##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549




---

FORM 20-F





|  |  |                                                                                                           
|- |  | ----------------------------------------------------------------------------------------------------------
|o |  | REGISTRATION STATEMENT PURSUANT TO
    SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF
    1934or
| 
|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                  
| 
|  |  | For the fiscal year ended December 31, 2002,
    or                                                       
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934              
| 
|  |  | For the transition period
    from           to                                                           

Commission File No.: 1-4192

MFC BANCORP LTD.

(Exact Name of Registrant as Specified in Its
Charter)


Yukon Territory, Canada

(Jurisdiction of Incorporation or
Organization)


Floor 21, Millennium Tower,
Handelskai 94-96, A-1200, Vienna, Austria

(Address of Office)


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

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



---

Common Shares without par value


(Title of Class)





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

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

12,831,854 Common Shares without par
value

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

Indicate
by check mark which financial statement item the registrant has
elected to
follow.     Item 17 o     Item 18 x



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TABLE OF CONTENTS



|                                                                                                                                                              |                                                                                       |                                                           |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|TABLE OF CONTENTS                                                                                                                                            
|PART I                                                                                                                                                       
|                                                                                                                                                              | ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        
|                                                                                                                                                              | ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                      
|                                                                                                                                                              | ITEM 3. KEY INFORMATION                                                              
|                                                                                                                                                              |                                                                                       | Cautionary Statement Regarding Forward-Looking Statements
|                                                                                                                                                              |                                                                                       | Exchange Rates                                           
|                                                                                                                                                              |                                                                                       | Selected Financial Data                                  
|                                                                                                                                                              | ITEM 4. INFORMATION ON THE COMPANY                                                   
|                                                                                                                                                              |                                                                                       | History and Development of the Company                   
|                                                                                                                                                              |                                                                                       | Overview                                                 
|                                                                                                                                                              | ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 
|                                                                                                                                                              |                                                                                       | Operating Results                                        
|                                                                                                                                                              |                                                                                       | Liquidity and Capital Resources                          
|                                                                                                                                                              |                                                                                       | Foreign Currency                                         
|                                                                                                                                                              |                                                                                       | Derivative Instruments                                   
|                                                                                                                                                              |                                                                                       | Inflation                                                
|                                                                                                                                                              |                                                                                       | Application of Critical Accounting Policies              
|                                                                                                                                                              | ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   
|                                                                                                                                                              |                                                                                       | Directors and Senior Management; Board Practices         
|                                                                                                                                                              |                                                                                       | Compensation                                             
|                                                                                                                                                              |                                                                                       | Employees                                                
|                                                                                                                                                              |                                                                                       | Share Ownership                                          
|                                                                                                                                                              | ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            
|                                                                                                                                                              |                                                                                       | Major Shareholders                                       
|                                                                                                                                                              |                                                                                       | Related Party Transactions                               
|                                                                                                                                                              | ITEM 8. FINANCIAL INFORMATION                                                        
|                                                                                                                                                              | ITEM 9. THE OFFER AND LISTING                                                        
|                                                                                                                                                              | ITEM 10. ADDITIONAL INFORMATION                                                      
|                                                                                                                                                              |                                                                                       | Articles and Bylaws                                      
|                                                                                                                                                              |                                                                                       | Material Contracts                                       
|                                                                                                                                                              |                                                                                       | Exchange Controls                                        
|                                                                                                                                                              |                                                                                       | Taxation                                                 
|                                                                                                                                                              |                                                                                       | Documents on Display                                     
|                                                                                                                                                              | ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|                                                                                                                                                              |                                                                                       | Derivative Instruments                                   
|                                                                                                                                                              |                                                                                       | Interest Rate Risk                                       
|                                                                                                                                                              |                                                                                       | Foreign Currency Exchange Rate Risk                      
|                                                                                                                                                              |                                                                                       | Equity Price Risk                                        
|                                                                                                                                                              | ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|PART II                                                                                                                                                      
|                                                                                                                                                              | ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                             
|                                                                                                                                                              | ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|                                                                                                                                                              | ITEM 15. CONTROLS AND PROCEDURES                                                     
|                                                                                                                                                              | ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                           
|                                                                                                                                                              | ITEM 16B. CODE OF ETHICS                                                             
|                                                                                                                                                              | ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                     
|PART III                                                                                                                                                     
|                                                                                                                                                              | ITEM 17. FINANCIAL STATEMENTS                                                        
|                                                                                                                                                              | ITEM 18. FINANCIAL STATEMENTS                                                        
|                                                                                                                                                              |                                                                                       | Index to Financial Statements and Schedules              
|MFC BANCORP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2002, 2001 and 2000 (Canadian Dollars, In Thousands)
|INDEPENDENT AUDITORS REPORT                                                                                                                                 
|SCHEDULE I: CONDENSED FINANCIAL INFORMATION OF REGISTRANT                                                                                                    
|                                                                                                                                                              | ITEM 19. EXHIBITS                                                                    
|SIGNATURES                                                                                                                                                   
|CERTIFICATION                                                                                                                                                
|Share Sale Agreement dated August 7,2002                                                                                                                     
|Royalty Deed dated August 7, 2002                                                                                                                            
|Arrangement Agreement                                                                                                                                        
|Stock Purchase Agreement dated July 23,2002                                                                                                                  
|Subsidiaries of MFC                                                                                                                                          
|Certification of Periodic Report                                                                                                                             



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##### Table of Contents



MFC BANCORP LTD.

FORM 20-F






TABLE OF CONTENTS


|           |  |                                                                                  |    |          |    | 
|---------- |  | -------------------------------------------------------------------------------- | -- | -------- | -- | 
|           |  |                                                                                  |    | Page No.
|           |  |                                                                                  |    |         
|PART I    
|ITEM 1.    |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISERS                        |    |          | 3  | 
|ITEM 2.    |  | OFFER STATISTICS AND EXPECTED TIMETABLE                                          |    |          | 3  | 
|ITEM 3.    |  | KEY INFORMATION                                                                  |    |          | 3  | 
|           |  | Cautionary Statement Regarding Forward-Looking
    Statements                    |    |          | 3  | 
|           |  | Exchange Rates                                                                   |    |          | 4  | 
|           |  | Selected Financial Data                                                          |    |          | 5  | 
|           |  | Risk Factors                                                                     |    |          | 7  | 
|ITEM 4.    |  | INFORMATION ON THE COMPANY                                                       |    |          | 13 | 
|           |  | History and Development of the Company                                           |    |          | 13 | 
|           |  | Overview                                                                         |    |          | 13 | 
|           |  | Organizational Structure                                                         |    |          | 17 | 
|           |  | Property, Plants and Equipment                                                   |    |          | 17 | 
|ITEM 5.    |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                     |    |          | 19 | 
|           |  | Operating Results                                                                |    |          | 19 | 
|           |  | Liquidity and Capital Resources                                                  |    |          | 21 | 
|           |  | Foreign Currency                                                                 |    |          | 23 | 
|           |  | Derivative Instruments                                                           |    |          | 23 | 
|           |  | Inflation                                                                        |    |          | 23 | 
|           |  | Application of Critical Accounting Policies                                      |    |          | 24 | 
|ITEM 6.    |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                       |    |          | 26 | 
|           |  | Directors and Senior Management; Board Practices                                 |    |          | 26 | 
|           |  | Compensation                                                                     |    |          | 27 | 
|           |  | Employees                                                                        |    |          | 29 | 
|           |  | Share Ownership                                                                  |    |          | 29 | 
|ITEM 7.    |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                |    |          | 30 | 
|           |  | Major Shareholders                                                               |    |          | 30 | 
|           |  | Related Party Transactions                                                       |    |          | 30 | 
|ITEM 8.    |  | FINANCIAL INFORMATION                                                            |    |          | 31 | 
|           |  | Consolidated Statements and Other Financial
    Information                      |    |          | 31 | 
|           |  | Significant Changes                                                              |    |          | 31 | 
|           |  | Legal Proceedings                                                                |    |          | 31 | 
|           |  | Dividend Information                                                             |    |          | 31 | 
|ITEM 9.    |  | THE OFFER AND LISTING                                                            |    |          | 32 | 
|           |  | Markets and Price History                                                        |    |          | 32 | 
|ITEM 10.   |  | ADDITIONAL INFORMATION                                                           |    |          | 33 | 
|           |  | Articles and Bylaws                                                              |    |          | 33 | 
|           |  | Material Contracts                                                               |    |          | 34 | 
|           |  | Exchange Controls                                                                |    |          | 35 | 
|           |  | Taxation                                                                         |    |          | 36 | 
|           |  | Documents on Display                                                             |    |          | 39 | 
|ITEM 11.   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK                   |    |          | 40 | 
|           |  | Derivative Instruments                                                           |    |          | 40 | 
|           |  | Interest Rate Risk                                                               |    |          | 41 | 
|           |  | Foreign Currency Exchange Rate Risk                                              |    |          | 42 | 
|           |  | Equity Price Risk                                                                |    |          | 43 | 
|ITEM 12.   |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES                       |    |          | 43 | 
|PART II   
|ITEM 13.   |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                  |    |          | 44 | 
|ITEM 14.   |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
    HOLDERS AND USE OF PROCEEDS |    |          | 44 | 
|ITEM 15.   |  | CONTROLS AND PROCEDURES                                                          |    |          | 44 | 
|ITEM 16A.  |  | AUDIT COMMITTEE FINANCIAL EXPERT [Reserved]                                      |    |          | 44 | 
|ITEM 16B.  |  | CODE OF ETHICS [Reserved]                                                        |    |          | 44 | 
|ITEM 16C.  |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES [Reserved]                                |    |          | 44 | 
|PART III  
|ITEM 17.   |  | FINANCIAL STATEMENTS                                                             |    |          | 45 | 
|ITEM 18.   |  | FINANCIAL STATEMENTS                                                             |    |          | 45 | 
|ITEM 19.   |  | EXHIBITS                                                                         |    |          | 75 | 
|SIGNATURES |  |                                                                                  | 77 |         

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##### Table of Contents



In this annual report, please note the
following:



| |   |                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | references to we, our,
    us or MFC mean MFC Bancorp Ltd. and its
    subsidiaries, unless the context of the sentence clearly
    suggests otherwise;                                                                                                                                                           
|
| |  | all references to monetary amounts are in
    Canadian dollars, unless otherwise indicated;                                                                                                                                                                                                                               
|
| |  | the information set forth in this annual
    report is as at December 31, 2002, unless an earlier or
    later date is indicated; and                                                                                                                                                                                     
|
| |  | selected financial information has been
    provided in U.S. dollars for informational purposes only
    using an exchange rate of one Canadian dollar being equal to
    U.S.$0.6329, being the Federal Reserve Bank of New York rate of
    conversion for Canadian dollars to U.S. dollars as at
    December 31, 2002.




PART I






|        |                                                          
|------- | ---------------------------------------------------------
|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISERS

Not applicable.






|        |                                            
|------- | -------------------------------------------
|ITEM 2. | OFFER STATISTICS AND EXPECTED
    TIMETABLE

Not applicable.






|        |                
|------- | ---------------
|ITEM 3. | KEY INFORMATION






Cautionary Statement Regarding Forward-Looking
Statements


The statements in this annual report that are not
based on historical facts are called forward-looking
statements within the meaning of the United States
Private Securities Litigation Reform Act of 1995. These
statements appear in a number of different places in this annual
report and can be identified by words such as
estimates, projects,
expects, intends, believes,
plans, or their negatives or other comparable words.
Also look for discussions of strategy that involve risks and
uncertainties. Forward-looking statements include statements
regarding the outlook for our future operations, forecasts of
future costs and expenditures, evaluation of market conditions,
the outcome of legal proceedings, the adequacy of reserves, or
other business plans. You are cautioned that any such
forward-looking statements are not guarantees and may involve
risks and uncertainties. Our actual results may differ
materially from those in the forward-looking statements due to
risks facing us or due to actual facts differing from the
assumptions underlying our predictions. Some of these risks and
assumptions are set out under Risk Factors below and
include, but are not limited to:



| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | transaction risks;                                                                
|
| |  | credit and counterparty risks;                                                    
|
| |  | market risks;                                                                     
|
| |  | competition risks;                                                                
|
| |  | legal and regulatory risks;                                                       
|
| |  | employment risks;                                                                 
|
| |  | general economic and business conditions,
    including changes in interest rates;
|
| |  | prices and other economic conditions;                                             
|
| |  | natural phenomena;                                                                
|
| |  | actions by government authorities, including
    changes in government regulation;
|
| |  | uncertainties associated with legal proceedings;                                  

3



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| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | technological development;                                             
|
| |  | future decisions by management in response to
    changing conditions; 
|
| |  | our ability to execute prospective business
    plans; and             
|
| |  | misjudgments in the course of preparing
    forward-looking statements.

We advise you that these cautionary remarks
expressly qualify in their entirety all forward-looking
statements attributable to us or persons acting on our behalf.
Unless required by law, we do not assume any obligation to
update forward-looking statements based on unanticipated events
or changes in expectations. However, you should carefully review
the reports and documents we file from time to time with the
U.S. Securities and Exchange Commission (the
SEC), including our current reports on Form 6-K.




Exchange Rates

The following table sets out exchange rates,
based on the noon buying rates in New York City for cable
transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York (the Noon
Buying Rate), for the conversion of Canadian dollars into
U.S. dollars in effect at the end of the following periods,
the average exchange rates during such periods (based on daily
Noon Buying Rates) and the range of high and low exchange rates
for such periods:

|                   |  |                          |        |      |  |      |        |      |  |      |        |  |  |  |        |  |  |  |        | 
|------------------ |  | ------------------------ | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ |  |  |  | ------ | 
|                   |  |                         
|                   |  | Years Ended December 31,
|                   |  |                         
|                   |  | 2002                     |        | 2001 |  | 2000 |        | 1999 |  | 1998
|                   |  |                          |        |      |  |      |        |      |  |     
|End of period      |  |                          | 0.6329 |      |  |      | 0.6279 |      |  |      | 0.6666 |  |  |  | 0.6925 |  |  |  | 0.6504 | 
|High for period    |  |                          | 0.6619 |      |  |      | 0.6697 |      |  |      | 0.6984 |  |  |  | 0.6925 |  |  |  | 0.7105 | 
|Low for period     |  |                          | 0.6200 |      |  |      | 0.6241 |      |  |      | 0.6397 |  |  |  | 0.6535 |  |  |  | 0.6341 | 
|Average for period |  |                          | 0.6368 |      |  |      | 0.6457 |      |  |      | 0.6732 |  |  |  | 0.6744 |  |  |  | 0.6714 | 

The following table sets out the high and low
exchange rates, based on the Noon Buying Rate for the conversion
of Canadian dollars into U.S. dollars, for the following
periods:

|                    |  |      |        |     |  |  |        | 
|------------------- |  | ---- | ------ | --- |  |  | ------ | 
|                    |  | High |        | Low
|                    |  |      |        |    
|2002                |  |      |        |     |  |  |        | 
|October             |  |      | 0.6407 |     |  |  | 0.6272 | 
|November            |  |      | 0.6440 |     |  |  | 0.6288 | 
|December            |  |      | 0.6461 |     |  |  | 0.6332 | 
|                   
|2003                |  |      |        |     |  |  |        | 
|January             |  |      | 0.6570 |     |  |  | 0.6349 | 
|February            |  |      | 0.6720 |     |  |  | 0.6530 | 
|March               |  |      | 0.6822 |     |  |  | 0.6709 | 
|April 1 to April 16 |  |      | 0.6889 |     |  |  | 0.6737 | 

On April 16, 2003, the Noon Buying Rate for
the conversion of Canadian dollars into U.S. dollars was
U.S.$0.6867 per Canadian dollar.

The presentation of selected information in our
financial statements in U.S. dollars is for informational
purposes only and information in our financial statements is
translated to U.S. dollars for convenience using year-end
exchange rates, as required by Regulation S-X.

4



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##### Table of Contents






Selected Financial Data

The following table summarizes selected
consolidated financial data for MFC prepared in accordance with
Canadian generally accepted accounting principles
(Canadian GAAP). Additional information is presented
to show the difference which would result from the application
of United States generally accepted accounting principles
(U.S. GAAP) to MFCs financial
information. For a description of the differences between
Canadian GAAP and U.S. GAAP, see Note 18 to our
consolidated financial statements included in this annual
report. The information in the table was extracted from the more
detailed consolidated financial statements and related notes
included in this annual report and should be read in conjunction
with such financial statements and with the information
appearing under the heading, Item 5. Operating and
Financial Review and Prospects.



| |              
| | -------------
| | Canadian GAAP

|                                                                                      |         |                                              |         |      |  |      |         |      |  |      |         |      |  |   |         |      |  |   |         |      | 
|------------------------------------------------------------------------------------- | ------- | -------------------------------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                                                      |         |                                             
|                                                                                      |         | Years Ended December 31,                    
|                                                                                      |         |                                             
|                                                                                      |         | 2002                                         |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                                                                                      |         |                                              |         |      |  |      |         |      |  |     
|                                                                                      |         |                                             
|                                                                                      |         | (in thousands, other than per share amounts)
|Revenues                                                                              |         | $                                            | 284,339 |      |  | $    | 214,246 |      |  | $    | 156,220 |      |  | $ | 125,526 |      |  | $ | 123,310 |     
|Income from continuing operations                                                     |         |                                              | 50,755  |      |  |      | 45,288  |      |  |      | 39,163  |      |  |   | 36,328  |      |  |   | 30,235  |     
|Income from continuing operations per share                                           |         |                                              |         |      |  |      |         |      |  |      |         |      |  |   |         |     
|                                                                                      | Basic   |                                              |         | 3.93 |  |      |         | 3.59 |  |      |         | 3.24 |  |   |         | 3.00 |  |   |         | 2.48 | 
|                                                                                      | Diluted |                                              |         | 3.70 |  |      |         | 3.35 |  |      |         | 3.03 |  |   |         | 2.83 |  |   |         | 2.30 | 
|Net income                                                                            |         |                                              | 50,755  |      |  |      | 45,288  |      |  |      | 39,163  |      |  |   | 31,389  |      |  |   | 30,235  |     
|Net income per share                                                                  |         |                                              |         |      |  |      |         |      |  |      |         |      |  |   |         |      |  |   |         |     
|                                                                                      | Basic   |                                              |         | 3.93 |  |      |         | 3.59 |  |      |         | 3.24 |  |   |         | 2.59 |  |   |         | 2.48 | 
|                                                                                      | Diluted |                                              |         | 3.70 |  |      |         | 3.35 |  |      |         | 3.03 |  |   |         | 2.46 |  |   |         | 2.30 | 
|Total assets                                                                          |         |                                              | 446,574 |      |  |      | 394,639 |      |  |      | 332,063 |      |  |   | 270,107 |      |  |   | 238,109 |     
|Net assets                                                                            |         |                                              | 291,041 |      |  |      | 249,118 |      |  |      | 216,915 |      |  |   | 173,773 |      |  |   | 156,808 |     
|Debt                                                                                  |         |                                              | 68,798  |      |  |      | 98,000  |      |  |      | 35,421  |      |  |   | 30,917  |      |  |   | 40,091  |     
|Shareholders equity                                                                  |         |                                              | 285,290 |      |  |      | 245,997 |      |  |      | 213,134 |      |  |   | 170,811 |      |  |   | 154,396 |     
|Capital stock                                                                         |         |                                              | 70,269  |      |  |      | 76,673  |      |  |      | 65,138  |      |  |   | 65,498  |      |  |   | 65,706  |     
|Cash dividends(1)                                                                     |         |                                              |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   | 369     |     
|Cash dividends per share(1)                                                           |         |                                              |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   | 0.03    |     
|Cash dividends (U.S.$)(1)                                                             |         |                                              |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   | 251     |     
|Cash dividends per share (U.S.$)(1)                                                   |         |                                              |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   | 0.02    |     
|Weighted average common stock outstanding,
    fully diluted (in thousands of shares) |         |                                              | 14,170  |      |  |      | 14,002  |      |  |      | 13,438  |      |  |   | 13,422  |      |  |   | 13,706  |     



---

|    |                             
|--- | ----------------------------
|(1) | Paid on MFCs common shares.

5



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##### Table of Contents





| |          
| | ---------
| | U.S. GAAP

|                                                                                      |         |                                              |         |      |  |      |         |      |  |      |         |      |  |   |         |      |  |   |         |      | 
|------------------------------------------------------------------------------------- | ------- | -------------------------------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                                                      |         |                                             
|                                                                                      |         | Years Ended December 31,                    
|                                                                                      |         |                                             
|                                                                                      |         | 2002                                         |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                                                                                      |         |                                              |         |      |  |      |         |      |  |     
|                                                                                      |         |                                             
|                                                                                      |         | (in thousands, other than per share amounts)
|Revenues                                                                              |         | $                                            | 284,339 |      |  | $    | 212,000 |      |  | $    | 162,694 |      |  | $ | 128,270 |      |  | $ | 118,842 |     
|Income from continuing operations                                                     |         |                                              | 50,755  |      |  |      | 43,211  |      |  |      | 45,637  |      |  |   | 40,313  |      |  |   | 31,922  |     
|Income from continuing operations per share                                           |         |                                              |         |      |  |      |         |      |  |      |         |      |  |   |         |     
|                                                                                      | Basic   |                                              |         | 3.93 |  |      |         | 3.42 |  |      |         | 3.78 |  |   |         | 3.33 |  |   |         | 2.62 | 
|                                                                                      | Diluted |                                              |         | 3.70 |  |      |         | 3.20 |  |      |         | 3.51 |  |   |         | 3.12 |  |   |         | 2.42 | 
|Net income                                                                            |         |                                              | 50,755  |      |  |      | 43,211  |      |  |      | 45,637  |      |  |   | 35,374  |      |  |   | 31,922  |     
|Net income per share                                                                  |         |                                              |         |      |  |      |         |      |  |      |         |      |  |   |         |      |  |   |         |     
|                                                                                      | Basic   |                                              |         | 3.93 |  |      |         | 3.42 |  |      |         | 3.78 |  |   |         | 2.92 |  |   |         | 2.62 | 
|                                                                                      | Diluted |                                              |         | 3.70 |  |      |         | 3.20 |  |      |         | 3.51 |  |   |         | 2.75 |  |   |         | 2.42 | 
|Total assets                                                                          |         |                                              | 445,342 |      |  |      | 391,489 |      |  |      | 336,523 |      |  |   | 265,658 |      |  |   | 229,529 |     
|Net assets                                                                            |         |                                              | 289,809 |      |  |      | 245,968 |      |  |      | 221,375 |      |  |   | 169,325 |      |  |   | 149,381 |     
|Debt                                                                                  |         |                                              | 68,798  |      |  |      | 98,000  |      |  |      | 35,421  |      |  |   | 30,917  |      |  |   | 40,091  |     
|Shareholders equity                                                                  |         |                                              | 284,058 |      |  |      | 242,847 |      |  |      | 217,594 |      |  |   | 166,363 |      |  |   | 146,969 |     
|Capital stock                                                                         |         |                                              | 70,269  |      |  |      | 76,673  |      |  |      | 65,138  |      |  |   | 65,498  |      |  |   | 65,706  |     
|Cash dividends(1)                                                                     |         |                                              |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   | 369     |     
|Cash dividends per share(1)                                                           |         |                                              |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   | 0.03    |     
|Cash dividends (U.S.$)(1)                                                             |         |                                              |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   | 251     |     
|Cash dividends per share (U.S.$)(1)                                                   |         |                                              |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   | 0.02    |     
|Weighted average common stock outstanding,
    fully diluted (in thousands of shares) |         |                                              | 14,170  |      |  |      | 14,002  |      |  |      | 13,438  |      |  |   | 13,422  |      |  |   | 13,706  |     



---

|    |                             
|--- | ----------------------------
|(1) | Paid on MFCs common shares.

6



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##### Table of Contents



Risk Factors

Our primary risks are transaction risks, credit
or counterparty risks and market risks. In addition, we have
been and may continue to be affected by many other factors,
including, but not limited to: (i) economic and market
conditions, including the liquidity of capital markets;
(ii) the volatility of market prices, rates and indices;
(iii) the timing and volume of market activity;
(iv) competition; (v) legal and regulatory risks;
(vi) inflation; (vii) the cost of capital, including
interest rates; (viii) political events, including
legislative, regulatory and other developments;
(ix) competitive forces, including our ability to attract
and retain personnel; (x) support systems; and
(xi) investor sentiment. In determining whether to make an
investment in our shares, you should consider carefully all of
the information set forth in this annual report and, in
particular, the following risk factors:

Transaction Risks

We
are subject to transaction risks.

We manage transaction risks through allocating
and monitoring our capital investments, only underwriting
securities in circumstances where the risk to our capital is
minimal, carefully screening clients and transactions, and
engaging qualified personnel to manage transactions.
Nevertheless, transaction risks can arise from, among other
things, our banking, finance and advisory services, trading and
proprietary investing activities and relate to the risks of the
proposed transaction. These risks include market and credit
risks associated with our role in providing advisory services.

We often make investments in highly unstructured
situations and in companies undergoing severe financial
distress. Such investments often involve severe time
constraints. These investments may expose us to significant
transaction risks. An unsuccessful investment may result in the
total loss of such an investment and may have a material adverse
effect on our business, results of operations, financial
condition and cash flow.



| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | We may face a lack of suitable acquisition or
    merger or other proprietary investment candidates.

In order to grow our business, we may seek to
acquire or merge with or invest or make proprietary investments
in new companies or opportunities. Our failure to make
acquisitions or investments may limit our growth. In pursuing
acquisition and investment opportunities, we may be in
competition with other companies having similar growth and
investment strategies. Competition for these acquisitions or
investment targets could result in increased acquisition or
investment prices and a diminished pool of businesses, services
or products available for acquisition or investment.



| |                             
| | ----------------------------
| | Credit or Counterparty Risks



| |                                                               
| | --------------------------------------------------------------
| | Counterparties or others may default on their
    obligations.

We manage credit risk on an individual
transaction, counterparty level and on a portfolio basis. Credit
limits for clients and counterparties are established by our
credit officers and management with knowledge of the
clients creditworthiness. In addition, we have policies
and limitations with respect to our securities lending
practices. Our management also reviews and monitors exposure
concentrations at a portfolio level. Nevertheless, we are
exposed to the risk that parties owing us money, securities or
other assets will not perform their obligations. These parties
include our trading counterparties, clients, clearing agents,
exchanges and other financial intermediaries, as well as issuers
whose securities we hold. These parties may default on their
obligations to us due to bankruptcy, lack of liquidity,
operational failure or other reasons. These counterparty
obligations may arise, for example, from placing money market
deposits, the extension of credit in trading and investment
activities, and participation in payment, securities and
commodity trade transactions on our behalf and as an agent on
behalf of our clients.



| |                                                                      
| | ---------------------------------------------------------------------
| | We may not obtain sufficient or accurate
    credit risk information.

To reduce credit risk, we only place money market
deposits with banks selected for their financial strength and
reliability. Further, we otherwise attempt only to deal with
creditworthy counterparties and

7



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##### Table of Contents



obtain collateral where appropriate. However,
although we regularly review our credit exposure to specific
clients and counterparties and to specific industries, countries
and regions that we believe may present credit concerns, default
risk may arise from events or circumstances that are difficult
to detect, such as fraud. We may also fail to receive full
information with respect to the trading risks of a counterparty.
In addition, in cases where we have extended credit against
collateral, we may find that we are undersecured, for example,
as a result of sudden declines in market values that reduce the
value of collateral.




| |             
| | ------------
| | Market Risks

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



| |                                                     
| | ----------------------------------------------------
| | We are exposed to the risk of a market
    downturn.

As a merchant banking company, our business is
materially affected by conditions in the financial markets and
economic conditions generally. In the event of a market
downturn, our business, results of operations and financial
condition could be adversely affected. In addition, you cannot
be assured that an active public market for our securities will
continue.

