET
                                VALUE       GAINS        LOSSES       VALUE      VALUE       GAINS        LOSSES       VALUE
                               --------   ----------   ----------   ---------   --------   ----------   ----------   ---------
    <S>                        <C>        <C>          <C>          <C>         <C>        <C>          <C>          <C>
    Bank trading account
      securities:
      Debt...................  $21,133       $ --         $ --       $21,133    $22,446      $   --       $   --      $22,446
      Equity securities......    8,068         --           --         8,068      1,601          --           --        1,601
                               -------       ----         ----       -------    -------      ------       ------      -------
    Total bank trading
      securities.............   29,201         --           --        29,201     24,047          --           --       24,047
    Non-bank securities:
      Term deposits..........      594          1           --           595      5,547          --           --        5,547
      Debt...................   23,210        598           --        23,808     23,280         807          807       23,280
      Preferred shares.......    8,884         --           --         8,884      4,034          --           --        4,034
      Common shares..........   15,109         --          271        14,838     18,638         911          911       18,638
                               -------       ----         ----       -------    -------      ------       ------      -------
      Total non-bank
        securities...........   47,797        599          271        48,125     51,499       1,718        1,718       51,499
                               -------       ----         ----       -------    -------      ------       ------      -------
    Total securities.........  $76,998       $599         $271       $77,326    $75,546      $1,718       $1,718      $75,546
                               =======       ====         ====       =======    =======      ======       ======      =======
</TABLE>

    At December 31, 1998, bank trading account securities included common shares
    of an affiliate which were stated at an estimated value of $3,015 (trading
    market value $16,388 less management's estimated reduction). At December 31,
    1997, the affiliate's common shares were included in non-bank securities at
    an estimated market value of $3,152. At December 31, 1998 and 1997, non-bank
    securities included preferred shares in two affiliates stated at cost of
    $7,527 and $4,034, respectively, because no market exists for the shares. At
    December 31, 1998 and 1997, the Company had a receivable of $910 and $1,115,
    respectively, from one of the affiliates.

NOTE 4.  LOANS

<TABLE>
<CAPTION>
                                                                     1998       1997
                                                                    -------    -------
    <S>                                                             <C>        <C>
    Bank loans:
      Collateralized with traded securities.....................    $22,506    $16,736
    Non-bank loans:
      Collateralized by premises and equipment, receivables,
        inventories and other tangible assets...................     34,472     32,056
                                                                    -------    -------
                                                                     56,978     48,792
    Allowance for credit losses.................................     (1,919)    (4,134)
                                                                    -------    -------
      Total loans...............................................    $55,059    $44,658
                                                                    =======    =======
</TABLE>

                                       34
<PAGE>   35
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4.  LOANS (CONTINUED)

    LOAN MATURITIES:

<TABLE>
<CAPTION>
                                                                  WITHIN      1-5      5-10     OVER 10     1998
                                                                  1 YEAR     YEARS     YEARS     YEARS      TOTAL
                                                                  -------    ------    -----    -------    -------
    <S>                                                           <C>        <C>       <C>      <C>        <C>
    Bank loans..................................................  $22,506    $   --    $ --      $ --      $22,506
    Non-bank loans..............................................   25,672     8,800      --        --       34,472
                                                                  -------    ------    ----      ----      -------
                                                                  $48,178    $8,800    $ --      $ --       56,978
                                                                  =======    ======    ====      ====
    Allowance for credit losses.................................                                            (1,919)
                                                                                                           -------
                                                                                                           $55,059
                                                                                                           =======
</TABLE>

    The non-bank loans generally earn interest at a major U.S. bank's prime rate
    which was 7.75% at December 31, 1998, plus two to seven percent. The
    weighted daily average prime rate was 8.35% during 1998.

    At December 31, 1998, the Company had no unfunded loan commitments.

NOTE 5.  IMPAIRED LOANS AND ALLOWANCE FOR CREDIT LOSSES

    Non-bank loans of $1,919 and $3,081 at December 31, 1998 and 1997,
    respectively, were classified as impaired and fully reserved.

<TABLE>
<CAPTION>
                                                                         ALLOWANCE FOR CREDIT LOSSES
                                                      ------------------------------------------------------------------
                                                                                             PROVISION     BALANCE AT
                                                      JANUARY 1,                                FOR       DECEMBER 31,
                                                         1998                                 CREDIT     ---------------
                                                       BALANCE     WRITE-OFFS   RECOVERIES    LOSSES      1998     1997
                                                      ----------   ----------   ----------   ---------   ------   ------
    <S>                                               <C>          <C>          <C>          <C>         <C>      <C>
    Bank loans:
      General provision............................     $1,053      $(1,053)       $ --       $    --    $   --   $1,053
    Non-bank loans:
      Specific provisions..........................      3,001          365          --        (1,447)    1,919    3,001
      General provision............................         80           --          --           (80)       --       80
                                                        ------      -------        ----       -------    ------   ------
      Total non-bank loans.........................      3,081          365          --        (1,527)    1,919    3,081
                                                        ------      -------        ----       -------    ------   ------
    Total allowance for credit losses..............     $4,134      $  (688)       $ --       $(1,527)   $1,919   $4,134
                                                        ======      =======        ====       =======    ======   ======
</TABLE>

NOTE 6.  RECEIVABLES

<TABLE>
<CAPTION>
                                                                       DECEMBER 31
                                                                    ------------------
                                                                     1998       1997
                                                                    -------    -------
    <S>                                                             <C>        <C>
    Securities trading..........................................    $18,097    $    --
    Real estate sales...........................................      3,142      4,720
    Reinsurance.................................................      2,049      2,138
    Investment income...........................................      1,952      1,287
    Affiliates..................................................      3,061      2,168
    Taxes.......................................................      3,778      3,778
    Note receivable sale........................................      4,004         --
    Short-term advances.........................................      3,701         --
    Insurers, agents and brokers................................      1,990      2,808
    Fees........................................................      1,871      2,314
    Other.......................................................        989      1,302
                                                                    -------    -------
                                                                    $44,634    $20,515
                                                                    =======    =======
</TABLE>

    At December 31, 1998, the Company pledged $8,473 in securities receivables
    as collateral.

