<PAGE>   1

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

     PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended:       March 31, 2001    Commission File No: 000-28638

                        INTERUNION FINANCIAL CORPORATION
                        --------------------------------
        (Exact name of small business issuer as specified in its charter)

Delaware                                                              87-0520294
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organisation)


   1232 N. Ocean Way, Palm Beach, Fl                            33480
   ---------------------------------                            -----
(Address of principal executive offices)                      (Zip Code)

           (561) 845-2849                             (561) 844-0517
           --------------                             --------------
    (Issuer's telephone number)               (Issuer's telecopier number)

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

Securities registered pursuant to Section 12 (g) of the Act: Common Stock $0.001
Par Value

Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or 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 "

Check if there is no disclosure of delinquent filers in response to item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ x ]

The Financial Statements required by Rule 3.09 of Regulation S-X of the
Registrant significant investee, InterUnion Asset Management, are incorporated
in full by reference herein.

State issuer's revenues for its most recent fiscal year:  $   333,029

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock, as of a specified date within the past 60
days. $2,478,642 as at April 30, 2001

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of share outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: $0.001 Par Value Common Shares -
1,899,974 as of March 31,2001.

Transitional Small Business Disclosure Format (Check One)  Yes [   ]  No [ X ]



                                  Page 1 of 22

<PAGE>   2







                        INTERUNION FINANCIAL CORPORATION

                                   FORM 10-KSB

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                        <C>
PART I......................................................................................................3
    Item 1 DESCRIPTION OF BUSINESS..........................................................................3
    Item 2 DESCRIPTION OF PROPERTY..........................................................................6
    Item 3 LEGAL PROCEEDINGS................................................................................6
    Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............................................7
PART II.....................................................................................................7
    Item 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........................................7
    Item 6 MANAGEMENT'S DISCUSSION AND ANALYSIS.............................................................9
    Item 7 FINANCIAL STATEMENTS............................................................................16
    Item 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE............16
PART III...................................................................................................16
    Item 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
           OF THE EXCHANGE ACT.............................................................................16
    Item 10 EXECUTIVE COMPENSATION.........................................................................18
    Item 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................19
    Item 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................21
    Item 13 EXHIBITS AND REPORTS ON FORM 8-K...............................................................22
</TABLE>




                                  Page 2 of 22


<PAGE>   3


PART I

Item 1   DESCRIPTION OF BUSINESS

(A)      BUSINESS DEVELOPMENT

INTERUNION FINANCIAL CORPORATION (the "Company"), is a Delaware corporation. The
Company was incorporated on February 7, 1994. InterUnion strategy is to acquire,
when possible, a majority interest in financial services business. The Company
acquires for cash but preferably for Common Shares of the Company with
additional incentives for vending shareholders via Common Share Purchase
Warrants and Stock Options for management.

In 1999, the Company restructured its interest in its Canadian based investment
management activities in order to facilitate the growth strategy in that sector.
InterUnion Asset Management became the holding company for the Company's
interest in the following investment management companies: Guardian Timing
Services Inc. ("GTS"); Leon Frazer, Black & Associates Limited ("LFB"); AIL
Investment Services ("AILIS") and Black Investment Limited ("BIM"). The purpose
of the restructuring of IUAM was to pursue acquisitions on a tax effective basis
as well as secure an institutional strategic alliance. Merchant banking
activities focus on restructuring and/or consolidating as principal, in order to
capitalise smaller or privately/family held companies and attract institutional
interest. Investment banking activities focus on advisory services and raising
of capital, as agent, for small and medium size corporations, public or private
which are either looking for institutional financing or strategic alliances in
sectors in which InterUnion Financial Corporation has recognized research and
corporate finance strength.

The Company's policy is not to get involved in the corporations it advises or
provides financing to when acting as agent, and to limit the extent of its
involvement in the corporations in which it acts as principal.

On January 25, 1999, the Company, through a roll over of its interests,
reorganised its investment management companies: BIM, GTS and LFB, into IUAM.
The purpose of the reorganisation was to allow IUAM to implement its business
plan and continue its acquisition program, on a tax effective basis, as a
consolidator of Canadian investment management companies and get access to an
institutional strategic alliance. That restructuring has allowed the Company to
include its IUAM ownership in its merchant banking activities.

On January 25, 1999, IUAM issued 310,010 convertible preferred shares to Working
Venture Canadian Fund ("WVCF") for gross proceeds of C$5,000,000. (C$ is the
symbol used for the Canadian currency, unless preceded by C, all dollar amounts
are US dollars). Each convertible preferred share is convertible into one common
share of IUAM and gives the holder one vote per share. WVCF is a Canadian
institutional investor with more than $500 million in funds under
administration. WVCF's only fund is a labor sponsored fund with approximately
400 shareholders. Investors in these funds receive an immediate tax credit of up
to 40% of the amount invested.

On March 9,1999, WVCF converted their Convertible Preferred Shares in IUAM
Common Shares and acquired an additional 568,160 Common Shares for C$5,000,000.
At that point, the ownership structure of IUAM became WVCF 56% and IUFC 44%.
Concurrent with that last financing, IUAM incorporated a new entity, AIL
INVESTMENT SERVICES LIMITED ("AILIS"). The objective of AILIS being to create a
family of mutual funds in order to expand WVCF's product line. The funds raised
by expanding the products sold by WVCF's sales force would be managed by the
various investment managers within the IUAM group.

On November 22, 1999, at the Company's Shareholders' meeting it was approved to
amend the Certificate of Incorporation of the Company by allowing the Board of
Directors of the Company to set the total amount of common voting stock, each
share of stock having one vote, at $0.001 par value and shall be set by
resolution as adopted by the Board of Directors, which such number of authorised
shares may


                                  Page 3 of 22

<PAGE>   4

be changed from time to time, within our 10,000,000 share limitation, as adopted
by resolution(s) adopted by the Board of Directors.

During December 1999, the Company at the recommendation of the Board of
Directors simplified its corporate structure by reducing the number of
subsidiaries through reallocation of their business to other operating entities
or the merging of their activities. To achieve simplification of the corporate
structure the following subsidiaries were dissolved:

         Credifinance Realty Corp., Toronto, Ontario, Canada
         Credifinance Securities Inc., Florida, USA
         Marbury Trading Corporation, Panama
         Bearhill Limited, British Virgin Islands

In December 1999, the Company formed a new, wholly owned, subsidiary named
InterUnion Merchant Group Inc. (IUMG), a British Virgin Islands based company.
InterUnion Merchant Group took over the assets and liabilities of Marbury
Trading Corporation and Bearhill Limited upon their liquidation. The Company
also changed name of I & B Inc. Delaware, USA, a wholly owned subsidiary to
Credifinance Capital Corp. (CFCC), Delaware, USA.

In September 2000, the Company decided to separate the investment banking and
investment management operations. In order to focus on its investment management
operation, the Company sold its investment banking operations to RIF Capital
Inc. (shareholder) for a consideration of the assumption of all the assets and
liabilities of the Company, exclusive of the Company's 42.8% ownership in IUAM
and its 100% ownership in IUAM. The shareholders of the Company approved the
sale at the annual meeting on November 17, 2000. The investment banking
operation was comprised of Credifinance Capital Corp. and its wholly owned
subsidiary, Credifinance Capital Inc. and the latter's wholly owned subsidiary,
Credifinance Securities Limited.

Following the sale, the Company owns a 42.8% interest in IUAM and 100% interest
in IUMG.

(B)      BUSINESS OF ISSUER

GENERAL

The Company was formed as a "business bank" which would acquire, when possible,
a majority interest in financial services companies in order to expand its
investment banking activities.

InterUnion is both a holding and an operating company as it engages in
activities which can be separate from the activities of its named subsidiaries:
InterUnion derives independent revenues from its own investment banking
activities.

PRODUCTS AND/OR SERVICES OF ACTIVE SUBSIDIARIES

In addition to the operations of InterUnion Financial Corporation as the parent,
the Company owns an operating entity, InterUnion Merchant Group Inc. In addition
to this subsidiary, the Company has a 42.8% interest in InterUnion Asset
Management Limited. IUAM is a holding company with interests in Canadian
investment management companies.

The Company's investment banking operations, consisting of Credifinance Capital
Corp., Credifinance Capital Inc. and Credifinance Securities Limited, were sold
in September 2000 to RIF Capital Inc.

InterUnion Merchant Group ("IUMG"), is a B.V.I. corporation with administrative
offices in Geneva Switzerland. Following the Company's sale of its investment
banking operations, IUMG has had no activities. IUMG's investment in Receptagen
Ltd, a Canadian based company, was assumed by the Company prior to the sale of
the investment banking operation and the assumption of the assets and the
liabilities of the Company in the sale to RIF Capital Inc.

                                  Page 4 of 22



<PAGE>   5

IUMG owns the proprietary rights to certain computer software known as ITM
Software, which is a computer software program used to generate buy and sell
signals with respect to any stock market monitored. The forecasting technique
used by the ITM market timing model involves general market indicators, interest
rates and monetary analysis, market perception indicators, and various
statistical data to detect trends. Until March 31, 1999, the Company was
amortising the ITM Software at a rate of $192,444 per annum. However, due to an
uncertain future of the software and its inability to produce an identifiable
cash flow in the near future, the Company decided to depreciate the ITM Software
fully, resulting in an additional depreciation cost of $817,889. The Company
will update and maintain the software and sell it when a suitable offer to
purchase is received.

The Company's primary interest in the investment management business is through
its 42.8% ownership of IUAM based in Toronto, Canada. IUAM's investment
management activities are carried out through Guardian Timing Services, Inc,
Black Investment Management Limited, Leon Frazer, Black & Associates Limited,
and A.I.L. Investment Services Limited, and P.J. Doherty & Associate Ltd.
Working Venture Canadian Fund owns the remaining 57.2%. The above companies, in
total, manage about $1.5 billion in assets.

Guardian Timing Services, Inc. ("GTS") is an independent investment and fund
management firm located in Toronto, Canada. GTS manages the Canadian Protected
Fund, the Protected American Fund and the First America Fund, in addition to
being the co-manager of the India Excel Fund. It uses the proprietary ITM market
timing model owned by BHL, a subsidiary of the Company.

Black Investment Management Limited ("BIM") is an independent investment counsel
based in Toronto, Canada, that provides professional management of financial
assets for pension funds, corporations, foundations, mutual funds and group
investment plans. Mr. Paul Black and Mr. Robert W. Crosbie established BIM in
1973. IUAM has a 53.20% interest in BIM.

Leon Frazer, Black & Associates Limited ("LFB") was established in 1939 and is
the second oldest independent counselling and investment management firm in
Toronto, Canada. IUAM has a 60.18% direct interest in LFB as well as an
additional 9.88% indirect interest through BIM.

The Glen Ardith-Frazer Corporation ("GAF") merged with Leon Frazer, Black &
Associates in Fiscal 2001.

A.I.L. Investment Services Limited ("AILIS") was recently incorporated in
Ontario. The objective of AILIS is to create a full family of mutual funds that
is to be managed by affiliated companies within the IUAM Group. The distribution
and marketing of the mutual funds themselves will be done by WVCF. AILIS is
wholly owned by IUAM.

P.J. Doherty & Associate Ltd. ("PJD") is an Ottawa, Canada based investment
management firm. In November 1999, IUAM acquired a 75% interest into P.J.
Doherty

The Company has reached its objective to consolidate and capitalize through an
association with an institutional investor, its Canadian investment management
activities through a pure play vehicle, which could facilitate and accelerate
its acquisition program. Going forward, the Company will focus exclusively on
developing its interest through an extension of its shareholding in the
investment management industry.

COMPETITION

Competition is a part of every business. InterUnion faces competition directly
and through its subsidiaries from larger, better-capitalized financial service
companies as well as smaller, also better capitalized niche companies. The
Company is a minority investor in IUAM, albeit with extensive minority
shareholders rights granted under a Shareholders Agreement. The performance of
the assets under administration by IUAM and its subsidiaries is a factor that
could adversely affect the results of the Company, as poor



                                  Page 5 of 22


<PAGE>   6

performance or loss of key portfolio managers may cause clients to move their
assets to other investment management companies.

GROWTH STRATEGY

Since inception, InterUnion's strategy has been to be a "business bank" i.e. to
be able to take advantage of investing/advisory opportunities. These
opportunities can include the temporary involvement of the Company in pure
financial service transactions. InterUnion's business will retain the purchase
and selling of companies or part of companies which will use InterUnion's
investment management services as well as its ability to pay cash and/or issue
its own security in order to complete corporate transactions. InterUnion's
strategy is also to reduce its shareholders' risk by ensuring that its book
value is spread among various interests and does not depend on only one sector
of activity or only one operating company. InterUnion has been successful in
managing its investors' risk as today there is a sufficient number of
professionals with adequate credentials and experience in the various operations
who at the same time are shareholders of InterUnion. In time, as InterUnion gets
a larger and more diversified shareholder base, that strategy should help
InterUnion to grow and enable it to obtain outside financing.

The investment management activity of the Company through IUAM should continue
to expand as: (i) IUAM has now been converted into a pure Canadian consolidator
and (ii) IUAM has the necessary resources to acquire firms either with cash or
stock, in a tax efficient manner.

GOVERNMENT REGULATION

The operating activities of the Company are not subject to governmental
regulatory agencies, except for:

Black Investment Management Limited, The Glen Ardith-Frazer Corporation,
Guardian Timing Services Inc., Leon Frazer Black & Associates Limited and P.J.
Doherty Associates Ltd. are regulated by the Ontario Securities Commission.

Credifinance Securities Limited ("CFSL") is a member of the Investment Dealers
Association of Canada, The Toronto Stock Exchange, The Montreal Exchange and the
International Securities Market Association. As such, it is subject to the
compliance, rules and regulations of these self-regulatory organisations. As a
result of the sale of CFCC to RIF Capital Inc. in September, 2000, CFSL is no
longer a subsidiary of the Company.

EMPLOYEES

InterUnion has 1 full time employee.

Item 2   DESCRIPTION OF PROPERTY

The Company does not own real estate and has no leasehold interests in real
estate. The Company maintains an office at 1232 North Ocean Way, Palm Beach.

Item 3   LEGAL PROCEEDINGS

A claim has been instituted against the Company by National Research Council of
Canada for the sum of Cdn$451,139.59 and prejudgment and postjudgment interest
and costs. The claim is related to the Company's interest in Receptagen Ltd. The
Company is defending its claim and has entered a counterclaim against National
Research Council of Canada, Ubisol Inc. and Marianna Sikorska for damages in the
amount of $4,000,000, punitive damages of $1,000,000, interest and costs. The
basis of the counterclaim arises from an alleged conversion, misappropriation of
confidential information and breach of confidentiality. The Company is awaiting
a defence to the counterclaim. Examinations for discovery in this matter have
not commenced.

                                  Page 6 of 22



<PAGE>   7

Due to the claim's relation to interests in Receptagen Ltd, and as result of the
assumption of the liabilities of the Company by Credifinance Capital Corp.
("CFCC") in September 2000, the obligation of the above claim has been assumed
by CFCC.

Item 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The following matters were brought to a vote of security holders, through
solicitation of proxies or otherwise, during the period covered by this report:

a)       Sale of the investment banking operation, comprised of Credifinance
         Capital Corp., Credifinance Capital Inc. and Credifinance Securities
         Limited, to RIF Capital Inc., the Company's majority shareholder.

b)       Conversion of 1,500,000 shares of the Company's Class "A" Preferred
         shares to 15,000,000 shares of the Company's common stock.

c)       Reverse split of the Company's common stock on the ratio of 10 for 1.


PART II

Item 5   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)      MARKET INFORMATION

The issuer's common equity is traded on the NASD OTC Bulletin Board under the
symbol: IUFC.

The high and low sale prices for each quarter within the last two fiscal years
are as follows.

<TABLE>
<CAPTION>
               Period              Open                 High                  Low                  Close
               ------              ----                 ----                  ---                  -----
             <S>                   <C>                  <C>                   <C>                  <C>
             FY00 Qtr 1            1.88                 1.88                  1.50                 1.50
             FY00 Qtr 2            0.84                 0.84                  0.75                 0.75
             FY00 Qtr 3            0.63                 0.63                  0.44                 0.44
             FY00 Qtr 4            0.50                 0.94                  0.47                 0.94
             FY01 Qtr 1            0.82                 0.88                  0.32                 0.32
             FY01 Qtr 2            0.32                 0.47                  0.16                 0.25
             FY01 Qtr 3            0.25                 0.26                  0.10                 1.75
             FY01 Qtr 4            1.75                 2.25                  1.40                 1.44
</TABLE>


(b)      HOLDERS

The approximate number of holders of record of each class of stock is as
follows:

         Class of Stock                  Number of Holders
         --------------                  -----------------
         Common Share                    337
         Class A Preferred               None issued(1)
         Class B Preferred               None issued
         Class C Preferred               None issued

         (1)      1,500,000 Class A Preferred shares, representing 100% of the
                  issued shares in this class were converted to 15,000,000
                  common shares on a 10 for 1 basis.

(c)      DIVIDENDS

The Company has never declared or paid dividends on its common stock or its
preferred stock. There are no restrictions, other than state law that may be
applicable; those limit the ability to pay out all earnings as dividends. The
Board of Directors does not anticipate paying any dividends in the foreseeable
future; it



                                  Page 7 of 22

<PAGE>   8

intends to retain the earnings which could be distributed, if any,
for the operations, expansion and development of its business.