A market downturn could lead to a decline in the
number and size of the transactions that we execute for our
clients, including transactions in which we provide financial
advisory and other services, and to a corresponding decline in
the revenues we receive from fees.

A downturn in a market could further result in
losses to the extent that we own assets in such market.
Conversely, to the extent that we have sold assets we do not own
(i.e. if we have short positions) in any market, an upturn in
such market could expose us to potentially unlimited losses as
we attempt to cover our short positions by acquiring assets in a
rising market.

Revenues from certain of our proprietary
investments may be significantly affected by changes in prices
for iron ore, cobalt and aluminum. The prices for these
commodities can fluctuate widely as a result of various factors
beyond our control such as supply and demand, exchange rates,
inflation, changes in global economics, and political, social
and other factors. Our ability, therefore, to maintain or
develop revenues or realize upon such investments may be
adversely affected by a sustained material reduction in the
price of such materials.

Even in the absence of a market downturn, we are
exposed to substantial risk of loss due to market volatility.



| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | We are exposed to political, economic, legal,
    operational and other risks as a result of our global
    operations.

In conducting our business in major markets
around the world, we are subject to political, economic, legal,
operational and other risks that are inherent in operating in
other countries. These risks range from difficulties in settling
transactions in emerging markets to possible nationalization,
expropriation, price controls and other restrictive governmental
actions, and terrorism. We also face the risk that exchange
controls or similar restrictions imposed by foreign governmental
authorities may restrict our ability to convert local currency
received or held by us in their countries into Swiss francs,
Canadian dollars, U.S. dollars, Euro or other currencies,
or to take those other currencies out of those countries.



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Fluctuations in interest rates and foreign
    currency exchange rates may affect our results.

Fluctuations in interest rates may affect the
fair value of our financial instruments sensitive to interest
rates. An increase in market interest rates may decrease the
fair value of our fixed interest rate financial instrument
assets and a decrease in market interest rates may decrease the
fair value of our fixed interest rate financial instrument
liabilities, thereby resulting in a reduction in the fair value
of our equity. See Item 11.

8



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##### Table of Contents



Quantitative and Qualitative Disclosures About
Market Risk  Interest Rate Risk for additional
information with respect to our exposure to interest rate risk.


Similarly, fluctuations in foreign currency
exchange rates may affect the fair value of our financial
instruments sensitive to foreign currency exchange rates. Our
reporting currency is the Canadian dollar. We hold financial
instruments primarily denominated in U.S. dollars, Euros
and Swiss francs. A depreciation of such currencies against the
Canadian dollar will decrease the fair value of our financial
instrument assets denominated in such currencies and an
appreciation of such currencies against the Canadian dollar will
increase the fair value of our financial instrument liabilities
denominated in such currencies, thereby resulting in a reduction
in our equity. See Item 11. Quantitative and
Qualitative Disclosures About Market Risk  Foreign
Currency Exchange Rate Risk for additional information
with respect to our exposure to foreign currency exchange rate
risk.



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Our risk management strategies leave us
    exposed to unidentified or unanticipated risks.

We use a variety of instruments and strategies to
manage exposure to various types of risks. For example, we use
derivative foreign exchange contracts to manage our exposure and
our clients exposure to foreign currency exchange rate
risks. If any of the variety of instruments and strategies we
utilize to manage our exposure to various types of risk are not
effective, we may incur losses. Many of our strategies are based
on historical trading patterns and correlations. However, these
strategies may not be fully effective in mitigating our risk
exposure in all market environments or against all types of
risk. Unexpected market developments may affect our risk
management strategies during this time, and unanticipated
developments could impact our risk management strategies in the
future.



| |                                                
| | -----------------------------------------------
| | A rise in inflation may affect our
    results.

We do not believe that inflation has had a
material impact on our revenues or income over the past three
fiscal years. In addition, since our assets to a large extent
are liquid in nature, they are not significantly affected by
inflation. However, increases in inflation could result in
increases in our expenses, which may not be readily recoverable
in the price of services provided to our clients. To the extent
inflation results in rising interest rates and has other adverse
effects on capital markets, it could adversely affect our
business, results of operations and financial condition.



| |                                                            
| | -----------------------------------------------------------
| | Market risks may increase the other risks that
    we face.

In addition to the market risks described above,
market risks could exacerbate the other risks that we face. For
example, if we incur substantial trading losses, our need for
liquidity could rise sharply while our access to liquidity could
be impaired. In addition, in conjunction with a market downturn,
our clients and counterparties could incur substantial losses of
their own, thereby weakening their financial condition and
increasing our credit risk.



| |                                                                        
| | -----------------------------------------------------------------------
| | Our risk management policies and procedures
    may not prevent losses.

We have adopted risk management processes to
facilitate, control and monitor risk taking. Nonetheless, the
policies and procedures we rely on to identify, monitor and
manage risks may not be fully effective. Some of our methods for
managing risks are based upon our observance of historical
market behaviour. We cannot assure you that these methods will
accurately predict future market behaviour. As a result, our
future risk exposure could be significantly greater than the
historical measures indicate.

Other risk management methods that we use depend
upon the evaluation of information regarding markets, clients or
other matters that is publicly available or otherwise accessible
by us. This information may not in all cases be accurate,
complete, up-to-date or properly evaluated. Management of
operational, legal and regulatory risk requires, among other
things, policies and procedures to record properly and verify a
large number of transactions and events, and these policies and
procedures may not be fully effective.

9



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##### Table of Contents



Competition Risks

We
face significant global competition.

We conduct our business in a global environment
that is highly competitive and unpredictable. Many of our
competitors are national or international companies with far
greater resources, capital and access to information than us.
Competition includes firms traditionally engaged in financial
services such as banks, broker-dealers and investment dealers,
along with other companies offering financial services such as
insurance companies, mutual fund groups, merchant banks and
trading and trade finance companies. Increased competition may
lead us to become involved in transactions with more risk. In
addition, many non-bank competitors are not subject to the same
extensive regulations that govern us.

Legal and Regulatory Risks

We
are exposed to legal liability.

We are exposed to legal risks in our business and
the volume and amount of damages claimed in litigation against
financial intermediaries are increasing. These risks include
potential liability under securities or other laws for
materially false or misleading statements made in connection
with securities and other transactions, potential liability for
advice we provide to participants in corporate transactions and
disputes over the terms and conditions of complex trading
arrangements. We also face the possibility that counterparties
in complex or risky trading transactions will claim that we
improperly failed to tell them of the risks involved or that
they were not authorized or permitted to enter into these
transactions with us and that their obligations to us are not
enforceable. During a prolonged market downturn, we would expect
these types of claims to increase. We are also exposed to legal
risks in our proprietary investing activities. We seek to invest
in undervalued businesses or assets often as a result of
financial, legal, regulatory or other distress affecting them.
Investing in distressed businesses and assets can involve us in
complex legal issues relating to priorities, claims and other
rights of stakeholders.

These risks are often difficult to assess or
quantify and their existence and magnitude often remains unknown
for substantial periods of time. We incur significant legal
expenses every year in defending against litigation, and we
expect to continue to do so in the future. See
Item 8. Financial Information  Legal
Proceedings for additional information with respect to our
legal and regulatory proceedings.



| |                                                                
| | ---------------------------------------------------------------
| | Extensive regulation of our business limits
    our activities.

The financial services industry is subject to
extensive regulation. Our banking operations are subject to
various Swiss regulatory requirements, including capital
requirements administered by the Swiss Federal Banking
Commission (the SFBC). The SFBC is our primary
banking regulator and establishes minimum capital requirements
for our banking subsidiary. Our failure to meet minimum capital
requirements can result in mandatory, and possibly additional
discretionary, action by the SFBC that, if undertaken, could
have a direct materially adverse effect on us. Under risk-based
capital adequacy guidelines established by the SFBC, banks in
Switzerland must meet specific capital guidelines that involve
quantitative measures of assets, liabilities and other
off-balance sheet items, as calculated under Swiss regulatory
accounting practices. Our banking operations are required to
file certain reports with the SFBC and we are subject to their
examination. Our banking subsidiary is subject to restrictions
on loans and extensions of credit to, and on certain other types
of transactions with, affiliates.

The requirements imposed by our regulators are
designed to ensure the integrity of the financial markets and to
protect customers and other third parties which deal with us and
are not designed to protect our shareholders. Consequently,
these regulations often serve to limit our activities, including
through net capital, customer protection and market conduct
requirements.

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Employment Risks



| |                                                               
| | --------------------------------------------------------------
| | We are dependent on the services of certain
    key employees.

Our future success depends, in significant part,
upon the continued service and performance of our senior
management and other key employees. Losing the services of some
or all of these individuals could impair our ability to manage
our company, obtain new or maintain existing client engagements
and complete new proprietary investments.

Enforcement Risks

You
may be unable to enforce civil liabilities.

The enforcement of civil liabilities by investors
under applicable U.S. federal and state securities laws
will be adversely affected because we are organized under the
laws of the Yukon Territory, Canada, most or all of our officers
or directors are not residents of the U.S., and substantially
all of our assets are located outside of the U.S.

As a result, it may be difficult or impossible
for U.S. investors to effect service of process upon us or
our officers or directors within the United States. It may also
be difficult to realize against us or them, in the United
States, upon judgments of U.S. courts for civil liabilities
under applicable U.S. federal and state securities laws.
Courts in Canada or elsewhere may not enforce:
(i) judgments of U.S. courts obtained in actions
against us or our officers or directors predicated upon the
civil liability provisions of applicable U.S. federal and
state securities laws; and (ii) in original actions,
liabilities against us or our officers or directors predicated
upon such laws.



| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | You may have trouble enforcing
    U.S. bankruptcy laws and other laws in Canada or
    elsewhere.

We are organized under the laws of the Yukon
Territory, Canada and our principal operating assets are located
outside of the United States. Under bankruptcy laws in the
United States, courts typically have jurisdiction over a
debtors property, wherever it is located, including
property situated in other countries. Courts outside of the
United States may not recognize the U.S. bankruptcy
courts jurisdiction. Accordingly, you may have trouble
administering a U.S. bankruptcy case involving a Canadian
debtor with property located outside of the United States. Any
orders or judgments of a bankruptcy court in the United States
may not be enforceable.

Environmental Risks



| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | Certain of our proprietary investments are
    subject to stringent environmental standards.

We have invested, and may further invest, in
operations that are subject to extensive environmental laws and
regulations. These laws and regulations impose stringent
standards on us regarding, among other things, air emissions,
effluent discharges and remediation of environmental
contamination. We may incur substantial costs to comply with
current requirements or new environmental laws that might be
adopted. In addition, we may discover currently unknown
environmental problems or conditions in the future and may incur
substantial costs in correcting such problems or conditions.

Other Risks



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Certain factors may inhibit a takeover that
    our shareholders may consider favourable.

Certain provisions of our charter documents and
the corporate legislation which governs us may discourage, delay
or prevent a change of control or changes in our management that
shareholders may consider favourable. Such provisions include
authorizing the issuance by our board of directors of preferred
stock in series, providing for a classified board of directors
with staggered, three-year terms and limiting the persons who
may call special meetings of shareholders. We currently have a
shareholder protection rights plan designed to protect us and
our shareholders from unfair, abusive or coercive acquisition
tactics and intend to

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##### Table of Contents



reconfirm same upon its expiration. For more
information, see Item 10. Additional
Information  Articles and Bylaws.


In addition, the Investment Canada Act
(the ICA) imposes limitations on the rights of
non-Canadians to acquire our common shares. For more
information, see Item 10. Additional
Information  Exchange Controls.

If a change of control or change in management is
delayed or prevented, the market price of our common stock could
decline.

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##### Table of Contents






ITEM 4.     INFORMATION ON THE
COMPANY






History and Development of the
Company


MFC is a corporation organized under the laws of
the Yukon Territory in Canada. We were originally incorporated
in June 1951 by letters patent. We were continued under the
Canada Business Corporations Act in March 1980 and under
the Business Corporations Act (Yukon) in August 1996. Our
name was changed to MFC Bancorp Ltd. in February
1997. Our registered office is located at Suite 300, 204
Black Street, Whitehorse, Yukon Y1A 2M9 and we have an
office located at Floor 21, Millennium Tower, Handelskai 94-96,
A-1200, Vienna, Austria (Tel: 43 1 240 250).




Overview

We are an international merchant banking company.
Merchant banking encompasses a broad spectrum of activities
related to the integrated combination of banking, trading and
financing commercial trade and proprietary investing.

Our merchant banking activities provide
specialized banking and corporate finance services and advise
clients on corporate strategy and structure, including mergers
and acquisitions and capital raising. They also include
proprietary trading in commodities and natural resources and
proprietary investing of our own capital in enterprises to
realize long-term or trading gains. Such investing is generally
in businesses or assets whose intrinsic value is not properly
reflected in their share or other price, often as a result of
financial or other distress affecting them. Such proprietary
investing is generally not passive and we seek investments where
our financial expertise and management can add or unlock value.
Proprietary investments are generated and made as part of our
overall merchant banking activities and are realized upon over
time.

We conduct our merchant banking business in a
highly integrated and coordinated manner. This permits us to
utilize a total integrated approach with our business partners
and as we pursue opportunities. Such an integrated approach
permits substantial cross-selling opportunities and broadens the
kind and scope of business conducted. Having multiple revenue
sources provides us with substantial flexibility in structuring
business relationships, revenues and transactions. As a result,
we are able to generate higher revenues from particular business
partners or opportunities than would otherwise be the case.
Through our fully integrated business approach, our banking and
finance advisory services often lead to commodity and natural
resources trading with clients and vice versa. Both such
activities often result in proprietary investments wherein we
utilize our own capital to help restructure businesses, acquire
interests therein or refinance obligations. Further, our
proprietary investment strategy is enhanced by our trading and
corporate finance capabilities.

Our merchant banking business generates revenues
through fees, interest income, trading revenue and realizations
on our proprietary investments. We earn advisory and service
fees by providing banking and financial advice to clients. We
earn interest income on our own capital. Trading revenue is
earned both from our commodities and natural resources trading
and securities trading. Realizations on proprietary investments
are generated through sales, equity and debt restructuring or
other forms of divestment.

We currently employ approximately 206 people and
our operations are primarily conducted in Europe and North
America. The following is a summary of our revenues by
geographic region for the three most recently completed fiscal
years:

|              |  |                |         |      |  |      |         |  |  |   |         | 
|------------- |  | -------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|              |  | 2002           |         | 2001 |  | 2000
|              |  |                |         |      |  |     
|              |  |               
|              |  | (in thousands)
|Europe        |  | $              | 254,564 |      |  | $    | 192,714 |  |  | $ | 136,671 | 
|Canada        |  |                | 26,006  |      |  |      | 17,183  |  |  |   | 10,459  | 
|United States |  |                | 3,559   |      |  |      | 4,349   |  |  |   | 9,090   | 
|Other         |  |                | 210     |      |  |      |        |  |  |   |        | 
|              |  |                |         |      |  |      |         |  |  |   |         | 
|              |  | $              | 284,339 |      |  | $    | 214,246 |  |  | $ | 156,220 | 
|              |  |                |         |      |  |      |         |  |  |   |         | 

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Description of Merchant Banking
Business

Our merchant banking operations provide
innovative finance and advisory services for corporate finance
transactions and capital raising. We counsel clients on business
and financing strategy and the execution of transactions that
advance their strategic goals, including mergers, acquisitions,
reorganizations and divestitures, and assist in structuring and
raising capital. We focus on meeting the financial needs of
small to mid-sized companies and other business enterprises
primarily in Europe and North America. We believe that many of
these clients, particularly in Europe, are underserviced by the
large global investment banks and financial service providers.
We specialize in advising and structuring business enterprises
involved in unstructured and novel situations where a strong
financial partner is needed and traditional, off-the-shelf
solutions are not workable. In addition, we generate fee income
by acting as an arranger and/or provider of bridge or interim
financing to business enterprises pending reorganization, prior
to their going public, as a complement to our proprietary
commodities and natural resources trading or investment
strategy. In furtherance of such banking and advisory services,
we often advise and help restructure enterprises that are
undergoing financial distress or have, or are near, debt
defaults.

Our experience and operating structure permit us
to respond more rapidly to our clients needs than many of
our larger competitors. These traits are important to small and
mid-sized business enterprises, many of which do not have large
internal corporate finance departments to handle their capital
requirements. We develop a partnership approach to assist
clients. This often permits us to develop multiple revenue
sources from the same client. For example, in addition to
providing banking and advisory services, we may purchase and
sell a clients products or commit our own capital to make
a proprietary investment in its business or capital structure.

These banking, finance and advisory activities
are conducted through our wholly-owned subsidiary, MFC Merchant
Bank S.A. (MFC Bank), a licensed full-service Swiss
bank. In 2002, our banking operations were relocated from Geneva
to Herisau, Switzerland. Since 1999, our banking operations have
outsourced and placed substantially all of their client deposits
with other major financial institutions on a fiduciary or trust
basis and earn a fee on the amount of money received from the
counterparty. This is in contrast to most North American banks,
which generate revenue from the spread between their cost of
funds and the credit received. These fiduciary or trust deposits
are off-balance sheet items and permit us to generate revenues
without committing or tying up significant amounts of capital.
These arrangements also let us maintain key client relationships
and mandates where we can provide value-added advisory services
and yet offer clients the capability and economies of scale of a
large banking institution.

Our banking operations are subject to various
Swiss regulatory requirements, including capital requirements
administered by the SFBC. The SFBC is our primary banking
regulator and establishes minimum capital and other requirements
for MFC Bank. Our failure to meet minimum capital and other
requirements can result in mandatory, and possibly additional
discretionary, action by the SFBC that, if undertaken, could
have a direct material effect on us. Under risk-based capital
adequacy guidelines established by the SFBC, banks in
Switzerland must meet specific capital guidelines that involve
quantitative measures of assets, liabilities and other
off-balance sheet items, as calculated under Swiss regulatory
accounting practices. Our banking operations are required to
file certain reports with the SFBC and we are subject to their
examination. MFC Bank is subject to restrictions on loans and
extensions of credit to, and on certain other types of
transactions with, affiliates. We believe that the capital of
our banking operations is sufficient for its current and
reasonably foreseeable operations.

Our merchant banking operations trade,
principally for our own account, commodities and natural
resources. Such activities include purchasing, selling and
product swaps of such items. To a lesser extent, we also act as
a trading agent for clients. Our trading operations currently
employ approximately 77 people. Our trading activities
often utilize innovative and sophisticated trading strategies
and structures. We currently trade with commodity and other
producers who are unable to effectively realize sales because of
credit, insurance or currency issues affecting them or their
principal customers. Generally we purchase the underlying
commodity and resell it to an end buyer or further trade it for
another commodity which will subsequently be sold. As a result
of our relative financial strength, ability to arrange credit
(including letters of credit) and

14



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insurance, we are often able to facilitate
purchases, sales and trades of commodities with more efficient
and effective execution than many producers and customers could
on their own. Commodity producers and end customers often work
with us to better manage their internal supply, distribution
risk, currency and capital requirements. In such trading
activities, we try to capture various trading, financing and
currency spreads. Through our trading activities, we have been
able to develop ongoing relationships with commodity producers,
end customers and trade financiers and insurers that are an
important part of our operations.


We conduct our commodity and natural resources
trading primarily through our subsidiary, MFC Commodities GmbH
(MFC Commodities), which is based in Vienna,
Austria. We have historically focused our trading activities
primarily in Europe. We believe that the trade, finance and
insurance infrastructure necessary to support the purchase and
sale of commodities and natural resources in Central and Eastern
Europe is not as developed as in Western Europe and North
America. Our central location in Vienna and our trading
professionals permit us to effectively pursue trading
opportunities in Europe and, in particular, participate in trade
flows between Western and Central Europe.

We intend to increase the volumes, products
traded and the geographic regions in which we operate. In 2003,
our commodity and natural resources trading operations will
include the Far East and Southern Asia. As we expand our trading
operations, we often seek to acquire interests or establish
relationships with commodity producers to realize upon potential
synergies. Such interests can be acquired through purchases of,
or investments in, commodity producers, or through contractual
arrangements with them, including off-take agreements. Such
investments broadened our trading line to include aluminum foil
and, when markets improve, cobalt. The investments we make in
commodity producers are part of our proprietary investing
strategy.

Our merchant banking activities include making
proprietary investments through investing our own capital and
utilizing our expertise to capture investment opportunities. We
seek to invest in businesses or assets whose intrinsic value is
not properly reflected in their share or other price. Often such
investments are in companies or assets that are under financial,
legal or regulatory distress and our services include resolving
such distress. Our investing takes many forms and can include
acquiring entire businesses or portions thereof, investing in
equity, investing in the existing indebtedness (secured and
unsecured) of a business or in new equity or debt issues. Our
investing is generally not passive and we invest where we
believe our expertise in financial restructuring and management
and complementary trading and corporate finance capabilities can
add or unlock value. Our investing in distressed businesses
and/or assets can result in complex and intricate legal issues
relating to priorities, claims and other rights of stakeholders.
Such issues can result in our being involved in legal and other
claims as part of our overall proprietary investment strategy.
Our proprietary investments are often made as a part of, or
complementary to, our banking, advisory and commodity and
natural resources trading activities.

We invest globally and our objective is to
maximize total return measured through both long-term
appreciation and recognized gains either through sales or other
forms of divestment. We realize upon our portfolio of
proprietary investments from time to time based upon
managements view of the value of the investment, the form
and structure of divestment, timing and our overall capital
requirements.

One of our key proprietary investments is an
indirect interest in a mineral royalty (the royalty
interest) in the Wabush Iron Ore Mine (the Wabush
Mine) located in the Province of Newfoundland, Canada. It
has provided an uninterrupted source of fairly predictable
revenue for over 30 years, which we have used to finance
other proprietary investments. The royalty interest consists of
a mining sub-lease of the lands upon which the Wabush Mine is
situated that commenced in 1956 and expires in 2055. Pursuant to
the terms of the mining sub-lease, revenues from the royalty
interest are based upon the price levels for iron ore and the
amount of iron ore shipped from the Wabush Mine in a particular
period, subject to a minimum annual royalty amount of
$3.25 million. The mining sub-lease does not provide for
renewal. For more information, see Property, Plants and
Equipment below.

Other proprietary investments include an indirect
interest in a portfolio of real estate assets which are
primarily located in the State of Washington, U.S.A. We are
conducting pre-development work relating to infrastructure,
rezoning, subdivision and permitting on a substantial portion of
the properties to the extent

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necessary to protect or enhance their value. We
intend to divest or otherwise monetize these real estate assets
and redeploy the proceeds in our merchant banking activities.


To complement our commodities and natural
resources trading, in 2002, as part of our overall investment
strategy, we made proprietary investments in two commodity
producers to capture potential synergies through distributing
and trading their end products.

In August 2002, we acquired approximately 85% of
the issued and outstanding shares and certain indebtedness of
Banff Resources Ltd. (Banff) for nominal
consideration and the provision of a contingent royalty interest
to the vendor in the future cobalt production of the cobalt
processing plant operated by Kasese Cobalt Company Limited
(Kasese), a 75% owned subsidiary of Banff, up to a
maximum of approximately U.S.$10.0 million. The balance of
the shares of Kasese are owned by the Ugandan government. Kasese
owns and operates a cobalt processing plant located in Southwest
Uganda. As part of our acquisition of Banff, the cobalt
processing plant has been put on a care and maintenance program
because of the current weakness in cobalt markets. We expect to
recommence processing cobalt at the plant when cobalt markets
improve as part of our realization of such investment and we
intend to handle the sales and distribution of such cobalt
production. In the interim, we are selling the hydro-electricity
produced by the plants dedicated 9 megawatt
hydro-electric power plant. For more information, see
Property, Plants and Equipment below and
Item 10. Additional Information  Material
Contracts.

In October 2002, we leased the operations of an
aluminum rolling mill located in Merseburg, Germany. The mill
produces aluminum foil and has an annual production capacity of
approximately 9,000 tonnes. The lease commenced in October 2002
and runs until September 2010. We can terminate the lease at our
option after September 2007. Our lease payments amount to
21,500 per month
including a flat rate for additional costs. We have an option to
acquire the property and fixed assets subject to the lease for a
purchase price of
3.4 million
which option to purchase expires in September 2007. We are
currently handling the sales and distribution of the mills
aluminum foil. For more information about the mill, see
Property, Plants and Equipment below.

In July 2002, we acquired all of the outstanding
minority interest of our 53% owned subsidiary, Trimble Resources
Corporation (Trimble), in consideration of 25,071 of
our common shares and approximately $205,000 in cash. In
December 2002, we restructured Trimbles outstanding
indebtedness of approximately $16.5 million in
consideration for approximately $3.3 million of newly
issued indebtedness guaranteed by us. We initially acquired our
53% interest in Trimble in October 2001, for approximately
$1.0 million. For more information, see Item 10.
Additional Information  Material Contracts.

In August 2002, we acquired approximately 93% of
the outstanding shares of Euro Trade & Forfaiting, Inc.
(Euro Trade) for approximately $42.9 million.
Euro Trade is engaged primarily in merchant banking in Europe.

In July 2002, we sold our proprietary investment
in an oil joint venture for proceeds of approximately
$25.9 million. For more information, see
Item 10. Additional Information  Material
Contracts.

In August 2002, we divested our investment in
Mymetics Corporation (Mymetics) through a stock
dividend of 0.95 common shares of Mymetics for each common share
of MFC held by shareholders of record as of August 13,
2002. Approximately 12,206,957 Mymetics shares were distributed
to MFC shareholders under the dividend. As a result of the
dividend, MFC shareholders became direct shareholders of
Mymetics. Mymetics is an international biotechnology company
focused on developing tools and techniques to disarm
retroviruses.

We intend to increase our assets and earnings by
expanding our merchant banking operations internationally
through both internal growth and acquisitions. We expect to grow
internally by expanding our finance and advisory services and
increasing our commodity and natural resources trading
activities. Growth through acquisitions will continue to focus
on undervalued assets that may be complementary to our other
operations and where our financial expertise and management can
add or unlock value.

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Competition

We conduct our business in a global environment
that is highly competitive and unpredictable. We encounter
intense competition in all aspects of our business and compete
directly with other financial services companies, brokerage
firms, investment banks, merchant banks, trading houses and
other investment managers. We face competition in Switzerland
from other banks, asset managers and a range of non-bank
financial institutions and internationally from investment banks
and securities dealers. Many of our competitors are national or
international companies with far greater resources, capital and
access to information than us. As a result, we may become
involved in transactions with more risk. For more information,
see Item 3. Key Information  Risk
Factors.

Organizational Structure

Our significant subsidiaries, their jurisdictions
of organization and our shareholdings are as follows:

|                                         |  |                               |                        |                 |  |  |      | 
|---------------------------------------- |  | ----------------------------- | ---------------------- | --------------- |  |  | ---- | 
|                                         |  | Jurisdiction of               |                        | Shareholding at
|Name of Subsidiary                       |  | Incorporation or Organization |                        | April 16, 2003 
|                                         |  |                               |                        |                
|MFC Merchant Bank S.A.                   |  |                               | Switzerland            |                 |  |  | 100% | 
|TriMaine Holdings, Inc.                  |  |                               | U.S.A.                 |                 |  |  | 83%  | 
|Constitution Insurance Company of Canada |  |                               | Canada                 |                 |  |  | 100% | 
|Drummond Financial Corporation           |  |                               | U.S.A.                 |                 |  |  | 96%  | 
|Trimble Resources Corporation            |  |                               | Turks & Caicos Islands |                 |  |  | 100% | 
|MFC Commodities GmbH                     |  |                               | Austria                |                 |  |  | 95%  | 
|Eurotrade & Forfaiting Inc.              |  |                               | U.S.A.                 |                 |  |  | 93%  | 
|MFC Aluminiumfolie Merseburg GmbH        |  |                               | Germany                |                 |  |  | 100% | 
|Kasese Cobalt Company Limited(1)         |  |                               | Uganda                 |                 |  |  | 75%  | 



---

|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(1) | Our interest in Kasese is held through Banff, our
    85% owned subsidiary.