                                       35
<PAGE>   36
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7.  PREMISES AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                       DECEMBER 31
                                                                    -----------------
                                                                     1998      1997
                                                                    ------    -------
    <S>                                                             <C>       <C>
    Land and building...........................................    $1,165    $   746
    Computer equipment..........................................     1,944      1,029
    Furniture, fixtures and equipment...........................     1,809      8,035
                                                                    ------    -------
                                                                     4,918      9,810
    Less accumulated depreciation...............................    (1,887)    (6,737)
                                                                    ------    -------
                                                                    $3,031    $ 3,073
                                                                    ======    =======
</TABLE>

NOTE 8.  DEPOSITS

<TABLE>
<CAPTION>
                                                                                     1998
                                                                   ----------------------------------------
                                                                    PAYABLE ON
                                                                      DEMAND
                                                                   (NON-INTEREST    PAYABLE ON A                1997
                                                                     BEARING)        FIXED DATE      TOTAL      TOTAL
                                                                   -------------    ------------    -------    -------
    <S>                                                            <C>              <C>             <C>        <C>
    Clients....................................................       $16,287          $5,365       $21,652    $22,028
    Banks......................................................         3,472              --         3,472      9,062
                                                                      -------          ------       -------    -------
                                                                      $19,759          $5,365       $25,124    $31,090
                                                                      =======          ======       =======    =======
</TABLE>

NOTE 9.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<TABLE>
<CAPTION>
                                                                       DECEMBER 31
                                                                    ------------------
                                                                     1998       1997
                                                                    -------    -------
    <S>                                                             <C>        <C>
    Accounts payable............................................    $ 4,732    $11,225
    Insurance losses, claims and settlement expenses............      5,353      8,395
    Interest....................................................      4,617      5,291
    Property and other taxes....................................      1,925      1,959
    Due securities brokers......................................     10,532      2,396
    Other.......................................................        600      1,968
                                                                    -------    -------
                                                                    $27,759    $31,234
                                                                    =======    =======
</TABLE>

    Activity in the insurance subsidiary's liability for losses, claims and
    settlement expenses is summarized as follows:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31
                                                                    ------------------
                                                                     1998       1997
                                                                    -------    -------
    <S>                                                             <C>        <C>
    Balance, beginning of year, net.............................    $ 6,435    $10,443
    Decrease in estimated losses and expenses for losses
      occurring in prior years..................................       (373)      (100)
    Paid on claims occurring during prior years.................     (2,296)    (3,908)
                                                                    -------    -------
    Unpaid claims, end of year, net.............................      3,766      6,435
    Reinsurers' share...........................................      1,587      1,960
                                                                    -------    -------
    Balance, end of year........................................    $ 5,353    $ 8,395
                                                                    =======    =======
</TABLE>

                                       36
<PAGE>   37
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 10.  DEBT

<TABLE>
<CAPTION>
                                                                       DECEMBER 31
                                                                    ------------------
                                                                     1998       1997
                                                                    -------    -------
    <S>                                                             <C>        <C>
    Bonds payable by the Company, interest at 8%, due
      semi-annually in October and April, principal due April
      2008, unsecured. Convertible into common stock of the
      Company at $20.23 (1,147,970 common shares reserved at
      December 31, 1998)........................................    $22,834    $    --
    Bonds payable by a subsidiary, non-recourse to the Company,
      interest variable, unsecured; exchanged for the Company's
      bonds during 1998.........................................         --     30,747
    Non-recourse notes payable, interest at 8% payable annually,
      principal due May 2003, unsecured.........................     14,724     10,005
    Non-recourse notes payable, interest at 15% due monthly,
      principal due August 1999, secured by property held for
      sale......................................................      2,533        850
                                                                    -------    -------
                                                                    $40,091    $41,602
                                                                    =======    =======
</TABLE>

    As of December 31, 1998, the principal maturities of debt are as follows:

<TABLE>
<CAPTION>

    MATURITY                                                       AMOUNT
    --------                                                       -------
    <S>                                                            <C>
    1999........................................................   $ 2,533
    2003........................................................    14,724
    Thereafter..................................................    22,834
                                                                   -------
                                                                   $40,091
                                                                   =======
</TABLE>

    Fair value of financial instruments approximates carrying value except for
    the bonds payable at December 31, 1998. The estimated fair value of these
    bonds is $20,550 based on market value.

NOTE 11.  INCOME TAXES

    Income before income taxes and minority interest consists of:

<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31
                                                                    -----------------------------
                                                                     1998       1997       1996
                                                                    -------    -------    -------
    <S>                                                             <C>        <C>        <C>
    Canadian....................................................    $ 2,495    $ 5,763    $ 4,904
    Foreign.....................................................     28,033     19,131      9,215
                                                                    -------    -------    -------
                                                                    $30,528    $24,894    $14,119
                                                                    =======    =======    =======
</TABLE>

    The recovery of (provision for) income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31
                                                                  ------------------------
                                                                  1998      1997      1996
                                                                  -----    -------    ----
    <S>                                                           <C>      <C>        <C>
    Current
      Canadian..................................................  $   7    $  (278)   $(13)
      Foreign...................................................   (364)      (227)     --
    Deferred
      Canadian..................................................   (265)      (690)     60
                                                                  -----    -------    ----
                                                                  $(622)   $(1,195)   $ 47
                                                                  =====    =======    ====
</TABLE>

    The timing differences relate primarily to differences in accounting between
    income tax and book for the results of operations of the insurance
    subsidiary.