         (d)      RECENT SALES OF UNREGISTERED SECURITIES

         (i)      SALES PURSUANT TO REGULATION D

The Company has not made any sales within the past three (3) years in reliance
upon an exemption from the registration requirements of the Securities Act of
1933, as amended, as contained within Regulation D, promulgated by the
Securities and Exchange Commission.

         (B)      SALES PURSUANT TO REGULATION S

The following sales of Common Stock were made by the Company within the past
three (3) years in reliance upon an exemption from the registration requirements
of the Securities Act of 1933, as amended, as contained within Regulation S
promulgated by the Securities and Exchange Commission:

<TABLE>
<CAPTION>
         Title of Class
            (1) (2) (3)                        Price per
                 (4)(5)   Number of Shares       Share      Consideration         Commission                 Date
         <S>              <C>                  <C>          <C>                   <C>              <C>
              Common(6)         229,453          5.00           1,147,265              Nil                April 1997
              Common(7)          60,000          3.00             180,000              Nil                 June 1997
              Common(8)          15,000          6.00              90,000              Nil               August 1997
              Common(9)         213,194          4.00             852,776              Nil             February 1998
             Common(10)         216,640          3.64             788,569              Nil                April 1998
             Common(11)          17,002          4.00              68,008              Nil                  May 1998
                 Common          35,000          4.00             140,000            7,000                 June 1998
             Common(11)         262,142          4.00           1,048,568              Nil                 July 1998
             Common(11)          10,000          4.00              40,000              Nil             December 1998
             Common(11)         180,000          3.50             630,000           63,000             February 1999
             Common(12)          25,000          3.50              87,500              Nil                March 1999
             Common(11)           1,140          4.00               4,560              Nil                March 1999
             Common(13)         114,500          0.50              57,250              Nil             November 1999
            Common (14)       2,014,198          0.40             805,679              Nil             November 1999
             Common(15)      15,000,000          4.00             150,000              Nil            September 2000
</TABLE>

NOTES TO SALES PURSUANT TO REGULATION S

         (1)      All sales were made directly by the Company as issuer.

         (2)      The class of persons to whom the Company sold the
                  above-referenced securities were individuals or entities whom
                  the Company had reason to believe were either accredited
                  investors within the meaning of Regulation Section 230.501 or
                  were investors having such knowledge and experience in
                  financial and business matters that the purchaser could
                  properly evaluate the risks and merits of the investment.

         (3)      All sales as shown above were made to non-U.S. persons.

         (4)      The company specifically relied upon compliance with
                  Regulation S as promulgated by the Securities and Exchanges
                  Commission. The Company was in compliance with Category 3 of
                  Rule 903 of Regulation S which provides an issuer safe
                  harbour. Under this Category the Company complied with the two
                  general conditions of Rule 903(a) and (b) and to transactional
                  and offering restrictions by the execution of an investor
                  Subscription Agreement, and the placing of the appropriate
                  restrictive legend on the stock certificate(s).

         (5)      These shares were issued on the conversion of a debenture.

         (6)      These shares were issued with regards to the Receptagen
                  restructuring. The consideration was determined by the price
                  of the common stock at the time of the transaction. These
                  shares were given to a non-related party.



                                  Page 8 of 22

<PAGE>   9

         (7)      These shares were issued upon the exercise of employee stock
                  options, previously granted to Mr. Selwyn J. Kletz.

         (8)      These shares were issued upon the exercise of warrants.

         (9)      These shares were issued in the acquisition of IUAM. The
                  consideration received was 91.55% of all of the issued and
                  outstanding shares of IUAM. The valuation of IUAM was
                  determined by an arms lengths transaction. These shares were
                  given to a non-related party.

         (10)     These shares were issued in the acquisition of BIM. The
                  consideration received was 45% of all of the issued and
                  outstanding shares of BIM. The valuation of BIM was determined
                  by an arms lengths transaction. These shares were given to a
                  non-related party.

         (11)     These shares were issued in settlement of an equal amount due
                  to the purchaser of the common stock.

         (12)     These shares issued for services received from the Chairman of
                  the Company, Mr. Robert Crosbie.

         (13)     The shares issued in settlement of note payable.

         (14)     The shares issued in settlement of note payable.

         (15)     These shares were issued on the conversion of 1,500,000 shares
                  of Class "A" Preferred at ratio of 10 to 1.

Item 6   MANAGEMENT'S DISCUSSION AND ANALYSIS

         (a)      OVERVIEW

InterUnion Financial Corporation ("IUFC" or InterUnion") was incorporated on
February 7, 1994. InterUnion strategy is to acquire, when possible, a majority
interest in financial services business. The Company acquires for cash but
preferably for Common Shares of the Company with additional incentives for
vending shareholders via Common Shares Purchase Warrants and Stock Options for
management.

In 1999, the Company restructured its interest in its Canadian based investment
management activities in order to facilitate the growth strategy in that sector.
InterUnion Asset Management became the holding company for the Company's
interest in the following investment management companies: Guardian Timing
Services Inc. ("GTS"); Leon Frazer, Black & Associates Limited ("LFB"); AIL
Investment Services ("AILIS") and Black Investment Limited ("BIM"). The purpose
of the restructuring of IUAM was to pursue acquisitions on a tax effective basis
as well as secure an institutional strategic alliance.

IUAM issued 878,170 Common Shares (56%) to Working Venture Canadian Fund
("Working Venture" or "WCF") for gross proceeds of C$10 million. On November 19,
1999, IUAM acquired a 75% interest into P.J.Doherty ("PJD"), an Ottawa, Canada,
based money manager.

In 2000, at the request of WVF which changed its mutual find strategy, IUAM sold
the AIL Investment Services ("AILIS"). During that same year, WVF exercised a
Common Share Purchase Warrants on IUAM, increasing its interest to 57.2% from
56%.

The following table is a summary of IUAM's interest in the above mentioned
investment management companies as at March 31, 2001:

<TABLE>
<CAPTION>
                                    Ownership Interest:
                                    -------------------
<S>                                      <C>
BIM                                         53.20%
GTS                                        100.00%
LFB                                         76.50%
AILIS                                      100.00%
PJD                                         75.00%
</TABLE>



                                  Page 9 of 22

<PAGE>   10

Although IUFC's interest in IUAM is 42.8%, through the Unanimous Shareholders
Agreement entered into with Working Venture, the Company has a number of
specific and extended minority rights. The Company accounts for IUAM on the
equity method.

Also in 1999, the Company simplified its corporate organisation chart:
Credifinance Realty Capital Corp. (Ontario), Credifinance Securities Inc.
(Florida); Marbury Trading Corp. (BVI) and Bearhill Ltd. (BVI) were dissolved. A
new company, InterUnion Merchant Group Inc. ("IUMG") (BVI), took over the assets
and liabilities of the dissolved companies as of January 1st, 2000. As of that
date as well, the name of I&B Inc. (Delaware) was changed to Credifinance
Capital Corp. (Delaware).

In June 2000, the Company acquired its 243,750 Common Shares at the rate of
$0.6153 per share in settlement of a $150,000 Note Receivable from an unrelated
party.

During the second calendar quarter of 2000, the Company sold its investment
banking subsidiary, Credifinance Capital Corp. (Delaware) "CFCC" to its majority
shareholder RIF Capital Inc ("RIF"). The transaction was made effective
September 30, 2000, and was approved by the shareholders of the Company at the
Company's Annual and Special Shareholders meeting in November 2000. The purpose
of the transaction was to make the Company a "pure play" and allow more
flexibility to either raise capital or use its Common Stock as currency while
pursuing acquisitions of investment management companies in Canada through IUAM
or, alone, elsewhere. It also allows an opportunity for the shareholders of IUAM
to roll over their interest in a tax effective manner into the Company while,
offering at the same time the possibility to the minority shareholders of the
IUAM investee companies, to exchange the share they hold in private companies
for common stock of a public entity.

In September 2000, the Company converted its Class "A" Preferred Shares into
Common Shares at the rate of 1 to 10. Consequently, in lieu of 1,500,000 Class
"A" Preferred Shares, the Company issued 15,000,000 Common Shares.

In November 2000, in a Special Meeting of the Shareholders of the Company, it
was resolved to execute a reverse split in the issued and outstanding common
stock of the Company in the ratio of ten (10) to one (1). Consequently, the
number of issued and outstanding common stock of the Company reduced to
1,899,974.

The Company does not intend to hold a passive investment interest in a number of
entities. Management believes that the divestiture in which the Company was
engaged in FY2001 was necessary in order to implement a business plan which will
allow in the short to medium term to create a "brand name" through the
amalgamation of a number of its affiliates. The Company, with only one class of
shares, through amalgamation and rolling over minority held interest in
privately held portion of investee companies, could effect considerable savings
and be allowed to use its own Common Shares for purchasing of further
businesses.

Revenues

The flow of revenues from investment banking ceased when the Company sold CFCC
during the 2nd quarter 2001. Total revenues for FY2001 were $333,029, down 49%
from $658,601 the previous year. The Company did not get any dividend from its
42.8% interest in IUAM.

Cost of Revenues

Until 2nd quarter of FY2001 the principal elements comprising costs of revenues
were commissions and salaries paid to non administrative personnel who were
remunerated solely on the basis of their performance. However, due to disposal
of investment banking business the cost of revenue primarily consisted of
general, selling and administrative expenses. During the year 2001, the selling,
general and administrative expenses declined by $248,415 to $366,607
representing a decline of 40.4% over fiscal 2000.



                                  Page 10 of 22

<PAGE>   11

Interest Income

The Company's interest income mainly consisted of interest from loans to
affiliated companies and the interest on credit balances maintained with the
banks. The company's interest earnings increased by 56.8% to $60,072 in fiscal
2001.

Interest Expenses

The Company paid interest on the loan from affiliated companies. However, the
amount of the interest expense reduced by 75.9% to $23,599 in year 2001 from
$98,106 in the year 2000.

Gain/Loss on Issuance of Security

The Company had no gain or loss on issuance of securities during FY 2001.

Discontinued Operations:

As a result of the sale of its investment banking subsidiary, CFCC, in the 2nd
quarter of FY 2001, the Company reported a profit of $358,169 in September 2000,
from discontinued operations. However, as a result of disposal of discontinued
assets of CFCC, the Company incurred a loss of $780,401.

In fiscal 2000, the Company dissolved the following subsidiaries: Credifinance
Realty Corp. (Ontario) and Credifinance Securities Inc. (Florida) which had no
activity. During the same year, the Company, through a newly created subsidiary,
InterUnion Merchant Group Inc.("IUMG""), (BVI), took over the assets and
liabilities of subsidiaries which were dissolved: Marbury Trading Corp. (BVI)
and Bearhill Ltd. (BVI).

Losses, Write Downs and Write Offs

At the beginning of FY2000, the book value of the ITM software was $1,154,666
and the annual amortisation was $192,444. In accordance with GAAP, SFAS No121,
the value of the software was written off, resulting in an amortisation expense
of $1,154,666.

In accordance with GAAP, the Company decided during FY 2000 to write down the
Market Value of its investment in Receptagen Ltd. ("RCG"), resulting in an
unrealised loss of $1,251,334. Subsequent to RCG default on the Forbearance
Agreement entered with the Company, InterUnion had recognized a gain of $668,986
during the third quarter of FY2000. It was recommended to the Company by its
auditors not to recognise that gain until the proceeds under the Note Receivable
from News Researches Corp. were realised through repayment of that Note or sale
of the underlying security. Consequently, the recognition of gain was reversed
in the 4th quarter of fiscal 2000. During fiscal 2001, the investment in "RCG"
was sold resulting in a further loss of $27,379. In FY2001, the company wrote
down its notes receivable from Receptagen of $633,286.


                                  Page 11 of 22


<PAGE>   12



As a result of the sale of the operations of CFCC, the Company reported a income
from operations of discontinued operations. The consolidated profit of CFCC
prior to disposal of $358,169 is shown in a separate line on the consolidated
statements of operations of the Company.

Exposure to International Operations

The Company's revenues are generated in North America, however, it has a 100%
owned subsidiary in British Virgin Islands. The Company, therefore, does not
have a significant exposure to currency or country risk.

Seasonal

Neither the Company nor its subsidiaries operate in any business which could be
affected by changes in season.

         (b)      RESULTS OF OPERATIONS

Fiscal 2000 was:

         -        The first year the Company decided to adopt the most
                  conservative approach to its investments and amortisation
                  costs.

Financial highlights are as follows:


<TABLE>
<CAPTION>
                                                           2001              2000             1999
                                                           ----              ----             ----
         <S>                                           <C>              <C>             <C>
         Revenues                                          333,029          658,601         1,463,884
         Loss excluding discontinue. Operations         (1,903,693)      (3,466,623)         (390,182)
         Discontinued operation                           (422,231)        (132,822)                0
         Net Loss                                       (2,325,925)      (3,599,445)         (390,182)

         Assets                                          3,144,335        9,722,529        29,448,186
         Shareholders' Equity                            2,764,613        5,240,538         7,919,650
         Working Capital                                   (77,480)       1,303,131         1,773,590
         Common Shares Outstanding                       1,899,974        4,243,123         2,114,425
         Book Value per Common Share                          1.46             1.24              3.67
</TABLE>

Fiscal Year 2001 Compared to Fiscal Year 2000

(1)      Overview

During fiscal 2001 revenue of the Company amounted to $333,029 as compared to
$658,601 in the fiscal 2000. The total expenses for the year ended March 31,
2001, excluding equity pick-up of IUAM but including write-down of notes
receivable from Receptagen of $633,286 was $1,073,267 as compared to $3,103,724
in fiscal 2000, representing a decrease of $ 2,030,457 or 65.42%. The Company's
equity share in the loss of IUAM for the year 2001 was $1,163,455 in comparison
to $1,021,500 in fiscal 2000. The Company recorded a net loss of $422,232 from
the sale of the CFCC subsidiary in September 2000. The Company's net loss for
the fiscal year 2001 was $2,325,925 as compared to $3,599,445 in fiscal 2000,
representing a decrease of $1,273,520 or 35.38%.

The Company does not expect to record future losses through amortization or
write-downs although it expects continued losses from its 42.8% interest in
IUAM.

Loss per share for fiscal 2001 was $2.016 versus a loss of $12.076 a year
earlier. The number of common shares outstanding as of March 31, 2001 is
1,899,974 versus 4,243,123 as of March 31, 2000.

                                  Page 12 of 22


<PAGE>   13

(2)      Revenues

For the fiscal year 2001, the Company's revenues stood at $333,029 as compared
to $658,601 for fiscal 2000, representing a decline of $347,332 or 56.0%.

(3)      Cost of Revenues

Until 2nd quarter of FY2001 the principal elements comprising costs of revenues
were commissions and salaries paid to non administrative personnel who were
remunerated solely on the basis of their performance. However, due to disposal
of the investment banking business the cost of revenue primarily consisted of
general, selling and administrative expenses. During the year 2001, the selling,
general and administrative expenses declined by $248,415 to $366,607
representing a decline of 40.4% over fiscal 2000.

(4)      Net loss

Net loss for the year ended March 31, 2001 was $2,325,925 as compared to a loss
of $3,599,445 for the fiscal year 2000, representing a decrease of $1,273,520 or
35.38%. The net loss for the fiscal 2001 was contributed mainly by the
followings: a net loss of $422,232 on disposal of CFCC subsidiary; a write-down
of notes receivable of $633,286 from Receptagen; and an equity share of
$1,163,455 in the loss of 42.8% owned subsidiary of IUAM.

Basic loss per share for the year 2001 was $2.016 versus $12.076 the previous
year. Weighted average common shares outstanding in Fiscal 2001 was 1,153,759
versus 298,076 in Fiscal 2000.

Fiscal Year 2000 (restated) Compared to Fiscal Year 1999

(1)      Overview

Revenues were reduced by $805,283 or 55.0%, representing the effect of $781,770
being the revenues from the 2000 activities of CFCC companies being reclassified
out of revenues from continuing operations. The total expenses for the year
ended March 31, 2000, excluding equity pick-up of IUAM but including one time
charge for assets write-down of $2,216,555, was $3,103,729 as compared to
$1,847,248 in 1999, representing an increase of $ 1,256,476 or 68.2 %. The
Company's loss from operations increased to $2,445,123 as compared to $383,364
in 1999, representing an increase of $2,061,759. The above increase in the loss
from operations was due to the following one-time charges totalling $2,216,555:
write down in investments ($1,251,334 for Receptagen Ltd.) And one time
amortisation ($965,221 for the Bearhill Ltd. market timing model).

Additional losses from unconsolidated affiliates, $1,021,500, were due to the
Company's 44% equity interest into IUAM

The Company does not expect to record future losses through amortization or
write-downs although it expects continued losses from its interest in IUAM.

Earnings per share for fiscal 2000 was a loss of $1.208 versus a loss of $0.21 a
year earlier. The average number of common shares outstanding for the year
ending March 31, 2000 is 2,980,763 versus 1,855,386 a year earlier.

(2)      Revenues

Revenues from continuing operations were reduced by $781,770 from fiscal 1999 at
$1,463,884.