Property, Plants and Equipment

Our main offices are located in Vienna, Austria,
Herisau, Switzerland and Berlin, Germany. All of our premises
are leased.

We indirectly participate in a royalty interest.
The royalty interest consists of a mining sub-lease of the lands
upon which the Wabush Mine is situated that commenced in 1956
and expires in 2055. The lessor is Knoll Lake Minerals Limited
(Knoll Lake), which holds a mining lease from the
Province of Newfoundland, Canada. The lease requires the payment
of royalties to Knoll Lake of $0.22 per ton on shipments of iron
ore from the Wabush Mine. Iron ore is shipped from the Wabush
Mine to Pointe Noire, Quebec, Canada, where it is pelletized. In
2002, 2001 and 2000, 4.5 million, 4.6 million and
5.9 million tons of iron ore, respectively, were shipped
from the Wabush Mine.

The Wabush Mine is operated by an unincorporated
joint venture consisting of Wabush Iron Company Limited
(U.S.A.), Steel Company of Canada Limited (Canada) and Dominion
Foundries & Steel Limited (Canada) (collectively, the
Consortium), which pays royalties to the holder of
the royalty interest based upon the amount of iron ore shipped
from the Wabush Mine. Pursuant to the terms of the mining
sub-lease, this royalty payment by the Consortium is not to be
less than $3.25 million per annum until the expiry of the
mining sub-lease in 2055. In 1987, the royalty rate specified in
the base price was amended to require a base royalty rate of
$1.685 per ton with escalations as defined by agreement. Iron
ore is typically sold either as a concentrate, whereby the iron
ore is in granular form, or as a pellet, whereby iron ore
concentrate has been mixed with a binding agent, formed into a
pellet and then fired in a furnace. Iron ore pellets can be
charged directly into blast furnaces without further processing
and are primarily used to produce pig iron which is subsequently
transformed into steel. As such, the demand and, consequently,
the pricing of iron ore is dependent upon the raw material
requirements of integrated steel producers. Demand for blast
furnace steel is in turn cyclical in nature and is influenced
by, among other things, the level of general economic activity.

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Although no assurance as to the future production
levels can be provided, since the operator of the Wabush Mine is
owned by the Consortium of steel producers, production from the
mine has been generally maintained at relatively consistent
levels.


We also indirectly own approximately
47 acres of undeveloped real property which is annexed to
the City of Gig Harbor, Washington, U.S.A. Of the total acreage,
29 acres are zoned for medium density residential use and
18 acres are zoned for business park/professional office
use. We may develop all or part of the land through
partnerships, joint ventures or other economic associations with
local developers. Our current involvement with the property is
limited to pre-development work, including infrastructure
(roads, sewer and water services), preliminary permits, market
studies, feasibility studies and related activities. All
utilities are available to the property and the City of Gig
Harbor has completed work on an extension of a street through
the property.

We also indirectly, through Banff, hold a 75%
interest in the cobalt processing plant in Kasese, Uganda, which
extracts cobalt from an existing cobalt concentrate stockpile.
The cobalt concentrate stockpile contained, as at May 2001,
approximately 593,616 tonnes of material with an average grade
of 1.39% cobalt. Kasese also has an option to acquire 65% of the
tailings owned by Kilembe Mines Limited, comprising
5.5 million tonnes of material averaging 0.114% cobalt. The
cobalt processing plant has a production capacity of
720 tonnes of cobalt per annum with a product quality of
99.9% cobalt in crushed cobalt cathode form. Kaseses
dedicated hydro-electric power station comprises three
hydro-electric generation units with a capacity of
9 megawatts. Power is also available on an as needed basis
from the Ugandan Electricity Boards national grid. Backup
power is provided by four 1 megawatt diesel generators
located at the plant. The plant recovers cobalt metal from
stockpiles of cobalt concentrate using a combination of
bioleaching, solvent extraction and electro-winning. Site
construction of the plant commenced in November 1997 and was
completed on July 1, 1999. Plant commissioning ran into
various difficulties which continued from completion until
June 30, 2001. Accordingly, July 1, 2001 represented
the start of commercial operations. In connection with our
acquisition of Banff, the plant was placed into a care and
maintenance program under which all cobalt production ceased by
September 2002 as a result of weak cobalt markets. The plant is
maintained in such a condition so as to enable it to resume
production as soon as the price of cobalt reaches an
economically feasible level. In its current state, the plant
employs 55 people.

We lease the equipment, operations and underlying
real property of an aluminum rolling mill located in Merseburg,
Germany. The mill manufactures and sells aluminum foil with
approximately 65% of its customer base being located within
Germany and the remaining 35% located in the rest of Europe. For
the last two and one-half months of 2002, the net sales of the
mill were approximately
4.5 million.
The raw materials needed for the production of aluminum foil at
the mill are obtained from German suppliers. Aluminum foil is a
very thin sheet of rolled aluminum supplied in its pure form or
in a variety of alloys and tempers which give a wide choice of
tensile properties. The thickness of foils ranges from 0.0065mm
to 0.2mm. Material thicker than 0.2mm is defined as sheet or
strip. Aluminum foils comprise 75% of aluminum processing and
the market for aluminum foil and strip in Germany has grown over
the last six years at an average rate of approximately 3.5%. The
growth is driven by an increased demand for packaging materials,
particularly in the food industry. Due to a special mix of
packaging demands, aluminum foil has been an essential material
in the packaging and distribution of dairy products, as well as
an efficient way to store liquid food over long periods. The
aluminum foil industry is largely structured with companies that
have annual production capacities in excess of 50,000 tonnes.
Our processing plant, with an annual production capacity of
9,000 tonnes, occupies a niche position characterized by high
flexibility in terms of small volumes. Our mill currently
employs approximately 42 persons working in three shifts. Five
work in machine maintenance, 29 in production, three in sales
and five in administration.

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|        |                                                 
|------- | ------------------------------------------------
|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND
    PROSPECTS

The following discussion and analysis of our
financial condition and results of operations for the three
years ended December 31, 2002 should be read in conjunction
with our consolidated financial statements and related notes
included in this annual report. Our financial statements
included in this annual report were prepared in accordance with
Canadian GAAP. For a reconciliation of our financial statements
included in this annual report to U.S. GAAP, see
Note 18 to the financial statements. We have made certain
reclassifications to the prior periods financial
statements to conform to the current periods presentation.




Operating Results

We are a highly integrated international
financial services company that focuses on merchant banking. We
provide specialized banking and corporate finance services
internationally. These activities are primarily conducted
through our wholly-owned subsidiary, MFC Bank. Our merchant
banking activities include a European trading group focused on
trading commodities and natural resources which we acquired in
October 2001. We also commit our own capital to promising
enterprises and invest and otherwise trade to capture investment
opportunities for our own account. We seek to invest in
businesses or assets whose intrinsic value is not properly
reflected in their share price or value. Our investing is
generally not passive. We seek investments where our financial
expertise and management can add or unlock value.

Our results of operations have been and may
continue to be affected by many factors of a global nature,
including economic and market conditions, the availability of
capital, the level and volatility of equity prices and interest
rates, currency values, commodity prices and other market
indices, technological changes, the availability of credit,
inflation and legislative and regulatory developments. Our
results of operations may also be materially affected by
competitive factors. Competition includes firms traditionally
engaged in financial services such as banks, broker-dealers and
investment dealers, along with other sources such as insurance
companies, mutual fund groups, other companies offering
financial services in Europe and globally and other trade and
finance companies.

Our results of operations for any particular
period may also be affected by our realization on proprietary
investments. These investments are made to maximize total return
through long-term appreciation and recognized gains on
divestment. We can realize on our proprietary investments
through a variety of methods including sales, capital
restructuring or other forms of divestment.

The international and integrated nature and focus
of our business has resulted in a relatively low net rate of
income tax. In 2002 and 2001, we had a net tax recovery, and in
2000 our effective consolidated tax rate was approximately 4.0%.

In recent years, the financial services industry
has experienced consolidation and convergence as financial
institutions involved in a broad spectrum of services have
merged or combined. The trend to consolidate is expected to
continue and produce global financial institutions with much
greater capital and other resources than we have. As a result of
the economic and competitive factors discussed above, our
results of operations may vary significantly from period to
period. We intend to manage our business for the long-term and
to mitigate the effects of such factors by focusing on our core
operations.

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Year Ended December 31, 2002 Compared
to the Year Ended December 31, 2001

The following table provides selected quarterly
financial information for 2002 for MFC:

|                           |  |                                              |         |              |  |         |         |          |  |   |         |  |  |   |         | 
|-------------------------- |  | -------------------------------------------- | ------- | ------------ |  | ------- | ------- | -------- |  | - | ------- |  |  | - | ------- | 
|                           |  |                                             
|                           |  | 2002                                        
|                           |  |                                             
|                           |  | December 31                                  |         | September 30 |  | June 30 |         | March 31
|                           |  |                                              |         |              |  |         |         |         
|                           |  |                                             
|                           |  | (in thousands, other than per share amounts)
|Revenues                   |  | $                                            | 124,574 |              |  | $       | 52,169  |          |  | $ | 53,364  |  |  | $ | 54,232  | 
|Expenses                   |  |                                              | 98,927  |              |  |         | 49,153  |          |  |   | 44,890  |  |  |   | 44,189  | 
|Net income                 |  |                                              | 28,864  |              |  |         | 1,854   |          |  |   | 10,049  |  |  |   | 9,988   | 
|Diluted earnings per share |  |                                              | 2.10    |              |  |         | 0.14    |          |  |   | 0.72    |  |  |   | 0.72    | 
|Total assets               |  |                                              | 446,574 |              |  |         | 494,179 |          |  |   | 434,487 |  |  |   | 396,225 | 
|Shareholders equity       |  |                                              | 285,290 |              |  |         | 252,907 |          |  |   | 244,368 |  |  |   | 250,969 | 

In 2002, our revenues increased by 32.7% to
$284.3 million from $214.2 million in 2001, primarily
as a result of the inclusion of the results of our trading
operations for the full year in 2002, instead of only three
months in 2001. In 2002, we expanded our trading operations by
hiring additional trade professionals and expanding the breadth
of products that we trade. We are also expanding geographically
into the Far East and Southern Asia. Such geographic expansion
of our merchant banking activities is being undertaken, in part,
as we expect that over the next several years the integration of
several central European countries into the European Union will
result in increased competition and put downward pressure on
operating margins.

In 2002, expenses increased by approximately
39.3% to $237.2 million from $170.2 million in 2001,
primarily as a result of the expansion of our trading operations
in 2002. In 2002, expenses increased by approximately 22.9% to
$175.8 million from $143.1 million in 2001. General
and administrative expenses increased to $35.8 million in
2002 from $21.8 million in 2001. The increases in financial
services and general and administrative expenses related
primarily to the inclusion of the results of our trading
operations for the full year in 2002 versus only three months in
2001.

In 2002, we recorded a loss for goodwill
impairment of approximately $16.1 million relating to the
goodwill associated with previously acquired subsidiaries as we
determined that the carrying value of such goodwill exceeded its
fair value. See Critical Accounting Policies 
Goodwill Impairment below for more information. There was
no similar charge in 2001. In 2002, we recognized a
$19.7 million gain on indebtedness of a subsidiary and a
$49.1 million gain on debt extinguishment. In 2001, we
recognized a $22.4 million gain on indebtedness of a
subsidiary. In 2002, interest expense increased to approximately
$9.5 million from approximately $5.4 million in 2001,
primarily as a result of the inclusion of the consolidated
indebtedness of Banff, in which we acquired an approximately 85%
interest in August 2002.

In 2002, we recorded a recovery of income tax of
$3.5 million as a result of the reversal of a tax accrual
due to the sale of an indirect oil royalty interest during the
year. In 2001, we had an income tax recovery of
$0.8 million.

In 2002, our net earnings increased to
$50.8 million, or $3.93 per share on a basic basis
($3.70 per share on a diluted basis), from
$45.3 million, or $3.59 per share on a basic basis
($3.35 per share on a diluted basis), in 2001.

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Year Ended December 31, 2001 Compared
to the Year Ended December 31, 2000

The following table provides selected quarterly
financial information for 2001 for MFC:

|                           |  |                                              |         |              |  |         |         |          |  |   |         |  |  |   |         | 
|-------------------------- |  | -------------------------------------------- | ------- | ------------ |  | ------- | ------- | -------- |  | - | ------- |  |  | - | ------- | 
|                           |  |                                             
|                           |  | 2001                                        
|                           |  |                                             
|                           |  | December 31                                  |         | September 30 |  | June 30 |         | March 31
|                           |  |                                              |         |              |  |         |         |         
|                           |  |                                             
|                           |  | (in thousands, other than per share amounts)
|Revenues                   |  | $                                            | 89,878  |              |  | $       | 33,478  |          |  | $ | 46,888  |  |  | $ | 44,002  | 
|Expenses                   |  |                                              | 71,095  |              |  |         | 25,958  |          |  |   | 37,349  |  |  |   | 35,830  | 
|Net income                 |  |                                              | 19,876  |              |  |         | 7,786   |          |  |   | 9,543   |  |  |   | 8,083   | 
|Diluted earnings per share |  |                                              | 1.40    |              |  |         | 0.58    |          |  |   | 0.72    |  |  |   | 0.63    | 
|Total assets               |  |                                              | 394,639 |              |  |         | 298,760 |          |  |   | 280,423 |  |  |   | 297,823 | 
|Shareholders equity       |  |                                              | 245,997 |              |  |         | 251,398 |          |  |   | 229,446 |  |  |   | 221,767 | 

In 2001, our revenues increased by 37.1% to
$214.2 million from $156.2 million in 2000, primarily
as a result of the acquisition of our trading operations in
October 2001 and increased investment activities. In 2001,
revenues included a recognition of a non-cash gain on
indebtedness of a subsidiary of $22.4 million. Expenses
from continuing operations increased by 48.8% to
$170.2 million in 2001 from $114.4 million in 2000,
primarily as a result of the acquisition of our trading
operations and higher investment expenses. In 2001, financial
services expenses increased by 61.2% to $143.1 million from
$88.7 million in 2000. General and administrative expenses
increased marginally to $21.8 million in 2001 from
$21.4 million in 2000. Interest expense increased by 27.3%
to $5.4 million in 2001 from $4.2 million in 2000,
primarily as a result of a net increase in our total
indebtedness resulting from acquisitions completed in 2001. At
December 2001, we recorded a loss on the change in the fair
value of foreign exchange hedging of $1.1 million.

In 2001, net earnings were $45.3 million, or
$3.59 per share on a basic basis ($3.35 per share on a diluted
basis) from $39.2 million, or $3.24 per share on a basic
basis ($3.03 per share on a diluted basis) in 2000.




Liquidity and Capital Resources

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

|                          |  |                  |         |                     |  |      |         |      |  |   |         |  |  |   |         | 
|------------------------- |  | ---------------- | ------- | ------------------- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                          |  |                  |         |                     |  |     
|                          |  |                  |         |                    
|                          |  | December 31,     |         | December 31,       
|                          |  |                  |         |                    
|                          |  | 2002             |         | 2001                |  | 2002 |         | 2001
|                          |  |                  |         |                     |  |      |         |     
|                          |  |                  |         |                    
|                          |  | (U.S. Dollars in |         | Canadian Dollars in
|                          |  | thousands)       |         | thousands)         
|Cash and cash equivalents |  | $                | 64,835  |                     |  | $    | 48,453  |      |  | $ | 102,413 |  |  | $ | 77,166  | 
|Securities                |  |                  | 39,661  |                     |  |      | 47,598  |      |  |   | 62,649  |  |  |   | 75,805  | 
|Total assets              |  |                  | 282,712 |                     |  |      | 247,796 |      |  |   | 446,574 |  |  |   | 394,639 | 
|Debt                      |  |                  | 43,554  |                     |  |      | 61,535  |      |  |   | 68,798  |  |  |   | 98,000  | 
|Shareholders equity      |  |                  | 180,608 |                     |  |      | 154,462 |      |  |   | 285,290 |  |  |   | 245,997 | 

We maintain a high level of liquidity, with a
substantial amount of our assets held in cash and cash
equivalents, securities and customer loans collateralized by
marketable securities. The highly liquid nature of these assets
provides us with flexibility in managing our business and
financing. We also use this liquidity in client related services
where we act as a financial intermediary for third parties and
in our own proprietary investing activities.

At December 31, 2002, our cash and cash
equivalents were $102.4 million, compared to
$77.2 million at December 31, 2001. At
December 31, 2002, we had securities of $62.6 million,
compared to $75.8 million at December 31, 2001.

At December 31, 2002, our debt was
$68.8 million, compared to $98.0 million at
December 31, 2001 and were denominated in U.S. dollars
and Euros.

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As part of our merchant banking activities, we
establish, utilize and maintain various kinds of credit lines
and facilities with other banks, insurers, and trade finance
providers. Most of these facilities are short-term. These
facilities are primarily used for structured trade financing,
accounts receivable financing and letters of credit. Such
facilities are drawn upon and used for specific trading
transactions. These credit facilities are generally secured by
the subject matter of a proposed transaction, being either a
receivable or the underlying commodity or natural resource being
traded. We often further enhance the credit of such facilities
through credit and/or performance insurance provided by
governmental and/or private insurers. Such trade finance
insurance is often layered with varying limitations and
exceptions. The amounts drawn under the credit facilities
fluctuate with the kind and level of commodities and natural
resources trading transactions being undertaken by us. As such
transactions are settled, proceeds are generally applied to
first settle amounts drawn under such credit facilities.

At December 31, 2002, we had approximately
ten separate credit lines and facilities used for commodities
and natural resources trading aggregating approximately
$64.0 million, of which approximately $25.0 million
was outstanding. In April 2003, we established two additional
credit lines and facilities to increase the aggregate available
amount of such credit lines and facilities to $approximately
$84.2 million of which approximately $39.8 million was
outstanding. The kind, amount and number of credit facilities we
utilize and amounts drawn thereunder fluctuate from time to time
based upon the nature, level and location of, and counterparties
with, whom we conduct our commodities and natural resources
trading activities.

We have debt maturities of $30.5 million in
2003 and $4.5 million in 2004. We expect such maturing debt
to be satisfied primarily through the settlement of underlying
commodities and natural resource trading transactions, cash on
hand and cash flow from operations. Much of such maturing debt
may either subsequently be made re-available to us by the
applicable financial institution or we may replace such
facilities with similar facilities depending upon our trading
and capital requirements. For more information, see Note 9
to our consolidated financial statements included in this annual
report.

Operating Activities

In 2002, changes in securities provided cash of
$12.2 million compared to $1.8 million in 2001. A
decrease in receivables provided cash of $1.6 million in
2002, compared to $48.3 million in 2001 which included
$12.9 million cash provided from a decrease in amounts due
from investment dealers resulting primarily from the outsourcing
of our private bank clients. An increase in commodity
investments used cash of $6.0 million in 2002, compared to
nil in 2001, resulting primarily from the expansion of our
commodities and natural resources trading operations. A decrease
in properties held for sale provided cash of $13.5 million
in 2002, compared to an increase in same using cash of
$0.4 million in 2001. An increase in accounts payable and
accrued expenses provided cash of $3.8 million in 2002,
compared to a decrease in same using cash of $8.5 million
in 2001. Operating activities provided cash of
$20.8 million in 2002, compared to $64.5 million in
2001. We expect to generate sufficient cash flow from operations
to meet our working capital and other requirements.

Investing Activities

In 2002, a net increase in loans used cash of
$4.8 million, compared to a net decrease in loans providing
cash of $25.1 million in 2001. The net purchase of
long-term securities used cash of $5.4 million in 2002
compared to $4.8 million in 2001. In 2002, the sale of an
equity method investment, being our indirect oil royalty
interest, provided cash of $25.9 million. In 2002,
purchases of subsidiaries, net of cash acquired, used cash of
$35.0 million, compared to $1.0 million in 2001.
Investing activities used cash of $19.1 million in 2002,
compared to providing cash of $18.8 million in 2001.

Financing Activities

Net debt repayments used cash of
$13.3 million in 2002, compared to $25.3 million in
2001. In 2002, a net increase in deposits provided cash of
$33.9 million, compared to a net decrease in deposits using
cash of $62.4 million in 2001. The net repurchase of common
shares in 2002 used cash of $7.0 million, compared to

22



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the net issuance of common shares providing cash
of $11.5 million in 2001. Net cash provided by financing
activities was $13.5 million in 2002, compared to net cash
used by financing activities of $76.1 million in 2001.


We had no material commitments to acquire assets
or operating businesses at December 31, 2002. We anticipate
that there will be acquisitions of businesses or commitments to
projects in the future. To achieve our long-term goals of
expanding our assets and earnings, including through
acquisitions, we will require substantial capital resources. The
necessary resources will be generated from cash flow from
operations, cash on hand, borrowing against our assets, sales of
proprietary investments or the issuance of securities.




Foreign Currency

Substantially all of our operations are conducted
in international markets and our consolidated financial results
are subject to foreign currency exchange rate fluctuations.

We translate foreign assets and liabilities into
Canadian dollars at the rate of exchange on the balance sheet
date. Revenues and expenses are translated at the average rate
of exchange prevailing during the period. Unrealized gains or
losses from these translations are recorded as
shareholders equity on the balance sheet and do not affect
our net earnings. As a substantial amount of our revenues are
received in Swiss francs, our financial position for any given
period, when reported in Canadian dollars, can be significantly
affected by the exchange rate for Swiss francs prevailing during
that period. In the year ended December 31, 2002, we
reported approximately a net $14.3 million foreign exchange
translation gain and, as a result, our cumulative foreign
exchange translation gain at December 31, 2002 was
$18.7 million, compared to a $4.5 million gain at
December 31, 2001.

We use derivative foreign exchange contracts to
manage our exposure and our clients exposure to foreign
currency exchange rate risks. At December 31, 2002, we did
not hold any forward foreign exchange contracts for our own
account. At December 31, 2001, we held four forward foreign
exchange contracts in the aggregate notional amount of
$24.7 million which covered the period through May 31,
2002. We entered into these contracts for our own account to
manage our exposure to foreign currency exchange risks. For more
information, see Item 11. Quantitative and
Qualitative Disclosures About Market Risk  Derivative
Instruments.

Based upon the period average exchange rates in
2002, the Canadian dollar decreased by approximately 9.2% in
value against the Swiss franc and by approximately 1.4% in value
against the U.S. dollar, compared to the period average
exchange rates in 2001. As at December 31, 2002, the
Canadian dollar decreased by approximately 16.0% in value
against the Swiss franc and by approximately 0.8% in value
against the U.S. dollar since December 31, 2001.




Derivative Instruments

Derivatives are financial instruments, the
payments of which are linked to the prices, or relationships
between prices, of securities or commodities, interest rates,
currency exchange rates or other financial measures. Derivatives
are designed to enable parties to manage their exposure to
interest rates and currency exchange rates, and security and
other price risks. We use derivatives to provide products and
services to clients and to manage our foreign currency exchange
exposure for our own account. For more information, see
Item 11. Quantitative and Qualitative Disclosures
about Market Risk  Derivative Instruments.




Inflation

We do not believe that inflation has had a
material impact on our revenues or income over the past three
fiscal years. Because our assets to a large extent are liquid in
nature, they are not significantly affected by inflation.
However, increases in inflation could result in increases in our
expenses, which may not be readily recoverable in the price of
services provided to our clients. To the extent inflation
results in rising interest rates and has other adverse effects
on capital markets, it could adversely affect our financial
position and profitability.

23



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##### Table of Contents






Application of Critical Accounting
Policies

The preparation of financial statements in
conformity with generally accepted accounting principles
requires our management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting periods.

Our management routinely makes judgments and
estimates about the effects of matters that are inherently
uncertain. As the number of variables and assumptions affecting
the probable future resolution of the uncertainties increase,
these judgments become even more subjective and complex. We have
identified certain accounting policies, described below, that
are the most important to the portrayal of our current financial
condition and results of operations. Our significant accounting
policies are disclosed in Note 1 to our consolidated
financial statements included in this annual report.

Revenue Recognition

Merchant banking revenues for banking and
services are recognized as they are performed, and from
commodities and natural resources trading and the sale of
proprietary investments as they are completed and when the
amounts of the revenues are fixed, agreed or determinable and
collectibility is reasonably assured.

Allowance for Credit Losses

Our allowance for credit losses is to be
maintained at an amount considered adequate to absorb estimated
credit-related losses. Such allowances reflect managements
best estimate of the probable losses in our credit portfolio and
judgments about both macro- and micro-economic conditions. The
evaluation process involves estimates and judgments, which could
change drastically in the near-term, and could result in a
significant change to a recognized allowance. Credit losses
arise primarily from loans but may also relate to other credit
instruments such as guarantees and letters of credit. An
allowance for credit losses may be increased by provisions which
are charged to income and reduced by write-offs net of any
recoveries.

We review our loan portfolio and receivables on a
regular basis. Specific provisions are established on a
loan-by-loan or receivable basis. In determining whether a
specific provision is required or not, we consider, but such
consideration is not limited to, the following factors:



| |   |                                                                     
| | - | --------------------------------------------------------------------
| |  | repayment history of the borrower;                                  
|
| |  | overall financial position and results of the
    borrower;         
|
| |  | the nature and quality of collateral and
    guarantee;             
|
| |  | business plan and outlook of the borrower;                          
|
| |  | secondary market value of the loan and the
    collateral; and      
|
| |  | our business plan or strategy to divest or
    restructure the debt.

A general provision may be established to absorb
potential credit losses attributable to the deterioration of
credit quality on aggregate exposures for which specific
provisions cannot yet be determined. A country risk provision
may be made based on exposures in less developed countries and
on managements overall assessment of the underlying
economic conditions in those countries. A market risk provision
may be made based on the macro-economic factors which are
specific to a particular region or industry and the
micro-economic factors which are specific to a particular
borrower. Write-offs are generally recorded after all reasonable
restructuring or collection activities have taken place and
there is no realistic prospect of recovery.

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Goodwill Impairment

A goodwill impairment loss should be recognized
when the carrying amount of the goodwill exceeds the fair value
of the goodwill. An impairment loss should not be reversed if
the fair value subsequently increases. We consider, but such
consideration is not limited to, the following factors to
determine the goodwill impairment:



| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a significant adverse change in legal factors or
    in the business climate;                                                                        
|
| |  | an adverse action or assessment by a regulator;                                                                                                      
|
| |  | unanticipated competition;                                                                                                                           
|
| |  | loss of key personnel;                                                                                                                               
|
| |  | a more-likely-than-not expectation that a
    significant portion or all of a reporting unit will be sold or
    otherwise disposed of;              
|
| |  | the testing for write-down or impairment of a
    significant asset group within a reporting unit; or                                                
|
| |  | the recognition of a goodwill impairment loss in
    its separate financial statements by a subsidiary that is a
    component of the reporting unit.

Valuation of Securities

Trading account securities held by MFC Bank are
stated at current market value, with the unrealized gain or loss
included in the results of operations. Other short-term
securities are carried at the lower of aggregate cost or current
market value, with the realized loss included in the results of
operations.

When there has been a loss in value of a
long-term security that is other than a temporary decline, the
security will be written down to recognize the loss. The
write-down is included in the determination of income.

A decline in market value may be only temporary
in nature or may reflect conditions that are more persistent.
Declines may be attributable to general market conditions,
either globally or regionally, that reflect prospects of the
economy as a whole or prospects of a particular industry or a
particular company. Such declines may or may not indicate the
likelihood of ultimate recovery of the carrying amount of a
security. We regularly review our portfolio position to
determine whether an other than temporary decline exists.

In determining whether the decline in value is
other than temporary, quoted market price is not the only
deciding factor, particularly for thinly traded securities,
large block holdings and restricted shares. We consider, but
such consideration is not limited to, the following factors:



| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | trend of the quoted market price and trading
    volume;                                                          
|
| |  | financial position and results for a period of
    years;                                                         
|
| |  | liquidity or going concern problems of the
    investee;                                                          
|
| |  | changes in or reorganization of the investee
    and/or its future business plan;                                 
|
| |  | outlook of the investees industry;                                                                               
|
| |  | the current fair value of the investment (based
    upon an appraisal thereof) relative to its carrying value; and
|
| |  | our business plan and strategy to divest the
    security or to restructure the investee.                         