                                       37
<PAGE>   38
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 11.  INCOME TAXES (CONTINUED)

    A reconciliation of the provision for income taxes calculated at applicable
    statutory rates in Canada to the provision in the consolidated statements of
    income is as follows:

<TABLE>
<CAPTION>
                                                                            DECEMBER 31
                                                                  -------------------------------
                                                                    1998        1997       1996
                                                                  --------    --------    -------
    <S>                                                           <C>         <C>         <C>
    Income before income taxes and minority interest............  $ 30,528    $ 24,894    $14,119
                                                                  ========    ========    =======
    Computed provision for income taxes at statutory rates......  $(13,688)   $(11,162)   $(6,330)
    (Increase) decrease in taxes resulting from:
      Nontaxable dividend income................................     2,421       2,421      2,421
      Foreign source income.....................................    12,570       8,578      4,131
      Tax loss benefit not recognized for book purposes.........        --          --       (306)
      Other, net................................................    (1,925)     (1,032)       131
                                                                  --------    --------    -------
    Recovery of (provision for) income taxes....................  $   (622)   $ (1,195)   $    47
                                                                  ========    ========    =======
</TABLE>

    At December 31, 1998, the Company had estimated accumulated noncapital
    losses which expire as follows:

<TABLE>
<CAPTION>

    YEAR                                                            CANADIAN     U.S.       SWISS
    ----                                                            --------    -------    -------
    <S>                                                             <C>         <C>        <C>
    2000........................................................    $15,371     $    --    $27,525
    2002........................................................      3,098          --         --
    2003........................................................      2,353          --      4,308
    2004........................................................      1,246          --         --
    2005........................................................      3,208          --         --
    2009-2012...................................................         --      13,000         --
                                                                    -------     -------    -------
                                                                    $25,276     $13,000    $31,833
                                                                    =======     =======    =======
</TABLE>

    A portion of the U.S. losses may be limited by U.S. tax law.

    The Company presently is in litigation with Revenue Canada with respect to
    the royalty agreement described in Note 18. Revenue Canada alleges that
    additional taxable income is attributable to the Company which results in
    tax due of $9,820 for tax years 1992, 1993 and 1994. However, management
    believes that there are sufficient Canadian tax losses to offset the taxable
    income being contested. If Revenue Canada prevails, the tax receivable
    amount of $3,778 included in Note 6 may not be recoverable. The Company is
    vigorously contesting Revenue Canada's position and management believes that
    it is more likely than not the Company will ultimately prevail, but no
    assurance can be given that there will be a favorable result.

NOTE 12.  PREFERRED STOCK

    The Class A Preferred Shares, Series 1 have an issue price of $100 per share
    and a dividend rate of $5 per share annually. These shares are convertible
    into common shares during the first year after issuance at $5 per common
    share increasing at $.25 per year until a maximum conversion price of $6 per
    share is attained. The shares may be redeemed at any time at $100 per share
    plus any unpaid accrued dividends. Shareholders may retract the shares after
    five years from date of issuance, May 15, 1996, at $100 per share plus any
    unpaid accrued dividends if approved in advance by the Company's board of
    directors. All outstanding shares are held by subsidiaries and have been
    eliminated in consolidation.

    The Class A Preferred Shares, Series A have an issue price of $100 per
    share, a dividend rate of $5 per share annually and may be converted into
    common shares during the first year after issuance at $9 per common share.
    These shares were converted during 1997.

                                       38
<PAGE>   39
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 13.  EARNINGS PER COMMON SHARE

    Earnings per share data for years ended December 31 is summarized as
    follows:

<TABLE>
<CAPTION>
                                                                             INCOME
                                                                  -----------------------------
                                                                   1998       1997       1996
                                                                  -------    -------    -------
    <S>                                                           <C>        <C>        <C>
    Net income..................................................  $30,235    $23,617    $13,994
    Less dividend on subsidiary's preferred shares..............     (119)      (121)      (468)
                                                                  -------    -------    -------
    Basic earnings..............................................   30,116     23,496     13,526
    Effect of dilutive securities:
      Interest on convertible bonds.............................    1,405          2          2
      Interest on options.......................................    1,351      1,002        453
                                                                  -------    -------    -------
    Diluted earnings............................................  $32,872    $24,500    $13,981
                                                                  =======    =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                                                  SHARES
                                                                  --------------------------------------
                                                                     1998          1997          1996
                                                                  ----------    ----------    ----------
    <S>                                                           <C>           <C>           <C>
    Basic earnings per share, weighted number of shares
      outstanding...............................................  12,169,470    12,044,361     8,891,598
    Effect of dilutive securities:
      Convertible bonds.........................................   1,147,970         4,566        66,414
      Options...................................................   1,595,829     1,641,760       323,640
      Convertible preferred shares..............................          --            --       955,423
                                                                  ----------    ----------    ----------
                                                                  14,913,269    13,690,687    10,237,075
                                                                  ==========    ==========    ==========
</TABLE>

NOTE 14.  STOCK BASED COMPENSATION

    1996 Stock Option Plan

    During 1996, the Company issued options to employees and directors to
    acquire 530,000 common shares of stock at $1.42 per share and 900,000 shares
    at $9.41. These options vest upon grant and have a five-year term. The
    weighted fair value of these options was $1.92. No additional options to
    acquire shares will be offered under this plan.

    Following is a summary of the status of the plan:

<TABLE>
<CAPTION>
                                                                    NUMBER     WEIGHTED AVERAGE
                                                                   OF SHARES    EXERCISE PRICE
                                                                   ---------   ----------------
    <S>                                                            <C>         <C>
    Outstanding at January 1, 1996..............................         --         $  --
      Granted...................................................   1,430,000         6.44
      Exercised.................................................   (335,000)         1.42
      Forfeited.................................................   (195,000)         1.42
                                                                   ---------        -----
    Outstanding at December 31, 1996............................    900,000         $9.41
                                                                   =========        =====
</TABLE>

    There were no options exercised or forfeited for this plan during 1998 or
    1997.

    1997 Amended Stock Option Plan

    The Company has a 1997 stock option plan which enables certain employees and
    directors to acquire common shares. Under the plan, options vest on grant
    and have a five-year term. The Company is authorized to issue up to
    1,492,500 shares under this plan.

    During 1998, options to acquire 750,000 shares at $9.18 were granted to
    officers and employees of the Company. At December 31, 1998, all of these
    options were outstanding and have a remaining contractual life of 4.75
    years. The weighted fair value of these options was $2.11.

    During 1997, options to acquire 742,500 shares at $11.10 were granted to
    officers and employees of the Company. At December 31, 1998, 514,000 of
    these options were outstanding and have a remaining contractual life of 3.5
    years. The weighted fair value of these options was $2.59.