                                  Page 13 of 22


<PAGE>   14

(3)      Cost of Revenues

Cost of revenues (Selling, General and Administrative expenditures) for the year
decreased by $889,937 or 59.1% to $615,022 versus $1,504,959 the previous year
reflecting the inclusion of CFCC expenses in discontinued operations. The
Company continues to control its costs effectively and intends to continue to
reduce non-selling costs.

(4)      Net loss

Net loss for the period was $3,599,444 versus $390,364 the previous year. Losses
from operations (revenues less expenses) was $2,577,944 versus $383,364 the year
before. The increased operating loss is due to the Company's 44% equity interest
in IUAM as well as one time write downs and amortization and depreciation
charges. The Company does not expect to record such charges in the future
although it can still expect some losses from its equity interest in IUAM.

Basic loss per share was $1.208 versus $0.21 the previous year. Basis weighted
average common shares outstanding in Fiscal 2000 was 2,980,763 versus 1,855,386
in Fiscal 1999.

(c)      LIQUIDITY AND CAPITAL RESOURCES

In order to meet its growth plans and fund any operating cash requirements, the
Company's policy is to issue additional capital stock, when possible. To date
the Company has done this either through the issuance of Confidential Private
Placement Offerings under Regulation "D" or Regulation "S". The following are
details of these private placements during the previous three fiscal years:

<TABLE>
<CAPTION>
                 Date               # of Shares               Amount            Type
                 ----               -----------               ------            ----
           <S>                   <C>                    <C>                <C>
                April 1997             229,453             1,147,265        Regulation "S"
                 June 1997              60,000               180,000        Regulation "S"
               August 1997              15,000                90,000        Regulation "S"
             February 1998             213,194               852,776        Regulation "S"
                April 1998             216,640               788,569        Regulation "S"
                  May 1998              17,002                68,008        Regulation "S"
                 June 1998              35,000               140,000        Regulation "S"
                 July 1998             262,142             1,048,568        Regulation "S"
             December 1998              10,000                40,000        Regulation "S"
             February 1999             180,000               630,000        Regulation "S"
                March 1999              25,000                87,500        Regulation "S"
                March 1999               1,140                 4,560        Regulation "S"
             November 1999             114,500                57,250        Regulation "S"
             November 1999           2,014,198               805,679        Regulation "S"
            September 2000          15,000,000               150,000        Regulation "S"
</TABLE>

In addition to the above, IUAM raised C$10 million directly in fiscal 2000.
During fiscal 2001 WVF exercised a Common Share Purchase Warrants on IUAM,
increasing its interest to 57.2% from 56% while decreasing IUFC's share in IUAM
to 42.8% from 44%. These funds were used to eliminate a bank loan of
approximately C$1 million and fund the AILIS venture, C$500,000. The balance of
the funds will be used for acquisitions and operations.


                                  Page 14 of 22

<PAGE>   15


Shareholders received one Right for every four (4) common share. Each Right gave
the holder the right to acquire a common share of the Company at $2.80 per
share, subject to a minimum of $1,500,000 raised. The Company's controlling
shareholder, RIF Capital, had agreed to subscribe on a pro-rata basis. Due to
the minimum subscription level not being met, the right offering was not closed.

NASDAQ advised the Company that its application for listing on the Small Cap
market was declined, as the minimum bid price per share was not greater than
$4.00.

All of the Company's Class A Preferred Shares have been converted into common
shares in Fiscal 2001.

New Accounting Pronouncements

Financial Derivatives and Hedging Activities: In June 1998, Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" was released. For fiscal years beginning after June 15,
1999, the statement requires the accounting and disclosure of gains and losses
on certain financial instruments. Management does not believe that this
pronouncement will have any significant effect on the Company.

Revenue Recognition: In December 1999, the Securities Exchange Commission issued
Staff Accounting Bulletin No. 101 - "Revenue Recognition in Financial
Statements" (SAB 101). The company has evaluated the effects of the SAB and has
determined that there is no material impact on its method of recognizing
revenue.

Stock Base Compensation: The recently promulgated accounting standard, FIN44
"Accounting for Certain Transactions involving Stock Compensation", does not
affect the financial statements of the Company.

Start-up Costs: In April 1998, Statement of Position (SOP) 98-5 Accounting for
Costs of Start-up Activities was issued. For fiscal years beginning after
December 15, 1999, SOP requires that pre-opening costs be expensed as incurred.
Management does not believe that this pronouncement will have any significant
effect on the Company.

Concluding Remarks

There are no other known trends, events or uncertainties that may have, or are
reasonably likely to have, a material impact on the Company's short-term or
long-term liquidity.

In addition, there is no significant income or losses that have risen from the
Company's continuing operations that has not been analysed or discussed above.
Nor has there been any material change in any line item that is presented on the
financial statements that has also not been discussed above.

This Form 10-KSB contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. For this purpose any
statements contained in this Form 10-KSB that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, many of which are not within the Company's control. These
factors include but are limited to economic conditions generally and in the
industries in which the Company's customers & investee participate in;
competition within these industries and that of the Company's, including
competition from much larger competitors; technological advances which could
render the Company's services less competitive or absolute; failure by the
Company successfully to improve its skills or anticipate current or prospective
customers' needs; price increases or other limitations by the Company for use or
its services and delays, reductions or cancellations of mandates previously
placed with the Company


                                  Page 15 of 22

<PAGE>   16

Item 7   FINANCIAL STATEMENTS

The audited consolidated financial statements for InterUnion Financial
Corporation, covering fiscal years ended March 31, 2001 and 2000 are submitted
in compliance with the requirements of Item 310 of Regulation S-B.

Items 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

Effective January 17, 2000, the Company retained Mintz & Partners as its
accountants. The 2000 opinion contained no adverse opinion or disclaimer of
opinion, and was not qualified as to uncertainty, audit scope or accounting
principles. Mintz & Partners continues as the Company's accountants.

During the last two fiscal years and subsequent interim period to the date
hereof, there were no disagreements between InterUnion and its certifying
accountants on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to satisfaction of the certifying accountants, would have caused it
to make a reference to the subject matter of the disagreements in connection
with its reports.

None of the reportable events described in Item 304(a) (1) (ii) occurred with
respect to InterUnion within the last two fiscal years and the subsequent
interim period to the date of change. During the last two fiscal years and the
subsequent interim period to the date of change, InterUnion did not consult
Mintz & Partners regarding any matter or events set forth in Item 304(a) (2) (i)
and (ii) of Regulation S-B.

PART III

Item 9   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         (a)      IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS


Name, Municipality of Residence     Age     Length of Service
================================================================================
Robert W. Crosbie                   71      Appointed as Director
Toronto, Ontario                            September 3, 1998

Georges Benarroch                   54      Director and appointed as President
Paris, France                               and Chief Financial Officer;
                                            March 21, 1994

T. Jack Gary, III                   59      Appointed as Secretary
West Palm Beach, Florida                    January 30, 1995

Muriel Woodtli                      50      Appointed as Director
Geneva, Switzerland                         November 22, 1999

Martin Kovnats                              Appointed as Vice President
Toronto, Ontario, Canada                    September 28, 1999

ROBERT W. CROSBIE is a Director of the Company and also represents the Company
as a director of IUAM.

GEORGES BENARROCH is the President, Chief Executive Officer of the Company as
well as a Director and Chairman of the Audit Committee. He is also Chairman of
InterUnion Asset Management Ltd. In addition, Mr. Benarroch is a Director of
Credifinance Capital Corp., the Chief Executive Officer, and Chairman of the
Board of Credifinance Securities Limited, President, Chief Executive Officer,
and

                                  Page 16 of 22


<PAGE>   17

Chairman of the Board of Credifinance Capital Inc. He is also a director of
Transmeridian Exploration Inc. and the President of Equibank Inc.

T. JACK GARY, III is the Secretary of the Company. He is Manager of the West
Palm Beach, Florida, office of Raymond James & Associates, a national brokerage
firm, having held that position since 1995 as well as a Director. Mr. Gary will
devote the time required to fulfil his duties as Secretary at InterUnion.

MURIEL WOODTLI served as a Director of the Company. She is a legal assistant in
Geneva, Switzerland. Ms. Woodtli's duties for InterUnion will be limited to her
participation at Board Meetings and as a member of the Audit Committee.

MARTIN KOVNATS is the Vice President of the Company and is a member of the IUAM
board of Directors. He is appointed as an officer of the Company for a period of
one year from the date of the appointment on September 28, 1999. He is a partner
in Aird & Berlis law firm in Toronto. Mr. Kovnats represents IUFC as a director
of IUAM.

                  (1)      No director of InterUnion is currently a director of
                           any other reporting company.

                  (2)      Under Section 1, ARTICLE III, of the By-Laws, the
                           directors shall serve until the next annual meeting
                           of the stockholders, as prescribed by the Board of
                           Directors, at which time directors are elected by the
                           stockholders.

                  (3)      In accordance with Item 405 no director, executive
                           officer and beneficial owner of more than ten percent
                           (10%) of any class of equity securities of the
                           Company failed to file on a timely basis reports
                           required by section 16(a) of the Exchange Act during
                           the most recent two fiscal years to the best of the
                           Company's knowledge.

(b)      AUDIT COMMITTEE

The Audit Committee had three meetings since approving the financial statements
for the previous year. The first meeting was to approve the change in auditors.
The second meeting was to review the Company's accounting policies while the
third meeting was to recommend to the Board of Director that the March 31, 2001
Consolidated Financial Statements be approved and presented to the shareholders,
and to receive confirmation from the auditors that they have been and remain
independent of the company.

(c)      IDENTIFY SIGNIFICANT EMPLOYEES

The Company does not expect to receive a significant contribution from employees
that are not executive officers.

(d)      FAMILY RELATIONSHIPS

Currently, there are no directors, executive officers or persons nominated or
persons chosen by the Company to become a director or executive officer of the
Company who are directly related to an individual who currently holds the
position of director or executive officer or is nominated to one of the said
positions.

(e)      INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

There are no material events that have occurred in the last five years that
would affect the evaluation of the ability or integrity of any director, person
nominated to become a director, executive officer, promoter or control person of
the Company.


                                  Page 17 of 22

<PAGE>   18

(f)      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

For the two fiscal years ended March 31, 2001, to the best of the Company's
knowledge no director, executive officer and beneficial owner of more than ten
percent (10%) of any class of equity securities of the Company failed to file on
a timely basis reports required by section 16(a) of the Exchange Act.

Item 10  DIRECTOR AND OFFICER COMPENSATION

         (A)      SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Name and                   Fiscal       Base            Other           Long Term       All other          Total
Principal Position         Year         Salary          Bonus           Compensation    Compensation       Compensation
=======================================================================================================================
<S>                        <C>           <C>             <C>             <C>             <C>               <C>
Georges Benarroch          2001          None            None            None            None              None
President & CEO            2000          None            None            None            $13,387 (1)       $13,387
                           1999          None            None            None            $30,000 (1)       $30,000
                           1998          None            None            None            $30,000 (1)       $30,000

Robert W. Crosbie          2001          None            $50,000(3)      None            None              $50,000
Director                   2000          None            None            None            None              $50,000
                           1999          $18,230(2)      $87,500(5)      None            $83,044 (2)       $188,774
                           1998          $45,885(2)      None            None            $27,097 (2)       $72,982

Muriel Woodtli             2001          None            None            None            $2,000 (4)        $2,000
Director                   2000          None            None            None            $1,750 (4)        $1,750
                           1999          None            None            None            None              None


T. Jack Gary               2001          None            None            None            None              None
Corporate                  2000          None            None            None            None              None
Secretary                  1999          None            None            $42,500(6)      None              $42,500
                           1998          None            None            None            None              None

Martin Kovnats             2001          None            None            None            $6,393 (7)        $6,393
Vice-President             2000          None            None            None            $12,388 (7)       $12,388
                           1999          None            None            None            None              None
                           1998          None            None            None            None              None
</TABLE>

         (1)      This amount represents life, disability and medical insurance
                  and certain expenses.

         (2)      This was paid by Black Investment Management Limited, a
                  subsidiary of IUAM, for services unrelated to those offered to
                  InterUnion Financial Corporation.

         (3)      This represents 16,575 Common Shares of the Company, issued in
                  Fiscal 2002.

         (4)      Director's fees.

         (5)      This represents 25,000 Common Shares of the Company.

         (6)      The amount represents 50,000 stock option with an expiry date
                  of September 3, 2001 and an exercise price of $4.00 per share.

         (7)      Mr. Martin Kovnats is a Vice President of IUFC. He represents
                  IUFC at the Board Meetings of IUAM. The amount indicated above
                  is paid directly to his firm, Aird & Berlis, for the time
                  spent on IUFC business.

(B)      ALL COMPENSATION COVERED

The Company has no formal options, warrants, SARs, long-term incentive plans,
pension or profit sharing plans, or other compensation plans, in effect
regarding any employees of the Company.

                                  Page 18 of 22


<PAGE>   19

The Company feels that it does not have to include executive compensation for an
executive officer of any subsidiary because under Rule 3b-7 under the Exchange
Act (17 CFR 240.3b-7) no executive officer(s) of any subsidiary perform(s)
policy making functions for the registrant.

The Company has no agreement or understanding, express or implied, with any
officer or director, or any other person regarding employment with the Company
or compensation for services.

Section 14 of ARTICLE III of the By-Laws of InterUnion provides that directors
do not receive any stated salary for their services as directors. However, by
board resolution, a fixed fee and expenses of attendance may be allowed for each
meeting. These limitations do not affect compensation for a person serving as an
officer or otherwise for the Company and receiving compensation therefor. The
Company's Board of Directors has approved payment of $1,750 and $2,000
respectively for the services of each of its independent directors for the
fiscal year ending March 31,2000 and 2001.

Item 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following persons (including any group as defined in Regulation S-B, Section
228.403) are known to InterUnion Financial Corporation, as the issuer, to be the
beneficial owner of more than five percent (5%) of any class of the said
issuer's voting securities.

<TABLE>
<CAPTION>
Title of         Name and Address of                         Amount and Nature of         Percentage
Class            Beneficial Owner                            Beneficial Owner             of Class
=====================================================================================================
<S>              <C>                                         <C>                         <C>
Common           RIF Capital Inc. (1)                            1,747,985                  92.00%
                 Price Waterhouse Centre
                 PO Box 634C
                 St. Michael, Barbados, WI
                                                    Total        1,747,985                  92.00%
</TABLE>

         (1)      RIF Capital Inc. is wholly owned by Central Investment Trust.
                  Safeguardian Limited is the sole protector of Central
                  Investment Trust and is neither a beneficiary of the Trust or
                  its subsidiaries.




                                  Page 19 of 22



<PAGE>   20



(b)      SECURITY OWNERSHIP OF MANAGEMENT

In September 2000, the Company approved the conversion of 1,500,000 shares of
Class A Preferred stock, owned by RIF Capital Inc., into 15,000,000 common
shares of the Company.

The following information lists, as to each class, equity securities
beneficially owned by all directors and nominees, and of the directors and
nominees of the issuer, as a group.

<TABLE>
<CAPTION>
Title of                 Name and Address of                         Amount and Nature of         Percentage
Class                    Beneficial Owner                            Beneficial Owner             of Class
=============================================================================================================
<S>                      <C>                                         <C>                         <C>
Common                   Safeguardian Limited                                  1,747,985            92.00%
                         PO Box 316                                              Trustee
                         Jardine House                                  (voting power of
                         1 Hesley Street                              Central Investment
                         St. Helier, Jersey, UK  JE4 8UD                           Trust

Common                   Robert W. Crosbie                                        19,104             1.01%
                         110 Yonge Street,  #1701
                         Toronto, Ontario
                         Canada     M5C 1T4

Common                   Martin Kovnats                                            ---               0.00%
                         BCE Place, Suite 1800,
                         181 Bay Street, Toronto, Ontario
                         Canada.

Common                   Georges Benarroch                                           ---             0.00%
                         68 rue Spontini
                         Paris, France     75016

Common                   T. Jack Gary, III                                           ---             0.00%
                         515 North Flagler Drive, #1500
                         West Palm Beach, Florida 33401

Common                   Muriel Woodtli                                              ---             0.00%
                         10 Rue Pierre-Fatio
                         Geneva, Switzerland

Common                   Directors and Executive Officers                                           93.01%
                         as a group (2 people)
</TABLE>


                                    NOTE TO (A) AND (B): As to the beneficial
                                    owner(s) of the securities listed above in
                                    (a) and (b), no such owner has any right to
                                    acquire within sixty (60) days or otherwise,
                                    the right to acquire shares from options,
                                    warrants, rights, conversion privileges or
                                    similar obligations.



                                  Page 20 of 22

<PAGE>   21


         (c)      CHANGES IN CONTROL

Currently, there is no such arrangement that may result in a change in control
of the Company.

Item 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         (a)      CERTAIN RELATED TRANSACTIONS

         During fiscal 2001 and fiscal 2000 the Company and IUAM were not
         involved in any related party transaction.