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##### Table of Contents






ITEM
6.     DIRECTORS, SENIOR MANAGEMENT AND
EMPLOYEES






Directors and Senior Management; Board
Practices


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

The following table sets out certain information
concerning our directors and executive officers:

|                      |  |                                      |  |                                                                                                                                                                                                                                                                           |  |                |          |                |  |  |         | 
|--------------------- |  | ------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | -------------- |  |  | ------- | 
|                      |  |                                      |  |                                                                                                                                                                                                                                                                           |  | Date of        |          | Expiration    
|                      |  | Present                              |  |                                                                                                                                                                                                                                                                           |  | Commencement   |          | of Term       
|                      |  | Position with                        |  |                                                                                                                                                                                                                                                                           |  | of Office with |          | of Office with
|Name                  |  | MFC                                  |  | Principal Occupation                                                                                                                                                                                                                                                      |  | MFC            |          | MFC           
|                      |  |                                      |  |                                                                                                                                                                                                                                                                           |  |                |          |               
|Michael J. Smith      |  | Director and President               |  | President, Chief Executive Officer and Director
    of MFC                                                                                                                                                                                                                |  |                | 19861996 |                |  |  | 2005N/A | 
|Sok Chu Kim(1)        |  | Director                             |  | Senior Vice-President, Korea Exchange Bank, 1967
    to 1985; President of Korea International Merchant Bank, 1985 to
    1989; Advisor to Sukura Bank (Seoul, Korea); Director of Korea
    Liberalization Fund Ltd.                                                     |  |                | 1996     |                |  |  | 2004    | 
|Oq-Hyun Chin(1)       |  | Director                             |  | Business Advisor, The Art Group Architects &
    Engineers Ltd.                                                                                                                                                                                                           |  |                | 1994     |                |  |  | 2004    | 
|Dr. Stefan Feuerstein |  | Director
    and Vice-
    President |  | Director and Vice-President of MFC; Managing
    Director, MFC Capital Partners AG; Managing Director of the
    Industrial Investment Council of the New German States;
    President of the Thuringian Economic Development Corporation
    (Germany) from 1992 to 2001 |  |                | 20002000 |                |  |  | 2003N/A | 
|Silke Brossmann(1)    |  | Director                             |  | Consultant, Head of Client Relations, Prokurist
    and Head of Central Administration, Koidl & Cie.
    Holding AG from 1999 to 2002                                                                                                                                     |  |                | 2003     |                |  |  | 2005    | 
|Roy Zanatta           |  | Secretary                            |  | Secretary of MFC                                                                                                                                                                                                                                                          |  |                | 1996     |                |  |  | N/A     | 
|Claudio Morandi       |  | Managing Director of MFC Bank        |  | Managing Director of MFC Bank                                                                                                                                                                                                                                             |  |                | 1997     |                |  |  | N/A     | 
|John Musacchio        |  | Vice- President                      |  | Vice-President of MFC; Chief Operating Officer,
    Chief Financial Officer and Director of Mymetics                                                                                                                                                                      |  |                | 1999     |                |  |  | N/A     | 



---

|    |                               
|--- | ------------------------------
|(1) | Member of the Audit Committee.

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There are no arrangements or understandings with
major shareholders, customers, suppliers or others pursuant to
which any person referred to above was selected as a director or
executive officer, nor are there any family relationships
between any of the persons referred to above.

Our board of directors has established an Audit
Committee. The Audit Committee operates pursuant to a charter
adopted by the board of directors. The Audit Committee is
appointed by and generally acts on behalf of the board of
directors. The Audit Committee is responsible primarily for
monitoring: (i) the integrity of our financial statements;
(ii) compliance with legal and regulatory requirements; and
(iii) the independence and performance of our internal and
external auditors. The members of the Audit Committee are Sok
Chu Kim, Oq-Hyun Chin and Silke Brossmann.

We do not have a Remuneration Committee of our
board of directors. Our executive compensation program is
administered by our Chief Executive Officer under the
supervision of our board of directors.

Employment Agreements and Termination of
Employment or Change of Control

Mr. Smith entered into an amended and
restated employment agreement with MFC in 2000. The agreement
generally provides, subject to certain termination provisions,
for the continued employment of Mr. Smith for a period of
36 months with automatic one month renewals, so that the
agreement at all times has a remaining term of 36 months.
The agreement provides for an annual base salary and other
compensation to be paid to Mr. Smith as determined by our
board of directors. In the event he is terminated without cause
or resigns for good reason (as defined in each agreement) within
three years of a change of control (as defined in each
agreement), Mr. Smith will be entitled to a lump sum
severance payment of three times the sum of (i) his current
annual salary under the agreement, and (ii) the higher of
his current annual bonus under the agreement and the highest
variable pay and bonus received by him in the previous five
fiscal years. If Mr. Smith is terminated without cause or
resigns for good reason after three years of a change of
control, he will be entitled to the same payments in equal
instalments over 12 months.

In addition, all unvested rights in any stock
options or other equity awards made to Mr. Smith will vest
in full in the event of a change of control. Mr. Smith will
also be entitled, for a period of 365 days following the
earlier of the date of his termination and the date of the
change of control, to require us to purchase all or any part of
our common shares held by Mr. Smith on the date of
termination or date of change of control, at a price equal to
the average closing market price of our common shares on the
Nasdaq National Market (the Nasdaq) for the ten
preceding trading days.




Compensation

During the fiscal year ended December 31,
2002, we paid an aggregate of approximately $2.1 million in
cash compensation to our directors and officers. This amount
does not take into account incentive stock options granted to or
exercised by such directors and officers or other non-cash
compensation, as more particularly described below. No other
funds were set aside or accrued by MFC during the fiscal year
ended December 31, 2002 to provide pension, retirement or
similar benefits for our directors or officers pursuant to any
existing plan provided or contributed to by MFC.

27



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##### Table of Contents



Executive Compensation

The following table provides a summary of
compensation paid by us during the fiscal year ended
December 31, 2002 to our Chief Executive Officer and to our
next four most highly paid executive officers who received a
combined salary and bonus during such period in excess of
$100,000 (collectively, with the Chief Executive Officer, the
Named Executives):

SUMMARY COMPENSATION TABLE

|                      |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|--------------------- |  | ---------------------- | ------- | ------------ |  | ---------------- | ------- | --------------- |  | ------------ | ------ |  |  |  | - |  |  |  | ---------- |  |  | 
|                     
|                     
|                     
|                      |  |                        |         | Long-Term    |  |                 
|                      |  | Annual Compensation(1) |         | Compensation |  |                 
|                      |  |                        |         |             
|                      |  |                        |         | Other Annual |  | Securities Under |         | All Other       |  |             
|Name and              |  | Salary                 |         | Bonus        |  | Compensation     |         | Options Granted |  | Compensation |        | 
|Principal Position    |  | ($)                    |         | ($)          |  | ($)              |         | (#)             |  | ($)          |        | 
|Michael J. Smith      |  |                        | 340,649 |              |  |                  | 330,624 |                 |  |              | 20,234 |  |  |  |  |  |  |  |           |  |  | 
|President, Chief      |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|Executive Officer and |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|Director              |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|                     
|Dr. Stefan Feuerstein |  |                        | 356,112 |              |  |                  | 66,771  |                 |  |              | 17,805 |  |  |  |  |  |  |  | 9,160      |  |  | 
|Vice-President and    |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|Director              |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|Claudio Morandi       |  |                        | 228,705 |              |  |                  | 205,215 |                 |  |              | 7,687  |  |  |  |  |  |  |  | 761,000(2) |  |  | 
|Managing Director     |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|MFC Bank              |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|                     
|Roy Zanatta           |  |                        | 239,429 |              |  |                  |        |                 |  |              |       |  |  |  |  |  |  |  |           |  |  | 
|Secretary             |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|                     
|John Musacchio        |  |                        | 301,842 |              |  |                  |        |                 |  |              |       |  |  |  |  |  |  |  |           |  |  | 
|Vice-President        |  |                        |         |              |  |                  |         |                 |  |              |        |  |  |  |   |  |  |  |            |  |  | 
|                     



---



|    |                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On a cash basis, unless otherwise stated.                                                                                                                                                                                         
|   
|(2) | As at December 31, 2002, Mr. Morandi
    had an outstanding loan of approximately $761,000 which is
    expected to be paid in the near term. The loan is payable on
    demand and bears interest at the rate of 4.25% per annum.



| |                        
| | -----------------------
| | Directors Compensation

Our non-management directors receive U.S.$20,000
annually for their services and U.S.$500 for each meeting of
directors that they attend. We also reimburse our directors and
officers for expenses incurred in connection with their services
as our directors and officers.



| |                                   
| | ----------------------------------
| | Options to Purchase
    Securities

We have an incentive stock option plan that
provides for the grant of incentive stock options to purchase
our common shares to our directors, officers and key employees
and other persons providing ongoing services to us. Our stock
option plan is administered by our board of directors. The
maximum number of our common shares which may be reserved and
set aside for issuance under our stock option plan is 2,762,000.
Each option upon its exercise entitles the grantee to one common
share. The exercise price of an option may not be less than the
closing market price of our common shares on the Nasdaq on the
day prior to the date of grant of the option. In the event our
common shares are not traded on such day, the exercise price may
not be less than the average of the closing bid and ask prices
of our common shares on the Nasdaq for the ten trading days
immediately prior to the date the option is granted. Options may
be granted under our stock option plan for an exercise period of
up to ten years from the date of grant of the option. We did not
grant any options in 2002.

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##### Table of Contents






Employees

We currently employ approximately 206 people. As
at December 31, 2002, 2001 and 2000 we employed
approximately 168, 144 and 36 people, respectively. We are not
party to any collective agreements with any labour unions.




Share Ownership

The following table sets forth information as of
April 16, 2003 concerning the beneficial ownership of our
common shares by each of our Named Executives and directors:

|                         |  |               |         |            |  |  |     |  
|------------------------ |  | ------------- | ------- | ---------- |  |  | --- | -
|                         |  | Number of     |         | Percentage
|Name of Beneficial Owner |  | Common Shares |         | of Class  
|                         |  |               |         |           
|Michael J. Smith         |  |               | 612,000 |            |  |  | 4.8 | %
|Claudio Morandi          |  |               |        | (1)        |  |  |    |  
|Roy Zanatta              |  |               |        | (2)        |  |  |    |  
|John Musacchio           |  |               | 1,000   | (3)        |  |  | *   |  
|Sok Chu Kim              |  |               |        |            |  |  |    |  
|Oq-Hyun Chin             |  |               |        |            |  |  |    |  
|Dr. Stefan Feuerstein    |  |               |        | (4)        |  |  |    |  
|Silke Brossmann          |  |               |        |            |  |  |    |  



---

|  |              
|- | -------------
|* | Less than 1%.



|    |                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Morandi has incentive stock options
    entitling him to acquire up to 75,000 of our common shares at an
    exercise price of U.S.$6.00 per share expiring October 28,
    2003.  
|   
|(2) | Mr. Zanatta has incentive stock options
    entitling him to acquire up to 60,000 of our common shares at an
    exercise price of U.S.$6.00 per share expiring October 28,
    2003.  
|   
|(3) | Mr. Musacchio has incentive stock options
    entitling him to acquire up to 50,000 of our common shares at an
    exercise price of U.S.$6.00 per share expiring October 28,
    2003.
|   
|(4) | Dr. Feuerstein has incentive stock options
    entitling him to acquire up to 50,000 of our common shares at an
    exercise price of U.S.$7.00 per share expiring March 29,
    2005. 

29



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##### Table of Contents








|        |                                                      
|------- | -----------------------------------------------------
|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS






Major Shareholders


The following table sets forth certain
information as at April 16, 2003 concerning the ownership
of our common shares by each person known to us, based solely
upon public records and filings, to be the direct and/or
indirect owner of five percent or more of our common shares:

|                            |  |              |           |                  |  |  |      |  
|--------------------------- |  | ------------ | --------- | ---------------- |  |  | ---- | -
|Identity of Person or Group |  | Amount Owned |           | Percent of Class
|                            |  |              |           |                 
|Peter Kellogg               |  |              | 3,141,550 | (1)              |  |  | 24.4 | %
|FMR Corp.                   |  |              | 763,800   |                  |  |  | 5.9  | %



---

|    |                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In his public filings, Mr. Kellogg disclaims
    beneficial ownership of 2,821,550 of the shares, or
    approximately 22.0% of our issued and outstanding common shares.

Our officers and directors, as a group, own or
control, directly or indirectly, an aggregate of 613,000 common
shares and have options to purchase an additional 235,000 common
shares, representing approximately 6.5% of our common shares on
a fully diluted basis.

All common shareholders have identical voting
rights.

Shareholder Distribution

As at April 16, 2003, there were
approximately 629 holders of record of our common shares and a
total of 12,849,854 common shares were outstanding.
Approximately 10,675,792 or 83.1% of our common shares are held
of record by 549 U.S. holders, including depositories and
clearing agencies.




Related Party Transactions

Other than as disclosed herein, to the best of
our knowledge, there have been no material transactions since
January 1, 2002 to which we were or are a party and in
which a director or officer of MFC, any relative or spouse of
any director or officer, or any individual owning, directly or
indirectly, an interest in our voting power that gives it
significant influence over us, has or will have a direct or
indirect material interest nor were any of our directors or
officers, any relatives or spouses of such directors or
officers, or any individuals owning, directly or indirectly, an
interest in our voting power that gives them significant
influence over us, indebted to us during this period.

As at December 31, 2002, we reorganized our
interest in two European commodity producers with a carrying
value of approximately $7.3 million by exchanging them for
a 49% interest in Equitable Industries Limited Partnership. No
gain or loss was recorded as a result of the exchange and it was
treated as a related party non-monetary transaction.

During 2002, we earned fees in the normal course
from our merchant banking affiliates amounting to approximately
$9.2 million of which approximately $4.1 million was
with a merchant banking client the president of which is also
our president. In 2001 and 2000, such fees amounted to
$0.3 million and $1.1 million, respectively.

In 2002, we also sold real estate for gross cash
proceeds of approximately $4.2 million to an affiliate. No
gain or loss was recognized on this transaction. At
April 16, 2003, we had a note payable of approximately
$0.8 million to this affiliate. At the beginning of 2002,
the amount outstanding under this note payable was approximately
$4.6 million which was also the largest amount outstanding
during the year. The note bears interest at the rate of 3.5% per
annum and is payable on demand. The note is unsecured and
non-recourse.

In 2002, we also sold commodities amounting to
approximately $3.5 million in the normal course to an
affiliate, approximately $2.9 million of which is included
in receivables from commodity transactions as at
December 31, 2002.

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We had a receivable from an officer of
$0.8 million at April 16, 2003, which will be paid in
the normal course. No amounts were paid on this loan in 2002 and
the loan is payable on demand and bears interest at the rate of
4.25% per annum.

We receive dividends pursuant to a royalty
interest from an affiliate at a rate of 10% annually. Dividends
earned amounted to $4.9 million in 2002.






|        |                      
|------- | ---------------------
|ITEM 8. | FINANCIAL INFORMATION

Consolidated Statements and Other Financial
Information

See Item 18. Financial
Statements for financial statements filed as part of this
annual report.

Significant Changes

No significant changes have occurred since the
date of the financial statements provided in Item 18 below.

Legal Proceedings

We are subject to routine litigation incidental
to our business and are named from time to time as a defendant
in various legal actions arising in connection with our
activities, certain of which include large claims for punitive
damages. We are also involved, from time to time, in
investigations and proceedings by governmental and
self-regulatory agencies. Some of these legal actions,
investigations and proceedings may result in adverse judgments,
penalties or fines.

In view of the inherent difficulty of predicting
the outcome of such matters, particularly in cases in which
substantial damages are sought, we cannot state what the
eventual outcome of pending matters will be. We are contesting
the allegations made in each pending matter and believe, based
on current knowledge and after consultation with counsel, that
the outcome of such matters will not have a material adverse
effect on our consolidated financial condition, but may be
material to our operating results for any particular period,
depending on the level of our income for such period.

Dividend Information

The actual timing, payment and amount of
dividends paid on our common shares is determined by our board
of directors, based upon things such as our cash flow, results
of operations and financial condition, the need for funds to
finance ongoing operations and such other business
considerations as our board of directors considers relevant.

In August 2002, we paid a stock dividend of 0.95
common shares of Mymetics for each common share of MFC held by
our shareholders of record as of August 13, 2002.
Approximately 12,206,957 Mymetics shares were distributed to MFC
shareholders under the dividend. For more information, see
Item 4. Information on the Company 
Overview.

31



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|        |                      
|------- | ---------------------
|ITEM 9. | THE OFFER AND LISTING

Markets and Price History

Our common shares are quoted on the Nasdaq
National Market under the symbol MXBIF and on the
Frankfurt Stock Exchange under the symbol
MFC GR. The following table sets forth the high
and low sales prices of our common shares on the Nasdaq for the
periods indicated. In August 2002, we paid a stock dividend of
0.95 common shares of Mymetics for each common share of MFC
held by shareholders of record as of August 13, 2002. As a
result, the sales prices set out below for periods prior to the
payment of the stock dividend did not reflect the payment of the
stock dividend to MFC shareholders.

|                         |  |        |       |     |  |       |      | 
|------------------------ |  | ------ | ----- | --- |  | ----- | ---- | 
|                         |  |       
|                         |  | Nasdaq
|                         |  |       
|                         |  | High   |       | Low
|                         |  |        |       |    
|Annual Highs and Lows    |  |        |       |     |  |       |      | 
|1998                     |  | U.S.$  | 14.38 |     |  | U.S.$ | 4.69 | 
|1999                     |  |        | 12.25 |     |  |       | 5.81 | 
|2000                     |  |        | 10.00 |     |  |       | 6.75 | 
|2001                     |  |        | 11.60 |     |  |       | 7.13 | 
|2002                     |  |        | 11.51 |     |  |       | 6.45 | 
|Quarterly Highs and Lows |  |        |       |     |  |       |      | 
|2001                     |  |        |       |     |  |       |      | 
|First Quarter            |  | U.S.$  | 8.50  |     |  | U.S.$ | 7.13 | 
|Second Quarter           |  |        | 11.00 |     |  |       | 7.63 | 
|Third Quarter            |  |        | 10.00 |     |  |       | 7.40 | 
|Fourth Quarter           |  |        | 11.60 |     |  |       | 7.90 | 
|2002                     |  |        |       |     |  |       |      | 
|First Quarter            |  |        | 11.51 |     |  |       | 9.20 | 
|Second Quarter           |  |        | 10.49 |     |  |       | 8.60 | 
|Third Quarter            |  |        | 9.19  |     |  |       | 7.01 | 
|Fourth Quarter           |  |        | 7.81  |     |  |       | 6.45 | 
|2003                     |  |        |       |     |  |       |      | 
|First Quarter            |  |        | 8.35  |     |  |       | 6.74 | 
|Monthly Highs and Lows   |  |        |       |     |  |       |      | 
|2002                     |  |        |       |     |  |       |      | 
|October                  |  | U.S.$  | 7.81  |     |  | U.S.$ | 6.60 | 
|November                 |  |        | 7.30  |     |  |       | 6.59 | 
|December                 |  |        | 7.30  |     |  |       | 6.45 | 
|2003                     |  |        |       |     |  |       |      | 
|January                  |  |        | 7.85  |     |  |       | 6.80 | 
|February                 |  |        | 7.30  |     |  |       | 6.74 | 
|March                    |  |        | 8.35  |     |  |       | 6.75 | 
|April 1 to April 16      |  |        | 8.65  |     |  |       | 7.51 | 

32



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|         |                       
|-------- | ----------------------
|ITEM 10. | ADDITIONAL INFORMATION






Articles and Bylaws


We are incorporated under the laws of the Yukon
Territory, Canada and have been assigned corporate access number
29216.

Our Articles and Bylaws do not contain a
description of our objects and purposes, except insofar as to
restrict us from carrying on the business of a railway,
steamship, air transport, canal, telegraph, telephone or
irrigation company. We may perform any and all corporate
activities permissible under the laws of the Yukon Territory.

Our Articles and Bylaws do not restrict a
directors power to vote on a proposal, arrangement or
contract in which the director is materially interested, vote
compensation to themselves or any other members of their body in
the absence of an independent quorum or exercise borrowing
powers. There is no mandatory retirement age for our directors
and our directors are not required to own securities of MFC in
order to serve as directors.

Our authorized capital consists of common shares
and class A preferred shares. Our class A preferred
shares may be issued in one or more series and our directors may
fix the number of shares which is to comprise each series and
the designation, rights, privileges, restrictions and conditions
attaching to each series. Currently, we have authorized 140,000
class A preferred shares, series 1 (the
Series 1 Shares), 140,000 class A
preferred shares, series A (the Series A
Shares), 100,000 class A preferred shares,
series 2 (the Series 2 Shares) and 20,000
class A preferred shares, series 3 (the
Series 3 Shares).

Holders of our common shares are entitled to vote
at all meetings of shareholders, except meetings at which only
holders of a specified class of shares are entitled to vote,
receive any dividend declared by MFC and, subject to the rights,
privileges, restrictions and conditions attaching to any other
class of shares, receive the remaining property of MFC upon
dissolution.

Our class A preferred shares of each series
rank on a parity with our class A preferred shares of any
other series and are entitled to a preference over our common
shares with respect to the payment of dividends and the
distribution of assets or return of capital in the event of
liquidation, dissolution or winding-up of MFC.

Holders of our Series 1 Shares and
Series A Shares are entitled to dividends of $5.00 per
share per annum. Our Series 1 Shares and Series A
Shares are redeemable at our option at a price of $100.00 and
carry retraction rights entitling a holder to require us to
redeem their Series 1 Shares or Series A Shares,
respectively, at any time after five years from the date of
issuance for a price of $100.00. Our Series 1 Shares and
Series A Shares are also convertible into such number of
our common shares as is specified in our Articles at any time
after five years from the date of issuance or in the event the
Series 1 Shares or Series A Shares, respectively, are
called for redemption.

Holders of our Series 2 Shares and
Series 3 Shares are entitled to dividends of $3.00 per
share per annum. Our Series 2 Shares and Series 3
Shares are redeemable at our option at a price of $100.00.

The provisions in our Articles attaching to our
common shares and class A preferred shares may be altered,
amended, repealed, suspended or changed by the affirmative vote
of the holders of not less than two-thirds of the common shares
and two-thirds of the class A preferred shares,
respectively.

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

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An annual meeting of shareholders must be held at
such time in each year not later than 15 months after the
last preceding annual meeting and at such place as our board of
directors, or failing it, our Chairman, Managing Director or
President, may from time to time determine. The holders of not
less than five percent of our issued shares that carry the right
to vote at a meeting may requisition our directors to call a
meeting of shareholders for the purposes stated in the
requisition. The quorum for the transaction of business at any
meeting of shareholders is two persons present in person or by
proxy who together hold or represent by proxy, in aggregate, not
less than one-third of our outstanding shares entitled to vote
at the meeting. Only persons entitled to vote, our directors and
auditors and others who, although not entitled to vote, are
otherwise entitled or required to be present, are entitled to be
present at a meeting of shareholders.

Except as provided in the ICA, there are no
limitations specific to the rights of non-Canadians to hold or
vote our common shares under the laws of Canada or the Yukon
Territory, or in our charter documents. See Exchange
Controls below for a discussion of the principal features
of the ICA for non-Canadian residents proposing to acquire our
common shares.

As set forth above, our Articles and Bylaws
contain certain provisions that would have an effect of
delaying, deferring or preventing a change in control of MFC,
including authorizing the issuance by our board of directors of
preferred stock in series, providing for a classified board of
directors with staggered, three-year terms and limiting the
persons who may call special meetings of shareholders. Our
Articles and Bylaws do not contain any provisions that would
operate only with respect to a merger, acquisition or corporate
restructuring of MFC.

In 1993, we adopted a shareholder protection
rights plan to protect us and our shareholders from unfair,
abusive or coercive acquisition tactics. Generally, the plan
provides for the issuance to the holders of each of our
outstanding common shares of a right to purchase one of our
common shares at an exercise price determined in accordance with
the plan upon the commencement of a take-over bid. We have
waived the application of the plan to an existing shareholder to
permit such shareholder to acquire up to 25% of our common
shares. Our plan currently expires in 2003, and we plan to renew
the same.

Our Bylaws do not contain any provisions
governing the ownership threshold above which shareholder
ownership must be disclosed.




Material Contracts

The following summary of certain material
provisions of the agreements referenced below is not complete
and these provisions are qualified in their entirety by
reference to the full text of such agreements which are filed
with this annual report or are on file with the SEC.

In October 2001, we acquired approximately 96% of
MFC Commodities pursuant to an investment and restructuring
agreement made among us, certain wholly-owned subsidiaries,
Hovis Commodity Trading GmbH (HCT), MFC Commodities
and its then shareholders (the investees) dated for
reference October 1, 2001 (the Investment
Agreement). MFC Commodities was established in 1993 and
is, directly and indirectly through subsidiaries, primarily
engaged in trading commodities and natural resources in Eastern
Europe. Pursuant to the terms of the Investment Agreement, our
wholly-owned subsidiary invested approximately
$11.4 million in HCT, the holding company of MFC
Commodities, in exchange for approximately 96% of its issued
share capital. Two prior shareholders of MFC Commodities
subscribed for approximately 4.5% in aggregate of the issued
share capital of the holding company in consideration of the
payment of an aggregate of approximately $0.3 million and
have the right to acquire up to an additional 44.5% of the
holding company of MFC Commodities in the event that its
consolidated net worth reaches prescribed targets on or before a
specified date or they pay the difference between the actual net
worth and target amount in cash. Further, the investees also
have the right to require us to purchase their shares during a
prescribed period pursuant to a stipulated price calculation. We
have the right to acquire their holding company shares for an
aggregate of approximately $0.3 million if they do not
acquire shares in the capital of HCT prior to December 31,
2006 or this right is terminated prior to that date.

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The Investment Agreement contains
representations, warranties and covenants customary for this
type of agreement. The Investment Agreement also provided for,
among other things, a restructuring of MFC Commodities
bank and other credit facilities, a reorganization of its
corporate structure and the shareholders entering into an
owners agreement (the Owners Agreement).
The Owners Agreement sets out the respective rights and
obligations of the shareholders, as well as its and MFC
Commodities management and operations. It contains terms
and conditions customary for such agreements including those
relating to the constitution and election of a board of
directors, the appointment of managing directors and their
respective rights and duties, restrictions on share transfers
other than to permitted transferees, rights of first refusal and
default provisions and remedies.

In conjunction with the acquisition of MFC
Commodities, we implemented certain operating and strategic
changes. These included reaffirming and establishing various
credit lines of MFC Commodities and its subsidiaries in the
aggregate amount of approximately $64.1 million. Further,
we streamlined the operations of MFC Commodities to focus on its
core trading activities and divested certain of its non-core
industrial assets.

In October 2001, we acquired approximately 53% of
the outstanding common shares of Trimble for approximately
$1.0 million. In July 2002, we acquired the outstanding
minority interest in Trimble pursuant to a plan of arrangement
dated May 17, 2002 between Trimble and MFC whereby
shareholders of Trimble elected to receive either $0.22 or
0.0139 of our common shares in exchange for each Trimble share
held. As a result, we issued 25,071 of our common shares and
will pay approximately $205,000 in cash to those shareholders of
Trimble who elected, or were deemed to elect, to receive cash.