                                       39
<PAGE>   40
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 14.  STOCK BASED COMPENSATION (CONTINUED)

    Following is a summary of the status of the plan:

<TABLE>
<CAPTION>
                                                                    NUMBER     WEIGHTED AVERAGE
                                                                   OF SHARES    EXERCISE PRICE
                                                                   ---------   ----------------
    <S>                                                            <C>         <C>
    Outstanding at January 1, 1997..............................         --         $   --
      Granted...................................................    742,500          10.36
      Forfeited.................................................    (10,000)         10.36
                                                                   ---------        ------
    Outstanding at December 31, 1997............................    732,500          10.36
      Granted...................................................    750,000           9.26
      Exercised.................................................   (218,500)         10.41
                                                                   ---------        ------
    Outstanding at December 31, 1998............................   1,264,000        $ 9.96
                                                                   =========        ======
</TABLE>

    Proforma Information

    Had compensation expense been recognized on the basis of fair value of the
    options granted under both plans, proforma net income and per share data
    would have been as follows compared to the amounts reported:

<TABLE>
<CAPTION>
                                                                    1998      1997      1996
                                                                   -------   -------   -------
    <S>                                                            <C>       <C>       <C>
    Net Income
      As reported...............................................   $30,235   $23,617   $13,994
                                                                   =======   =======   =======
      Proforma..................................................   $28,483   $21,778   $13,129
                                                                   =======   =======   =======
    Earnings per share -- as reported
      Basic.....................................................   $  2.48   $  1.95   $  1.52
                                                                   =======   =======   =======
      Fully diluted.............................................   $  2.20   $  1.79   $  1.37
                                                                   =======   =======   =======
    Earnings per share -- proforma
      Basic.....................................................   $  2.33   $  1.80   $  1.42
                                                                   =======   =======   =======
      Fully diluted.............................................   $  2.09   $  1.66   $  1.28
                                                                   =======   =======   =======
</TABLE>

    The fair value of each option granted was estimated for proforma purposes on
    the grant date using the Black Scholes Model. The assumptions used in
    calculating fair value are as follows:

<TABLE>
<CAPTION>
                                                                    1998      1997      1996
                                                                   -------   -------   -------
    <S>                                                            <C>       <C>       <C>
    Risk-free interest rate.....................................      6.0%      6.0%      5.0%
    Expected life of the options................................   2 years   2 years   2 years
    Expected volatility.........................................    57.91%    57.54%    27.43%
    Expected dividend yield.....................................      0.0%      0.0%      0.0%
</TABLE>

NOTE 15.  COMMITMENTS AND CONTINGENCIES

    Leases

    Future minimum commitments under long-term non-cancelable leases are as
    follows for the next five years:

<TABLE>
<CAPTION>
    YEAR                                                            AMOUNT
    ----                                                            ------
    <S>                                                             <C>
    1999........................................................    $  264
    2000........................................................       276
    2001........................................................       289
    2002........................................................       301
                                                                    ------
                                                                    $1,130
                                                                    ======
</TABLE>

    Rent expense was $1,373, $1,549 and $660 for the years ended December 31,
    1998, 1997 and 1996, respectively.

                                       40
<PAGE>   41
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 15.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

    Guarantees and Letters of Credit

    The Bank issues guarantees and letters of credit to meet credit requirements
    of its customers. The amounts, which are collateralized, are not included in
    the consolidated financial statements. Guarantees amounted to $2,944 and
    $2,133 and letters of credit amounted to none and $2,884 at December 31,
    1998 and 1997, respectively.

    Litigation

    The Company and its subsidiaries are subject to litigation in the normal
    course of business other than the matter discussed in Note 11. Management
    considers the aggregate liability which may result from such litigation not
    material at December 31, 1998.

    Regulations

    Swiss regulations require legal reserves of equity capital amounting to
    $5,419 at the bank subsidiary and $919 at the investment advisory
    subsidiaries as of December 31, 1998. Further, Canadian regulations with
    respect to the Company's insurance subsidiary did not allow dividends to be
    paid amounting to $3,827 at December 31, 1998, without permission being
    granted by the appropriate regulatory authority.

    Year 2000

    The Year 2000 Issue arises because many computerized systems use two digits
    rather than four to identify a year. Date-sensitive systems may recognize
    the year 2000 as 1900 or some other date, resulting in errors when
    information using year 2000 dates is processed. In addition, similar
    problems may arise in some systems which use certain dates in 1999 to
    represent something other than a date. The effects of the Year 2000 Issue
    may be experienced before, on, or after January 1, 2000, and, if not
    addressed, the impact on operations and financial reporting may range from
    minor errors to significant system failures which could affect an entity's
    ability to conduct normal business operations. The Company's bank subsidiary
    is currently addressing the expected effects of the Year 2000 Issue
    including, where required, modification of the bank subsidiary's own
    computer system. The Company and its other subsidiaries have addressed the
    Year 2000 Issue and believe no significant tasks remain. However, it is not
    possible to be certain that all aspects of the Year 2000 Issue affecting the
    entity, including those related to the efforts of customers, suppliers, or
    other third parties, will be fully resolved.

    New European Currency

    In certain European countries, a new currency unit called the "euro" was
    introduced in January 1999. The Company's bank subsidiary is located in
    Switzerland which is not converting to the euro. However, many of the bank
    subsidiary's transactions as well as those of the Company are stated in the
    euro. Based on experience with euro transactions to date, management
    believes that the euro conversion will not have a material effect on
    operations.

NOTE 16.  INTEREST RATE SENSITIVITY POSITION

    Management has analyzed the bank subsidiary's interest rate sensitivity
    position at December 31, 1998. Because of the current nature (over 90% of
    assets and liabilities and off-balance sheet positions are due within three
    months) of the bank subsidiary's position, the total interest rate gap is
    not significant at December 31, 1998, assuming no interest rate hedging is
    undertaken over the next twelve months.

NOTE 17.  SEGMENTED INFORMATION

    The following table presents revenues attributed to Canada, the Company's
    country of domicile, and other geographic areas based upon the customer's
    location:

<TABLE>
<CAPTION>
                                                                    1998       1997       1996
                                                                  --------    -------    -------
    <S>                                                           <C>         <C>        <C>
    Canada......................................................  $ 31,392    $29,043    $39,460
    Switzerland.................................................    88,237     30,925         --
    United States...............................................     3,681     26,092     36,007
                                                                  --------    -------    -------
                                                                  $123,310    $86,060    $75,467
                                                                  ========    =======    =======
</TABLE>

    Long lived assets other than financial instruments, working capital and
    intangibles amounting to $3,056, $3,073 and none are located in Switzerland
    at December 31, 1998, 1997 and 1996, respectively, based upon location of
    the assets.