Item 13  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Listing of Exhibits

Exhibit                                                                    Page
Table Number      Exhibit Name                                            Number
------------      ------------                                            ------
(2)(i)         Unanimous Consent in Lieu of The First Meeting               +
               of the Board of Directors of AU 'N AG, INC.
               (A Delaware Corporation)

(2)(ii)        Pre-Organisation Subscription and Letter of                  +
               Non-Distributive Intent

(2)(iii)       Plan and Agreement of Merger                                 +

(2)(iv)        Certificate of Merger, dated February 15, 1994               +

(3)(i)         Certificate of Incorporation of AU 'N AG, INC. Dated         +
               February 15, 1994

(3)(ii)        Certificate of Amendment of Certificate of Incorporation     +
               of AU 'N  AG, INC. Dated April 11, 1994

(3)(iii)       Certificate of Amendment of Certificate of Incorporation     +
               of AU 'N AG, INC. Dated April 11, 1994

(3)(iv)        Bylaws of InterUnion Financial Corporation                   +

(4)            Instruments Defining the Rights of Security                  +
               Holders Including Indentures                                 +


                  +        Incorporated by reference to the Company's
                           Registration Statement on Form 10-KSB filed on June
                           20, 1997.

         (b)      Reports on Form 8-K Subsequent to the Third Quarter

Exhibit                                                                   Page
Table Number      Exhibit Name                                           Number
------------      ------------                                           ------
(10)              Working Venture Canadian Fund's Investment in            ++
                  InterUnion Asset Management Limited


                                  Page 21 of 22


<PAGE>   22

Exhibit                                                                   Page
Table Number      Exhibit Name                                           Number
------------      ------------                                           ------
(16)              Letter on change in certifying accountant               +++

Exhibit F         Financial Statements of InterUnion Asset Management Ltd.
                  as at March 31, 2001

                  ++       Incorporated by reference to the Company's
                           Registration Statement on Form 8-K filed on March 16,
                           1999.

                  +++      Incorporated by reference to the Company's
                           Registration Statement on Form 8-K filed on April 27
                           1999 and May 6,1999.
SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorised.

                                          INTERUNION FINANCIAL CORPORATION
Date: June 29, 2001                       By: /s/ Georges Benarroch
---------------------------               -------------------------------------
                                          Georges Benarroch
                                          President and Chief Executive Officer

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in their capacities on the
dates indicated.

     Signature                            Title                         Date
     ---------                            -----                         ----

/s/  Georges Benarroch      President and Chief Executive Officer  June 29, 2001
------------------------
Georges Benarroch

/s/  Muriel Woodtli                                                June 29, 2001
------------------------    -------------------------------------
Muriel Woodtli              Director




                                  Page 22 of 22
<PAGE>   23

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

                                                INTERUNION FINANCIAL CORPORATION

                                               CONSOLIDATED FINANCIAL STATEMENTS



================================================================================
                                                         MARCH 31, 2001 and 2000
================================================================================




<PAGE>   24





                        INTERUNION FINANCIAL CORPORATION

                             MARCH 31, 2001 and 2000



                                    CONTENTS
<TABLE>
<CAPTION>

                                                                       Page
                                                                       ----
<S>                                                      <C>
Independent Auditors' Report:                                          F - 2

Consolidated Financial Statements:

Consolidated Balance Sheets                                            F - 3

Consolidated Statements of Operations                                  F - 5

Consolidated Statements of Shareholders' Equity                        F - 6

Consolidated Statements of Cash Flows                                  F - 7

Notes to Consolidated Financial Statements                 F - 8  To  F - 21
</TABLE>















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



<PAGE>   25


                          INDEPENDENT AUDITORS' REPORT

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



To The Directors and Shareholders of
InterUnion Financial Corporation

We have audited the accompanying consolidated balance sheets of InterUnion
Financial Corporation as of March 31, 2001 and 2000 and the related consolidated
statements of operations, shareholders' equity, and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of InterUnion Financial
Corporation as of March 31, 2001 and 2000, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

/s/ Mintz & Partners LLP
Chartered Accountants

Toronto, Canada
June 20, 2001



                                                                           F - 2


<PAGE>   26

                        INTERUNION FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AS AT MARCH 31                                                   2001             2000
===========================================================================================
<S>                                                         <C>               <C>
                                   A S S E T S
CURRENT ASSETS

    Cash and cash equivalents                               $       7,356     $      71,627
    Accounts receivables                                                0            68,239
    Receivable from Affiliates                                     54,792            27,555
    Refundable income taxes                                         7,502             6,709
    Prepaid expenses and other current assets                       5,400             7,434
    Notes receivable                                                    0         1,001,414
    Assets of discontinued operations (Note 10)                         0         3,996,413
                                                            -------------     -------------
                  Total current assets                             75,050         5,179,391
                                                            =============     =============
NON-CURRENT ASSETS

    Property and equipment, net               (Note 4)                  0             3,518
    Notes receivable, non-current portion     (Note 5)            878,150           633,286
    Investment in unconsolidated affiliates   (Note 15)         2,191,135         3,639,680
    Assets of Discontinued Operations         (Note 10)                 0           266,654
                                                            -------------     -------------
                  Total non-current assets                      3,069,285         4,543,138
                                                            -------------     -------------
                  TOTAL ASSETS                              $   3,144,335     $   9,722,529
                                                            =============     =============
</TABLE>















================================================================================
                 See Notes to Consolidated Financial Statements            F - 3





<PAGE>   27



                        INTERUNION FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AS AT MARCH 31                                                                        2001             2000
===============================================================================================================
<S>                                                                              <C>             <C>

                              L I A B I L I T I E S
CURRENT LIABILITIES
    Accounts payable and accrued liabilities                                            89,130          370,980
    Due to affiliates                                                                    3,399                0
    Note Payable                                                                        60,000                0
    Liabilities of discontinued operations   (Note 10)                                       0        3,477,724
                                                                                  ------------     ------------
                  Total current liabilities                                            152,529        3,848,704
                                                                                  ------------     ------------
NOTES PAYABLE, LONG-TERM PORTION  (Note 6)                                             227,193          633,286
                                                                                  ------------     ------------
                  Total liabilities                                                    379,722        4,481,990
                                                                                  ============     ============

                              SHAREHOLDERS' EQUITY

CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Note 8)
    Class A Preferred Stock, $0.10 par value
         Authorized - none in 2001; 1,500,000 shares in 2000
    Issued and outstanding - 1,500,000                                                       0          150,000
    Class B Preferred Stock, $0.10 par value
         Authorized - 1,000 shares'
         Issued and outstanding - None                                                       -                -
    Class C Preferred Stock, $0.10 par value
         Authorized - 1,000 shares'
         Issued and outstanding - None                                                       -                -
    Common Stock, $0.001 par value
         Authorized - 5,000,000 in 2001 and 2000
         Issued and outstanding 1,899,974 in 2001; 4,243,123 in 2000                    18,999            4,243
    Additional Paid-In Capital                                                      10,597,294       10,612,050
CUMULATIVE TRANSLATION ADJUSTMENT                                                            0           37,439
ACCUMULATED DEFICIT                                                                 (7,851,680)      (5,563,194)
                                                                                  ------------     ------------
                  Total shareholders' equity                                         2,764,613        5,240,539
                                                                                  ------------     ------------
Total Liabilities and Shareholders' Equity                                        $  3,144,335     $  9,722,529
                                                                                  ============     ============
</TABLE>


================================================================================
              See Notes to Consolidated Financial Statements               F - 4


<PAGE>   28






                        INTERUNION FINANCIAL CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31                                                               2001                  2000
=========================================================================================================================
<S>                                                                                  <C>                   <C>
REVENUES

    Investment Banking                                                               $      272,957        $      620,289
    Interest Income                                                                          60,072                38,312
                                                                                     --------------        --------------
                                                                                            333,029               658,601
                                                                                     --------------        --------------
EXPENSES

    Selling, General and Administrative                                                     366,607               615,023
    Write-down of Notes Receivable         (Note 20)                                        633,286                     0
    Amortization and Depreciation          (Note 18)                                          5,588             1,155,358
    Foreign Exchange Loss (Gain)                                                             16,808               (16,098)
    Write-down of Investment               (Note 19)                                         27,379             1,251,334
    Interest                                                                                 23,599                98,106
                                                                                     --------------        --------------
                                                                                          1,073,267             3,103,723
                                                                                     --------------        --------------

LOSS FROM CONTINUING OPERATIONS                                                            (740,238)           (2,445,122)

EQUITY IN NET LOSSES OF UNCONSOLIDATED AFFILIATES                                        (1,163,455)            (1,021,500)
                                                                                     ---------------        ---------------

(LOSS) FROM CONTINUING OPERATIONS                                                        (1,903,693)       $   (3,466,622)
                                                                                     ===============       ===============

DISCONTINUED OPERATIONS (Note 10, 12):

Income (loss) from operations of discontinued subsidiary, net of tax                        358,169              (132,822)
Loss on disposal of subsidiary, net of tax                                                 (780,401)                    0)
                                                                                     ---------------        ---------------
LOSS FROM DISCONTINUED OPERATIONS                                                          (422,232)              (132,822)
                                                                                     ---------------        ---------------
NET LOSS FOR THE YEAR                                                                $   (2,325,925)        $   (3,599,444)
                                                                                     ===============        ===============

LOSS PER COMMON SHARE - Basic and Diluted
    Weighted average common shares outstanding                                            1,153,759               298,076
    Weighted average preferred shares outstanding                                                 0             1,500,000
    Basic loss per share                                                                    (2.016)              (12.076)
    Loss from Continuing Operations                                                         (1.650)              (11.630)
    Loss from Discontinued Operations                                                       (0.366)               (0.446)
</TABLE>





================================================================================
              See Notes to Consolidated Financial Statements               F - 5





<PAGE>   29


                        INTERUNION FINANCIAL CORPORATION

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED MARCH 31, 2001 AND 2000
================================================================================

<TABLE>
<CAPTION>
                                                          Number                        Additional         Share
                                                            of                           Paid-in          Capital
                                                         Shares            Amount        Capital           Totals
<S>                                                      <C>           <C>           <C>                <C>
Preferred Shares
    Balances,
      March 31, 1999 and 2000                            1,500,000        $150,000               0      $    150,000
      Converted into common
      Stock at 1 to 10                                  (1,500,000)       (150,000)              0          (150,000)
                                                       -----------      ----------   -------------      ------------
      March 31, 2001                                             0               0               0                 0
                                                       -----------      ----------   -------------      ------------
Common Shares
    Balance, March 31, 1999                              2,114,425           2,114       9,750,249         9,752,363
    Issued during the year
    in cancellation of debt                              2,128,698           2,129         861,801           863,930
                                                       -----------      ----------   -------------      ------------
    Balance, March 31, 2000                              4,243,123      $    4,243   $  10,612,050      $ 10,616,293
    Acquired in June 2000, 243,750 shares @
    $0.6153 in settlement of note receivable              (243,750)           (244)       (149,756)         (150,000)
    Conversion of Preferred Class A shares at
    1 to 10                                             15,000,000          15,000         135,000           150,000
                                                       -----------      ----------   -------------      ------------
                                                        18,999,373          18,999      10,597,294        10,616,293
    Reverse split @ 10 to 1                            (17,099,399)              0               0                 0
                                                       -----------      ----------   -------------      ------------
    Balance March 31, 2001                               1,899,974          18,999      10,597,294        10,616,293
                                                       -----------      ----------   -------------      ------------
</TABLE>

<TABLE>
<CAPTION>
                                                               Cumulative
                                                                 Foreign
                                                                 Currency
Deficit and Foreign currency                                    Translation                          Comprehensive
Translation adjustment                                          Adjustment          Deficit             Income
                                                                ----------          -------             ------
<S>                                                            <C>             <C>                 <C>
    Balance, March 31, 1999                                         (18,963)      (1,963,750)
Translation adjustment                                               56,402                -              56,402
    Net loss for fiscal 2000                                              -       (3,599,444)         (3,599,444)
                                                                -----------    -------------       -------------
    Balance, March 31, 2000                                     $    37,439    $  (5,563,194)      $  (3,543,042)
                                                                                                              -
    Translation Adjustment on discontinued operations              (37,439)           37,439              37,439
    Net loss for fiscal 2001                                             0        (2,325,925)         (2,325,925)
                                                                -----------    -------------       -------------
    Balance, March 31, 2001                                              0        (7,851,680)         (2,288,486)
                                                                -----------    -------------       -------------
</TABLE>




================================================================================
              See Notes to Consolidated Financial Statements               F - 6



<PAGE>   30

================================================================================
                        INTERUNION FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,                                                 2001                  2000
==============================================================================================================
<S>                                                                        <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Loss from Continuing Operations                                        $   (1,903,693)     $   (3,466,622)
    Loss from Discontinued Operations                                            (422,232)           (132,822)
                                                                           --------------      --------------
    Total:                                                                     (2,325,925)         (3,599,444)

    Adjustments to reconcile net loss to net
     cash provided by (used in) operating activities
      Depreciation and Amortisation                                                 5,588           1,165,392
      Equity in net losses of unconsolidated affiliates                         1,163,455           1,021,500
      Non cash operating expenses                                                 212,510             387,633
      Net loss from discontinued operations                                       422,232                   0
      Loss in marketable securities and investments                                27,379           1,255,987
      Write-down of Notes Receivable                                              633,286                   0
                                                                           --------------      --------------
                                                                                  138,525             231,068
                                                                           --------------      --------------
    Changes in operating assets and liabilities:
      Increase (decrease) in due to/from brokers and dealers, net                       0         (22,136,587)
      Decrease (increase) in due to/from client, net                                    0           2,179,710
      Decrease in marketable securities                                                 0          19,852,782
      Decrease in accounts receivable and other assets                             69,054             463,545
      Decrease in accounts payable and accrued liabilities                       (331,850)           (428,150)
                                                                           --------------      --------------
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES                        (124,271)            162,368
                                                                           --------------      --------------
CASH FLOWS FROM FINANCING ACTIVITIES
      Proceeds of notes payable                                                    60,000                   0
                                                                           --------------      --------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES                                    60,000                   0
                                                                           --------------      --------------
CASH FLOWS FROM INVESTING ACTIVITIES
      Purchase of property and equipment, net                                           0              (6,190)
                                                                           --------------      --------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES                                             0              (6,190)
                                                                           --------------      --------------
NET (DECREASE) INCREASE IN CASH                                                   (64,271)            156,178
CASH AND CASH EQUIVALENTS - Beginning of Year                                      71,627             285,706
                                                                           --------------      --------------
CASH AND CASH EQUIVALENTS - End of Year                                    $        7,356      $      441,884
                                                                           ==============      ==============
</TABLE>

For supplemental disclosure information for the Consolidated Statement of Cash
flows, see note 13.

================================================================================
              See Notes to Consolidated Financial Statements               F - 7



<PAGE>   31


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

         1.       ORGANIZATION AND BASIS OF PRESENTATION
Description of Business: InterUnion Financial Corporation ("IUFC") and its
subsidiaries (collectively the "Company") are engaged in financial services with
activities in investment banking business, In particular, the investment
management business.

Principles of Consolidation: The consolidated financial statements include the
accounts of IUFC and all wholly owned and majority owned subsidiaries from their
respective dates of acquisition, after the elimination of all significant
inter-company transactions and balances. At March 31, 2001 (March 31, 2000 -
refer to note 10), the consolidated subsidiary of IUFC is InterUnion Merchant
Group Inc. ("IUMG"). Investments in affiliates, representing 20% to 50% of the
ownership, are accounted for under the equity method. Under the equity method,
the Company records its proportionate share of income (loss) of the affiliate
(net of the amortization of the excess of the purchase price over the net assets
acquired) to results of operations, with this amount either added to (deducted
from) the cost of the investment. Dividends received from affiliates which are
accounted for on the equity basis are deducted from the carrying value of the
investment. Equity method affiliates are InterUnion Asset Management Limited and
its subsidiaries; Black Investment Management Limited, Guardian Timing Services
Limited, Leon Frazer, Black & Associates Limited, The Glen Ardith-Frazer
Corporation, and P.J. Doherty & Associates Co. Ltd. Investments in companies
representing less than 20% ownership are accounted for under the cost method.

         2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents: Cash and cash equivalents include demand deposits
with banks, money market accounts, and other highly liquid short-term
investments with original maturities of 90 days or less when acquired. Balances
of cash and cash equivalents in financial institutions may at times exceed the
government-insured limits.

Marketable Securities: The Company classifies its marketable securities into one
of three categories: trading, held to maturity, or available for sale. Trading
securities, which are bought and held primarily for the purpose of selling them
in the near term, are recorded at fair value with gains and losses included in
earnings. Held-to-maturity securities, which are securities that the Company has
the ability and the intent to hold until maturity, are recorded at amortized
cost and adjusted for amortization or accretion of premiums or discounts. All
other investments in marketable securities not classified as either trading or
held-to-maturity are classified as available-for-sale and are reported at fair
value. Unrealised gains and losses on securities classified as available for
sale are reported as a separate component of shareholders' equity until
realized. Market values of marketable securities are based on the last day of
the fiscal year. A decline in market value of any available-for-sale or
held-to-maturity security below cost that is deemed other than temporary is
charged to earnings, resulting in the establishment of a new cost basis for the
security.