In August 2002, we acquired approximately 85% of
the issued shares and U.S.$11.4 million of indebtedness of
Banff for nominal consideration and the provision of a
contingent royalty interest to the vendor pursuant to a Share
Sale Agreement among Newmont Australia Limited
(Newmont), Newmont LaSource S.A.S. (NLS)
and MFC dated August 7, 2002 and a Royalty Deed among MFC,
Newmont and NLS dated August 7, 2002. Under the Royalty
Deed, we granted to the vendor a royalty in an amount equal to
10% of the net cash flow resulting from any processing
operations of Kasese up to an aggregate maximum of
U.S.$10.0 million. If there is no cash flow, no royalty
will be payable for such period. These documents also contain
terms and conditions customary for agreements of this type. We
also subsequently acquired approximately $77.2 million of
indebtedness of Kasese. For more information on the cobalt
processing plant, see Item 4. Information on the
Company  Property, Plants and Equipment and
Note 2 to our consolidated financial statements included in
this annual report.

In July 2002, we disposed of an indirect interest
in an oil venture royalty stream pursuant to a Stock Purchase
Agreement among Occidental (East Shabwa), LLC
(Occidental), Intercap Yemen, Inc.
(Intercap), an indirect wholly-owned subsidiary of
MFC, and MFC dated July 23, 2003. Pursuant to such
agreement, all of the outstanding common shares of Comeco
Petroleum, Inc. (Comeco) held by Intercap were
transferred to Occidental as consideration for the purchase
price. Intercap held 500 shares of common stock of Comeco which
represented a 41.25% interest in Comeco. Comeco, in turn, holds
a 28.57% interest in the East Shabwa Development Area, an oil
field in Yemen. The agreement contains terms and conditions
customary for agreements of this type.




Exchange Controls

There are presently no governmental laws, decrees
or regulations in Canada which restrict the export or import of
capital, or which impose foreign exchange controls or affect the
remittance of interest, dividends or other payments to
non-resident holders of MFCs common shares. However, any
remittances of dividends to United States residents are subject
to a 15% withholding tax (5% if the beneficial owner of the
dividends is a corporation owning at least 10% of our voting
shares) pursuant to the Canada-U.S. Tax Convention (1980),
as amended (the Treaty). See Item 10.
Additional Information  Taxation.

Except as provided in the ICA, there are no
limitations specific to the rights of non-Canadians to hold or
vote our common shares under the laws of Canada or the Yukon
Territory, or in our charter documents. The following summarizes
the principal features of the ICA for non-Canadian residents
proposing to acquire our

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common shares. This summary is of a general
nature only and is not intended to be, and should not be
construed to be, legal advice to any holder or prospective
holder of our common shares, and no opinion or representation to
any holder or prospective holder of our common shares is hereby
made. Accordingly, holders and prospective holders of our common
shares should consult with their own legal advisors with respect
to the consequences of purchasing and owning our common
shares.


The ICA governs the acquisition of Canadian
businesses by non-Canadians. Under the ICA, non-Canadian persons
or entities acquiring control (as defined in the
ICA) of a corporation carrying on business in Canada are
required to either notify, or file an application for review
with, Industry Canada. Industry Canada may review any
transaction which results in the direct or indirect acquisition
of control of a Canadian business, where the gross value of
corporate assets exceeds certain threshold levels (which are
higher for investors from members of the World Trade
Organization (WTO), including Americans, or WTO
member-controlled companies) or where the activity of the
business is related to Canadas cultural heritage or
national identity. No change of voting control will be deemed to
have occurred, for purposes of the ICA, if less than one-third
of the voting control of a Canadian corporation is acquired by
an investor.

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

Certain transactions relating to our common
shares would be exempt from the ICA, including:



| |   |                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the acquisition of our common shares by a person
    in the ordinary course of that persons business as a
    trader or dealer in securities;                                                                                                                      
|
| |  | the acquisition of control of MFC in connection
    with the realization of security granted for a loan or other
    financial assistance and not for a purpose related to the
    provisions of the ICA; and                                                       
|
| |  | the acquisition of control of MFC by reason of an
    amalgamation, merger, consolidation or corporate reorganization
    following which the ultimate direct or indirect control in fact
    of MFC, through ownership of our common shares, remains
    unchanged.




Taxation



| |                                                     
| | ----------------------------------------------------
| | Certain Canadian Federal Income Tax
    Consequences

We consider that the following general summary
fairly describes the principal Canadian federal income tax
consequences applicable to a holder of our common shares who is
a resident of the United States, who is not, will not be and
will not be deemed to be a resident of Canada for purposes of
the Income Tax Act (Canada) (the ITA) and any
applicable tax treaty and who does not use or hold, and is not
deemed to use or hold, his common shares in the capital of MFC
in connection with carrying on a business in Canada (a
non-resident holder).

This summary is based upon the current provisions
of the ITA, the regulations thereunder (the
Regulations), the current publicly announced
administrative and assessing policies of the Canada Customs and
Revenue Agency and the Treaty. This summary also takes into
account the amendments to the ITA and the Regulations publicly
announced by the Minister of Finance (Canada) prior to the date
hereof (the Tax Proposals) and assumes that all such
Tax Proposals will be enacted in their present form. However, no
assurances can be given that the Tax Proposals will be enacted
in the form proposed, or at all. This summary is not exhaustive
of all possible Canadian federal income tax consequences
applicable to a holder of our common shares and, except for the
foregoing, this summary does not take into account or anticipate
any changes in law, whether by legislative, administrative or
judicial decision or action, nor does it take into account
provincial,

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territorial or foreign income tax legislation or
considerations, which may differ from the Canadian federal
income tax consequences described herein.


This summary is of a general nature only and
is not intended to be, and should not be construed to be, legal,
business or tax advice to any particular holder or prospective
holder of our common shares, and no opinion or representation
with respect to the tax consequences to any holder or
prospective holder of our common shares is made. Accordingly,
holders and prospective holders of our common shares should
consult their own tax advisors with respect to the income tax
consequences of purchasing, owning and disposing of our common
shares in their particular circumstances.



| |          
| | ---------
| | Dividends

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



| |              
| | -------------
| | Capital Gains

A non-resident holder is not subject to tax under
the ITA in respect of a capital gain realized upon the
disposition of a common share of MFC unless such share
represents taxable Canadian property (as defined in
the ITA) to the holder thereof. Our common shares generally will
be considered taxable Canadian property to a nonresident holder
if:



| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | the non-resident holder;                                                                                
|
| |  | persons with whom the non-resident holder did not
    deal at arms length; or                          
|
| |  | the non-resident holder and persons with whom
    such non-resident holder did not deal at arms length,

owned, or had an interest in an option in respect
of, not less than 25% of the issued shares of any class of our
capital stock at any time during the 60 month period
immediately preceding the disposition of such shares. In the
case of a non-resident holder to whom shares of MFC represent
taxable Canadian property and who is resident in the United
States, no Canadian taxes will generally be payable on a capital
gain realized on such shares by reason of the Treaty unless the
value of such shares is derived principally from real property
situated in Canada.



| |                                                          
| | ---------------------------------------------------------
| | Certain United States Federal Income Tax
    Consequences

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

The following discussion is based upon the
Internal Revenue Code of 1986, as amended (the
Code), Treasury Regulations, published Internal
Revenue Service (IRS) rulings, published
administrative positions of the IRS and court decisions that are
currently applicable, any or all of which could be materially
and adversely changed, possibly on a retroactive basis, at any
time. In addition, this discussion does not consider the
potential effects, both adverse and beneficial, of any recently
proposed legislation which, if enacted, could be applied,
possibly on a retroactive basis, at any time. No assurance can
be given that the IRS will agree with

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such statements and conclusions, or will not
take, or a court will not adopt, a position contrary to any
position taken herein.


The following discussion is for general
information only and is not intended to be, nor should it be
construed to be, legal, business or tax advice to any holder or
prospective holder of our common shares, and no opinion or
representation with respect to the United States Federal income
tax consequences to any such holder or prospective holder is
made. Accordingly, holders and prospective holders of common
shares should consult their own tax advisors with respect to
Federal, state, local, and foreign tax consequences of
purchasing, owning and disposing of our common shares.



| |             
| | ------------
| | U.S. Holders

As used herein, a U.S. Holder
includes a holder of less than 10% of our common shares who is a
citizen or resident of the United States, a corporation created
or organized in or under the laws of the United States or of any
political subdivision thereof, any entity which is taxable as a
corporation for U.S. tax purposes and any other person or
entity whose ownership of our common shares is effectively
connected with the conduct of a trade or business in the United
States. A U.S. Holder does not include persons subject to
special provisions of Federal income tax law, such as tax-exempt
organizations, qualified retirement plans, financial
institutions, insurance companies, real estate investment
trusts, regulated investment companies, broker-dealers,
non-resident alien individuals or foreign corporations whose
ownership of our common shares is not effectively connected with
the conduct of a trade or business in the United States and
shareholders who acquired their shares through the exercise of
employee stock options or otherwise as compensation.



| |                   
| | ------------------
| | Foreign Tax Credit

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



| |                                           
| | ------------------------------------------
| | Passive Foreign Investment
    Corporation

We do not believe that we are a passive foreign
investment corporation (a PFIC). If a
U.S. Holder disposes of shares in a PFIC, any resultant
gain will be subject to a tax that is determined by apportioning
the gain pro rata over the entire holding period of the shares.
The amount of gain that is apportioned to the current year, and
to any pre-1987 holding period, is included in the
U.S. Holders current income.

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

38



---



##### Table of Contents



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

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




Documents on Display

We are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended. In
accordance with these requirements, we file reports and other
information with the SEC. These materials, including this annual
report and the exhibits hereto, may be inspected and copied at
the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the
SECs regional offices at 175 West Jackson Boulevard,
Suite 900, Chicago, Illinois 60604 and 233 Broadway, New
York, New York 10279. Copies of the materials may be obtained
from the principal office of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The public may
obtain information on the operation of the SECs public
reference facilities by calling the SEC in the United States at
1-800-SEC-0330. The SEC also maintains a web site at
http://www.sec.gov that contains reports, proxy
statements and other information regarding registrants that file
electronically with the SEC.

39



---



##### Table of Contents








|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK

We are exposed to market risks from changes in
interest rates, foreign currency exchange rates and equity
prices which may affect our results of operations and financial
condition and, consequently, our fair value. We manage these
risks through internal risk management policies as well as the
use of derivative instruments. We use derivative instruments to
manage our exposure and our clients exposure to currency
exchange rate risks. The use of derivative instruments depends
on our managements perception of future economic events
and developments. These types of derivative instruments are
generally highly speculative in nature. They are also very
volatile as they are highly leveraged given that margin
requirements are relatively low in proportion to notional
amounts.

Many of our strategies, including the use of
derivative instruments and the types of derivative instruments
selected by us, are based on historical trading patterns and
correlations and our managements expectations of future
events. However, these strategies may not be fully effective in
all market environments or against all types of risks.
Unexpected market developments may affect our risk management
strategies during this time, and unanticipated developments
could impact our risk management strategies in the future. If
any of the variety of instruments and strategies we utilize are
not effective, we may incur losses.




Derivative Instruments

At December 31, 2002, we did not hold any
forward foreign exchange contracts. We have provided a loan, in
the principal amount of
30.0 million,
which has an embedded derivative feature which fixes the
exchange rate at
1.00 =
U.S.$0.9731 in the event the Euro falls below this exchange
rate. No gain or loss was recognized on this embedded derivative
as at December 31, 2002. At December 31, 2001, we held
four forward foreign exchange contracts in the aggregate
notional amount of $24.7 million which covered the period
through March 31, 2002. We entered into these contracts for
our own account to manage our exposure to foreign currency
exchange risks.

40



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##### Table of Contents






Interest Rate Risk

Fluctuations in interest rates may affect the
fair value of fixed interest rate financial instruments
sensitive to interest rates. An increase in market interest
rates may decrease the fair value of our financial instrument
assets and increase the fair value of our financial instrument
liabilities. A decrease in market interest rates may increase
the fair value of our financial instrument assets and decrease
the fair value of our financial instrument liabilities. An
increase in interest rates may also increase the risk of
defaults on loans. However, since our loans are collateralized,
we do not consider that the loans are subject to interest rate
risk. Our financial instruments which may be sensitive to
interest rate fluctuations are investments and debt obligations.
The following tables provide information about our exposure to
interest rate fluctuations for the carrying amount of financial
instruments that may be sensitive to such fluctuations as at
December 31, 2002 and 2001, respectively, and expected cash
flows from these instruments.

As at December 31, 2002

(in thousands)


|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |       |            |  |   |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|------------------- |  | -------- | ------ | ----- |  | -------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ----- | ---------- |  | - | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ------ | 
|                    |  |          |        |       |  |                           
|                    |  |          |        |       |  | Expected Future Cash Flow*
|                    |  | Carrying |        | Fair  |  |                           
|                    |  | Value    |        | Value |  | 2003                       |        | 2004 |  | 2005 |        | 2006 |  | 2007 |       | Thereafter
|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |       |           
|Investments(1)      |  | $        | 68,163 |       |  | $                          | 68,261 |      |  | $    | 35,282 |      |  | $    | 5,716 |            |  | $ | 4,900 |  |  | $ | 4,900 |  |  | $ | 4,900 |  |  | $ | 37,046 | 
|Debt obligations(2) |  |          | 25,790 |       |  |                            | 20,413 |      |  |      | 2,784  |      |  |      | 1,721 |            |  |   | 1,721 |  |  |   | 6,074 |  |  |   | 1,721 |  |  |   | 22,369 | 



---

|  |                                                   
|- | --------------------------------------------------
|* | Including interest and dividends where applicable.

|    |                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------
|(1) | Investments consist of debt securities and
    preferred stock.                                           
|(2) | Debt obligations consist of the bonds which
    mature on April 1, 2008 and bear interest at 8% per annum.

As at December 31, 2001

(in thousands)


|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |        |            |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        | 
|------------------- |  | -------- | ------ | ----- |  | -------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | - | ----- |  |  | - | ----- |  |  | - | ------ |  |  | - | ------ | 
|                    |  |          |        |       |  |                           
|                    |  |          |        |       |  | Expected Future Cash Flow*
|                    |  | Carrying |        | Fair  |  |                           
|                    |  | Value    |        | Value |  | 2002                       |        | 2003 |  | 2004 |        | 2005 |  | 2006 |        | Thereafter
|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |        |           
|Investments(1)      |  | $        | 60,530 |       |  | $                          | 60,503 |      |  | $    | 27,246 |      |  | $    | 4,955  |            |  | $ | 5,688 |  |  | $ | 4,900 |  |  | $ | 4,900  |  |  | $ | 37,451 | 
|Debt obligations(2) |  |          | 63,381 |       |  |                            | 46,954 |      |  |      | 7,759  |      |  |      | 18,351 |            |  |   | 1,735 |  |  |   | 1,735 |  |  |   | 33,718 |  |  |   | 23,856 | 



---

|  |                                                   
|- | --------------------------------------------------
|* | Including interest and dividends where applicable.

|    |                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------
|(1) | Investments consist of debt securities and
    preferred stock.                                           
|(2) | Debt obligations consist of the bonds which
    mature on April 1, 2008 and bear interest at 8% per annum.

41



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##### Table of Contents






Foreign Currency Exchange Rate Risk

Our reporting currency is the Canadian dollar. We
hold financial instruments primarily denominated in
U.S. dollars, Euro and Swiss francs. A depreciation of such
currencies against the Canadian dollar will decrease the fair
value of our financial instrument assets and liabilities. An
appreciation of such currencies against the Canadian dollar will
increase the fair value of our financial instrument assets and
liabilities. Our financial instruments which may be sensitive to
foreign currency exchange rate fluctuations are investments,
loans, deposits and debt obligations. The following tables
provide information about our exposure to foreign currency
exchange rate fluctuations for the carrying amount of financial
instruments that may be sensitive to such fluctuations as at
December 31, 2002 and 2001, respectively, and expected cash
flows from these instruments:

As at December 31, 2002

(in thousands)


|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |        |            |  |   |       |  |  |   |        |  |  |   |       |  |  |   |        | 
|------------------- |  | -------- | ------ | ----- |  | -------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | - | ----- |  |  | - | ------ |  |  | - | ----- |  |  | - | ------ | 
|                    |  |          |        |       |  |                           
|                    |  |          |        |       |  | Expected Future Cash Flow*
|                    |  | Carrying |        | Fair  |  |                           
|                    |  | Value    |        | Value |  | 2003                       |        | 2004 |  | 2005 |        | 2006 |  | 2007 |        | Thereafter
|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |        |           
|Investments(1)      |  | $        | 54,115 |       |  | $                          | 54,821 |      |  | $    | 43,370 |      |  | $    | 816    |            |  | $ |      |  |  | $ |       |  |  | $ |      |  |  | $ | 10,010 | 
|Loans(2)            |  |          | 75,366 |       |  |                            | 75,366 |      |  |      | 33,393 |      |  |      | 52,613 |            |  |   |      |  |  |   |       |  |  |   |      |  |  |   |       | 
|Deposits(3)         |  |          | 39,198 |       |  |                            | 39,198 |      |  |      | 39,198 |      |  |      |       |            |  |   |      |  |  |   |       |  |  |   |      |  |  |   |       | 
|Debt obligations(4) |  |          | 68,798 |       |  |                            | 63,421 |      |  |      | 33,941 |      |  |      | 6,720  |            |  |   | 6,526 |  |  |   | 10,684 |  |  |   | 1,721 |  |  |   | 22,369 | 



---

|  |                                                   
|- | --------------------------------------------------
|* | Including interest and dividends where applicable.

|    |                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Investments consist of debt securities and equity
    securities, both of which are denominated in U.S. dollars,
    Euros or Swiss francs.
|(2) | Loans are denominated in U.S. dollars, Euros
    or Swiss francs.                                                                          
|(3) | Deposits consist of cash deposits with MFC Bank.                                                                                           
|(4) | Debt obligations consist of the bonds and other
    debt, which are denominated in U.S. dollars or Euros.                                  

As at December 31, 2001

(in thousands)


|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |        |            |  |   |       |  |  |   |       |  |  |   |        |  |  |   |        | 
|------------------- |  | -------- | ------ | ----- |  | -------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | - | ----- |  |  | - | ----- |  |  | - | ------ |  |  | - | ------ | 
|                    |  |          |        |       |  |                           
|                    |  |          |        |       |  | Expected Future Cash Flow*
|                    |  | Carrying |        | Fair  |  |                           
|                    |  | Value    |        | Value |  | 2002                       |        | 2003 |  | 2004 |        | 2005 |  | 2006 |        | Thereafter
|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |        |           
|Investments(1)      |  | $        | 67,989 |       |  | $                          | 66,867 |      |  | $    | 59,893 |      |  | $    | 55     |            |  | $ | 822   |  |  | $ |      |  |  | $ |       |  |  | $ | 7,356  | 
|Loans(2)            |  |          | 45,460 |       |  |                            | 45,460 |      |  |      | 37,687 |      |  |      | 9,913  |            |  |   |      |  |  |   |      |  |  |   |       |  |  |   |       | 
|Deposits(3)         |  |          | 524    |       |  |                            | 524    |      |  |      | 524    |      |  |      |       |            |  |   |      |  |  |   |      |  |  |   |       |  |  |   |       | 
|Debt obligations(4) |  |          | 82,394 |       |  |                            | 64,941 |      |  |      | 18,544 |      |  |      | 14,309 |            |  |   | 6,057 |  |  |   | 5,888 |  |  |   | 37,702 |  |  |   | 23,856 | 



---

|  |                                                   
|- | --------------------------------------------------
|* | Including interest and dividends where applicable.

|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Investments consist of debt securities and equity
    securities, both of which are primarily denominated in
    U.S. dollars or Swiss francs.
|(2) | Loans are denominated in U.S. dollars, Euros
    or Swiss francs.                                                                             
|(3) | Deposits consist of cash deposits with MFC Bank.                                                                                              
|(4) | Debt obligations consist of the bonds and other
    debt, all of which are denominated in U.S. dollars or Euro.                               

42



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Equity Price Risk

Changes in trading prices of equity securities
may affect the fair value of equity securities or the fair value
of other securities convertible into equity securities. An
increase in trading prices will increase the fair value and a
decrease in trading prices will decrease the fair value of
equity securities or instruments convertible into equity
securities. Our financial instruments which may be sensitive to
fluctuations in equity prices are investments and debt
obligations. The following tables provide information about our
exposure to fluctuations in equity prices for the carrying
amount of financial instruments sensitive to such fluctuations
as at December 31, 2002 and 2001, respectively, and
expected cash flows from these instruments:

As at December 31, 2002

(in thousands)


|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |       |            |  |   |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|------------------- |  | -------- | ------ | ----- |  | -------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ----- | ---------- |  | - | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ------ | 
|                    |  |          |        |       |  |                           
|                    |  |          |        |       |  | Expected Future Cash Flow*
|                    |  | Carrying |        | Fair  |  |                           
|                    |  | Value    |        | Value |  | 2003                       |        | 2004 |  | 2005 |        | 2006 |  | 2007 |       | Thereafter
|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |       |           
|Investments(1)      |  | $        | 70,157 |       |  | $                          | 70,354 |      |  | $    | 22,691 |      |  | $    | 4,900 |            |  | $ | 4,900 |  |  | $ | 4,900 |  |  | $ | 4,900 |  |  | $ | 52,563 | 
|Debt obligations(2) |  |          | 21,509 |       |  |                            | 16,132 |      |  |      | 1,721  |      |  |      | 1,721 |            |  |   | 1,721 |  |  |   | 1,721 |  |  |   | 1,721 |  |  |   | 21,939 | 



---

|  |                                                   
|- | --------------------------------------------------
|* | Including interest and dividends where applicable.

|    |                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------
|(1) | Investments consist of equity securities.                                                              
|(2) | Debt obligations consist of bonds which are
    convertible into common shares of MFC at a fixed price.

As at December 31, 2001

(in thousands)


|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |       |            |  |   |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|------------------- |  | -------- | ------ | ----- |  | -------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ----- | ---------- |  | - | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ------ | 
|                    |  |          |        |       |  |                           
|                    |  |          |        |       |  | Expected Future Cash Flow*
|                    |  | Carrying |        | Fair  |  |                           
|                    |  | Value    |        | Value |  | 2002                       |        | 2003 |  | 2004 |        | 2005 |  | 2006 |       | Thereafter
|                    |  |          |        |       |  |                            |        |      |  |      |        |      |  |      |       |           
|Investments(1)      |  | $        | 72,703 |       |  | $                          | 71,110 |      |  | $    | 28,027 |      |  | $    | 4,900 |            |  | $ | 4,900 |  |  | $ | 4,900 |  |  | $ | 4,900 |  |  | $ | 49,596 | 
|Debt obligations(2) |  |          | 21,687 |       |  |                            | 20,385 |      |  |      | 1,735  |      |  |      | 1,735 |            |  |   | 1,735 |  |  |   | 1,735 |  |  |   | 1,735 |  |  |   | 23,856 | 



---

|  |                                                   
|- | --------------------------------------------------
|* | Including interest and dividends where applicable.

|    |                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------
|(1) | Investments consist of equity securities.                                                              
|(2) | Debt obligations consist of bonds which are
    convertible into common shares of MFC at a fixed price.






|         |                                                           
|-------- | ----------------------------------------------------------
|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES

Not applicable.

43



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##### Table of Contents






PART II






|         |                                                    
|-------- | ---------------------------------------------------
|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND
    DELINQUENCIES

None.






|         |                                                                                 
|-------- | --------------------------------------------------------------------------------
|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF
    SECURITY HOLDERS AND USE OF PROCEEDS

None.






|         |                        
|-------- | -----------------------
|ITEM 15. | CONTROLS AND PROCEDURES

Within 90 days prior to the date of this
report, we carried out an evaluation, under the supervision and
with the participation of our chief executive officer and
principal financial officer, of the effectiveness of the design
and operation of our disclosure controls and procedures. Based
on this evaluation, our chief executive officer and principal
financial officer concluded that our disclosure controls and
procedures are effective in timely alerting them to material
information required to be included in our periodic reports on
file with the SEC. It should be noted that the design of any
system of controls is based in part upon certain assumptions
about the likelihood of certain events, and there can be no
assurance that any design will succeed in achieving its stated
goals under all future conditions, regardless of how remote. In
addition, we reviewed our internal controls, and there have been
no significant changes in our internal controls or in other
factors that could significantly affect those controls
subsequent to the date of their last evaluation.






|          |                                 
|--------- | --------------------------------
|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT

[Reserved]






|          |               
|--------- | --------------
|ITEM 16B. | CODE OF ETHICS

[Reserved]






|          |                                           
|--------- | ------------------------------------------
|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND
    SERVICES

[Reserved]

44



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##### Table of Contents






PART III




ITEM 17.     FINANCIAL
STATEMENTS

Not applicable.




ITEM 18.     FINANCIAL
STATEMENTS




Index to Financial Statements and
Schedules



|   |                                                                                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------
|1. | Independent Auditors Report on the
    Consolidated Financial Statements of MFC as at December 31,
    2002, 2001 and 2000.      
|  
|2. | Consolidated Balance Sheets at December 31,
    2002 and 2001 (audited).                                                          
|  
|3. | Consolidated Statements of Income for the years
    ended December 31, 2002, 2001 and 2000 (audited).                             
|  
|4. | Consolidated Statements of Changes in
    Shareholders Equity for the years ended December 31,
    2002, 2001 and 2000 (audited).
|  
|5. | Consolidated Statements of Cash Flows for the
    years ended December 31, 2002, 2001 and 2000 (audited).                         
|  
|6. | Notes to Consolidated Financial Statements.                                                                                       
|  
|7. | Independent Auditors Report on Financial
    Statement Schedules.                                                                
|  
|8. | Financial Statement Schedules:                                                                                                    

I     Condensed
Financial Information of Registrant.

III   Supplementary Insurance
Information.

IV   Reinsurance.

VI   Supplemental Information
Concerning Property  Casualty Insurance Operations.

45



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##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Shareholders

MFC Bancorp Ltd.


We have audited the consolidated balance sheets
of MFC Bancorp Ltd. and Subsidiaries as at December 31,
2002 and 2001, and the consolidated statements of income,
changes in shareholders equity and cash flows for the
years ended December 31, 2002, 2001 and 2000. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, these consolidated financial
statements present fairly, in all material respects, the
financial position of the Company as at December 31, 2002
and 2001, and the results of its operations and its cash flows
for the years ended December 31, 2002, 2001 and 2000, in
accordance with generally accepted accounting principles in
Canada, which differ from United States generally accepted
accounting principles as described in Note 18 to the
consolidated financial statements.