                                       41
<PAGE>   42
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 18.  TRANSACTIONS WITH AFFILIATES

    Revenue for 1998 includes $2,967 from an entity where the Company's
    president is a board member. The consolidated amount due from this entity
    was $3,268 at December 31, 1998.

    The Company is the lessee of an iron ore mine located in Canada. Neither the
    Company nor any of its affiliates operate the mine. Instead, the mine is
    operated by an independent party who pays royalties based on the amount of
    ore it extracts from the mine. The royalties are paid to a 36% owned
    affiliate which acquired the rights to the royalties during a prior year in
    exchange for preferred shares. The preferred shares provide for a variable
    annual dividend rate and allow the Company the right to redeem the shares at
    an amount equal to the fair market value of the anticipated future royalty
    stream plus any unpaid dividends. The amount of preferred dividends earned
    amounted to $5,400 each for 1998, 1997 and 1996, respectively. During 1998,
    the Company earned management fees of $2,328 from the affiliate. At December
    31, 1998, $1,764 is due from the affiliate all of which was paid in 1999.

    In 1996, the Company earned fees of $1,011 from another affiliate.

NOTE 19.  UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

    The Company's consolidated financial statements have been prepared in
    accordance with generally accepted accounting principles (GAAP) in Canada,
    which conform in all material respects with those in the United States
    (U.S.), except as set forth below:

<TABLE>
<CAPTION>
                                                                             DECEMBER 31
                                                                    -----------------------------
    RECONCILIATION OF NET INCOME                                     1998       1997       1996
    ----------------------------                                    -------    -------    -------
    <S>                                                             <C>        <C>        <C>
    Net income in accordance with Canadian GAAP.................    $30,235    $23,617    $13,994
    Consolidation of investee...................................       (193)    (5,062)        --
    Gain on debt................................................     (8,113)    (2,922)    (3,373)
    Change in unrealized gain (loss) on trading securities,
      net.......................................................      2,635        555       (665)
    Deferred income tax provision, net..........................       (755)    (6,745)        --
                                                                    -------    -------    -------
    Income before extraordinary item............................     23,809      9,443      9,956
    Extraordinary item, gain on extinguishment of debt..........      8,113      2,922      3,373
                                                                    -------    -------    -------
    Net income in accordance with U.S. GAAP.....................    $31,922    $12,365    $13,329
                                                                    =======    =======    =======
    Basic earnings per common share U.S. GAAP
      Income before extraordinary item..........................    $  1.95    $  0.81    $  1.07
      Extraordinary item........................................       0.67       0.26       0.38
                                                                    -------    -------    -------
                                                                    $  2.62    $  1.07    $  1.45
                                                                    =======    =======    =======
    Diluted earnings per common share U.S. GAAP
      Income before extraordinary item..........................    $  1.83    $  0.76    $  1.04
      Extraordinary item........................................       0.59       0.24       0.37
                                                                    -------    -------    -------
                                                                    $  2.42    $  1.00    $  1.41
                                                                    =======    =======    =======
</TABLE>

    Under Canadian GAAP, fully diluted earnings per share is calculated by
    adjusting net income available to common shareholders for imputed earnings
    on funds which would have been received on the exercise of options. U.S.
    GAAP requires the use of the treasury stock method, whereby diluted earnings
    per share are calculated as if options were exercised at the beginning of
    the year and funds received were used to purchase the company's own stock.

<TABLE>
    <S>                                                             <C>        <C>        <C>
    Retained earnings in accordance with U.S. GAAP..............    $72,467    $40,914    $29,049
                                                                    =======    =======    =======
</TABLE>

    Comprehensive Income

    Comprehensive income for the years ended December 31 is as follows:

<TABLE>
<CAPTION>
                                                                    1998      1997      1996
                                                                   -------   -------   -------
    <S>                                                            <C>       <C>       <C>
    Net income in accordance with U.S. GAAP.....................   $31,922   $12,365   $13,329
    Other comprehensive income, net of tax
      Foreign currency translation adjustment...................     9,036     1,438         1
      Unrealized holding loss on available-for-sale securities
        arising during the period...............................    (1,679)       --        --
                                                                   -------   -------   -------
    Other comprehensive income..................................     7,357     1,438         1
                                                                   -------   -------   -------
    Comprehensive income........................................   $39,279   $13,803   $13,330
                                                                   =======   =======   =======
</TABLE>

                                       42
<PAGE>   43
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 19.  UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)

    The change in accumulated other comprehensive income is as follows:

<TABLE>
<CAPTION>
                                                                              ACCUMULATED
                                                                      OTHER COMPREHENSIVE INCOME
                                                                   ---------------------------------
                                                                     FOREIGN
                                                                    CURRENCY     UNREALIZED
                                                                   TRANSLATION    LOSS ON
                                                                   ADJUSTMENT    SECURITIES   TOTAL
                                                                   -----------   ----------   ------
    <S>                                                            <C>           <C>          <C>
    Balance at December 31, 1995................................     $    --      $    --     $   --
    Change in other comprehensive income........................           1           --          1
                                                                     -------      -------     ------
    Balance at December 31, 1996................................           1           --          1
    Change in other comprehensive income........................       1,438           --      1,438
                                                                     -------      -------     ------
    Balance at December 31, 1997................................       1,439           --      1,439
    Change in other comprehensive income........................       9,036       (1,679)     7,357
                                                                     -------      -------     ------
    Balance at December 31, 1998................................     $10,475      $(1,679)    $8,796
                                                                     =======      =======     ======
</TABLE>

    Consolidation

    The results of 1998 and 1997 operations of an entity in which the Company
    has a temporary investment are required to be consolidated under U.S. GAAP.
    "Consolidation of investee" in the above reconciliation gives effect to this
    requirement.

    Securities

    U.S. GAAP requires that certain investments be classified into
    available-for-sale or trading securities categories and be stated at their
    fair values. Any unrealized holding gains or losses are to be reported as a
    separate component of shareholders' equity until realized for
    available-for-sale securities, and included in earnings for trading
    securities.