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

Security Transactions: For the year ended March 31, 2000 and until
discontinuation of the subsidiary the Security transactions were recorded in
accordance with industry practice in the accounts on trade date. Commission
income and related expenses for transactions executed but not yet settled were
accrued as of the financial statement date. For the year ended March 31, 2000
and until the sale of the investment banking subsidiary, in accordance

================================================================================
/Continued...                                                              F - 8




<PAGE>   32


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

with Canadian industry practice, the balances due from and to brokers, dealers
and clients may include the trading balances of clients at the end of the
reporting period and may not be an indication of the investment activity of the
Company. These balances are due to the Company's ownership of Credifinance
Securities Limited, a Canadian broker/dealer. These balances may fluctuate
significantly.

         Property and Equipment: Property and equipment are stated at cost less
accumulated amortization. Amortization is computed using straight line and
accelerated methods over the estimated useful lives of the asset. The Company
evaluates its property and equipment on a yearly basis.

         Other Long Term Assets: For the year ended March 31, 2000, stock
exchange seats were recorded at cost and were included in non-current assets of
discontinued operations. Declines in market value are only recorded when there
is an indication of permanent decline in value. The Company evaluates its long
term assets on a yearly basis. Any impairment in the value of the long term
assets is provided in the year an asset is considered impaired.

         Long-lived Assets: As prescribed by the Statement of Financial
Accounting (SFAS) No. 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed of", the Company assesses the
recoverability of its long-lived assets by determining whether the asset balance
can be recovered over the remaining depreciation or amortization period through
projected undiscounted future cash flows. Any impairment in the value of the
long lived assets is provided in the year the long lived asset is considered
impaired

         Fair Value of Financial Assets: The carrying value of cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities, notes
receivable, notes payable and due to affiliates approximates the fair value. In
addition, unless described elsewhere, the carrying value of all financial assets
approximate the fair value based on terms and interest rates currently available
to the Company.

         Income Recognition: Revenues are recognized once an assignment to
provide business and advisory services is completed. Gains and losses resulting
from the issuance of shares by affiliate are recorded as income or loss in the
year the transaction occurs.

         Income Taxes: The Company provides for federal and state income taxes
currently payable, as well as for those deferred because of timing differences
between reporting income and expenses for financial statements purposes versus
tax purposes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect of a change in
tax rates is recognized as income or expense in the period that includes the
enactment date.

The Company and its U.S. subsidiaries file U.S. federal and state income tax
returns. Non-U.S. subsidiaries, which are consolidated for financial reporting,
file tax returns outside the U.S., and therefore separate provisions for income
taxes have been determined for these entities. Except for return of capital and
selected dividends, the Company intends to reinvest the unremitted earnings of
its non-U.S. subsidiaries and postpone their remittance indefinitely.
Accordingly, no provision for U.S. income taxes for non-U.S. subsidiaries was
required for any year presented.

================================================================================
/Continued...                                                              F - 9


<PAGE>   33


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

Impact of Accounting Pronouncement: In December 1999, the Securities Exchange
Commission issued Staff Accounting Bulletin No. 101 - "Revenue Recognition in
Financial Statements" (SAB 101). The company has evaluated the effects of the
SAB and has determined that there is no material impact on its method of
recognising revenue.

Translation of Foreign Currencies: In accordance with SFAS No.52, "Foreign
Currency Translation", the financial statements of certain subsidiaries of the
Company are measured using local currency as the functional currency. Assets and
liabilities have been translated at current exchange rates and related revenue
and expenses have been translated at average monthly exchange rates. Gains and
losses resulting from the translation of subsidiaries' financial statements are
included as a separate component of shareholders' equity. Any gains or losses
resulting from foreign currency transactions are included in results of
operations.

Earnings per Share: Net income (loss) per share is reported in accordance with
SFAS No. 128, "Earnings Per Share". SFAS No. 128 requires dual presentation of
basic earnings per share ("EPS") and diluted EPS on the face of all statements
of earnings, for all entities with complex capital structures. Diluted EPS
reflects the potential dilution that could occur from common shares issuable
through the exercise or conversion of stock options, restricted stock awards,
warrants and convertible securities. In certain circumstances, the conversion of
these options, warrants and convertible securities are excluded from diluted EPS
if the effect of such inclusion is anti-dilutive. Fully diluted loss per share
is not provided, as the effect will be anti-dilutive.

Stock Based Compensation: The Company accounts for employee stock options in
accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees". Under APB No. 25, the Company applies the
intrinsic value method of accounting. SFAS No. 123, "Accounting for Stock-Based
Compensation", prescribes the recognition of compensation expense based on fair
value of options determined on the grant date. However, SFAS No. 123 allow
companies currently applying APB No. 25 to continue applying the intrinsic value
method under APB No. 25. For companies that continue in applying the intrinsic
value method, SFAS No. 123 mandates certain pro forma disclosures as if the fair
value method had been utilized. The recently promulgated accounting standard,
FIN44 "Accounting for Certain Transactions involving Stock Compensation", does
not affect the financial statements of the company.

Comprehensive Income: The Company follows Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". This statement establishes
standards for reporting and display of comprehensive income and its components.
Comprehensive income is net income plus certain items that are recorded directly
to shareholders' equity bypassing net income.

Segment Information: The Company follows SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131 requires that
the Company disclose its operations in the business segment as viewed by
management: which is Investment Banking, which includes its merchant, banking
activities and Investment Management.

Financial Derivatives and Hedging Activities: In June 1998, Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" as amended by SFAS 137 was released. For fiscal years
beginning after June 2000, the statement requires the accounting and disclosure
of gains and losses on certain financial instruments. Management has evaluated
the effects of this pronouncement and has determined that it has no significant
effect on the Company.

Other: All amounts in these financial statements are in United States dollars
unless indicated with a "C" to represent Canadian dollar presentation.

================================================================================
Continued...                                                               F -10



<PAGE>   34

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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

3.       MARKETABLE SECURITIES

<TABLE>
<CAPTION>
                                                               Original            Carrying             Market
                                                                 Cost                Value               Value
                                                            ---------------     ---------------    ----------------

<S>                                                         <C>                 <C>                <C>
As of March 31, 2001
               Trading securities                           $             0     $             0    $              0
               Available for Sale                                         -                   -                   -
               Held to maturity                                           -                   -                   -
                                                            ---------------     ---------------    ----------------
               Total                                        $             0    $              0    $              0
                                                            ===============    ================    ================
As of March 31, 2000
               Trading securities                           $        37,308     $        32,520    $         32,520
               Available for Sale                                         -                   -                   -
               Held to maturity                                           -                   -                   -
                                                            ---------------     ---------------    ----------------
               Total                                        $        37,308    $         32,520    $         32,520
                                                            ===============    ================    ================
</TABLE>

The majority of marketable securities are pledged as security to the due to
brokers and dealers.

The marketable securities figure for the year ended March 31, 2000, is shown as
current assets of discontinued operations in the current year's balance sheet on
page 3.

<TABLE>
<CAPTION>
         For the year ending March 31,                                               2001                2000
                                                                                ---------------    --------------
         <S>                                                                    <C>                <C>
         Proceeds from securities classified as available for sale              $             -    $            -
         Gross realised gains (losses) from securities
         classified as available for sale                                                     -                 -
         Gross realised gains (losses) due to change
         in classification to trading from available for sale                                 -                 -
         Change in net unrealised gains (losses)
         on available for sale securities                                                     -                 -
         Change in net unrealised gains (losses) on trading
         securities included in revenues                                                      0             4,654
</TABLE>

4.       PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                     March 31
                                                       -----------------------------------
                                                             2001               2000
                                                       ---------------    ----------------
         <S>                                           <C>                <C>
         Computer hardware and software                $         4,499    $         41,920
         ITM Computer software                                       0           1,924,443
         Furniture, fixtures and equipment                       2,506              32,163
         Leasehold improvements                                  1,735               1,735
                                                       ---------------    ----------------
                  Total cost                           $         8,740    $      2,000,261
         Less: accumulated amortization                          8,740           1,957,582
                                                       ---------------    ----------------
                                                       $             0    $         42,679
                                                       ===============    ================
</TABLE>

Amortization expense amounted to $5,588 and $1,155,358 respectively, for the
years ended March 31, 2001 and 2000. Included in the property and equipment
figure for the year ended March 31, 2000, is $39,161 shown as non-current assets
of discontinued operations in the current year's balance sheet on page F3.

================================================================================
/Continued...                                                             F - 11


<PAGE>   35


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

5.       NOTES RECEIVABLE

<TABLE>
<CAPTION>
                                                                                             2001              2000
                                                                                        -------------     -------------
<S>                                                                                    <C>                <C>
   Note receivable from Receptagen Ltd., an investee (no longer as of 3rd Q 2001)
    with no minimum Periodic payment, no maturity date and no rate of interest                      0           633,286
    Notes Receivable from Credifinance Capital Corp. (CFCC) bearing
    Interest @ 3% per annum with no maturity date                                             878,150
    Note receivable from Finance Research & Development Trust
    with no minimum periodic payment, no maturity date and no rate of  interest                     0           150,000
    Note receivable from New Researches Corp.
    with no minimum periodic payment, due November 30,2004,
    with no interest.  This note was collateralised by 1,740,000 shares
    of common stock of B-Twelve Inc. which is discounted for $69,600
    for one year @ 6% per annum.                                                                    0         1,001,414
                                                                                        -------------     -------------
                                                                                              878,150         1,784,700
                   Less: current portion                                                            0         1,001,414
                                                                                        -------------     -------------
                   Non-current portion                                                  $     878,150     $     783,286
                                                                                        =============     =============
</TABLE>

The notes receivable figure for the year ended March 31, 2000, contains $150,000
which is shown as non-current assets of discontinued operations in the current
year's balance sheet on page 3.

6.       NOTES PAYABLE

<TABLE>
<CAPTION>
                                                                                             2001              2000
                                                                                        -------------     -------------
<S>                                                                                    <C>                <C>
    Note payable by IUMG to Credifinance Capital Corp.
    bearing interest @ 3% per annum with no maturity date                               $     227,193                 0
    Note payable by IUFC within one year to RIF Capital Inc.
    bearing no interest rate                                                                   60,000                 0
    Note payable to the co developer  of Receptagen Ltd's research with
    no minimum periodic payment, no maturity and no rate of interest                                0           633,286
                                                                                        -------------     -------------
                                                                                              287,193           633,286
              Less: current portion                                                            60,000                 0
                                                                                        -------------     -------------
              Long-term portion                                                         $     227,193     $     633,286
                                                                                        =============     =============
</TABLE>





================================================================================
/Continued...                                                             F - 12


<PAGE>   36




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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

7.       EQUITY INVESTMENT IN INTERUNION ASSET MANAGEMENT LIMITED

         On January 25th, 1999, the Company reorganised its investment
         management interest in order to have them all under one holding
         company, InterUnion Asset Management Limited ("IUAM"). The Company's
         interest at the time of the reorganisation were:

<TABLE>
<CAPTION>
                                                        Directly              Indirectly
                                                        --------              ----------
         <S>                                           <C>                    <C>
         Black Investment Management Limited              45.0%                     -
         Guardian Timing Services Limited                100.0%                     -
         Leon, Frazer, Black & Associates Ltd.            33.3%                  14.4%
         The Glen Ardith-Frazer Corporation              100.0%                     -
</TABLE>

         Thereafter, IUAM issued 310,010 convertible preferred shares for
         C$5,000,000 to Working Ventures Canadian Fund ("WVCF"). Each of these
         shares was exchangeable into one common share of IUAM, thus reducing
         the Company's interest to 69%. This transaction was recorded as of
         January 1, 1999.

         On March 9th, 1999, WVCF converted their convertible preferred shares
         into common shares and subscribed for an additional 569,160 common
         shares for C$5,000,000.

         In October 2000, WVCF exercised a warrant to acquire 44,000 common
         shares of IUAM, thereby diluting the Company's interest in IUAM to
         42.8%.

         On April 13, 1999, IUAM acquired an additional 5,978 common shares of
         Black Investment Management Limited (BIM) for C$209,230 in cash
         bringing their interest in BIM up to 50.5%. On March 31, 2001, IUAM
         purchased an additional 3,201 shares in Leon Frazer & Associates Inc.
         from Black Investment Management Limited, thereby increasing IUAM's
         direct ownership in Leon Frazer & Associates Inc. to 76.5%.

         IUAM's interest in the following companies as of March 31, 2001, was as
         follows:

<TABLE>
<CAPTION>
                                                       Ownership Interest
                                                       ------------------
         <S>                                             <C>
         Black Investment Management Limited                  53.2%
         Guardian Timing Services Limited                    100.0%
         Leon, Frazer & Associates Ltd.                       76.5%
         The Glen Ardith-Frazer Corporation                  100.0%
         P.J. Doherty & Associates Co. Ltd                    75.0%
</TABLE>

         The following is summarised information from IUAM's Audited
         Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                      March 31, 2001             March 31, 2000
                                                      --------------             --------------
         <S>                                          <C>                         <C>
         Current assets                                  1,821,292                   2,129,414
         Non-current assets, excluding goodwill          1,249,204                   1,947,468
         Goodwill                                        5,798,410                   8,763,090
         Current liabilities                               513,489                     548,810
         Non-current liabilities                         2,353,620                   2,632,847
</TABLE>


================================================================================
/Continued...                                                             F - 13



<PAGE>   37


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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


<TABLE>
<S>                                              <C>                <C>
Continued from page F-13
         Minority interests                          85,598             208,229
         Revenues                                 4,052,965           3,628,502
         Operating Expenses                       4,201,643           4,302,810
         Net loss for the year                   (2,761,919)         (1,150,653)
</TABLE>

         Information as to this and other unconsolidated investments is included
         in Note 15 .

8.       CAPITAL STOCK

         On September 4,1999, the shareholders voted to increase the authorised
         number of Common Shares to 5,000,000 from 2,500,000.

         Currently, the number of shares that the Company is authorised to issue
         under each class of stock are:

              1,500,000    Class A Preferred Shares, ($0.10 par value),
                           entitled to 100 votes for every one share issued,
                           annual dividends, if declared by the directors, at a
                           rate of $0.01 per share, non-cumulative. In case of
                           liquidation or dissolution of the company, the holder
                           of Class A Preferred Shares shall be entitled to be
                           paid in full the par value of the shares before the
                           holder of the common stock of Class B and C Preferred
                           Stock.

                  1,000    Class B Preferred Shares, ($0.10 par value),
                           non-voting, annual dividends, if declared by the
                           directors, at a rate to be determined by the
                           directors at the first issuance of these shares,
                           non-cumulative

                  1,000    Class C Preferred Shares, ($0.10 par value),
                           non-voting, annual dividends, if declared by the
                           directors, at a rate to be determined by the
                           directors at the first issuance of these shares,
                           non-cumulative. These shares are convertible into
                           common stock at terms determined by the directors
                           when these shares are issued.

              5,000,000    Common shares ($0.001 par value); each share has one
                           vote

During fiscal 2000, the Company issued 2,128,698 shares of Common Stock for
$863,930 by cancelling the debt from its controlling shareholder, RIF Capital
Inc. (Note 6) and for the repayment of certain notes payable by RIF Capital Inc.

During fiscal 2001 the Company acquired 243,750 common shares for $150,000 in
settlement of a note receivable. The majority shareholder of the Company, RIF
Capital Inc., converted its Preferred Class "A" shares into common shares at 1
to 10. During this year the Company exercised a reverse split of common shares
at 10 to 1.

9.       STOCK OPTIONS

         The Company currently issues stock options at the direction of the
         Board of Directors. To date, non-qualified stock options have been
         granted to selected key employees under terms and conditions determined
         by the Board of Directors at the time the options are issued. Presented
         below is a summary of stock option plan activity:

================================================================================
/Continued...                                                             F - 14



<PAGE>   38


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

<TABLE>
<CAPTION>
                                                                        Wt. Avg.                                Wt. Avg.
                                                                        Exercise          Options               Exercise
                                                        Number            Price         Exercisable               Price
                                                     -----------       -----------      ------------          -----------
         <S>                                         <C>              <C>               <C>                  <C>
         Balance, April 1,1999                           360,000       $      4.00           360,000          $      4.00
         Cancelled                                       (25,000)             4.00           (25,000)                4.00
                                                     -----------       -----------      ------------          -----------
         Balance, March 31, 2000                         335,000              4.00           335,000                 4.00
         Cancelled                                             0              4.00                 0                 4.00
                                                     -----------       -----------      ------------          -----------
         Balance, March 31, 2001                         335,000       $      4.00           335,000          $      4.00
                                                     ===========       ===========      ============          ===========
</TABLE>

Options outstanding and exercisable at March 31, 2001 are as follows:

<TABLE>
<CAPTION>
                       Outstanding                                                          Exercisable
        ----------------------------------------------------------------------      --------------------------
                                                 Wt. Avg.          Wt. Avg.                           Wt. Avg.
                                    Expiry       Remaining         Remaining                          Exercise
        Price         Number         Date          Life         Exercise Price       Number             Price
        -----         ------         ----          ----         --------------       ------             -----
        <S>           <C>          <C>             <C>          <C>                 <C>              <C>
         $  4.00       85,000       Aug. 2001       <1           $   4.00              85,000        $   4.00
         4.00          50,000      Sept. 2003       <1               4.00              50,000            4.00
         4.00         200,000       May 2005        <3               4.00             200,000            4.00
</TABLE>

         SFAS No.123 requires entities that account for awards for stock-based
         compensation to employees in accordance with APB No.25 to present pro
         forma disclosures of net income and earnings per share as if
         compensation cost was measured at the date of grant based on fair value
         of the award. The fair value for these options was estimated at the
         date of grant using a Black-Scholes option-pricing model with the
         following weighted-average assumptions:

<TABLE>
<CAPTION>
                                                               2001
                                                               ----
                  <S>                                     <C>
                  Expected life of the option              3 - 5 years
                  Risk free interest rate                      7.0 %
                  Expected volatility                         50.0%
                  Expected dividend yield                      0.0 %
</TABLE>

         The Black-Scholes option valuation model was developed for use in
         estimating the fair value of traded options, which have no vesting
         restrictions and are fully transferable. In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility. Because the Company's employee stock
         options have characteristics significantly different from those of
         traded options, and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
         the existing models do not necessarily provide a reliable single
         measure of the fair value of its employee stock options. As at March
         31, 2001, the shares of IUFC were trading below the exercise price of
         the option at $4.00 per share. As a result, the options are out of
         money, have no intrinsic value, and have no impact on the earnings per
         share. Therefore there is no compensation cost for the Company's stock
         option plan to recognize based upon the fair value on the grant date
         under the methodology

================================================================================
/Continued...                                                             F - 15



<PAGE>   39


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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


prescribed by SFAS No. 123, and the Company's loss from operations and loss per
share would not have been impacted.