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

April 7, 2003

Seattle, Washington


46



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##### Table of Contents



MFC BANCORP LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2001


(In Thousands)


|                                         |                                                                  |                   |         |                  |        |      |         |         |         |   |         |         |         | 
|---------------------------------------- | ---------------------------------------------------------------- | ----------------- | ------- | ---------------- | ------ | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                         |                                                                  |                   |         |                  |        |     
|                                         |                                                                  | U.S. Dollars      |         |                 
|                                         |                                                                  | (Information      |         | Canadian Dollars
|                                         |                                                                  | Only)             |         |                 
|                                         |                                                                  | 2002              |         | 2002             |        | 2001
|                                         |                                                                  |                   |         |                  |        |     
|ASSETS                                   |                                                                  |                   |         |                 
|Cash and cash equivalents                |                                                                  | $                 | 64,835  |                  |        | $    | 102,413 |         |         | $ | 77,166  |        
|Securities                               |                                                                  |                   | 39,661  |                  |        |      | 62,649  |         |         |   | 75,805  |        
|Loans                                    |                                                                  |                   | 49,303  |                  |        |      | 77,879  |         |         |   | 69,737  |        
|Receivables                              |                                                                  |                   | 34,157  |                  |        |      | 53,955  |         |         |   | 44,864  |        
|Commodity investments                    |                                                                  |                   | 8,338   |                  |        |      | 13,172  |         |         |   | 5,447   |        
|Properties held for sale                 |                                                                  |                   | 46,188  |                  |        |      | 72,959  |         |         |   | 22,480  |        
|Resource property                        |                                                                  |                   | 23,263  |                  |        |      | 36,747  |         |         |   | 37,451  |        
|Goodwill                                 |                                                                  |                   | 10,390  |                  |        |      | 16,412  |         |         |   | 28,066  |        
|Equity method investments                |                                                                  |                   | 5,012   |                  |        |      | 7,917   |         |         |   | 30,898  |        
|Prepaid and other                        |                                                                  |                   | 1,565   |                  |        |      | 2,471   |         |         |   | 2,725   |        
|                                         |                                                                  |                   |         |                  |        |      |         |         |         |   |         |        
|                                         |                                                                  | $                 | 282,712 |                  |        | $    | 446,574 |         |         | $ | 394,639 |        
|                                         |                                                                  |                   |         |                  |        |      |         |         |         |   |         |        
|LIABILITIES AND SHAREHOLDERS
    EQUITY |                                                                  |                   |         |                 
|Liabilities                              |                                                                  |                   |         |                  |        |      |         |         |         |   |         |        
|                                         | Accounts payable and accrued expenses                            |                   | $       | 29,931           |        |      | $       | 47,279  |         |   | $       | 41,649  |        
|                                         | Debt                                                             |                   |         | 43,554           |        |      |         | 68,798  |         |   |         | 98,000  |        
|                                         | Future income tax liability                                      |                   |         | 163              |        |      |         | 258     |         |   |         | 5,348   |        
|                                         | Deposits                                                         |                   |         | 24,815           |        |      |         | 39,198  |         |   |         | 524     |        
|                                         |                                                                  |                   |         |                  |        |      |         |         |         |   |         |        
|                                         |                                                                  | Total liabilities |         |                  | 98,463 |      |         |         | 155,533 |   |         |         | 145,521 | 
|                                         |                                                                  |                   |         |                  |        |      |         |         |         |   |         |        
|Minority interests                       |                                                                  |                   | 3,641   |                  |        |      | 5,751   |         |         |   | 3,121   |        
|Shareholders Equity                     |                                                                  |                   |         |                  |        |      |         |         |         |   |         |        
|                                         | Common stock, without par value; authorized
    unlimited number |                   |         | 44,485           |        |      |         | 70,269  |         |   |         | 76,673  |        
|                                         | Cumulative translation adjustment                                |                   |         | 11,859           |        |      |         | 18,733  |         |   |         | 4,452   |        
|                                         | Retained earnings                                                |                   |         | 124,264          |        |      |         | 196,288 |         |   |         | 164,872 |        
|                                         |                                                                  |                   |         |                  |        |      |         |         |         |   |         |        
|                                         |                                                                  |                   | 180,608 |                  |        |      | 285,290 |         |         |   | 245,997 |        
|                                         |                                                                  |                   |         |                  |        |      |         |         |         |   |         |        
|                                         |                                                                  | $                 | 282,712 |                  |        | $    | 446,574 |         |         | $ | 394,639 |        
|                                         |                                                                  |                   |         |                  |        |      |         |         |         |   |         |        

The accompanying notes are an integral part of
these consolidated financial statements.

47



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MFC BANCORP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31, 2002,
2001 and 2000


(In Thousands, Except Earnings Per
Share)


|                                                  |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |        |        | 
|------------------------------------------------- | -------------------------- | ------------ | ------- | ---------------- | ------ | ---- | ------- | ------- | ------ | - | ------- | ------- | ------ | - | ------- | ------ | ------ | 
|                                                  |                            |              |         |                  |        |      |         |        
|                                                  |                            | U.S. Dollars |         |                 
|                                                  |                            | (Information |         | Canadian Dollars
|                                                  |                            | Only)        |         |                 
|                                                  |                            | 2002         |         | 2002             |        | 2001 |         | 2000   
|                                                  |                            |              |         |                  |        |      |         |        
|Financial services revenue                        |                            | $            | 180,006 |                  |        | $    | 284,339 |         |        | $ | 214,246 |         |        | $ | 156,220 |       
|Expenses                                          |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |       
|                                                  | Financial services         |              |         | 111,290          |        |      |         | 175,792 |        |   |         | 143,071 |        |   |         | 88,742 |       
|                                                  | General and administrative |              |         | 22,637           |        |      |         | 35,758  |        |   |         | 21,793  |        |   |         | 21,394 |       
|                                                  | Goodwill impairment        |              |         | 10,203           |        |      |         | 16,116  |        |   |         |        |        |   |         |       |       
|                                                  | Interest expense           |              |         | 6,010            |        |      |         | 9,493   |        |   |         | 5,369   |        |   |         | 4,218  |       
|                                                  |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |       
|                                                  |                            |              | 150,140 |                  |        |      | 237,159 |         |        |   | 170,233 |         |        |   | 114,354 |       
|                                                  |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |       
|Income before income taxes and minority interests |                            |              | 29,866  |                  |        |      | 47,180  |         |        |   | 44,013  |         |        |   | 41,866  |       
|Recovery of (provision for) income taxes          |                            |              | 2,214   |                  |        |      | 3,497   |         |        |   | 772     |         |        |   | (1,689  | )     
|                                                  |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |       
|Income before minority interests                  |                            |              | 32,080  |                  |        |      | 50,677  |         |        |   | 44,785  |         |        |   | 40,177  |       
|Minority interests                                |                            |              | 49      |                  |        |      | 78      |         |        |   | 503     |         |        |   | (1,014  | )     
|                                                  |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |       
|                                                  |                            | Net income   |         | $                | 32,129 |      |         | $       | 50,755 |   |         | $       | 45,288 |   |         | $      | 39,163 | 
|                                                  |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |       
|Earnings per share                                |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |       
|                                                  | Basic                      |              | $       | 2.48             |        |      | $       | 3.93    |        |   | $       | 3.59    |        |   | $       | 3.24   |       
|                                                  |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |       
|                                                  | Diluted                    |              | $       | 2.35             |        |      | $       | 3.70    |        |   | $       | 3.35    |        |   | $       | 3.03   |       
|                                                  |                            |              |         |                  |        |      |         |         |        |   |         |         |        |   |         |       

The accompanying notes are an integral part of
these consolidated financial statements.

48



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MFC BANCORP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS EQUITY

For the Years Ended December 31, 2002,
2001 and 2000


(Canadian Dollars, In Thousands)


|                                                                               |  |              |            |        |  |            |        |             |  |       |         |   |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------ |  | ------------ | ---------- | ------ |  | ---------- | ------ | ----------- |  | ----- | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                                                               |  |              |            |        |  |            |        |            
|                                                                               |  | Common Stock |            |        |  |            |        |            
|                                                                               |  |              |            |        |  | Cumulative |        |            
|                                                                               |  | Number of    |            |        |  | Retained   |        | Translation |  |      
|                                                                               |  | Shares       |            | Amount |  | Earnings   |        | Adjustment  |  | Total
|                                                                               |  |              |            |        |  |            |        |             |  |      
|Balance at December 31, 1999                                                   |  |              | 12,041,156 |        |  | $          | 65,498 |             |  | $     | 109,604 |   |  | $ | (4,291 | ) |  | $ | 170,811 |  
|Net income                                                                     |  |              |           |        |  |            |       |             |  |       | 39,163  |   |  |   |       |   |  |   | 39,163  |  
|Shares issued for exercise of stock options                                    |  |              | 47,000     |        |  |            | 436    |             |  |       |        |   |  |   |       |   |  |   | 436     |  
|Shares issued for cash                                                         |  |              | 500,000    |        |  |            | 5,230  |             |  |       |        |   |  |   |       |   |  |   | 5,230   |  
|Repurchase of shares                                                           |  |              | (500,000   | )      |  |            | (6,026 | )           |  |       |        |   |  |   |       |   |  |   | (6,026  | )
|Translation adjustment                                                         |  |              |           |        |  |            |       |             |  |       |        |   |  |   | 3,520  |   |  |   | 3,520   |  
|                                                                               |  |              |            |        |  |            |        |             |  |       |         |   |  |   |        |   |  |   |         |  
|Balance at December 31, 2000                                                   |  |              | 12,088,156 |        |  |            | 65,138 |             |  |       | 148,767 |   |  |   | (771   | ) |  |   | 213,134 |  
|Net income                                                                     |  |              |           |        |  |            |       |             |  |       | 45,288  |   |  |   |       |   |  |   | 45,288  |  
|Shares issued for exercise of stock options                                    |  |              | 1,089,000  |        |  |            | 11,535 |             |  |       |        |   |  |   |       |   |  |   | 11,535  |  
|Translation adjustment                                                         |  |              |           |        |  |            |       |             |  |       |        |   |  |   | 5,223  |   |  |   | 5,223   |  
|Dividend in equity securities, at carrying value                               |  |              |           |        |  |            |       |             |  |       | (29,183 | ) |  |   |       |   |  |   | (29,183 | )
|                                                                               |  |              |            |        |  |            |        |             |  |       |         |   |  |   |        |   |  |   |         |  
|Balance at December 31, 2001                                                   |  |              | 13,177,156 |        |  |            | 76,673 |             |  |       | 164,872 |   |  |   | 4,452  |   |  |   | 245,997 |  
|Net income                                                                     |  |              |           |        |  |            |       |             |  |       | 50,755  |   |  |   |       |   |  |   | 50,755  |  
|Shares issued for exercise of stock options                                    |  |              | 157,500    |        |  |            | 1,635  |             |  |       |        |   |  |   |       |   |  |   | 1,635   |  
|Shares issued for purchase of minority interest
    in consolidated subsidiary |  |              | 25,071     |        |  |            | 397    |             |  |       |        |   |  |   |       |   |  |   | 397     |  
|Repurchase of shares                                                           |  |              | (546,100   | )      |  |            | (8,660 | )           |  |       |        |   |  |   |       |   |  |   | (8,660  | )
|Shares issued for compensation                                                 |  |              | 18,227     |        |  |            | 224    |             |  |       |        |   |  |   |       |   |  |   | 224     |  
|Translation adjustment                                                         |  |              |           |        |  |            |       |             |  |       |        |   |  |   | 14,281 |   |  |   | 14,281  |  
|Dividend in equity securities, at carrying value                               |  |              |           |        |  |            |       |             |  |       | (19,339 | ) |  |   |       |   |  |   | (19,339 | )
|                                                                               |  |              |            |        |  |            |        |             |  |       |         |   |  |   |        |   |  |   |         |  
|Balance at December 31, 2002                                                   |  |              | 12,831,854 |        |  | $          | 70,269 |             |  | $     | 196,288 |   |  | $ | 18,733 |   |  | $ | 285,290 |  
|                                                                               |  |              |            |        |  |            |        |             |  |       |         |   |  |   |        |   |  |   |         |  

The accompanying notes are an integral part of
these consolidated financial statements.

49



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MFC BANCORP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the Years Ended December 31, 2002,
2001 and 2000


(Canadian Dollars, In Thousands)


|                                                  |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |         |       |         |  
|------------------------------------------------- | ----------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ----- | ------- | -
|                                                  |                                                 | 2002                                                                            |                                       | 2001    |         | 2000  
|                                                  |                                                 |                                                                                 |                                       |         |         |       
|Cash flows from operating activities              |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |        
|                                                  | Net income                                      |                                                                                 | $                                     | 50,755  |         |        | $       | 45,288  |         |        | $       | 39,163  |      
|                                                  | Adjustments for:                                |                                                                                 |                                       |         |         |        |         |         |         |        |         |         |      
|                                                  |                                                 | Goodwill impairment                                                             |                                       |         | 16,116  |        |         |         |        |        |         |         |      |        
|                                                  |                                                 | Gain on debt reduction                                                          |                                       |         | (19,746 | )      |         |         | (22,409 | )      |         |         |      |        
|                                                  |                                                 | Amortization and depreciation                                                   |                                       |         | 1,528   |        |         |         | 2,049   |        |         |         | 2,041 |        
|                                                  |                                                 | Minority interests                                                              |                                       |         | (78     | )      |         |         | (503    | )      |         |         | 1,014 |        
|                                                  |                                                 | Dividend from equity method investee                                            |                                       |         |        |        |         |         | 1,021   |        |         |         |      |        
|                                                  |                                                 | Debt extinguishment                                                             |                                       |         | (49,122 | )      |         |         |        |        |         |         |      |        
|                                                  |                                                 | Changes in operating assets and liabilities, net
    of effects of acquisitions |                                       |         |         |        |         |         |         |        |         |         |       |        
|                                                  |                                                 |                                                                                 | Securities                            |         |         | 12,179 |         |         |         | 1,836  |         |         |       | (17,760 | )
|                                                  |                                                 |                                                                                 | Receivables                           |         |         | 1,621  |         |         |         | 48,315 |         |         |       | 187     |  
|                                                  |                                                 |                                                                                 | Commodity investments                 |         |         | (6,026 | )       |         |         |       |         |         |       |        |  
|                                                  |                                                 |                                                                                 | Properties held for sale              |         |         | 13,487 |         |         |         | (406   | )       |         |       | (1,232  | )
|                                                  |                                                 |                                                                                 | Accounts payable and accrued expenses |         |         | 3,767  |         |         |         | (8,466 | )       |         |       | 2,064   |  
|                                                  |                                                 |                                                                                 | Future income tax liability           |         |         | (4,604 | )       |         |         | (1,417 | )       |         |       |        |  
|                                                  |                                                 |                                                                                 | Other                                 |         |         | 970    |         |         |         | (777   | )       |         |       | (275    | )
|                                                  |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |        
|Cash flows from operating activities              |                                                 |                                                                                 | 20,847                                |         |         |        | 64,531  |         |         |        | 25,202  |        
|Cash flows from investing activities              |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |        
|                                                  | Net decrease (increase) in loans                |                                                                                 |                                       | (4,778  | )       |        |         | 25,099  |         |        |         | (31,661 | )    
|                                                  | Purchases of long-term securities, net          |                                                                                 |                                       | (5,441  | )       |        |         | (4,816  | )       |        |         | 5,551   |      
|                                                  | Sale of equity method investment                |                                                                                 |                                       | 25,915  |         |        |         |        |         |        |         |        |      
|                                                  | Purchases of subsidiaries, net of cash acquired |                                                                                 |                                       | (34,978 | )       |        |         | (1,018  | )       |        |         |        |      
|                                                  | Other                                           |                                                                                 |                                       | 204     |         |        |         | (425    | )       |        |         | 430     |      
|                                                  |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |        
|Cash flows from investing activities              |                                                 |                                                                                 | (19,078                               | )       |         |        | 18,840  |         |         |        | (25,680 | )      
|Cash flows from financing activities              |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |        
|                                                  | Net increase (decrease) in deposits             |                                                                                 |                                       | 33,894  |         |        |         | (62,385 | )       |        |         | 13,282  |      
|                                                  | Borrowings                                      |                                                                                 |                                       | 38,660  |         |        |         | 12,310  |         |        |         | 8,135   |      
|                                                  | Debt repayments                                 |                                                                                 |                                       | (52,005 | )       |        |         | (37,562 | )       |        |         | (4,089  | )    
|                                                  | Issuance (repurchase) of common stock, net      |                                                                                 |                                       | (7,025  | )       |        |         | 11,535  |         |        |         | (360    | )    
|                                                  | Other                                           |                                                                                 |                                       |        |         |        |         |        |         |        |         | (111    | )    
|                                                  |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |        
|Cash flows from financing activities              |                                                 |                                                                                 | 13,524                                |         |         |        | (76,102 | )       |         |        | 16,857  |        
|Exchange rate effect on cash and cash equivalents |                                                 |                                                                                 | 9,954                                 |         |         |        | 1,373   |         |         |        | 2,578   |        
|                                                  |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |        
|Increase in cash and cash equivalents             |                                                 |                                                                                 | 25,247                                |         |         |        | 8,642   |         |         |        | 18,957  |        
|Cash and cash equivalents, beginning of year      |                                                 |                                                                                 | 77,166                                |         |         |        | 68,524  |         |         |        | 49,567  |        
|                                                  |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |        
|Cash and cash equivalents, end of year            |                                                 | $                                                                               | 102,413                               |         |         | $      | 77,166  |         |         | $      | 68,524  |        
|                                                  |                                                 |                                                                                 |                                       |         |         |        |         |         |         |        |         |        

The accompanying notes are an integral part of
these consolidated financial statements.

50



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Note 1.     The
Company and Summary of Significant Accounting Policies

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



| |                     
| | --------------------
| | Nature of Operations

The Company is in the business of merchant
banking. This includes financial advisory services, proprietary
investing and trading activities on an international basis which
are facilitated by the Companys banking and trading
subsidiaries. The Company seeks investments in many industries
while emphasizing those business opportunities where the
perceived intrinsic value is not properly recognized. The
Company uses its financial and management expertise to add value
within a relatively short time period. The Company also trades
in various basic materials primarily on its own account.
Revenues from these activities are recognized as agreed upon
activities are performed or as assets are disposed of with no
substantial further involvement by the Company and
collectibility is reasonably assured. The Company is managed as
a unit and is treated as a single segment.



| |                            
| | ---------------------------
| | Principles of Consolidation

The consolidated financial statements include the
accounts of the Company and its subsidiaries. Investments in
entities where the Company owns at least a 20% voting interest,
but does not have control, are accounted for under the equity
method. The amount of earnings from equity investees was not
material. All significant intercompany accounts and transactions
have been eliminated.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

Cash and cash equivalents include highly liquid
investments with original maturities of three months or less and
are generally interest bearing. The Company regularly maintains
cash balances in other financial institutions in excess of
insured limits. Interest paid on a cash basis was $7,188, $4,667
and $4,990 for the years ended December 31, 2002, 2001 and
2000, respectively. Income tax amounts paid were $8, none and
$81 during 2002, 2001 and 2000, respectively.

Nonmonetary transactions include the exchange
transaction discussed in Note 15 in 2002; the receipt of
securities totaling $5,506 in repayment of a loan in 2001; an
exchange of 402,500 shares of an affiliate for $1,779 in
cash and 2,597,060 common shares of that affiliate in 2000.

Securities

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

Long-term investment securities are purchased
with the original intention to hold the securities to maturity
or until market conditions render alternative investments more
attractive. Equity securities are stated at cost and debt
securities at amortized cost unless there has been an other than
temporary decline in value, at which time the security is
written down and the unrealized loss is included in the results
of operations.

Realized gains or losses on sales of securities
are determined based on the specific cost basis.

Loans

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

51



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


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

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

Interest income from loans is recognized when
earned using the interest method unless the loan is classified
as impaired at which time recognition of interest income ceases.
Interest on impaired loans is credited to the carrying value of
the loan when received. Loan origination fees are considered to
be adjustments to loan yield and are deferred and amortized to
interest income over the term of the loan. Commitment fees are
amortized to income over the commitment period when it is
unlikely that the commitment will be called upon; otherwise,
they are deferred and amortized to interest income over the term
of the resulting loan. Loan syndication fees are recognized in
income unless the yield on any loans retained by the Company is
less than that of other comparable lenders involved in the
financing. In such cases an appropriate portion of the fee is
deferred and amortized to interest income over the term of the
loan.

Allowance for Credit Losses

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

Specific provisions are established on a
loan-by-loan or receivable basis. A general provision may be
established to absorb potential credit losses attributable to
the deterioration of credit quality on aggregate exposures for
which specific provisions cannot yet be determined. A country
risk provision may be made based on exposures in less developed
countries and on managements overall assessment of the
underlying economic conditions in those countries. Write-offs
are generally recorded after all reasonable restructuring or
collection activities have taken place and there is no realistic
prospect of recovery.

No loans were considered impaired at
December 31, 2002 and 2001, and the Company did not
consider it necessary to reserve for any specific loans or
receivables, country risks or general risks.

Derivative Financial
Instruments

Derivative financial instruments are financial
contracts whose value is derived from interest rates, foreign
exchange rates or other financial or commodity indices. These
instruments are either exchange-traded or

52



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


negotiated. Derivatives may be designated as
hedges, provided certain criteria are met. The Company has no
derivative financial instruments which have been designated as
hedges.

The Company enters into derivative contracts
usually to meet the needs of its customers and to take trading
positions. These derivatives are marked to market with any
unrealized gains or losses recognized immediately in income.
Also, in 2002, the Company entered into an embedded derivative
transaction within a client loan of $49,691. This derivative was
designed to reduce a foreign currency risk. Due to the terms of
this derivative, a loss may not be incurred and at
December 31, 2002, there was no unrealized gain. The
Company held no other significant derivative financial
instruments at December 31, 2002.

At December 31, 2001, the Company held
foreign currency exchange contracts amounting to $24,655 in
notional amount which were settled in 2002 for a realized gain
of $129. During 2001, the Company recorded a loss from a change
in the fair value of these contracts amounting to $1,070.

Commodity Investments

Commodity investments consist of basic materials
held for sale. These investments are stated at the lower of cost
(specific identification) or market.

Properties Held for Sale

Properties held for sale are stated at cost
unless the estimated future undiscounted cash flows expected to
result from disposition is less than carrying value in which
case a loss is recognized based on the fair value of similar
property in the same geographic region. No such losses have been
recorded in these consolidated financial statements.

Resource Property

Resource property is stated at cost. Amortization
is provided on the straight-line basis over the period revenue
is to be received which will end in 2055. However, if expected
future undiscounted cash flows are less than carrying value, a
loss will be recognized. No such losses have been recorded in
these consolidated financial statements.

Goodwill and Other Intangible
Assets

The Canadian Institute of Chartered Accountants
(CICA) adopted a new accounting standard on goodwill
and other intangible assets in 2001, which the Company adopted
for periods beginning January 1, 2002. Goodwill represents
the difference between the acquisition cost of a business and
the fair value of its net tangible assets after an allocation
has been made for assets with indefinite and finite lives. Under
this new standard, goodwill and other intangible assets with
indefinite useful lives are not amortized but are subject to
fair value impairment tests, on at least an annual basis.
Goodwill is allocated to reporting units and any potential
goodwill impairment is identified by comparing the carrying
value of the reporting unit with its fair value.

If any potential impairment is identified, then
the amount of the impairment is quantified by comparing the
carrying value of goodwill to its fair value, based on the fair
value of the assets and liabilities of the reporting unit.
Intangibles with a finite life are amortized over their
estimated useful life and also are tested for impairment
whenever circumstances indicate that the carrying value may not
be recoverable. Other intangible assets are considered impaired
and written down to their net recoverable amount when their net
carrying value exceeds their estimated future net cash flows.
Any impairment of goodwill or other intangible assets is charged
to income in the period in which the impairment is determined.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Foreign Currency Translation

The Company translates foreign assets and
liabilities of its self-sustaining foreign subsidiaries at the
rate of exchange at the balance sheet date. Revenues and
expenses have been translated at the average rate of exchange
throughout the year. Unrealized gains or losses from these
conversions are included in the equity section of the
consolidated balance sheet. Transaction gains that arise from
exchange rate fluctuations on transactions denominated in a
currency other than the local functional currency amounting to
$453, $2,342 and $291 in 2002, 2001 and 2000, respectively, have
been included in general and administrative expenses in the
consolidated statements of income. The translation adjustments
did not recognize the effect of income tax because the Company
expects to reinvest the amounts indefinitely.

Taxes on Income

The Company uses the asset and liability method
to provide for income taxes on all transactions recorded in
these consolidated financial statements. Under this method,
future income tax assets and liabilities are recognized for
temporary differences between the tax and accounting bases of
assets and liabilities as well as for the benefit of losses to
be carried forward to future years for tax purposes that are
likely to be realized using expected tax rates in which the
temporary differences are expected to be recovered or settled.

Stock Based Compensation

The Company follows the intrinsic value based
method of accounting for compensation resulting from the
granting of stock options to employees. No compensation expense
has been recognized in these consolidated financial statements
for the granting of options to employees because the exercise
price of the options approximated the market price for the
common shares at the grant date. Shares of stock issued to
employees are expensed as compensation in the year the shares
are issued based on fair value at the date of issuance. Stock
based payments to non-employees are to be expensed based on the
fair value of shares or options issued. There have been no stock
based payments to non-employees.

The following table illustrates the effect on net
income and earnings per share if compensation expense had been
recognized on the basis of fair value of employee stock options
granted.

|                                                                                                                                  |  |      |        |      |  |      |        |  |  |   |        | 
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                                                                                                                  |  | 2002 |        | 2001 |  | 2000
|                                                                                                                                  |  |      |        |      |  |     
|Net Income                                                                                                                        |  |      |        |      |  |      |        |  |  |   |        | 
|As reported                                                                                                                       |  | $    | 50,755 |      |  | $    | 45,288 |  |  | $ | 39,163 | 
|Deduct: Total stock option compensation expense
    determined under fair value based methods, net of any related
    tax effects |  |      |       |      |  |      | 217    |  |  |   | 217    | 
|                                                                                                                                  |  |      |        |      |  |      |        |  |  |   |        | 
|Proforma net income  basic                                                                                                       |  |      | 50,755 |      |  |      | 45,071 |  |  |   | 38,946 | 
|Dilution adjustment from Note 11                                                                                                  |  |      | 1,735  |      |  |      | 1,634  |  |  |   | 1,520  | 
|                                                                                                                                  |  |      |        |      |  |      |        |  |  |   |        | 
|Proforma net income  diluted                                                                                                     |  | $    | 52,490 |      |  | $    | 46,705 |  |  | $ | 40,466 | 
|                                                                                                                                  |  |      |        |      |  |      |        |  |  |   |        | 
|Basic Earnings Per Share                                                                                                          |  |      |        |      |  |      |        |  |  |   |        | 
|As reported                                                                                                                       |  | $    | 3.93   |      |  | $    | 3.59   |  |  | $ | 3.24   | 
|Proforma                                                                                                                          |  | $    | 3.93   |      |  | $    | 3.57   |  |  | $ | 3.22   | 
|Diluted Earnings Per Share                                                                                                        |  |      |        |      |  |      |        |  |  |   |        | 
|As reported                                                                                                                       |  | $    | 3.70   |      |  | $    | 3.35   |  |  | $ | 3.03   | 
|Proforma                                                                                                                          |  | $    | 3.70   |      |  | $    | 3.34   |  |  | $ | 3.01   | 



| |                   
| | ------------------
| | Earnings Per Share

In 2000, the Company adopted the new CICA
accounting standard on earnings per share which requires the use
of the treasury stock method to calculate diluted earnings per
share. The treasury stock method

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


determines the number of additional common shares
by assuming that outstanding stock warrants and options whose
exercise price is less than the average market price of the
Companys common stock during the period, are exercised and
then reduced by the number of common shares assumed to be
repurchased with the exercise proceeds.

Basic earnings per share is determined by
dividing net income applicable to common shares by the average
number of common shares outstanding for the period. Diluted
earnings per share is determined using the same method as basic
earnings per share except that the weighted average number of
common shares outstanding includes the potential dilutive effect
of stock options and warrants granted as well as convertible
debt computed under the treasury stock method. Such potential
dilution is not recognized in a loss period.



| |          
| | ---------
| | Estimates

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



| |                         
| | ------------------------
| | New Accounting Standards

The CICA has also issued the following new
accounting standards:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A standard which will require the Company to
    document hedging relationships and explicitly demonstrate that
    they are sufficiently effective in order to use accrual
    accounting for positions hedged with derivatives. Otherwise, the
    derivative instrument will be marked-to-market through the
    current years statement of income. This standard is
    applicable for years beginning on or before July 1, 2003.
    The effect on the Companys consolidated financial
    statements is not yet determinable.                                                                     
|
| |  | Related standards with respect to impairment or
    disposal of long-lived assets (effective for years beginning on
    or after April 1, 2003) and disposal of long-lived assets
    and discontinued operations (effective for years beginning
    May 1, 2003), and impaired loans (effective for years
    beginning May 1, 2003). Generally, these standards give
    guidance on write-downs and disposals of long-lived assets.
    Further, the definition of discontinued operations is broadened.
    The effect on the Companys consolidated financial
    statements is not yet determinable.



| |                  
| | -----------------
| | Reclassifications

Certain reclassifications have been made to prior
year balances to conform with current year presentation.



|        |             
|------- | ------------
|Note 2. | Acquisitions

In August 2002, the Company acquired 85.3% of the
outstanding common shares of Banff Resources Ltd.
(Banff), a Canadian corporation. The results of
Banffs operations have been included in these consolidated
financial statements since the acquisition date. Banffs
primary assets are a cobalt stockpile and related processing
facility, and a hydro-electric plant located in Uganda. This
acquisition is consistent with the Companys business of
proprietary investing.