    Non-bank securities included trading securities at fair value and are
    summarized as follows:

<TABLE>
<CAPTION>
                                                                      DECEMBER 31
                                                                   -----------------
                                                                    1998      1997
                                                                   -------   -------
    <S>                                                            <C>       <C>
    Debt securities.............................................   $20,970   $19,457
    Term deposits...............................................       595     5,547
    Preferred shares............................................     1,358        --
    Common shares...............................................     9,684    18,638
                                                                   -------   -------
                                                                   $32,607   $43,642
                                                                   =======   =======
</TABLE>

    The change in unrealized gain (loss) in trading securities is included in
    the income reconciliation above.

    Income Taxes

    No tax is provided for the extraordinary item because of the utilization of
    tax net operating losses.

    Under U.S. GAAP, the Company would have had no deferred tax asset at
    December 31, 1998, and $755 and $7,500 at December 31, 1997 and 1996,
    respectively. The effect of the change in this asset amount is included in
    the income reconciliation above.

    Supplemental Disclosures with Respect to Statements of Cash Flows

    Significant noncash transactions in 1998 included:

    1.   $30,747 in bonds payable of a subsidiary were exchanged for Company
         bonds which resulted in a net gain.

    2.   A subsidiary of the Company sold one of its subsidiaries at a gain of
         $648 resulting from an assumption of liabilities.

    Significant noncash transactions in 1997 included:

    1.   Series A, Class A preferred shares with a value of $12,832 were
         converted to common shares.

    2.   A subsidiary of the Company converted $2,983 of debt from another
         subsidiary into 217,500 preferred shares.

    3.   A note receivable for $7,233 was settled with trading securities with
         the same market value.

                                       43
<PAGE>   44
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 19.  UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)

    Significant noncash transactions in 1996 included:

    1.  The Company received common stock in its former parent with a fair value
        of $10,625 and a note in the amount of $19,810.

    2.  The Company sold a subsidiary to an affiliate in exchange for common
        stock with a fair value of $1,363 and a promissory note for $1,942.

    3.  The Company transferred parcels of land to lenders in exchange for
        extinguishment of debt amounting to $2,340 resulting in a gain of $352.

    4.  Debentures of $8,233 were converted into 857,143 common shares of the
        Company's stock at the market price.

    5.  Preferred shares of $4,383 were converted into 1,096,000 common shares
        of the Company's stock.

    New U.S. Accounting Standards

    Statement of Financial Accounting Standards No. 133, "Accounting for
    Derivative Instruments and Hedging Activities", is effective for years
    beginning after June 15, 1999. This statement requires that entities
    recognize all derivatives as either assets or liabilities in the balance
    sheet and measure those instruments at fair value provided certain
    conditions are met. The Company does not become involved in derivative
    instruments or engage in hedging activities on its own account so management
    believes there would be no affect on the Company's consolidated financial
    statements.

                                       44
<PAGE>   45

                          INDEPENDENT AUDITORS' REPORT

To the Shareholders
  MFC BANCORP LTD.

     Our report on the consolidated financial statements of MFC Bancorp Ltd. is
included on page 26 of this Form 20-F. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedules listed in Item 19(a)7 of this Form 20-F.

     In our opinion, the financial statement schedules referred to above, 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.

/s/ PETERSON SULLIVAN, P.L.L.C.

Peterson Sullivan, P.L.L.C.
April 30, 1999
Seattle, Washington

                                       45
<PAGE>   46

                                MFC BANCORP LTD.

          SCHEDULE  I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                             (DOLLARS IN THOUSANDS)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 AS AT DECEMBER 31,
                                                                --------------------
                                                                  1998        1997
                                                                --------    --------
<S>                                                             <C>         <C>
                                       ASSETS
Cash and securities.........................................    $115,869    $117,768
Receivables.................................................      44,634      20,515
Loans and notes receivable..................................      55,059      53,490
Real estate held for resale.................................       5,639       6,339
Excess cost of net assets acquired..........................      18,516      20,037
Other.......................................................      10,065       8,741
                                                                --------    --------
                                                                $249,782    $226,890
                                                                ========    ========
</TABLE>

<TABLE>

<S>                                                             <C>         <C>
                        LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits....................................................    $ 25,124    $ 31,090
Accounts payable and accrued expenses.......................      27,759      31,234
Debt........................................................      40,091      41,602
Minority interest...........................................       2,412       2,808
Shareholders' equity........................................     154,396     120,156
                                                                --------    --------
                                                                $249,782    $226,890
                                                                ========    ========
</TABLE>

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                             --------------------------------
                                                               1998        1997        1996
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Financial services revenue...............................    $123,310    $ 86,060    $ 75,467
Expenses
  General and administrative.............................      19,361      12,368       7,558
  Financial services.....................................      68,650      43,658      47,676
  Interest...............................................       4,771       5,140       6,114
  Income taxes (recovery)................................         622       1,195         (47)
  Minority interest......................................        (329)         82         172
                                                             --------    --------    --------
                                                               93,075      62,443      61,473
                                                             --------    --------    --------
  Net income (loss)......................................    $ 30,235    $ 23,617    $ 13,994
                                                             ========    ========    ========
</TABLE>

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                             --------------------------------
                                                               1998        1997        1996
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Net cash (used) provided by operating activities.........    $   (952)   $(21,383)   $ 15,493
Net cash (used) provided by financing activities.........      (4,885)    (29,611)     12,937
Net cash (used) provided by investing activities.........      (1,613)     74,492     (12,341)
Exchange rate effect on cash and cash equivalents........       4,099       1,161          --
                                                             --------    --------    --------
Net change in cash.......................................      (3,351)     24,659      16,089
Cash and cash equivalent, beginning of year..............      42,222      17,563       1,474
                                                             --------    --------    --------
Cash and cash equivalent, end of year....................    $ 38,871    $ 42,222    $ 17,563
                                                             ========    ========    ========
</TABLE>

                                       46
<PAGE>   47

                                MFC BANCORP LTD.