For fiscal 2001 and 2000 the basic loss per share diluted loss per share are the
same due to anti-dilution effect of options.

10.      DISCONTINUATION, DISSOLUTION AND FORMATION OF A NEW COMPANY:

         In December 1999, In order to make the organizational structure of IUFC
         simple and cost effective the management with the consent of the Board
         of Directors and shareholders decided to dissolve the previously wholly
         owned subsidiaries: Credifinance Realty Inc., (Ontario, Canada),
         Credifinance Securities Inc. (Florida, USA), Bearhill Limited (British
         Virgin Island) and Marbury Trading Corporation (Panama). In January
         2000, a new wholly owned subsidiary , InterUnion Merchant Group Inc.
         (British Virgin Island), was formed which took over the assets and
         liabilities of the two dissolved subsidiaries, Bearhill Limited and
         Marbury Trading Corporation. The above dissolution had no significant
         impact on the financial statements of the Company. As of that date as
         well, the name of I&B Inc. (Delaware) was changed to Credifinance
         Capital Corp. (Delaware), "CFCC".

         During the second calendar quarter of 2000, the Company sold its
         investment banking subsidiary, Credifinance Capital Corp. (Delaware)
         "CFCC" to its majority shareholder RIF Capital Inc. (RIF), as described
         in note No. 12. The transaction was made effective September 30, 2000
         and was approved by the shareholders of the Company at the Company's
         Annual and Special Shareholders meeting in November 2000. The CFCC was
         100% owner of Credifinance Capital Inc. (Toronto, Ontario), "CFCI" and
         Credifinance Securities Limited (Toronto, Ontario), "CFSL". As a result
         of sale of CFCC to RIF Capital Inc, the Company, effective September
         30, 2000 is no longer involved in investment banking and stock
         brokerage activities.

         The consolidated balance sheet and statement of operations for fiscal
         2000 have been restated to show the assets, liabilities and loss from
         operations of the discontinued operations separately.

11.      INCOME TAXES

         IUFC files US Federal income tax returns for its US operations and its
         US subsidiaries. Separate income tax returns are filed, as locally
         required, for each of its foreign subsidiaries. The provision for
         income taxes consists of:

<TABLE>
<CAPTION>
         Year Ended March 31,                                                             2001             2000
                                                                                    -------------    --------------
         <S>                                                                        <C>              <C>
                Domestic
                Current                                                             $           0    $            0
                Deferred                                                                        0                 0
                Foreign
                Current                                                                         0                 0
                Deferred                                                                        0                 0
                                                                                    -------------    --------------
         Total provision for income taxes                                           $           0    $            0
                                                                                    =============    ==============
</TABLE>

The total provision for income taxes differs from that amount which would be
computed by applying the

================================================================================
/Continued...                                                             F - 16


<PAGE>   40


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

United States federal income tax rate to income (loss) before provision for
income taxes. The reasons for these differences are as follows:

<TABLE>
<CAPTION>
Year Ended March 31,                                                   2001                           2000
                                                            -------------------------    ----------------------
                                                                 Amount          %          Amount         %
                                                            --------------     ------    -----------     ------
<S>                                                         <C>                <C>       <C>              <C>
Statutory income tax rate (recovery)                        $     (395,000)    (16.98)   $   (29,680)     (0.87)
Foreign taxes payable                                                    0          0              0          0
Use of losses carried forward                                            0          0        (22,250)     (0.67)
Non-deductible items                                                 1,125       0.05          5,000        0.1
Other, including valuation                                               0          0              0          0
Allowance adjustment                                               393,875      16.93         46,930        0.1
                                                            --------------     ------    -----------     ------
Net taxes (recovery) and effective rate                     $            0          0    $         0          0
                                                            ==============     ======    ===========     ======
</TABLE>

The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax basis of assets and liabilities and net operating loss
carry-forwards. Temporary differences and carry-forwards, which give rise to,
deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                               March 31, 2001                     March 31, 2000
                                       ---------------------------------     -------------------------------
                                           Component         Tax Effect        Component         Tax Effect
                                       ---------------    --------------     -------------     -------------
<S>                                    <C>                <C>                <C>               <C>
Net operating losses - domestic        $     1,746,000    $      392,000     $      86,000     $      17,500
Unrealised gains - domestic                          0                 0                 0
Less valuation allowance                    (1,746,000)         (392,000)          (86,000)          (17,500)
                                       ---------------    --------------     -------------     -------------
Net deferred asset                     $             0    $            0     $           0                 0
                                       ===============    ==============     =============     =============
Net operating losses - foreign         $     2,326,000    $      116,000     $     446,800     $     196,000
Less valuation allowance               $    (2,326,000)         (116,000)         (446,800)         (196,000)
                                       ---------------    --------------     -------------     -------------
         Net deferred asset            $             0    $            0     $           0     $           0
                                       ===============    ==============     =============     =============
</TABLE>

At March 31, 2001, the Company had cumulative net operating loss carry-forwards
of approximately $1,746,000 and $ 2,326,000 in the United States and British
Virgin Islands respectively. These amounts will expire in various years through
2010. The related deferred tax asset have been completely offset by a valuation
allowance. The Company has no significant deferred tax liabilities.

================================================================================
Continued...                                                              F - 17




<PAGE>   41


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

12.      RELATED PARTY TRANSACTIONS:

         Directors, officers or employees of the Company may also be officers of
         and serve on the board of directors of companies in which IUFC or its
         subsidiaries have invested.

         Effective September 2000, as discussed in note No. 10, the Company sold
         its investment banking subsidiary, Credifinance Capital Corp. (CFCC) to
         its majority shareholder RIF Capital Inc. The income from operations of
         CFCC for the six months to September 2000, derived from revenues of
         approximately $1,258,000, was $358,169 which is shown as income from
         discontinued operations in a separate line in the income statement.
         However, as a result of disposal of discontinued assets of CFCC, the
         Company incurred a loss of $780,401. As a part of the discontinuation
         of CFCC operations, as of September 30, 2000, IUFC transferred the
         Notes Payable of $633,286 and its investment in B-Twelve Inc., at
         carrying value, to CFCC (Note No. 13)

         During the year ending March 31, 2001, the Company incurred an expense
         of $50,000 on account of one Director's Fee. The fee is to be paid by
         issuing 16,575 common shares in the fiscal year 2002.

         During the fiscal year ending March 31, 2000, the Company received US
         $125,000 from RIF Capital, its majority shareholder, as "Fee" for the
         services rendered.

         During the year ending March 31, 2000, the wholly owned subsidiaries of
         the Company received from Receptagen Ltd., an affiliate, in total, US$
         55,259 as fee for certain services provided to it; and US $ 4,139 as a
         reimbursement for the expense incurred on behalf of Receptagen Ltd. As
         of March 31, 2000, the Company had US $ 5,310 receivable from
         Receptagen Ltd.

13.   SUPPLEMENTAL CASH FLOW DISCLOSURE

         The following is additional information regarding the Consolidated
         Statement of Cash Flows:

<TABLE>
<CAPTION>
         Supplemental disclosure of cash flow information:                                    2001               2000
                                                                                        ---------------    --------------
         <S>                                                                            <C>                <C>
           Cash paid during the year for interest                                       $        20,200    $        9,237
           Cash paid during the year for income taxes                                            10,483             7,178
         Supplemental disclosure of non-cash financing and investing:

           Non-cash consideration received                                                            0           255,000
           Liabilities paid by issuing common stock                                                   0           863,930
         Shares of B-12 Inc. transferred at carrying value
         in exchange for notes receivable                                                     1,228,607                 0
         Note payable to co-developers of Receptagen Ltd assumed by
         CFCC in exchange for notes payable to CFCC                                             633,286
         Notes receivable settled by repossessing Company's
         243,750 common shares                                                                  150,000
            1,500,000 preferred shares converted into common shares
            at the rate of 1 to 10                                                              150,000                 0
</TABLE>

================================================================================
Continued...                                                              F - 18


<PAGE>   42


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

14.      SEGMENT INFORMATION

         The following tables summaries the revenues, operating income (losses)
         from continuing operations and identifiable assets by geographical
         area.

<TABLE>
<CAPTION>
                                                                                              Adjustments
                                                                  United                           &
                                                  Canada          States           Other      Elimination   Consolidated
                                                -----------    ------------     -----------   -----------   --------------
<S>                                             <C>            <C>              <C>           <C>           <C>
For the year ended and as of March 31, 2001
Revenue from
  unaffiliated customers                        $        57    $    332,972     $         0   $         0   $      333,029
Revenue from
  Inter-segments                                          0               0               0             0                0
                                                -----------    ------------     -----------   -----------   --------------
Total revenue                                            57         332,972               0             0          333,029
                                                ===========    ============     ===========   ===========   ==============
Depreciation
& Amortization                                            0           5,588               0             0            5,588
                                                ===========    ============     ===========   ===========   ==============
Operating profit                                         57         327,384               0             0          327,441
                                                ===========    ============     ===========   ===========   ==============
General corporate
  expenses                                           32,021       2,175,514               0             0        2,207,535
Interest expenses, net                                3,399          20,200               0             0           23,599
Income from continuing
  Operations before provision
   for income taxes                                 (35,363)     (1,868,330)              0             0       (1,903,693)
                                                ===========    ============     ===========   ===========   ==============
Loss from Discontinued
Operations                                                0        (422,232)              0             0         (422,232)
Net income (loss) for the period                    (35,363)     (2,290,562)              0             0       (2,325,925)
                                                ===========    ============     ===========   ===========   ==============
Identifiable assets                             $     4,005    $  3,618,092     $         0      (477,763)  $    3,144,334
                                                ===========    ============     ===========   ===========   ==============
For the year ended and as of March 31, 2000
Revenue from
  unaffiliated customers                        $   781,770    $    508,501     $   150,100   $         0   $    1,440,371
Revenue from
  Inter-segments
                                                -----------    ------------     -----------   -----------   --------------
Total revenue                                       781,770         508,501         150,100             0        1,440,371
                                                ===========    ============     ===========   ===========   ==============
Depreciation
& Amortization                                       10,034         145,025       1,010,333             -        1,165,392
                                                ===========    ============     ===========   ===========   ==============
Operating profit                                    229,267         385,271      (1,010,233)            0         (395,695)
                                                ===========    ============     ===========   ===========   ==============
General corporate
  expenses                                          250,015       1,562,072          50,094             0        1,862,181
Interest expenses, net                               78,070          28,506          69,600             0          176,176
Income from continuing
  Operations before provision
   for income taxes                                (108,853)     (1,350,331)     (2,140,260)            0       (3,599,444)
                                                ===========    ============     ===========   ===========   ==============
Identifiable assets                             $ 4,263,066    $  8,729,326     $ 1,703,934   $(4,973,797)  $    9,722,529
                                                ===========    ============     ===========   ===========   ==============
</TABLE>


================================================================================
/Continued...                                                             F - 19



<PAGE>   43


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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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


15.      INVESTMENT IN UNCONSOLIDATED COMPANIES:

It is a Company policy to account of all investments in unconsolidated companies
on a cost basis if the investment of the Company is below 20% of equity of the
investee company. If the ownership of the equity of the investee company is
between 20% to 50% then investment is accounted for on an equity basis. The
investment in the unconsolidated companies and their respective ownership are
shown below:

<TABLE>
<CAPTION>
Company                                    % of Ownership                  Amount of investment
                                      Year 2001      Year 2000            Year 2001       Year 2000
                                      ---------      ---------            ---------       ---------
                                                                             $                $
<S>                                     <C>           <C>                  <C>            <C>
Receptagen Ltd.                             0          22.62%                     0           30,089
B-Twelve Inc.                               0           8.80%                     0          255,000
InterUnion Asset Management Inc.         42.8%         44.00%              2,191,135       3,354,590
                                                                           ---------       ---------
                                                                           2,191,135       3,639,680
                                                                           =========       =========
</TABLE>

There is no difference between the Company's carrying value of the investments
and its proportionate interest in the underlying net assets.

16.    LONG TERM ASSETS:

<TABLE>
<CAPTION>
                                                                                Year 2001         Year 2000
                                                                                ---------         ---------
          <S>                                                                  <C>              <C>
          Stock Exchange Seat,  Toronto and Montreal                            $       0        $   77,493
</TABLE>

Shown on consolidated balance sheet as non-current assets of discontinued
operations (Note 10)

17.      CONTINGENCIES:

From time to time the Company is exposed to claims and legal actions in the
normal course of business, some of which are initiated by the Company. At March
31, 2001, management believes that any such outstanding issues will be resolved
without significantly impairing the financial condition of the Company.

18.      WRITE DOWN IN PROPERTY & EQUIPMENT

During the fiscal year 2000, the book value of ITM Software owned by InterUnion
Merchant Group Inc., a wholly owned subsidiary of the Company, was $1,154,666.
The Company was amortising the above software at a rate of $192,444 per annum.
However, due to an uncertain future of the software and its inability to produce
an identifiable cash flow in the near future the Company decided to write it
down to zero in the fiscal year 2000. This resulted in an amortisation expense
in 2000 of $ 1,154,666.

================================================================================
/Continued...                                                             F - 20



<PAGE>   44



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

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2001 AND 2000

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

19.      WRITE DOWN IN INVESTMENT

         During the fiscal year 2000, InterUnion Merchant Group Inc., a wholly
         owned subsidiary of the Company, had an investment of $1,231,618 in
         Receptagen Ltd., a Canadian based Company, and the Company had a direct
         investment of $49,805. Due to the uncertain future of Receptagen Ltd.,
         the Company decided to write down value of its investment to the market
         value of Receptagen Ltd. shares as of March 31, 2000. This caused a
         write down of investment to $ 30,089. Due to this the Company recorded
         an unrealised loss in 2000 of $1,251,334. In fiscal 2001, the above
         investment was sold resulting in a loss of $27,379

20.      WRITE DOWN OF NOTES RECEIVABLE:

         During the fiscal year 2001, the Company wrote-down notes receivable of
         $633,286 from Receptagen Limited as management considered this amount
         unrecoverable.

================================================================================
                                                                          F - 21
<PAGE>   45
INTERUNION ASSET MANAGEMENT LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2001 AND MARCH 31, 2000






<TABLE>
<CAPTION>
                                                                        CONTENTS
--------------------------------------------------------------------------------


<S>                                                                       <C>
AUDITORS' REPORT                                                               2

CONSOLIDATED FINANCIAL STATEMENTS

         CONSOLIDATED BALANCE SHEETS                                           3

         CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT                     4

         CONSOLIDATED STATEMENTS OF CASH FLOWS                                 5

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                         6-15

</TABLE>

<PAGE>   46


                                                  60 Columbia Way Suite 400
                        BDO Dunwoody LLP          Markham Ontario Canada L3R 0C9
[BDO DUNWOODY LLP       Chartered Accountants     Telephone (905) 946-1066
      LOGO]             and Consultants            Telefax: (905) 946-9524
--------------------------------------------------------------------------------
                                                                AUDITORS' REPORT
--------------------------------------------------------------------------------


TO THE SHAREHOLDERS OF
INTERUNION ASSET MANAGEMENT LIMITED


We have audited the consolidated balance sheets of InterUnion Asset Management
Limited as at March 31, 2001 and 2000 and the consolidated statements of
operations and deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with Canadian 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 March 31, 2001
and 2000 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles.