Because of low market prices for cobalt, the
Company has not processed any significant amounts of stockpile
since acquisition. Incidental revenue has been earned from the
sale of excess power generated by the hydro-electric plant. The
Company intends to sell the assets acquired when the market
price for cobalt recovers sufficiently, although this is beyond
the Companys control and there is no assurance of such
recovery near-term. Further, since the assets are located in
Uganda, there are uncertainties with respect to the political,
legal and regulatory environment in that country which may have
an effect on ultimate disposal value. The

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Company has classified the acquired assets as
properties held for sale in these consolidated financial
statements.

The aggregate purchase price was primarily an
assumption of non-recourse debt. The following table summarizes
the fair values of the assets acquired and liabilities assumed
at the date of acquisition.

|                                  |                           |   |        |        | 
|--------------------------------- | ------------------------- | - | ------ | ------ | 
|Current assets                    |                           | $ | 6,996  |       
|Stockpile and processing facility |                           |   | 36,273 |       
|Hydro-electric plant              |                           |   | 34,696 |       
|                                  |                           |   |        |       
|                                  | Total assets acquired     |   |        | 77,965 | 
|Current liabilities               |                           |   | 6,996  |       
|Debt                              |                           |   | 70,969 |       
|                                  |                           |   |        |       
|                                  | Total liabilities assumed |   |        | 77,965 | 
|                                  |                           |   |        |       
|                                  | Net assets acquired       |   | $      |       | 
|                                  |                           |   |        |       

The purchase agreement provides for royalties to
be paid to the seller. The royalty is equal to 10% of the net
cash flow resulting from any processing operations up to an
aggregate maximum of $15,796. The Company will charge to expense
the royalty amounts as incurred; none were incurred in 2002.

Also, in August 2002, the Company acquired 93.4%
of the outstanding common shares of Euro Trade &
Forfaiting, Inc. (Euro Trade), a
U.S. corporation. The results of Euro Trades
operations have been included in these consolidated financial
statements since the acquisition date. Euro Trade is engaged
primarily in merchant banking in Europe which is consistent with
the Companys business activities.

The aggregate purchase price of $42,806 was paid
in cash. The following table summarizes the estimated fair
values of the assets acquired and liabilities assumed at the
date of acquisition.

|                     |                           |   |        |        | 
|-------------------- | ------------------------- | - | ------ | ------ | 
|Current assets       |                           | $ | 43,925 |       
|Long-term securities |                           |   | 1,373  |       
|Goodwill             |                           |   | 3,708  |       
|                     |                           |   |        |       
|                     | Total assets acquired     |   |        | 49,006 | 
|Current liabilities  |                           |   | 3,437  |       
|Minority interest    |                           |   | 2,763  |       
|                     |                           |   |        |       
|                     | Total liabilities assumed |   |        | 6,200  | 
|                     |                           |   |        |       
|                     | Net assets acquired       |   | $      | 42,806 | 
|                     |                           |   |        |       

Goodwill is not expected to be deductible for
income tax purposes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


The following unaudited proforma information
presents the results of operations of the Company as if the
acquisitions had taken place on January 1, 2002 and 2001,
respectively. The proforma information is not necessarily
indicative of the results that would have occurred had the
acquisitions taken place at the beginning of the periods
presented. Further, the proforma information is not necessarily
indicative of future results.

|                          |         |                         |         |      |  |   |         |       |  
|------------------------- | ------- | ----------------------- | ------- | ---- |  | - | ------- | ----- | -
|                          |         |                        
|                          |         | Year Ended December 31,
|                          |         |                        
|                          |         | 2002                    |         | 2001
|                          |         |                         |         |     
|Revenues                  |         | $                       | 296,277 |      |  | $ | 215,848 |      
|Net income (loss)         |         | $                       | 29,268  |      |  | $ | (73,378 | )    
|Earnings (loss) per share |         |                         |         |      |  |   |         |      
|                          | Basic   |                         | $       | 2.26 |  |   | $       | (5.81 | )
|                          | Diluted |                         | $       | 2.19 |  |   | $       | (5.12 | )



|        |         
|------- | --------
|Note 3. | Goodwill

The changes in the carrying amount of goodwill
are as follows:

|                                             |  |      |         |      |  |   |        |  
|-------------------------------------------- |  | ---- | ------- | ---- |  | - | ------ | -
|                                             |  | 2002 |         | 2001
|                                             |  |      |         |     
|Balance at beginning of year                 |  | $    | 28,066  |      |  | $ | 17,032 |  
|Acquisitions                                 |  |      | 3,708   |      |  |   | 12,796 |  
|Reductions due to purchase price adjustments |  |      | (695    | )    |  |   |       |  
|Exchange rate effect                         |  |      | 1,449   |      |  |   | (812   | )
|Amortization                                 |  |      |        |      |  |   | (950   | )
|                                             |  |      |         |      |  |   |        |  
|                                             |  |      | 32,528  |      |  |   | 28,066 |  
|Impairment                                   |  |      | (16,116 | )    |  |   |       |  
|                                             |  |      |         |      |  |   |        |  
|Balance at end of year                       |  | $    | 16,412  |      |  | $ | 28,066 |  
|                                             |  |      |         |      |  |   |        |  

Consistent with current CICA standards, there was
no amortization of goodwill in 2002. Goodwill amortization
expense amounted to $950 and $942 during the years ended
December 31, 2001 and 2000, respectively. Had goodwill not
been amortized, net income would have been $46,238 and $40,105,
respectively; basic earnings per share would have increased by
$.08 each year; and diluted earnings per share would have
increased by $.07 each year.

Based on a review of the fair value of the
Companys reporting units, management has determined that
an impairment of $16,116 was necessary at December 31,
2002. No writedown was necessary at December 31, 2001. The
Company has no other intangible assets.



|        |           
|------- | ----------
|Note 4. | Securities

At December 31, 2002 and 2001, bank trading
account securities consisted of debt securities of $26,544 and
$21,925 and common shares of $5,585 and $28,025, respectively.
The change in market value of bank trading account securities
amounted to $1,245, $12,567 and $(4,311) for the years ended
December 31, 2002, 2001 and 2000, respectively, and has
been included in results of operations.

Short-term securities consisted of debt
securities of $1,906 and $358, preferred shares of $1,878 and
$1,788 and common shares of $10,328 and $10,789 at
December 31, 2002 and 2001, respectively. Holding gains
(losses) of $415, $(3,868) and none were included in the results
of operations for years ended December 31, 2002, 2001 and
2000, respectively.

57



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Long-term securities consist of the following at
December 31:

|                 |  |                             |        |            |  |            |     |           |  |          |   |            |  |            |        |           |  |   |        |  |  |   |   |  |  |   |       |  |  |   |        | 
|---------------- |  | --------------------------- | ------ | ---------- |  | ---------- | --- | --------- |  | -------- | - | ---------- |  | ---------- | ------ | --------- |  | - | ------ |  |  | - | - |  |  | - | ----- |  |  | - | ------ | 
|                 |  |                            
|                 |  | Unrealized Gains and Losses
|                 |  |                            
|                 |  |                             |        |           
|                 |  | 2002                        |        | 2001      
|                 |  |                             |        |           
|                 |  |                             |        | Gross      |  | Gross      |     | Estimated |  |          |   | Gross      |  | Gross      |        | Estimated
|                 |  | Carrying                    |        | Unrealized |  | Unrealized |     | Market    |  | Carrying |   | Unrealized |  | Unrealized |        | Market   
|                 |  | Value                       |        | Gains      |  | Losses     |     | Value     |  | Value    |   | Gains      |  | Losses     |        | Value    
|                 |  |                             |        |            |  |            |     |           |  |          |   |            |  |            |        |          
|Debt             |  | $                           | 789    |            |  | $          | 98  |           |  | $        |  |            |  | $          | 887    |           |  | $ | 795    |  |  | $ |  |  |  | $ | 34    |  |  | $ | 761    | 
|Preferred shares |  |                             | 299    |            |  |            |    |           |  |          |  |            |  |            | 299    |           |  |   | 601    |  |  |   |  |  |  |   |      |  |  |   | 601    | 
|Common shares    |  |                             | 15,320 |            |  |            | 197 |           |  |          |  |            |  |            | 15,517 |           |  |   | 11,524 |  |  |   |  |  |  |   | 1,593 |  |  |   | 9,931  | 
|                 |  |                             |        |            |  |            |     |           |  |          |   |            |  |            |        |           |  |   |        |  |  |   |   |  |  |   |       |  |  |   |        | 
|                 |  | $                           | 16,408 |            |  | $          | 295 |           |  | $        |  |            |  | $          | 16,703 |           |  | $ | 12,920 |  |  | $ |  |  |  | $ | 1,627 |  |  | $ | 11,293 | 
|                 |  |                             |        |            |  |            |     |           |  |          |   |            |  |            |        |           |  |   |        |  |  |   |   |  |  |   |       |  |  |   |        | 

At December 31, 2002 and 2001, bank trading
account and short-term securities included common shares in an
affiliate with a carrying value of $7,048 and $2,935,
respectively. Also, at December 31, 2002, the Company had
long-term investments in the common shares of two affiliates
with a carrying value of $11,565.

The maturity of securities is as follows at
December 31:

|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |        |        |        | 
|-------------------------------- | -------------------- | ---------------- | ----- | ------ | ----- | ------ | ------ | ------- | ------ | -------- | ----- | ----- | ----- | ----- | - | - | - | - | ------ | ----- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | ------ | ------ | ------ | 
|                                 |                      |                 
|                                 |                      | Remaining Terms 
|                                 |                      |                 
|                                 |                      |                  |       | No     |       |       
|                                 |                      | Within           |       | 1 to 3 |       | 3 to 5 |        | 5 to 10 |        | specific |       | 2002  |       | 2001 
|                                 |                      | 1 year           |       | years  |       | years  |        | years   |        | Maturity |       | Total |       | Total
|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |      
|Bank trading account securities: |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|                                 | Debt:                |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |        |       
|                                 |                      | Governments      |       | $      |      |        |        | $       | 6,324  |          |       | $     |      |       |   | $ |  |   |        | $     |       |        |        | $     | 6,324  |        |        | $      | 6,050  |       
|                                 |                      | Other issuers    |       |        | 3,822 |        |        |         | 11,080 |          |       |       | 5,318 |       |   |   |  |   |        |       |       |        |        |       | 20,220 |        |        |        | 15,875 |       
|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|                                 |                      |                  | 3,822 |        |       |        | 17,404 |         |        |          | 5,318 |       |       |       |  |   |   |   |       |       |        |        | 26,544 |       |        |        | 21,925 |       
|                                 | Common shares        |                  |       |       |       |        |        |        |        |          |       |      |       |       |   |  |   |   |        | 5,585 |        |        |        | 5,585 |        |        |        | 28,025 |       
|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|                                 |                      |                  | Total |        |       | 3,822  |        |         |        | 17,404   |       |       |       | 5,318 |   |   |   |  |        |       |        | 5,585  |        |       |        | 32,129 |        |        |        | 49,950 | 
|Short-term securities            |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|                                 | Debt (other issuers) |                  |       | 1,906  |       |        |        |        |        |          |       |      |       |       |   |  |   |   |        |      |        |        |        | 1,906 |        |        |        | 358    |       
|                                 | Equities:            |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |        |       
|                                 |                      | Preferred shares |       |        |      |        |        |         |       |          |       |       |      |       |   |   |  |   |        |       | 1,878  |        |        |       | 1,878  |        |        |        | 1,788  |       
|                                 |                      | Common shares    |       |        |      |        |        |         |       |          |       |       |      |       |   |   |  |   |        |       | 10,328 |        |        |       | 10,328 |        |        |        | 10,789 |       
|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|                                 |                      |                  |      |        |       |        |       |         |        |          |      |       |       |       |  |   |   |   | 12,206 |       |        |        | 12,206 |       |        |        | 12,577 |       
|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|                                 |                      |                  | Total |        |       | 1,906  |        |         |        |         |       |       |       |      |   |   |   |  |        |       |        | 12,206 |        |       |        | 14,112 |        |        |        | 12,935 | 
|Long-term securities             |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|                                 | Debt (other issuers) |                  |       |       |       |        |        | 789     |        |          |       |      |       |       |   |  |   |   |        |      |        |        |        | 789   |        |        |        | 795    |       
|                                 | Equities:            |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |        |       
|                                 |                      | Preferred shares |       |        |      |        |        |         |       |          |       |       |      |       |   |   |  |   |        |       | 299    |        |        |       | 299    |        |        |        | 601    |       
|                                 |                      | Common shares    |       |        |      |        |        |         |       |          |       |       |      |       |   |   |  |   |        |       | 15,320 |        |        |       | 15,320 |        |        |        | 11,524 |       
|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|                                 |                      |                  |      |        |       |        |       |         |        |          |      |       |       |       |  |   |   |   | 15,619 |       |        |        | 15,619 |       |        |        | 12,125 |       
|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|                                 |                      |                  | Total |        |       |       |        |         |        | 789      |       |       |       |      |   |   |   |  |        |       |        | 15,619 |        |       |        | 16,408 |        |        |        | 12,920 | 
|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       
|Total securities                 |                      | $                | 5,728 |        |       | $      | 18,193 |         |        | $        | 5,318 |       |       | $     |  |   |   | $ | 33,410 |       |        | $      | 62,649 |       |        | $      | 75,805 |       
|                                 |                      |                  |       |        |       |        |        |         |        |          |       |       |       |       |   |   |   |   |        |       |        |        |        |       |        |        |        |       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 5.     Loans

|                                                                                                                                                                                                                     |  |      |        |      |  |   |        | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                                                                                                                                                                                                     |  | 2002 |        | 2001
|                                                                                                                                                                                                                     |  |      |        |     
|Bank loans, collateralized by traded securities
    and other assets, due from one company $3,303 at
    December 31, 2002, and one company $7,700 at
    December 31, 2001                                          |  | $    | 9,845  |      |  | $ | 11,606 | 
|Other loans, collateralized by traded securities,
    receivables, inventories and other tangible assets, due from one
    company $63,907 at December 31, 2002, and four companies
    $55,026 at December 31, 2001 |  |      | 68,034 |      |  |   | 58,131 | 
|                                                                                                                                                                                                                     |  |      |        |      |  |   |        | 
|                                                                                                                                                                                                                     |  | $    | 77,879 |      |  | $ | 69,737 | 
|                                                                                                                                                                                                                     |  |      |        |      |  |   |        | 

Loan maturities:

|            |  |               |        |             |  |            |        |  |  |   |        | 
|----------- |  | ------------- | ------ | ----------- |  | ---------- | ------ |  |  | - | ------ | 
|            |  | Within 1 Year |        | 1  5 Years |  | 2002 Total
|            |  |               |        |             |  |           
|Bank loans  |  | $             | 9,845  |             |  | $          |       |  |  | $ | 9,845  | 
|Other loans |  |               | 18,343 |             |  |            | 49,691 |  |  |   | 68,034 | 
|            |  |               |        |             |  |            |        |  |  |   |        | 
|            |  | $             | 28,188 |             |  | $          | 49,691 |  |  | $ | 77,879 | 
|            |  |               |        |             |  |            |        |  |  |   |        | 

Bank loans generally earn interest ranging from
3.5% to 7.0% and other loans generally earn interest ranging
from 5.0% to 9.75% as of December 31, 2002.

Note 6.     Receivables

|                       |  |      |        |      |  |   |        | 
|---------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                       |  | 2002 |        | 2001
|                       |  |      |        |     
|Commodity transactions |  | $    | 38,210 |      |  | $ | 31,488 | 
|Short-term advances    |  |      | 5,548  |      |  |   | 2,979  | 
|Investment income      |  |      | 3,496  |      |  |   | 5,035  | 
|Pension plan recovery  |  |      | 1,587  |      |  |   | 1,587  | 
|Government taxes       |  |      | 3,294  |      |  |   | 381    | 
|Other                  |  |      | 1,820  |      |  |   | 3,394  | 
|                       |  |      |        |      |  |   |        | 
|                       |  | $    | 53,955 |      |  | $ | 44,864 | 
|                       |  |      |        |      |  |   |        | 

Receivables are stated at their outstanding
principal balances.

Note 7.     Accounts
Payable and Accrued Expenses

|                          |  |      |        |      |  |   |        | 
|------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                          |  | 2002 |        | 2001
|                          |  |      |        |     
|Accounts payable          |  | $    | 38,657 |      |  | $ | 26,064 | 
|Affiliates                |  |      | 1,485  |      |  |   | 301    | 
|Interest                  |  |      | 708    |      |  |   | 8,557  | 
|Property and other taxes  |  |      | 2,605  |      |  |   | 2,177  | 
|Commissions and severance |  |      | 752    |      |  |   | 1,293  | 
|Other                     |  |      | 3,072  |      |  |   | 3,257  | 
|                          |  |      |        |      |  |   |        | 
|                          |  | $    | 47,279 |      |  | $ | 41,649 | 
|                          |  |      |        |      |  |   |        | 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 8.     Deposits

|        |  |      |        |      |  |   |     | 
|------- |  | ---- | ------ | ---- |  | - | --- | 
|        |  | 2002 |        | 2001
|        |  |      |        |     
|Clients |  | $    | 39,190 |      |  | $ | 164 | 
|Banks   |  |      | 8      |      |  |   | 360 | 
|        |  |      |        |      |  |   |     | 
|        |  | $    | 39,198 |      |  | $ | 524 | 
|        |  |      |        |      |  |   |     | 

All deposits at December 31, 2002, were
payable on demand and bear interest at not more than .25%. At
December 31, 2002, deposits from affiliates where the
Companys president is also the affiliates president
and the Company has minority voting rights amounted to $36,370.

Note 9.     Debt

|                                                                                                                                                                                                                                                                                                    |  |      |        |      |  |   |        | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                                                                                                                                                                                                                                                                                    |  | 2002 |        | 2001
|                                                                                                                                                                                                                                                                                                    |  |      |        |     
|Bonds payable, US$13,617 as at December 31,
    2002 and 2001, interest at 8% due semi-annually in October and
    April, principal due April 2008, unsecured, non-recourse.
    Convertible into common stock of the Company at $20.88
    (1,030,038 common shares reserved at December 31, 2002) |  | $    | 21,509 |      |  | $ | 21,687 | 
|Bonds payable, US$2,088 and US$13,190 at
    December 31, 2002 and 2001, interest at 8%, principal and
    interest due December 2006, unsecured                                                                                                                                                    |  |      | 3,298  |      |  |   | 21,007 | 
|Notes payable under lines of credit due to banks,
    interest from 3.7% to 4.4%, secured by commodity transaction
    receivables                                                                                                                                                                  |  |      | 24,953 |      |  |   | 11,114 | 
|Note payable to a bank, interest at six month
    Euribor plus 1.5% (resulting in a rate of 4.3% at
    December 31, 2002), interest and principal payments of
    $2,257 due semiannually beginning in June 2003, due in full
    December 2006, secured by commodity transactions receivables     |  |      | 18,055 |      |  |   | 15,599 | 
|Bonds payable, interest at 15% paid semiannually,
    unsecured, non-recourse, paid in 2002                                                                                                                                                                                                         |  |      |       |      |  |   | 7,906  | 
|Note payable, interest at 8.25%, interest payable
    quarterly, principal due January 2003, unsecured,
    paid in 2002                                                                                                                                                                            |  |      |       |      |  |   | 8,377  | 
|Note payable, interest at 7%, principal and
    interest due December 2003, unsecured, non-recourse, paid in 2002                                                                                                                                                                                   |  |      |       |      |  |   | 7,700  | 
|Note payable, interest at 3.5%, payable on
    demand, unsecured, non-recourse                                                                                                                                                                                                                      |  |      | 983    |      |  |   | 4,610  | 
|                                                                                                                                                                                                                                                                                                    |  |      |        |      |  |   |        | 
|                                                                                                                                                                                                                                                                                                    |  | $    | 68,798 |      |  | $ | 98,000 | 
|                                                                                                                                                                                                                                                                                                    |  |      |        |      |  |   |        | 

As of December 31, 2002, the principal
maturities of debt are as follows:

|           |  |        |        | 
|---------- |  | ------ | ------ | 
|Maturity   |  | Amount
|           |  |       
|2003       |  | $      | 30,450 | 
|2004       |  |        | 4,514  | 
|2005       |  |        | 4,514  | 
|2006       |  |        | 7,811  | 
|2007       |  |        |       | 
|Thereafter |  |        | 21,509 | 
|           |  |        |        | 
|           |  | $      | 68,798 | 
|           |  |        |        | 

Notes payable of $983 and $4,610 at
December 31, 2002 and 2001, respectively, are to an
affiliate where the Company has an equity interest and the
Companys president is also the president and director of
the creditor.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 10.     Income
Taxes

Income before income taxes and minority interests
consists of:

|         |  |      |        |      |  |      |        |  |  |   |        | 
|-------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|         |  | 2002 |        | 2001 |  | 2000
|         |  |      |        |      |  |     
|Canadian |  | $    | 36,427 |      |  | $    | 28,623 |  |  | $ | 5,739  | 
|Foreign  |  |      | 10,753 |      |  |      | 15,390 |  |  |   | 36,127 | 
|         |  |      |        |      |  |      |        |  |  |   |        | 
|         |  | $    | 47,180 |      |  | $    | 44,013 |  |  | $ | 41,866 | 
|         |  |      |        |      |  |      |        |  |  |   |        | 

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

|        |          |      |       |        |   |      |     |      |   |   |        |        |  
|------- | -------- | ---- | ----- | ------ | - | ---- | --- | ---- | - | - | ------ | ------ | -
|        |          | 2002 |       | 2001   |   | 2000
|        |          |      |       |        |   |     
|Current |          |      |       |        |   |      |     |      |   |   |        |       
|        | Canadian |      | $     | (1,004 | ) |      | $   | (220 | ) |   | $      | 40     |  
|        | Foreign  |      |       | (589   | ) |      |     | (427 | ) |   |        | (401   | )
|Future  |          |      |       |        |   |      |     |      |   |   |        |       
|        | Canadian |      |       | 301    |   |      |     | 525  |   |   |        | 4      |  
|        | Foreign  |      |       | 4,789  |   |      |     | 894  |   |   |        | (1,332 | )
|        |          |      |       |        |   |      |     |      |   |   |        |       
|        |          | $    | 3,497 |        |   | $    | 772 |      |   | $ | (1,689 | )     
|        |          |      |       |        |   |      |     |      |   |   |        |       

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

|                                                           |                            |      |         |        |   |      |         |       |  |   |         |        |  
|---------------------------------------------------------- | -------------------------- | ---- | ------- | ------ | - | ---- | ------- | ----- |  | - | ------- | ------ | -
|                                                           |                            | 2002 |         | 2001   |   | 2000
|                                                           |                            |      |         |        |   |     
|Income before income taxes and minority interests          |                            | $    | 47,180  |        |   | $    | 44,013  |       |  | $ | 41,866  |       
|                                                           |                            |      |         |        |   |      |         |       |  |   |         |       
|Computed provision for income taxes at statutory
    rates |                            | $    | (17,041 | )      |   | $    | (16,777 | )     |  | $ | (18,756 | )     
|(Increase) decrease in taxes resulting from:               |                            |      |         |        |   |      |         |       |  |   |         |       
|                                                           | Nontaxable dividend income |      |         | 1,770  |   |      |         | 2,018 |  |   |         | 2,421  |  
|                                                           | Foreign source income      |      |         | 3,884  |   |      |         | 5,850 |  |   |         | 16,193 |  
|                                                           | Permanent differences      |      |         | 23,347 |   |      |         |      |  |   |         |       |  
|                                                           | Valuation allowance        |      |         | (8,231 | ) |      |         | 7,404 |  |   |         |       |  
|                                                           | Other, net                 |      |         | (232   | ) |      |         | 2,277 |  |   |         | (1,547 | )
|                                                           |                            |      |         |        |   |      |         |       |  |   |         |       
|Recovery of (provision for) income taxes                   |                            | $    | 3,497   |        |   | $    | 772     |       |  | $ | (1,689  | )     
|                                                           |                            |      |         |        |   |      |         |       |  |   |         |       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


The tax effect of temporary differences that give
rise to significant components of future tax liabilities and
assets are as follows:

|                                                                                                 |                     |                                 |        |         |      |   |        |         |        |  
|------------------------------------------------------------------------------------------------ | ------------------- | ------------------------------- | ------ | ------- | ---- | - | ------ | ------- | ------ | -
|                                                                                                 |                     | 2002                            |        | 2001   
|                                                                                                 |                     |                                 |        |        
|Future income tax liability, difference in tax
    basis of assets acquired in the United States |                     | $                               | (258   | )       |      | $ | (5,348 | )      
|Future income tax asset, non-capital tax loss
    carryforwards:                                 |                     |                                 |        |         |      |   |        |        
|                                                                                                 | Canada              |                                 |        | 1,066   |      |   |        | 10,254  |       
|                                                                                                 | Switzerland         |                                 |        |        |      |   |        | 1,020   |       
|                                                                                                 | United States       |                                 |        | 6,997   |      |   |        | 5,440   |       
|                                                                                                 | Austria             |                                 |        | 3,520   |      |   |        | 3,100   |       
|                                                                                                 |                     |                                 |        |         |      |   |        |        
|                                                                                                 |                     |                                 | 11,583 |         |      |   | 19,814 |        
|                                                                                                 | Valuation allowance |                                 |        | (11,583 | )    |   |        | (19,814 | )     
|                                                                                                 |                     |                                 |        |         |      |   |        |        
|                                                                                                 |                     | Net future income tax asset     |        |         |     |   |        |         |       |  
|                                                                                                 |                     |                                 |        |         |      |   |        |        
|                                                                                                 |                     | Net future income tax liability |        | $       | (258 | ) |        | $       | (5,348 | )
|                                                                                                 |                     |                                 |        |         |      |   |        |        

Management believes that, due to the nature of
its operations, the Companys available tax loss
carryforwards may not be utilized prior to their expiration
dates. Therefore, the resulting tax benefit has been fully
reserved at December 31, 2002 and 2001.

At December 31, 2002, the Company had
estimated accumulated non-capital losses which expire in the
following countries as follows:

|           |  |        |       |               |  |         |        |  |  |   |        | 
|---------- |  | ------ | ----- | ------------- |  | ------- | ------ |  |  | - | ------ | 
|Year       |  | Canada |       | United States |  | Austria
|           |  |        |       |               |  |        
|2003       |  | $      | 807   |               |  | $       |       |  |  | $ |       | 
|2004       |  |        |      |               |  |         |       |  |  |   |       | 
|2005       |  |        |      |               |  |         |       |  |  |   |       | 
|2006       |  |        | 4     |               |  |         |       |  |  |   |       | 
|2007       |  |        | 2,136 |               |  |         |       |  |  |   |       | 
|2010-2020  |  |        | 5     |               |  |         | 20,580 |  |  |   |       | 
|Indefinite |  |        |      |               |  |         |       |  |  |   | 10,352 | 
|           |  |        |       |               |  |         |        |  |  |   |        | 
|           |  | $      | 2,952 |               |  | $       | 20,580 |  |  | $ | 10,352 | 
|           |  |        |       |               |  |         |        |  |  |   |        | 

Any accumulated tax losses at December 31,
2002, in Uganda have not been agreed with that countrys
revenue authority. There were no remaining tax losses available
in Switzerland at December 31, 2002.