               SCHEDULE III: SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
                                                 FUTURE POLICY
                                  DEFERRED     BENEFITS, LOSSES,              OTHER POLICY
                                   POLICY         CLAIMS AND                   CLAIMS AND                 NET
                                 ACQUISITION         LOSS          UNEARNED     BENEFITS     PREMIUM   INVESTMENT
SEGMENT                             COST           EXPENSES        PREMIUMS     PAYABLE      REVENUE     INCOME
-------                          -----------   -----------------   --------   ------------   -------   ----------
<S>                              <C>           <C>                 <C>        <C>            <C>       <C>
Property and casualty:
December 31, 1998..............     --            $ 5,353,000        --          --            --      $ 612,000
December 31, 1997..............     --            $ 8,395,000        --          --            --      $2,351,000
December 31, 1996..............     --            $13,150,000        --          --            --      $1,663,000

<CAPTION>
                                                     AMORTIZATION
                                 BENEFITS, CLAIMS    OF DEFERRED
                                     LOSS AND           POLICY        OTHER
                                    SETTLEMENT       ACQUISITION    OPERATING    PREMIUMS
SEGMENT                              EXPENSES            COST        EXPENSES    WRITTEN
-------                          -----------------   ------------   ----------   --------
<S>                              <C>                 <C>            <C>          <C>
Property and casualty:
December 31, 1998..............      --                 --          $  304,000      --
December 31, 1997..............      --                 --          $   59,000      --
December 31, 1996..............      --                 --          $1,502,000      --
</TABLE>

                                       47
<PAGE>   48

                                MFC BANCORP LTD.

                            SCHEDULE IV: REINSURANCE

<TABLE>
<CAPTION>
                                                              ASSUMED                    PERCENTAGE
                                                CEDED TO       FROM                      OF AMOUNT
                                    GROSS         OTHER        OTHER          NET         ASSUMED
                                   AMOUNT       COMPANIES    COMPANIES      AMOUNT         TO NET
                                 -----------    ---------    ---------    -----------    ----------
<S>                              <C>            <C>          <C>          <C>            <C>
Property and casualty:
December 31, 1998..............  $        --    $     --     $     --     $        --       N/A
December 31, 1997..............  $        --    $     --     $     --     $        --       N/A
December 31, 1996..............  $        --    $     --     $     --     $        --       N/A
</TABLE>

                                       48
<PAGE>   49

                                MFC BANCORP LTD.

SCHEDULE VI: SUPPLEMENTAL INFORMATION CONCERNING PROPERTY -- CASUALTY INSURANCE
OPERATIONS AS AT DECEMBER 31, 1998

     [THIS SCHEDULE IS OMITTED BECAUSE THE RELEVANT INFORMATION WAS EITHER SHOWN
ON SCHEDULE III OR SCHEDULE IV]

                                       49
<PAGE>   50

(b) EXHIBITS:

<TABLE>
    <C>    <S>
     3.1   Articles of Incorporation.(1)

     3.2   Certificate of Amendment.(1)

     3.3   Bylaws.(1)

     4.1   Master Trust Indenture between Drummond Financial
           Corporation and Harris Trust Company of New York, as
           trustee, dated August 26, 1993. Incorporated by reference to
           Form S-1 filed June 7, 1993.

     4.2   First Supplemental Indenture between Drummond Financial
           Corporation and Harris Trust Company of New York, as
           trustee, dated November 30, 1993.(1)

     4.3   Second Supplemental Indenture between Drummond Financial
           Corporation and Harris Trust Company of New York, as
           trustee, dated October 23, 1996. Incorporated by reference
           to Drummond Financial Corporation's Form 10-QSB for the
           period ended September 30, 1996.

     4.4   Third Supplemental Indenture between Drummond Financial
           Corporation, Harris Trust Company of New York and The Bank
           of Nova Scotia Trust Company of New York dated for reference
           May 13, 1997.(1)

     4.5   Fourth Supplemental Indenture between Drummond Financial
           Corporation, The Bank of Nova Scotia Trust Company of New
           York and Drummond Financial (B.C.) Ltd. dated for reference
           February 4, 1998.(1)

     4.6   Master Trust Indenture between the Company and Norwest Bank
           Minnesota, National Association, as trustee, dated March 31,
           1998.(1)

    10.1   Memorandum of Agreement between the Company and Wabush Iron
           Co. Limited, Stelco Inc. and Dofasco Inc. dated November 24,
           1987.(2)

    10.2   Amendment to Mining Lease between the Company and Wabush
           Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated January
           1, 1987.(2)

    10.3   First Amendment to Memorandum of Agreement between the
           Company and Wabush Iron Co. Limited, Stelco Inc. and Dofasco
           Inc.(2)

    10.4   Assignment Agreement between the Company and Prada Holdings
           Ltd. dated as of January 1, 1992.(1)

    10.5   Employment Agreement dated July 1, 1994 between the Company
           and Michael J. Smith.(1)

    10.6   Separation Agreement between Mercer International Inc. and
           the Company dated for reference March 29, 1996.(1)

    10.7   Amendment Agreement made effective March 19, 1996, between
           the Company and Michael J. Smith.(1)

    10.8   Purchase Agreement between the Company and Volendam
           Securities C.V. dated for reference May 16, 1996.(1)

    10.9   Purchase Agreement between the Company and Volendam
           Securities C.V. dated for reference May 27, 1996.(1)

    10.10  Share Purchase Agreement between the Company and Frederick
           Wong dated June 6, 1996.(1)

    10.11  Subscription Agreement between the Company and Drummond
           Financial Corporation dated June 20, 1996. Incorporated by
           reference to Drummond Financial Corporation's Form 8-K dated
           June 27, 1996.
</TABLE>

                                       50
<PAGE>   51
<TABLE>
    <C>    <S>
    10.12  Share Purchase Agreement between the Company and Med Net
           International Ltd. dated June 20, 1996.(3)

    10.13  Share Purchase Agreement among the Company and various
           shareholders of Logan International Corp. dated June 20,
           1996.(3)

    10.14  Subscription Agreement between Drummond Financial
           Corporation and Logan International Corp. dated June 20,
           1996. Incorporated by reference to Logan International
           Corp.'s Form 8-K dated June 27, 1996.