(signed by BDO Dunwoody LLP)

Chartered Accountants


Toronto, Canada
April 27, 2001

   BDO Dunwoody LLP is a Limited Liability Partnership registered in Ontario



                                       2
<PAGE>   47


INTERUNION ASSET MANAGEMENT LIMITED
Consolidated Balance Sheets
(amounts expressed in Canadian dollars unless otherwise stated)
(as at March 31)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                2001                      2000
                                                                                        ------------              ------------

                                                             Assets
<S>                                                                                        <C>                    <C>
Current:
     Cash                                                                                  $ 661,238              $    525,621
     Marketable securities, at market (note 4)                                             1,535,670                 1,991,800
     Accounts receivable and accrued revenue (note 10)                                       576,068                   472,166
     Prepaid expenses                                                                         76,989                    71,317
     Future income tax asset                                                                  26,108                    26,108
                                                                                        ------------              ------------

                                                                                           2,876,073                 3,087,012


Management contracts, net (note 5)                                                         1,619,048                 2,304,762
Capital assets, net (note 6)                                                                 338,945                   447,006
Investments, at cost (note 7)                                                                 13,915                    71,477
Goodwill (note 8)                                                                          9,152,976                12,703,851
                                                                                        ------------              ------------
Total assets                                                                            $ 14,000,957              $ 18,614,108

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

                                                           Liabilities
Current:
     Bank indebtedness                                                                  $     16,041              $     36,853
     Accounts payable and accrued liabilities (note 10)                                      644,082                   542,578
     Current portion of long term debt                                                        18,000                    69,339
     Income taxes payable                                                                     48,494                   146,840
     Deferred revenue                                                                         83,942                    76,493
                                                                                        ------------              ------------
                                                                                             810,559                   872,103

Deferred inducements (note 9)                                                                 44,514                    45,371
Long term debt (note 11)                                                                      39,500                   151,224
Other liabilities (note 10)                                                                  131,250                    43,750
Preference shares (note 12)                                                                3,500,000                 3,500,000
                                                                                        ------------              ------------
                                                                                           4,525,823                 4,612,448
                                                                                        ------------              ------------
Non-controlling interest                                                                     135,119                   301,869
                                                                                        ------------              ------------

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

                                                        Shareholders' Equity

Shareholders' equity:
Share capital (note 13)                                                                   16,358,559                16,358,558
Deficit                                                                                   (7,018,544)               (2,658,767)
                                                                                        ------------              ------------
Total shareholders' equity                                                                 9,340,015                13,699,791
                                                                                        ------------              ------------
Total liabilities and shareholders' equity                                              $ 14,000,957              $ 18,614,108

</TABLE>
--------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements


Approved by the Board:

Director      /s/ Selwyn J. Kletz           Director      /s/ Jim Hall
         -------------------------------             ---------------------------
                  Selwyn Kletz                               Jim Hall



                                       3

<PAGE>   48


INTERUNION ASSET MANAGEMENT LIMITED
Consolidated Statements of Operations and Deficit
(amounts expressed in Canadian dollars unless otherwise stated)
(for the years ended March 31)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                2001                      2000
                                                                                        ------------              ------------
<S>                                                                                     <C>                       <C>
Revenue:
     Management fees                                                                    $  6,198,691              $  5,316,239
     Other income (loss) (note 3 and 10)                                                     199,044                   (56,000)
                                                                                        ------------              ------------
                                                                                           6,397,735                 5,260,239
                                                                                        ------------              ------------
Operating expense
     Commission and incentives                                                               933,377                 1,023,113
     Salaries and benefits                                                                 3,488,823                 2,848,340
     Marketing and advertising                                                               205,925                   435,022
     Office and general                                                                    1,158,597                 1,397,057
     Professional fees                                                                       375,407                   251,932
     Amortization of management contracts                                                    335,714                   195,238
     Amortization of capital assets                                                          134,585                    87,081
                                                                                        ------------              ------------
                                                                                           6,632,428                 6,237,783
                                                                                        ------------              ------------
     Operating loss before undernoted                                                       (234,693)                 (977,544)
                                                                                        ------------              ------------

Interest expense
     Current                                                                                  31,971                    39,328
     Long term                                                                               190,083                    90,371
                                                                                        ------------              ------------
                                                                                             222,054                   129,699
                                                                                        ------------              ------------
Loss before amortization and impairment of goodwill,
non-controlling interest and income taxes                                                   (456,747)               (1,107,243)
                                                                                        ------------              ------------

Income taxes (note 14)
     Current income taxes                                                                    509,376                   212,224
     Future income taxes (benefit)                                                                --                   (26,108)
                                                                                        ------------              ------------
                                                                                             509,376                   186,116
                                                                                        ------------              ------------
Loss before amortization and impairment of goodwill
and non-controlling interest                                                                (966,123)               (1,293,359)

Amortization of goodwill                                                                     834,531                   573,740
Impairment of goodwill (note 8)                                                            2,565,000                        --
                                                                                        ------------              ------------
                                                                                           3,399,531                   573,740
                                                                                        ------------              ------------
Loss before non-controlling interest                                                      (4,365,654)               (1,867,099)

Non-controlling interest                                                                      (5,877)                 (198,998)
                                                                                        ------------              ------------
Net loss, for the year                                                                    (4,359,777)               (1,668,101)

Deficit, beginning of year                                                                (2,658,767)                 (990,666)
                                                                                        ------------              ------------
Deficit, end of year                                                                    $ (7,018,544)             $ (2,658,767)

</TABLE>
--------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements


                                       4
<PAGE>   49


INTERUNION ASSET MANAGEMENT LIMITED
Consolidated Statements of Cash Flows
(amounts expressed in Canadian dollars unless otherwise stated)
(for the years ended March 31)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                2001                      2000
                                                                                        ------------              ------------
<S>                                                                                     <C>                       <C>
Cash flows from operating activities
Net loss                                                                                $ (4,359,777)             $ (1,668,101)

Adjustments for:
 Amortization of goodwill                                                                    834,531                   573,740
 Amortization of management contracts                                                        335,714                   195,238
 Amortization of capital assets                                                              134,585                    87,081
 Deferred inducements                                                                          3,160                       318
 Unrealized loss on investment                                                                57,562                   133,000
 Provision for doubtful receivable                                                            25,750                   218,000
 Future income tax asset                                                                          --                   (26,108)
 Gain on sale                                                                               (226,590)                       --
 Impairment of goodwill                                                                    2,565,000                        --
 Non-controlling interest                                                                     (5,877)                 (198,998)
Changes in non-cash working capital
 Decrease (increase) in accounts receivable                                                 (103,902)                   52,677
 Increase (decrease) in accounts payable                                                     101,504                  (701,249)
 Increase (decrease) in income taxes payable                                                 (98,346)                  158,762
 Other items, net                                                                              3,040                  (237,955)
                                                                                        ------------              ------------
                                                                                            (733,646)               (1,413,595)
                                                                                        ------------              ------------
Cash flows from investing activities
 Acquisition of capital assets, net of disposals                                             (26,524)                 (293,347)
 Dispositions (acquisitions),
 net of cash acquired (disposed)                                                             723,532                (4,401,403)
 Sale (purchase) of marketable securities                                                    456,130                (1,253,506)
                                                                                        ------------              ------------
                                                                                           1,153,138                (5,948,256)
                                                                                        ------------              ------------
Cash flows from financing activities
 Decrease in bank indebtedness                                                               (20,812)                 (188,842)
 Proceeds from long term borrowings                                                               --                    32,829
 Repayments of long term borrowings                                                         (163,063)                  (67,234)
 Dividend paid to non-controlling interest                                                  (100,000)                  (25,000)
                                                                                        ------------              ------------
                                                                                            (283,875)                 (248,247)

Net increase (decrease) in cash                                                              135,617                (7,610,098)

Cash at beginning of year                                                                    525,621                 8,135,719
                                                                                        ------------              ------------
Cash at end of year                                                                     $    661,238               $   525,621
------------------------------------------------------------------------------------------------------------------------------
Supplemental Cash Flows Information
 Interest paid                                                                          $    112,692               $    88,571
 Income taxes paid                                                                           606,044                    65,921
                                                                                        ------------              ------------
</TABLE>
--------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements



                                       5
<PAGE>   50


INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------



1.   NATURE OF BUSINESS

     InterUnion Asset Management Limited, formerly Cluster Asset Management
     Limited, was incorporated on August 13, 1997 under the laws of Ontario. The
     principal business activities of InterUnion Asset Management Limited and
     its subsidiaries are discretionary and advisory portfolio management
     services for its clients and the acquisition of investment management
     firms.

--------------------------------------------------------------------------------
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       a) Principles of Consolidation
          These consolidated financial statements include the accounts of
          InterUnion Asset Management Limited and its subsidiaries. The
          principal operating subsidiaries are Black Investment Management Ltd.,
          Glen Ardith-Frazer Corporation, Guardian Timing Services Inc., Leon
          Frazer & Associates Inc., P.J. Doherty & Associates Co. Ltd. and
          A.I.L. Investment Services Inc. (see note 3). Unless the context
          implies otherwise, the term "Company" collectively refers to
          InterUnion Asset Management Limited and all of its subsidiaries.

       b) Marketable Securities
          Marketable securities are valued at market and unrealized gains and
          losses are reflected in income.

       c) Management Contracts
          Management contracts are recorded at cost less accumulated
          amortization and are amortized on a straight-line basis over a period
          of 7 years. The Company assesses the value of its management contracts
          by considering the future economic benefit associated with the revenue
          capacity of the related contracted items.

       d) Capital Assets
          Capital assets are recorded at cost less accumulated amortization.
          Amortization is provided on the following basis:

<TABLE>
         <S>                                       <C>

          Computer equipment                       30% declining balance
          Furniture and fixtures                   20% declining balance
          Leasehold improvements                   over the term of lease on a straight line basis
</TABLE>

       e)   Goodwill
            Goodwill being the excess of cost over assigned values of net assets
            acquired, is stated at cost less amortization. Amortization is
            provided on a straight-line basis over periods from 15 to 20 years.
            The value of goodwill is evaluated regularly by reviewing, among
            other items, the undiscounted cash flows relating to the returns of
            the related business, and by taking into account the risk associated
            with the investment. Any impairment in the value of the goodwill is
            written off against operations.

       f)   Revenue Recognition
            Revenue is recognized by the Company on an earned basis. For its
            services, the Company is entitled to an annual fee payable monthly
            or quarterly, depending on its agreement with the client. Fees are
            calculated based on the fair market value of the portfolio at the
            end of each month. Fees billed in advance are recorded as deferred
            revenue and taken into income evenly over the term of the stated
            billing.

       g)   Financial Instruments
            The Company's financial instruments consist of cash, bank
            indebtedness, marketable securities, accounts receivable,
            investments, accounts payable and accrued liabilities, other
            liabilities, preference shares and long term debt. It is
            management's opinion that the Company is not exposed to significant
            interest risks arising from these financial instruments. Unless
            otherwise noted, the fair value of these financial instruments
            approximates their carrying values.



                                       6

<PAGE>   51


INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------

          The Company is exposed to credit risk on the accounts receivable from
          its customers. Management has adopted credit policies in an effort to
          minimize those risks. The Company does not have a significant exposure
          to any individual customer or counter-party.

       h) Income Taxes
          As recommended by The Canadian Institute of Chartered Accountants,
          effective April 1, 1999, the Corporation adopted the liability method
          of accounting for income taxes. Under this method, future tax assets
          and liabilities are recognized for temporary differences between the
          financial reporting and tax bases of assets and liabilities as well as
          for the benefit of losses available to be carried forward to future
          years for tax purposes that are likely to be realized.

       i) Stock-Based Compensation Plan
          The Company's stock-based compensation arrangements are described in
          Note 13. No compensation expense is recognized for these arrangements
          when stock options are issued to employees. Any consideration paid by
          employees on exercise of stock options is credited to share capital.
          If stock options are repurchased from employees, the excess of the
          consideration paid over the carrying amount of the stock option
          cancelled is charged to retained earnings.

       j) Use of Estimates
          The preparation of financial statements in accordance with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the reported amounts of 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 management's best estimates as additional
          information becomes available in the future.

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

3.   ACQUISITIONS AND DISPOSITIONS

     The following are acquisitions made during the periods. These acquisitions
     were accounted for by the purchase method and consolidated from the
     respective effective date of acquisition, except where noted.

     Fiscal 2001 Acquisitions:
     o    On March 31, 2001 the Company purchased an additional 3,201 shares in
          Leon Frazer & Associates Inc. from Black Investment Management
          Limited, thereby increasing the Company's direct ownership in Leon
          Frazer & Associates Inc. to 76.5%. Subject to certain provisions of
          the call option agreement, Black Investment Management Limited shall
          have the right on May 16, 2001 to require the Company to sell back to
          Black Investment Management Limited the 3,201 shares.

     Fiscal 2000 Acquisitions:
     o    The Company purchased an additional 5,978 shares in Black Investment
          Management Limited on April 13, 1999 for cash considerations of
          $209,230. The purchase increased the Company's ownership to 50.5%.

     o    The Company purchased an additional 3,000 shares in Black Investment
          Management Limited on July 22, 1999 for cash consideration of
          $105,000.

     o    On November 19, 1999, the Company completed the acquisition of 75% of
          P.J. Doherty & Associates Co. Ltd. for total consideration of
          $7,632,022. Goodwill of $5,340,879 resulting from this acquisition is
          being amortized over 15 years.

     o    Effective February 29, 2000, the Company acquired an additional 7,610
          shares in Leon Frazer & Associates Inc. in exchange for 100% of the
          Company's investment in The Glen Ardith-Frazer Corporation. The
          transaction was accounted for using the Company's carrying value of
          $2,356,927 at


                                       7
<PAGE>   52


INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------

          February 29, 2000 and represents a continuity of interest. The
          acquisition increased the Company's direct ownership to 59.2%.

     o    The assets acquired and consideration given are as follows:


<TABLE>
<CAPTION>
                                                                 12 months ended
                                                                  March 31, 2000
                                                                 ---------------
        <S>                                                      <C>
           Cash                                                   $       44,849
           Net assets (liabilities) acquired,
                at fair value                                            311,601
           Management contracts                                        2,000,000
                                                                 ---------------
                                                                       2,356,450
                                                                 ---------------
         Consideration
           Cash                                                        4,324,310
           Class A Preference Shares                                   3,500,000
           Direct acquisition expenses                                   121,942
                                                                 ---------------
                                                                       7,946,252
                                                                 ---------------
         Goodwill                                                 $    5,589,802
                                                                 ---------------
</TABLE>

     Fiscal 2001 Dispositions:
     o    On September 29, 2000, the Company sold its share ownership in A.I.L.
          Investment Services Inc. (AILISI), a wholly owned subsidiary, for net
          cash proceeds of $611,000. AILISI provided all management and
          administrative services for one mutual fund corporation. The primary
          asset of AILISI was a management contract with a net book value of
          $350,000 on the date of sale (2000 - $400,000). Included in `Other
          income' is a net gain of $197,000 resulting from this transaction.

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

4.   MARKETABLE SECURITIES

     Marketable securities are recorded at market values and comprise the
     following:

<TABLE>
<CAPTION>
                                                      2001                  2000
                                            --------------        --------------
<S>                                         <C>                   <C>
     Bankers Acceptance                     $    1,094,850        $    1,554,482
     Money Market Mutual Funds                     409,047               393,309
     Other Mutual Funds                             31,773                44,009
                                            --------------        --------------
                                            $    1,535,670        $    1,991,800
</TABLE>

     The Bankers Acceptance outstanding at March 31, 2001 matures on April 30,
     2001. Annualized yield on this security is 5.86%.

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

5.   MANAGEMENT CONTRACTS

     Management contracts comprise the following:

<TABLE>
<CAPTION>
                                                                2001                                      2000
                                       -------------------------------------------------------   -------------
                                                             Accumulated             Net Book         Net Book
                                                Cost        Amortization                Value            Value
                                       -------------     ---------------      ---------------     ------------

    <S>                               <C>               <C>                  <C>                 <C>
     Management contract               $          --     $            --      $            --     $    400,000
     (see note 3)
     Non-competition agreement             2,000,000             380,952            1,619,048        1,904,762
                                       -------------     ---------------      ---------------     ------------
                                       $   2,000,000     $       380,952      $     1,619,048     $  2,304,762
                                       -------------     ---------------      ---------------     ------------

</TABLE>


                                       8
<PAGE>   53



INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------

6.   CAPITAL ASSETS

     Capital assets comprise the following:
<TABLE>
<CAPTION>
                                                                2001                                      2000
                                       -------------------------------------------------------   -------------
                                                             Accumulated             Net Book         Net Book
                                                Cost        Amortization                Value            Value
                                       -------------     ---------------      ---------------     ------------

    <S>                               <C>               <C>                  <C>                 <C>
     Computer equipment                $     635,122     $       504,032      $       131,090     $    176,879
     Furniture and fixtures                  443,532             330,097              113,435          137,785
     Leasehold improvements                  158,277              63,857               94,420          132,342
                                       -------------     ---------------      ---------------     ------------
                                      $    1,236,931     $       897,986      $       338,945     $    447,006
                                       -------------     ---------------      ---------------     ------------
</TABLE>

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

7.   INVESTMENTS

     Investments are carried at the lower of cost and fair value and include the
     following:

<TABLE>
<CAPTION>
                                                                                         2001              2000
                                                                              ---------------     -------------

    <S>                                                                       <C>                <C>
     2,722 (2000 - 27,224 before 10 to 1 reverse stock split) common                  $ 3,914     $      17,000
         shares of InterUnion Financial Corporation, a shareholder of
         the Company, held by a subsidiary of the Company (quoted
         market value - $6,168; March 31, 2000 - $36,997)
     44,477 Class A preference shares of Kanata Capital Inc., a                             1            44,477
         corporation controlled by minority shareholders of and held
         by a subsidiary (it is impractical to determine a fair value as
          the company is privately held and there is no ready market)
     Other investments                                                                 10,000            10,000
                                                                              ---------------     -------------
                                                                              $        13,915     $      71,477
                                                                              ---------------     -------------
</TABLE>

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

8.   GOODWILL

<TABLE>
<CAPTION>
                                                                                         2001              2000
                                                                              ---------------     -------------
     <S>                                                                      <C>                <C>
     Cost                                                                     $    13,610,691     $  13,762,035
     Impairment of goodwill                                                         2,565,000                --
     Accumulated amortization                                                       1,892,715         1,058,184
                                                                              ---------------     -------------
                                                                             $      9,152,976     $  12,703,851
                                                                              ---------------     -------------
</TABLE>

     In the current year, the Company has recorded goodwill impairment charges
     of $2,565,000 on its investments in Black Investment Management Ltd. and
     Guardian Timing Services Inc. Impairment has resulted from significant
     client departures and the disposition of several product offerings. In the
     case of Black Investment Management Ltd., the amount of impairment is based
     on the estimated net realizable cash value while in Guardian Timing
     Services Inc., the amount of impairment is based on estimated undiscounted
     future cash flows.