    10.15  Share Purchase Agreement between Lehman Brothers Bankhaus AG
           and the Company dated October 3, 1996.(1)

    10.16  Purchase Agreement between the Company and Robabond Holding
           AG dated June 27, 1997.(1)

    10.17  Share Purchase Agreement between the Company and Procom
           Holding AG dated September 22, 1997.(1)

    10.18  Supplementary Agreement to Share Purchase Agreement between
           the Company and Procom Holding AG dated September 22,
           1997.(1)

    10.19  Agreement between the Company and the holders of the
           Company's Class A Preferred Shares dated December 1,
           1996.(1)

    10.20  Subscription Agreement between the Company and Logan
           International Corp. dated December 2, 1996. Incorporated by
           reference to the Company's Schedule 13D/A (Amendment No. 1)
           dated December 16, 1996 with respect to Logan.

    21.    Subsidiaries of the Company.
</TABLE>

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

(1) Incorporated by reference to the Company's Form 20-Fs filed in prior years.

(2) Incorporated by reference to the Company's Form 10-K for the year ended
    December 31, 1989.

(3) Incorporated by reference to the Company's Schedule 13D dated June 27, 1996
    with respect to Logan.

                                       51
<PAGE>   52

                                   SIGNATURES

     Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated at Geneva, Switzerland this 7th day of May, 1999.

                                          MFC BANCORP LTD.

                                          By: /s/ MICHAEL J. SMITH

                                            ------------------------------------
                                            Michael J. Smith
                                            Chief Executive Officer

                                       52
<PAGE>   53

                                MFC BANCORP LTD.

                                   FORM 20-F

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
  NO.    DESCRIPTION OF EXHIBIT                                          PAGE NO.
-------  ----------------------                                          --------
<C>      <S>                                                             <C>

    3.1  Articles of Incorporation.(1)

    3.2  Certificate of Amendment.(1)

    3.3  Bylaws.(1)

    4.1  Master Trust Indenture between Drummond Financial
         Corporation and Harris Trust Company of New York, as
         trustee, dated August 26, 1993. Incorporated by reference to
         Form S-1 filed June 7, 1993.

    4.2  First Supplemental Indenture between Drummond Financial
         Corporation and Harris Trust Company of New York, as
         trustee, dated November 30, 1993.(1)

    4.3  Second Supplemental Indenture between Drummond Financial
         Corporation and Harris Trust Company of New York, as
         trustee, dated October 23, 1996. Incorporated by reference
         to Drummond Financial Corporation's Form 10-QSB for the
         period ended September 30, 1996.

    4.4  Third Supplemental Indenture between Drummond Financial
         Corporation, Harris Trust Company of New York and The Bank
         of Nova Scotia Trust Company of New York dated for reference
         May 13, 1997.(1)

    4.5  Fourth Supplemental Indenture between Drummond Financial
         Corporation, The Bank of Nova Scotia Trust Company of New
         York and Drummond Financial (B.C.) Ltd. dated for reference
         February 4, 1998.(1)

    4.6  Master Trust Indenture between the Company and Norwest Bank
         Minnesota, National Association, as trustee, dated March 31,
         1998.(1)

   10.1  Memorandum of Agreement between the Company and Wabush Iron
         Co. Limited, Stelco Inc. and Dofasco Inc. dated November 24,
         1987.(2)

   10.2  Amendment to Mining Lease between the Company and Wabush
         Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated January
         1, 1987.(2)

   10.3  First Amendment to Memorandum of Agreement between the
         Company and Wabush Iron Co. Limited, Stelco Inc. and Dofasco
         Inc.(2)

   10.4  Assignment Agreement between the Company and Prada Holdings
         Ltd. dated as of January 1, 1992.(1)

   10.5  Employment Agreement dated July 1, 1994 between the Company
         and Michael J. Smith.(1)

   10.6  Separation Agreement between Mercer International Inc. and
         the Company dated for reference March 29, 1996.(1)

   10.7  Amendment Agreement made effective March 19, 1996, between
         the Company and Michael J. Smith.(1)

   10.8  Purchase Agreement between the Company and Volendam
         Securities C.V. dated for reference May 16, 1996.(1)
</TABLE>
<PAGE>   54
<TABLE>
<CAPTION>
EXHIBIT
  NO.    DESCRIPTION OF EXHIBIT                                          PAGE NO.
-------  ----------------------                                          --------
<C>      <S>                                                             <C>
   10.9  Purchase Agreement between the Company and Volendam
         Securities C.V. dated for reference May 27, 1996.(1)

  10.10  Share Purchase Agreement between the Company and Frederick
         Wong dated June 6, 1996.(1)

  10.11  Subscription Agreement between the Company and Drummond
         Financial Corporation dated June 20, 1996. Incorporated by
         reference to Drummond Financial Corporation's Form 8-K dated
         June 27, 1996.

  10.12  Share Purchase Agreement between the Company and Med Net
         International Ltd. dated June 20, 1996.(3)

  10.13  Share Purchase Agreement among the Company and various
         shareholders of Logan International Corp. dated June 20,
         1996.(3)

  10.14  Subscription Agreement between Drummond Financial
         Corporation and Logan International Corp. dated June 20,
         1996. Incorporated by reference to Logan International
         Corp.'s Form 8-K dated June 27, 1996.

  10.15  Share Purchase Agreement between Lehman Brothers Bankhaus AG
         and the Company dated October 3, 1996.(1)

  10.16  Purchase Agreement between the Company and Robabond Holding
         AG dated June 27, 1997.(1)

  10.17  Share Purchase Agreement between the Company and Procom
         Holding AG dated September 22, 1997.(1)

  10.18  Supplementary Agreement to Share Purchase Agreement between
         the Company and Procom Holding AG dated September 22,
         1997.(1)

  10.19  Agreement between the Company and the holders of the
         Company's Class A Preferred Shares dated December 1,
         1996.(1)

  10.20  Subscription Agreement between the Company and Logan
         International Corp. dated December 2, 1996. Incorporated by
         reference to the Company's Schedule 13D/A (Amendment No. 1)
         dated December 16, 1996 with respect to Logan.

    21.  Subsidiaries of the Company.
</TABLE>

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

(1) Incorporated by reference to the Company's Form 20-Fs filed in prior years.

(2) Incorporated by reference to the Company's Form 10-K for the year ended
    December 31, 1989.

(3) Incorporated by reference to the Company's Schedule 13D dated June 27, 1996
    with respect to Logan.