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

9.   DEFERRED INDUCEMENTS

     Deferred inducements comprise the following:

<TABLE>
<CAPTION>
                                                                                         2001              2000
                                                                              ---------------     -------------
     <S>                                                                      <C>                <C>
     Deferred lease inducement                                                $        44,514     $      45,371

</TABLE>


                                       9

<PAGE>   54


INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------


     A controlled company's lease at its Toronto premises provides for rent-free
     periods and periods of significantly reduced rent. In order to properly
     reflect these rental inducements over the term of the lease, the total
     lease payments have been aggregated and allocated over the term of the
     lease on a straight-line basis. This treatment of rental inducements has
     given rise to deferred rent inducements which will be applied to income
     over the term of the lease.

     The controlled company has sub-let certain of its leased premises for the
     term of the lease. Included in deferred inducements are expenses associated
     with the sub-lease arrangement which have been deferred and will be
     amortized over the remaining life of the sub-lease.

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

10.  RELATED PARTY TRANSACTIONS

     Transactions with shareholders, officers and directors of the Company
     influenced by the aforementioned parties are considered related party
     transactions.

     Summary of the related party transactions affecting the accounts are as
     follows:

<TABLE>
<CAPTION>
                                                                                         2001              2000
                                                                              ---------------     -------------
     <S>                                                                      <C>                <C>
     Revenue
         Management fees                                                      $          --       $     128,000
         Other income                                                                29,700                  --
     Expenses
         Commissions and incentives                                                  83,900              23,200
         Marketing and advertising                                                       --              31,250
         Interest expense                                                           175,000              63,500
         Office and general                                                          42,800             138,200
         Professional fees                                                            4,800              25,000

</TABLE>

         These transactions are in the normal course of operations and are
         measured at the exchange values (the amount of consideration
         established and agreed to by the related parties), which approximate
         the arm's length equivalent values.

     Related party balances in the accounts are as follows:

<TABLE>
<CAPTION>
                                                                                         2001              2000
                                                                              ---------------     -------------
     <S>                                                                      <C>                <C>

         Accounts receivable                                                  $          --       $      71,460
         Accounts payable                                                            21,875              46,880
         Other liabilities                                                          131,250              43,740
</TABLE>


     These balances are interest-free, unsecured, payable on demand and have
     arisen from the transactions referred to above (except for Other
     liabilities which is due on November 19, 2002 and has arisen on issuance
     of preferred shares).



                                       10
<PAGE>   55


INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------

11.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                         2001              2000
                                                                              ---------------     -------------
     <S>                                                                      <C>                <C>
     Demand installment loan, monthly principal payments of $2,700, interest
     at prime plus 2%.  The loan was repaid during the current year.          $            --     $     114,100

     Demand bank loan, interest at prime +1/2%, monthly principal
     payments of $1,500 commencing January 2000.                                       57.500            75,500

     Bank loan, interest at prime + 1 1/2%.  The loan was repaid during the
     current year.                                                                         --            25,164

     10% note payable to a director and non-controlling interest
     shareholder.  The loan was repaid during the current year.                            --             5,799
                                                                              ===============     =============
                                                                                       57.500           220,563

     Less: current portion                                                             18,000            69,339
                                                                              ---------------     -------------

                                                                              $        39,500     $     151,224
                                                                              ---------------     -------------
</TABLE>

     The demand bank loan is guaranteed by two of a subsidiary company's
     shareholders.

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

12.  PREFERENCE SHARES

     3,500 Cumulative Redeemable Convertible Class A Preference Shares (with a
     value equal to $1,000 per share) were issued on November 19, 1999 as
     consideration for the acquisition of P.J. Doherty & Associates Co. Ltd.
     These Class A Preference Shares are redeemable at the option of either the
     holders (commencing November 19, 2002, subject to certain provisions for
     early redemption arising from non-payment of dividends and an Initial
     Public Offering of the Common Shares of the Company prior to November 19,
     2002) or the Company (commencing November 19, 2001) at $1,000 per share. In
     the instance that the Class A Preference Shares are redeemed by the
     Company, the holders are entitled to a cash premium of 2.5% per annum,
     calculated from the original issue date together with all dividends
     accruing thereon whether or not declared. At any time after issuance, each
     Class A Preference Share is convertible to 80.61 Common Shares (see note
     13) at a conversion price of $12.7538 per Common Share (subject to certain
     provisions with respect to the issuance of additional Common Shares).
     Holders of these Class A Preference Shares are entitled to quarterly
     cumulative cash dividends of: i.) 2.50% per annum until the third
     anniversary of the original issue date; and ii.) 5.00% per annum,
     thereafter. Holders of these Class A Preference Shares are also entitled to
     an additional dividend of 2.50% per annum accruing until and payable on the
     earlier of: i.) the third anniversary of the original issue date; ii.) the
     date on which Common Shares are delivered to the holder pursuant to a
     conversion of Class A Preference Shares; and iii.) the redemption of such
     Class A Preference Shares. As these Class A Preference Shares are
     redeemable at the option of the holders, the value of these shares have
     been classified as long-term debt on the balance sheet. These Class A
     Preference Shares are collateralized by a pledge by the Company of
     4,000,000 common shares in the capital of P.J. Doherty & Associates Co.
     Ltd. valued at $4,000,000.

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

13.  SHARE CAPITAL

     The authorized share capital of the Company consists of an unlimited number
     of Common Shares and an unlimited number of Preference Shares (issuable in
     series).


                                       11
<PAGE>   56


INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------



     The Preference Shares were voting, convertible, and rank in priority to the
     Common Shares with respect to the payment of dividends and the distribution
     of assets on liquidation, dissolution, or wind-up. The remaining conditions
     attached to the Preference Shares were to be fixed by the Directors of the
     Corporation before any series of Preference Shares are issued.

     During the prior year, the articles of the Company were amended to cancel
     the former Preference Shares and to authorize the issuance of an unlimited
     number of Class A and Class B Preference Shares, issuable in Series (note
     12).

     Details of issued share capital are as follows:

<TABLE>
<CAPTION>
                                                           Shares                             Amount
                                                   -------------------------      -------------------------------
                                                    Common        Preference         Common           Preference
                                                   ---------      ----------      ------------        -----------
     <S>                                         <C>              <C>             <C>                 <C>
      March 31, 2000                               1,568,161         --           $ 16,358,558        $    --
         Issued on conversion of warrants             44,000         --                      1             --
                                                   ---------      ----------      ------------        -----------
      March 31. 2001                               1,612,161         --           $ 16,358,559        $    --
                                                   ---------      ----------      ------------        -----------
</TABLE>

     During a prior fiscal period, the Board of Directors of the Company
     approved the granting of options to employees to purchase up to 136,300
     common shares of the Company which may be granted from time to time.
     Various vesting requirements are associated with each employee grant.

     Subsequently, as a result of the issuance of common shares relating to the
     warrant referred to above, in the current year, additional stock options
     were issued and the preferred share conversion ratio was adjusted to
     maintain the proportionate holdings of the option holders and preferred
     shareholders as required under the terms of the financial instruments.

      Vested Options

<TABLE>
<CAPTION>
                                                                           Number of Options
                                                      -----------------------------------------------------------
      Fiscal year    Vested expiry       Exercise     Outstanding,       Issued/     Exercised     Outstanding,
      granted        date                price        March 31, 2000     Vested                    March 31, 2001
      -----------    -------------       -------      --------------     ---------   ----------    --------------

      <S>            <C>                <C>             <C>               <C>         <C>           <C>
      1999           Jan 21, 2009        $16.13          36,300            1,019       --            37,319
      1999           Jan 21, 2009        $0.001          22,000              617       --            22,617
      2000           May 10, 2009        $13.00           9,167           11,566       --            20,733

</TABLE>

      Unvested Options
<TABLE>
<CAPTION>

                                                                     Number of Options
                                             -----------------------------------------------------------------
      Fiscal year  Vested expiry  Exercise   Outstanding,    Issued     Vested     Forfeited/   Outstanding,
      granted      date           price      March 31, 2000                        Expired      March 31, 2001
      ----------   -------------  ---------  ------------    ------     -------    ----------   --------------

     <S>           <C>            <C>          <C>          <C>        <C>        <C>             <C>
      1999         Jan 21, 2009   $16.13            --       1,019      1,019          --              --
      1999         Jan 21, 2009   $0.001        11,000         926        617      11,309              --
      2000         May 10, 2009   $13.00        23,833         926     11,566          --          13,193
</TABLE>

     Unvested options with an exercise price of $0.001 will vest on the basis of
     specific employee performance related to the acquisition of assets under
     management. The unvested options expired on March 31, 2001 as performance
     criteria were not met. Unvested options with an exercise price of $13.00
     will vest evenly over a three-year term.



                                       12
<PAGE>   57


INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------

14.  INCOME TAXES

     The Company's effective income tax rate used in determining the provision
     for income taxes is as follows:

<TABLE>
<CAPTION>
                                                                                         2001              2000
                                                                              ---------------     -------------
     <S>                                                                      <C>                <C>
     Combined statutory tax rate (recovery)                                           (43.5)%             (44.6)%

     Deduct:
          Non-deductible expenses                                                      27.3                 5.6
          Unrecognized losses carried forward                                         151.1                53.8
          Non-taxable gains                                                           (27.7)                 --
          Other, net                                                                    4.3                 2.0
                                                                              ---------------     -------------
          Effective income tax rate                                                   111.5%               16.8%
                                                                              ---------------     -------------
</TABLE>

     As at March 31, 2001, the consolidated group had approximately $2,079,000
     of non-capital losses (March 31, 2000 - $1,512,000) and $391,000 (March 31,
     2000 - $13,000) of capital losses which may be carried forward and utilized
     to reduce future years' taxable income and capital gains, respectively.
     These figures reflect the reduction of $507,000 in non-capital losses
     arising from the sale of AILISI. In addition, the consolidated group also
     has $280,000 in restricted capital losses arising from a related party
     transaction. Capital losses can be carried forward indefinitely. The right
     to claim the non-capital losses expires as follows:

<TABLE>
<CAPTION>
            Expiry
            ------
           <C>                  <C>
            2005                $  146,000
            2006                   135,000
            2007                   757,000
            2008                 1,041,000
</TABLE>


     During the year, the Company's future income tax asset increased by
     $381,000 and totaled $1,182,000 (March 31, 2000 - $801,000) after applying
     the statutory tax rate to the temporary differences and non-capital and
     capital losses described above.

     Subsequently, the net change to the valuation allowance during the year,
     and the total valuation allowance as at March 31, 2001 provided by the
     Company, increased by $381,000 and totaled $1,156,000 (March 31, 2000 -
     $775,000) to reduce the future income tax asset, reflecting the uncertainty
     of full realization of the future income tax asset.

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

15.  LOSS PER SHARE

     Basic loss per share has been calculated on a weighted average basis of
     common shares outstanding during the period.

<TABLE>
<CAPTION>
                                                             2001           2000
                                                       ----------      ---------
     <S>                                               <C>            <C>
     Weighted average common shares
     - basic calculation                                1,612,161      1,612,161
</TABLE>


     The calculations of fully diluted earnings per share is based upon the
     common shares outstanding during the period as above and not adjusted by
     the unexercised convertible Class A Preference shares and vested options in
     computing diluted loss per share because their effects were antidilutive.

<TABLE>
<CAPTION>
                                                             2001          2000
                                                       ----------     ---------
     <S>                                               <C>           <C>
     Basic loss per share                                 $ (2.70)   $    (1.03)
</TABLE>




                                       13
<PAGE>   58


INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------

     In accordance with revised recommendations of The Canadian Institute of
     Chartered Accountants, the company adopted on a retroactive basis the
     accounting standards for calculating Earnings Per Share. Accordingly, prior
     period basic earnings per share has been restated to account for the effect
     of the outstanding warrants issued which were contingent upon certain
     conditions which had been satisfied at March 8, 1999. The basic earnings
     per share reported in the prior year has been increased by $0.03 per share.

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

16.  COMMITMENTS

     The Company has basic lease payments exclusive of operating costs for the
     premises and office equipment for the next four years as follows:

<TABLE>

<S>                            <C>        <C>
                               2002       $     256,000
                               2003             149,000
                               2004              98,000
                               2005              18,000
</TABLE>

     The Company has employment contracts and obligations with seven of its
     employees at the following annual base salaries amount:

<TABLE>

<S>                            <C>        <C>
                               2002    $      1,010,000
                               2003             614,000
                               2004             490,000
                               2005             326,000
</TABLE>

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

17.  RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
     PRINCIPLES

     The consolidated financial statements of the Company are prepared in
     accordance with accounting principles generally accepted in Canada
     ("Canadian GAAP"). Material differences at March 31 between Canadian GAAP
     and accounting principles generally accepted in the United States ("U.S.
     GAAP") are described below:

     a)  Statements of Operations:

         The application of U.S. GAAP would have the following effect on net
         loss for the quarter and loss per common share as reported:

<TABLE>
<CAPTION>
                                                                  2001              2000
                                                         -------------     ------------

        <S>                                             <C>               <C>
         Net loss for the period, Canadian GAAP          $  (4,360,000)    $ (1,668,000)
         Stock based compensation (i)                           69,000         (175,000)
                                                         -------------     ------------
         Net loss for the period, U.S. GAAP              $  (4,291,000)    $ (1,843,000)
                                                         -------------     ------------
         Loss per common share under U.S. GAAP           $       (2.66)    $      (1.14)
</TABLE>



                                       14
<PAGE>   59



INTERUNION ASSET MANAGEMENT LIMITED
Notes to Consolidated Financial Statements
March 31, 2001 and March 31, 2000
(amounts expressed in Canadian dollars unless otherwise stated)
--------------------------------------------------------------------------------


     (i)  Stock-Based Compensation Expense

          The Company does not recognize compensation expense for stock options
          granted. Under U.S. GAAP, Accounting Principles Board ("APB") Opinion
          No. 25 requires that stock based compensation cost be recorded using
          the intrinsic-value method. FASB Statement of Financial Accounting
          Standard ("SFAS") No. 123 encourages the Company to record
          compensation expense using the fair-value method. In reconciling
          Canadian GAAP with U.S. GAAP, the Company has chosen to measure
          compensation costs related to stock options in accordance with APB 25.

          Under APB 25 the intrinsic-value of vested options would have been $0
          (2000 - $177,000). The intrinsic-value of unvested options is
          estimated to be $0 (2000 - $177,000 with a vesting period of two
          years). Accordingly, had the Company recognized compensation cost
          related to the unvested options outstanding at March 31, 2000, the
          intrinsic value would have been amortized over the vesting period, or
          in amounts of $88,500 in each vesting year. However, as performance
          conditions attached to certain of these unvested options were not met,
          current year compensation costs under APB 25 would have been adjusted
          accordingly. Therefore, total compensation cost for the period under
          APB 25 would have been $(69,000) (2000 - $175,000). Had the Company
          booked compensation expense in accordance with APB 25, basic loss per
          share would have been decreased by $0.04 (2000 - increased by $0.11).

b)   Other Disclosures:

     (i)  Stock-Based Compensation Expense

          For options granted in the prior fiscal year, the estimated fair value
          of the underlying equity at date of grant was $13.00. As such,
          compensation costs under SFAS 123 would have totaled $227,700 with a
          vesting period of three years.

          The fair value estimates were determined using the Black-Scholes
          option-pricing model. Valuation was based on a risk-free interest rate
          of 5.46%, an expected term of 10 years, an expected volatility of 30%
          and no expected dividends. Had the Company booked compensation
          expense, loss per common share would have been increased by $0.14.

     (ii) Comprehensive Income

          FASB SFAS No. 130 introduced the concept of Comprehensive Income.
          Under this pronouncement, U.S. GAAP requires companies to report
          Comprehensive Income as a measure of overall performance.
          Comprehensive Income includes net income and all other changes in
          equity, exclusive of shareholders' contributions or any distributions
          to shareholders. The application of FASB SFAS N0. 130 would not have a
          material effect on net loss for the period and loss per common share
          as reported under U.S. GAAP.

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

18.  COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

     Certain comparative figures have been restated to conform with the current
     year's presentation.