Note 11.     Earnings
Per Share

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

|                                                                                      |                               |      |        |       |  |      |        |       |  |   |        |       | 
|------------------------------------------------------------------------------------- | ----------------------------- | ---- | ------ | ----- |  | ---- | ------ | ----- |  | - | ------ | ----- | 
|                                                                                      |                               | 2002 |        | 2001  |  | 2000
|                                                                                      |                               |      |        |       |  |     
|Net income                                                                            |                               | $    | 50,755 |       |  | $    | 45,288 |       |  | $ | 39,163 |      
|Less dividend paid on preferred shares held by
    subsidiarys minority shareholders |                               |      |       |       |  |      |       |       |  |   | (79    | )    
|                                                                                      |                               |      |        |       |  |      |        |       |  |   |        |      
|Basic earnings from operations available to
    common shareholders                   |                               |      | 50,755 |       |  |      | 45,288 |       |  |   | 39,084 |      
|Effect of dilutive securities                                                         |                               |      |        |       |  |      |        |       |  |   |        |      
|                                                                                      | Interest on convertible bonds |      |        | 1,735 |  |      |        | 1,634 |  |   |        | 1,599 | 
|                                                                                      |                               |      |        |       |  |      |        |       |  |   |        |      
|Diluted earnings from operations                                                      |                               | $    | 52,490 |       |  | $    | 46,922 |       |  | $ | 40,683 |      
|                                                                                      |                               |      |        |       |  |      |        |       |  |   |        |      

62



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


|                                                                                   |                   |        |            |           |  |      |            |           |  |  |            |           | 
|---------------------------------------------------------------------------------- | ----------------- | ------ | ---------- | --------- |  | ---- | ---------- | --------- |  |  | ---------- | --------- | 
|                                                                                   |                   |       
|                                                                                   |                   | Shares
|                                                                                   |                   |       
|                                                                                   |                   | 2002   |            | 2001      |  | 2000
|                                                                                   |                   |        |            |           |  |     
|Basic earnings per share, weighted average number
    of common shares outstanding |                   |        | 12,931,117 |           |  |      | 12,621,633 |           |  |  | 12,054,898 |          
|Effect of dilutive securities:                                                     |                   |        |            |           |  |      |            |           |  |  |            |          
|                                                                                   | Convertible bonds |        |            | 1,030,038 |  |      |            | 1,030,038 |  |  |            | 1,047,542 | 
|                                                                                   | Options           |        |            | 209,006   |  |      |            | 350,764   |  |  |            | 335,240   | 
|                                                                                   |                   |        |            |           |  |      |            |           |  |  |            |          
|Weighted average number of common shares
    outstanding  diluted                 |                   |        | 14,170,161 |           |  |      | 14,002,435 |           |  |  | 13,437,680 |          
|                                                                                   |                   |        |            |           |  |      |            |           |  |  |            |          

Note 12.     Stock
Based Compensation

1996 Stock Option Plan

During 1996, the Company issued options to
employees and directors to acquire 900,000 common shares of
stock at $9.41 which vested upon grant and have a five-year
term. All of these options were exercised in 2001. No additional
options to acquire shares will be offered under this plan.

1997 Amended Stock Option
Plan

The Company has a 1997 stock option plan which
enables certain employees and directors to acquire common
shares. Under the plan, options vest on grant and have a
five-year term. The Company is authorized to issue up to
2,762,000 shares under this plan.

During 2000, options to acquire
30,000 shares at $13.31 and 100,000 shares at $10.50 were
granted to officers and employees of the Company. At
December 31, 2002, 80,000 of these options were outstanding
and exercisable and have a remaining contractual life of
2.25 years. At grant date, the weighted fair value of these
options was $3.34.

During 1998, options to acquire
750,000 shares at $9.26 were granted to officers and
employees of the Company. At December 31, 2002, 415,000 of
these options were outstanding and exercisable and have a
remaining contractual life of 0.75 years. At grant date,
the weighted fair value of these options was $2.11.

During 1997, options to acquire
742,500 shares at $11.10 were granted to officers and
employees of the Company. At December 31, 2002, none of
these options were outstanding and exercisable as the exercise
period expired in 2002. At grant date, the weighted fair value
of these options was $2.59.

63



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Following is a summary of the status of the plan:

|                                 |           |           |           |          |   |   |       |        |  
|-------------------------------- | --------- | --------- | --------- | -------- | - | - | ----- | ------ | -
|                                 |           |           |           | Weighted
|                                 |           |           |           | Average 
|                                 |           | Number    |           | Exercise
|                                 |           | of Shares |           | Price   
|                                 |           |           |           |         
|Outstanding at December 31, 1999 |           |           | 1,131,000 |          |   | $ | 9.98  |       
|                                 | Granted   |           |           | 130,000  |   |   |       | 11.15  |  
|                                 | Exercised |           |           | (47,000  | ) |   |       | (9.38  | )
|                                 |           |           |           |          |   |   |       |       
|Outstanding at December 31, 2000 |           |           | 1,214,000 |          |   |   | 10.12 |       
|                                 | Exercised |           |           | (189,000 | ) |   |       | (11.17 | )
|                                 |           |           |           |          |   |   |       |       
|Outstanding at December 31, 2001 |           |           | 1,025,000 |          |   |   | 10.77 |       
|                                 | Exercised |           |           | (157,500 | ) |   |       | (10.49 | )
|                                 | Forfeited |           |           | (372,500 | ) |   |       | (11.43 | )
|                                 |           |           |           |          |   |   |       |       
|Outstanding at December 31, 2002 |           |           | 495,000   |          |   | $ | 10.05 |       
|                                 |           |           |           |          |   |   |       |       

The fair value of each option granted was
estimated for proforma purposes on the grant date using the
Black-Scholes Model. The assumptions used in calculating fair
value in Note 1 in those years when options were granted
were as follows:

|                             |  |      |          | 
|---------------------------- |  | ---- | -------- | 
|                             |  | 2000
|                             |  |     
|Risk-free interest rate      |  |      | 7.0%     | 
|Expected life of the options |  |      | 2  years | 
|Expected volatility          |  |      | 42.65%   | 
|Expected dividend yield      |  |      | 0.0%     | 

Note 13.     Commitments
and Contingencies

Leases

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

|     |  |        |       | 
|---- |  | ------ | ----- | 
|Year |  | Amount
|     |  |       
|2003 |  | $      | 1,024 | 
|2004 |  |        | 976   | 
|2005 |  |        | 511   | 
|2006 |  |        | 510   | 
|2007 |  |        | 512   | 
|     |  |        |       | 
|     |  | $      | 3,533 | 
|     |  |        |       | 

Rent expense was $1,166, $439 and $548 for the
years ended December 31, 2002, 2001 and 2000, respectively.

Litigation

The Company and its subsidiaries are subject to
litigation in the normal course of business. Management
considers the aggregate liability which may result from such
litigation not material at December 31, 2002.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Guarantees

The Company has guaranteed to one of its
clients account the value of an investment in common
shares to a maximum amount of $1,012. The Company has provided a
five-year guarantee expiring August 2007 to an affiliate with
respect to a $1,656 asset sale transaction. This affiliate has
agreed to deposit the same amount against this guarantee.

Regulations

The Companys wholly-owned banking
subsidiary is located in Switzerland. The subsidiary is subject
to the rules and regulations of the Swiss Federal Banking
Commission which require equity capital amounting to $9,344 to
be maintained as of December 31, 2002.

Note 14.     Interest
Rate Sensitivity Position

Management has analyzed the bank
subsidiarys interest rate sensitivity position at
December 31, 2002. Because of the current nature (over 90%
of assets and liabilities and off-balance sheet positions are
due within three months) of the bank subsidiarys position,
the total interest rate gap is not significant at
December 31, 2002, assuming no interest rate hedging is
undertaken over the next twelve months.

Note 15.     Segmented
Information

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

|              |  |      |         |      |  |      |         |  |  |   |         | 
|------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|              |  | 2002 |         | 2001 |  | 2000
|              |  |      |         |      |  |     
|Canada        |  | $    | 26,006  |      |  | $    | 17,183  |  |  | $ | 10,459  | 
|Europe        |  |      | 254,564 |      |  |      | 192,714 |  |  |   | 136,671 | 
|United States |  |      | 3,559   |      |  |      | 4,349   |  |  |   | 9,090   | 
|Other         |  |      | 210     |      |  |      |        |  |  |   |        | 
|              |  |      |         |      |  |      |         |  |  |   |         | 
|              |  | $    | 284,339 |      |  | $    | 214,246 |  |  | $ | 156,220 | 
|              |  |      |         |      |  |      |         |  |  |   |         | 

The following table presents total assets by
geographic area based upon the location of the assets.

|              |  |      |         |      |  |   |         | 
|------------- |  | ---- | ------- | ---- |  | - | ------- | 
|              |  | 2002 |         | 2001
|              |  |      |         |     
|Canada        |  | $    | 119,763 |      |  | $ | 143,201 | 
|Europe        |  |      | 200,206 |      |  |   | 220,561 | 
|United States |  |      | 52,308  |      |  |   | 30,877  | 
|Africa        |  |      | 74,297  |      |  |   |        | 
|              |  |      |         |      |  |   |         | 
|              |  | $    | 446,574 |      |  | $ | 394,639 | 
|              |  |      |         |      |  |   |         | 

During 2001 and 2000, one client represented
approximately 13% and 11%, respectively, of financial services
revenues and there was no client concentration in 2002. At
December 30, 2002, the Company exchanged assets located in
Europe with a carrying value of $7,292 for a 49% interest in
Equitable Industries Limited Partnership. No gain or loss was
recorded as a result of the exchange. It was treated as a
nonmonetary transaction with an affiliate in 2002.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)




|         |                                    
|-------- | -----------------------------------
|Note 16. | Fair Value of Financial Instruments

The fair value of financial instruments at
December 31 is summarized as follows:

|                                    |  |                 |         |            |  |                 |         |            |  |   |        |  |  |   |        | 
|----------------------------------- |  | --------------- | ------- | ---------- |  | --------------- | ------- | ---------- |  | - | ------ |  |  | - | ------ | 
|                                    |  |                 |         |           
|                                    |  | 2002            |         | 2001      
|                                    |  |                 |         |           
|                                    |  | Carrying Amount |         | Fair Value |  | Carrying Amount |         | Fair Value
|                                    |  |                 |         |            |  |                 |         |           
|Cash and cash equivalents           |  | $               | 102,413 |            |  | $               | 102,413 |            |  | $ | 77,166 |  |  | $ | 77,166 | 
|Loans                               |  |                 | 77,879  |            |  |                 | 77,879  |            |  |   | 69,737 |  |  |   | 69,737 | 
|Deposits                            |  |                 | 39,198  |            |  |                 | 39,198  |            |  |   | 524    |  |  |   | 524    | 
|Debt                                |  |                 | 68,798  |            |  |                 | 63,421  |            |  |   | 98,000 |  |  |   | 80,547 | 
|Foreign currency exchange contracts |  |                 |        |            |  |                 |        |            |  |   | 1,070  |  |  |   | 1,070  | 

The fair value of cash and cash equivalents is
based on reported market value. The fair value of loans is based
on the value of similar loans. The fair value of deposits
approximates their carrying value as they are all due on demand.
The fair value of debt was determined using discounted cash
flows at prevailing market rates or based on reported market
value for the Companys publicly traded debt. The fair
values of the foreign exchange derivative contracts are obtained
from dealer quotes. These values represent the estimated amount
the Company would receive or pay to terminate agreements taking
into consideration current interest rates, the credit-worthiness
of the counterparties and current foreign currency exchange
rates. The Company does not anticipate nonperformance with
respect to any of its derivative financial instruments.



|         |                             
|-------- | ----------------------------
|Note 17. | Transactions with Affiliates

During 2002, 2001 and 2000, the Company earned
fees in the normal course from affiliated entities amounting to
$9,164 (of which $4,115 was a merchant bank client where the
Companys president is also the president of the
affiliate), $323 and $1,111, respectively. In 2002, the Company
sold real estate to an affiliate for $4,202 on which no gain or
loss has been recognized. The Company sold commodities amounting
to $3,490 in the normal course to an affiliate during 2002,
$2,856 of which is included in receivables from commodity
transactions at December 31, 2002. The Company received
dividends of $4,900 on preferred shares of stock in an affiliate
in 2002. Generally, the Company has representation on the board
of an affiliate and/or an equity interest.

The Company has a receivable from an officer of a
subsidiary amounting to $761 at December 31, 2002, which is
expected to be paid in the near-term.



|         |                                                           
|-------- | ----------------------------------------------------------
|Note 18. | United States Generally Accepted Accounting
    Principles

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

|                                                                |  |             |        |      |  |      |        |   |  |   |        |  
|--------------------------------------------------------------- |  | ----------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                |  |            
|                                                                |  | December 31
|                                                                |  |            
|Reconciliation of Net Income                                    |  | 2002        |        | 2001 |  | 2000
|                                                                |  |             |        |      |  |     
|Net income in accordance with Canadian GAAP                     |  | $           | 50,755 |      |  | $    | 45,288 |   |  | $ | 39,163 |  
|Equity accounting for an investee                               |  |             |       |      |  |      |       |   |  |   | (440   | )
|Adjustment of gain on sale of shares in investee                |  |             |       |      |  |      | 169    |   |  |   |       |  
|Change in unrealized gain (loss) on trading
    securities, net |  |             |       |      |  |      | (2,246 | ) |  |   | 6,914  |  
|                                                                |  |             |        |      |  |      |        |   |  |   |        |  
|Net income in accordance with U.S. GAAP                         |  | $           | 50,755 |      |  | $    | 43,211 |   |  | $ | 45,637 |  
|                                                                |  |             |        |      |  |      |        |   |  |   |        |  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


|                                            |  |      |      |      |  |      |      |  |  |   |      | 
|------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|                                            |  | 2002 |      | 2001 |  | 2000
|                                            |  |      |      |      |  |     
|Basic earnings per common share U.S. GAAP   |  | $    | 3.93 |      |  | $    | 3.42 |  |  | $ | 3.78 | 
|Diluted earnings per common share U.S. GAAP |  | $    | 3.70 |      |  | $    | 3.20 |  |  | $ | 3.51 | 

|                                                   |  |      |         |      |  |      |         |  |  |   |         | 
|-------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                                   |  | 2002 |         | 2001 |  | 2000
|                                                   |  |      |         |      |  |     
|Retained earnings in accordance with
    U.S. GAAP |  | $    | 194,758 |      |  | $    | 163,342 |  |  | $ | 153,478 | 

|                                        |                                          |                                                                                 |        |        |       |      |        |       |        |   |        |       |       | 
|--------------------------------------- | ---------------------------------------- | ------------------------------------------------------------------------------- | ------ | ------ | ----- | ---- | ------ | ----- | ------ | - | ------ | ----- | ----- | 
|Comprehensive Income                    |                                          | 2002                                                                            |        | 2001   |       | 2000
|                                        |                                          |                                                                                 |        |        |       |     
|Net income in accordance with U.S. GAAP |                                          | $                                                                               | 50,755 |        |       | $    | 43,211 |       |        | $ | 45,637 |      
|Other comprehensive income, net of tax  |                                          |                                                                                 |        |        |       |      |        |       |        |   |        |      
|                                        | Foreign currency translation adjustment  |                                                                                 |        | 14,281 |       |      |        | 5,223 |        |   |        | 3,520 |      
|                                        | Unrealized gains (losses) on securities: |                                                                                 |        |        |       |      |        |       |        |   |        |       |      
|                                        |                                          | Unrealized holding gains (losses) arising during
    period                     |        |        | 2,151 |      |        |       | (594   | ) |        |       | 2,071 | 
|                                        |                                          | Less: reclassification adjustment for (gains)
    losses realized in net income |        |        | (233  | )    |        |       | (775   | ) |        |       | 364   | 
|                                        |                                          |                                                                                 |        |        |       |      |        |       |        |   |        |      
|                                        |                                          | Net unrealized gains (losses)                                                   |        |        | 1,918 |      |        |       | (1,369 | ) |        |       | 2,435 | 
|                                        |                                          |                                                                                 |        |        |       |      |        |       |        |   |        |      
|Other comprehensive income              |                                          |                                                                                 | 16,199 |        |       |      | 3,854  |       |        |   | 5,955  |      
|                                        |                                          |                                                                                 |        |        |       |      |        |       |        |   |        |      
|Comprehensive income                    |                                          | $                                                                               | 66,954 |        |       | $    | 47,065 |       |        | $ | 51,592 |      
|                                        |                                          |                                                                                 |        |        |       |      |        |       |        |   |        |      

The change in accumulated other comprehensive
income is as follows:

|                                     |  |                                        |        |            |  |       |        |   |  |   |        |  
|------------------------------------ |  | -------------------------------------- | ------ | ---------- |  | ----- | ------ | - |  | - | ------ | -
|                                     |  |                                       
|                                     |  | Accumulated Other Comprehensive Income
|                                     |  |                                       
|                                     |  | Foreign Currency                       |        | Unrealized |  |      
|                                     |  | Translation                            |        | Loss on    |  |      
|                                     |  | Adjustment                             |        | Securities |  | Total
|                                     |  |                                        |        |            |  |      
|Balance at December 31, 1999         |  | $                                      | (4,291 | )          |  | $     | (2,686 | ) |  | $ | (6,977 | )
|Change in other comprehensive income |  |                                        | 3,520  |            |  |       | 2,435  |   |  |   | 5,955  |  
|                                     |  |                                        |        |            |  |       |        |   |  |   |        |  
|Balance at December 31, 2000         |  |                                        | (771   | )          |  |       | (251   | ) |  |   | (1,022 | )
|Change in other comprehensive income |  |                                        | 5,223  |            |  |       | (1,369 | ) |  |   | 3,854  |  
|                                     |  |                                        |        |            |  |       |        |   |  |   |        |  
|Balance at December 31, 2001         |  |                                        | 4,452  |            |  |       | (1,620 | ) |  |   | 2,832  |  
|Change in other comprehensive income |  |                                        | 14,281 |            |  |       | 1,918  |   |  |   | 16,199 |  
|                                     |  |                                        |        |            |  |       |        |   |  |   |        |  
|Balance at December 31, 2002         |  | $                                      | 18,733 |            |  | $     | 298    |   |  | $ | 19,031 |  
|                                     |  |                                        |        |            |  |       |        |   |  |   |        |  



| |           
| | ----------
| | Securities

U.S. GAAP requires that certain investments
be classified into available-for-sale or trading securities
categories and be stated at their fair values. At
December 31, 2002, approximately 15% of trading securities
represents an investment in the common shares of an affiliate
and approximately 27% represents debt securities from two
entities. At December 31, 2001, approximately 27% of
trading securities represented an investment in one company. Any
unrealized holding gains or losses are to be reported as a
component of comprehensive income until realized for
available-for-sale securities, and included in earnings for
trading securities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Other than bank securities included trading
securities at fair value and are summarized as follows:

|                 |  |             |        |      |  |   |        | 
|---------------- |  | ----------- | ------ | ---- |  | - | ------ | 
|                 |  |            
|                 |  | December 31
|                 |  |            
|                 |  | 2002        |        | 2001
|                 |  |             |        |     
|Debt securities  |  | $           | 1,906  |      |  | $ | 358    | 
|Preferred shares |  |             | 1,878  |      |  |   | 1,788  | 
|Common shares    |  |             | 10,328 |      |  |   | 10,789 | 
|                 |  |             |        |      |  |   |        | 
|                 |  | $           | 14,112 |      |  | $ | 12,935 | 
|                 |  |             |        |      |  |   |        | 

Available-for-sale securities consist of common
shares, preferred shares and debt securities at
December 31, 2002, 2001 and 2000. At December 31, 2002
and 2001, securities in two companies represented 80% and
securities in four companies represented 76%, respectively, of
the total available-for-sale securities. The proceeds from the
sale of these securities amounted to $1,330, $5,703 and $6,603,
which resulted in realized gains (losses) of $233, $775 and
$(364) during 2002, 2001 and 2000, respectively. The cost of
these securities was $11,588, $6,908 and $8,700, which resulted
in unrealized losses in accumulated other comprehensive income
of $298, $(1,620) and $(251) at December 31, 2002, 2001 and
2000, respectively.



| |                                           
| | ------------------------------------------
| | New United States Accounting
    Standards

Statement of Financial Accounting Standards
(SFAS) No. 145 and No. 146 are generally
modifications to previously adopted standards. A part of SFAS
No. 145 is effective for years beginning after May 15,
2002; however, early application is encouraged of the portion
relating to no longer classifying gain or loss on
extinguishments of debt as an extraordinary item. In order to be
consistent with Canadian GAAP, the Company has elected early
application of this portion of SFAS No. 145. Therefore, the
gain on debt reduction amount of $22,409 in 2001 is no longer
classified as extraordinary in the reconciliation table above.
SFAS No. 146 is effective for years beginning after
December 31, 2002. These new standards, other than that
portion dealing with gain or loss on extinguishments of debt, do
not have an effect on the Companys consolidated financial
statements.

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INDEPENDENT AUDITORS REPORT

To the Shareholders

MFC Bancorp Ltd.


Our report on the consolidated financial
statements of MFC Bancorp Ltd. is included on page 46 of
this Form 20-F. In connection with our audits of such
financial statements, we have also audited the related financial
statement schedules I, III, IV and VI of this
Form 20-F.

In our opinion, the financial statement schedules
referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth
therein.

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

Seattle, Washington

April 7, 2003


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MFC BANCORP LTD.






SCHEDULE
I:     CONDENSED FINANCIAL INFORMATION
OF REGISTRANT

(Dollars in thousands)


BALANCE SHEETS

|                                         |  |                    |         |      |  |   |         | 
|---------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------- | 
|                                         |  |                   
|                                         |  | As at December 31,
|                                         |  |                   
|                                         |  | 2002               |         | 2001
|                                         |  |                    |         |     
|ASSETS                                  
|Cash and securities                      |  | $                  | 165,062 |      |  | $ | 152,971 | 
|Receivables                              |  |                    | 53,955  |      |  |   | 44,864  | 
|Loans                                    |  |                    | 77,879  |      |  |   | 69,737  | 
|Commodity investments                    |  |                    | 13,172  |      |  |   | 5,447   | 
|Properties held for sale                 |  |                    | 72,959  |      |  |   | 22,480  | 
|Resource property                        |  |                    | 36,747  |      |  |   | 37,451  | 
|Goodwill                                 |  |                    | 16,412  |      |  |   | 28,066  | 
|Equity method investments                |  |                    | 7,917   |      |  |   | 30,898  | 
|Other                                    |  |                    | 2,471   |      |  |   | 2,725   | 
|                                         |  |                    |         |      |  |   |         | 
|                                         |  | $                  | 446,574 |      |  | $ | 394,639 | 
|                                         |  |                    |         |      |  |   |         | 
|LIABILITIES AND SHAREHOLDERS
    EQUITY
|Deposits                                 |  | $                  | 39,198  |      |  | $ | 524     | 
|Accounts payable and accrued expenses    |  |                    | 47,279  |      |  |   | 41,649  | 
|Deferred tax liability                   |  |                    | 258     |      |  |   | 5,348   | 
|Debt                                     |  |                    | 68,798  |      |  |   | 98,000  | 
|Minority interests                       |  |                    | 5,751   |      |  |   | 3,121   | 
|Shareholders equity                     |  |                    | 285,290 |      |  |   | 245,997 | 
|                                         |  |                    |         |      |  |   |         | 
|                                         |  | $                  | 446,574 |      |  | $ | 394,639 | 
|                                         |  |                    |         |      |  |   |         | 

STATEMENTS OF OPERATIONS

|                           |                            |                         |         |         |   |      |         |         |   |   |         |        | 
|-------------------------- | -------------------------- | ----------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------ | 
|                           |                            |                        
|                           |                            | Year Ended December 31,
|                           |                            |                        
|                           |                            | 2002                    |         | 2001    |   | 2000
|                           |                            |                         |         |         |   |     
|Financial services revenue |                            | $                       | 284,339 |         |   | $    | 214,246 |         |   | $ | 156,220 |       
|Expenses                   |                            |                         |         |         |   |      |         |         |   |   |         |       
|                           | Financial services         |                         |         | 175,792 |   |      |         | 143,071 |   |   |         | 88,742 | 
|                           | General and administrative |                         |         | 35,758  |   |      |         | 21,793  |   |   |         | 21,394 | 
|                           | Interest                   |                         |         | 9,493   |   |      |         | 5,369   |   |   |         | 4,218  | 
|                           | Goodwill impairment        |                         |         | 16,116  |   |      |         |        |   |   |         |       | 
|                           | Income taxes (recovery)    |                         |         | (3,497  | ) |      |         | (772    | ) |   |         | 1,689  | 
|                           | Minority interest          |                         |         | (78     | ) |      |         | (503    | ) |   |         | 1,014  | 
|                           |                            |                         |         |         |   |      |         |         |   |   |         |       
|                           |                            |                         | 233,584 |         |   |      | 168,958 |         |   |   | 117,057 |       
|                           |                            |                         |         |         |   |      |         |         |   |   |         |       
|Net income                 |                            | $                       | 50,755  |         |   | $    | 45,288  |         |   | $ | 39,163  |       
|                           |                            |                         |         |         |   |      |         |         |   |   |         |       

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STATEMENTS OF CASH FLOWS

|                                                     |  |                         |         |      |  |      |         |   |  |   |         |  
|---------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                     |  |                        
|                                                     |  | Year Ended December 31,
|                                                     |  |                        
|                                                     |  | 2002                    |         | 2001 |  | 2000
|                                                     |  |                         |         |      |  |     
|Net cash provided by operating activities            |  | $                       | 20,847  |      |  | $    | 64,531  |   |  | $ | 25,202  |  
|Net cash (used) provided by financing
    activities |  |                         | 13,524  |      |  |      | (76,102 | ) |  |   | 16,857  |  
|Net cash (used) provided by investing
    activities |  |                         | (19,078 | )    |  |      | 18,840  |   |  |   | (25,680 | )
|Exchange rate effect on cash and cash equivalents    |  |                         | 9,954   |      |  |      | 1,373   |   |  |   | 2,578   |  
|                                                     |  |                         |         |      |  |      |         |   |  |   |         |  
|Net change in cash                                   |  |                         | 25,247  |      |  |      | 8,642   |   |  |   | 18,957  |  
|Cash and cash equivalents, beginning of year         |  |                         | 77,166  |      |  |      | 68,524  |   |  |   | 49,567  |  
|                                                     |  |                         |         |      |  |      |         |   |  |   |         |  
|Cash and cash equivalents, end of year               |  | $                       | 102,413 |      |  | $    | 77,166  |   |  | $ | 68,524  |  
|                                                     |  |                         |         |      |  |      |         |   |  |   |         |  

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MFC BANCORP LTD.

SCHEDULE
III:     SUPPLEMENTARY INSURANCE
INFORMATION

|                       |  |             |   |                |  |          |           |          |  |         |   |            |  |             |   |              |  |           |   |          |  |   |         |   |  |  |   |  |  |  |   |  |  |   |         |  |  |  |   | 
|---------------------- |  | ----------- | - | -------------- |  | -------- | --------- | -------- |  | ------- | - | ---------- |  | ----------- | - | ------------ |  | --------- | - | -------- |  | - | ------- | - |  |  | - |  |  |  | - |  |  | - | ------- |  |  |  | - | 
|                       |  |             |   |                |  |          |           | Other    |  |         |   |            |  |             |   |              |  |           |   |         
|                       |  |             |   | Future policy  |  |          |           | policy   |  |         |   |            |  | Benefits,   |   | Amortization |  |           |   |         
|                       |  | Deferred    |   | benefits,      |  |          |           | claims   |  |         |   |            |  | claims loss |   | of deferred  |  |           |   |         
|                       |  | policy      |   | losses, claims |  |          |           | and      |  |         |   | Net        |  | and         |   | policy       |  | Other     |   |         
|                       |  | acquisition |   | and loss       |  | Unearned |           | benefits |  | Premium |   | Investment |  | settlement  |   | acquisition  |  | operating |   | Premiums
|Segment                |  | cost        |   | expenses       |  | premiums |           | payable  |  | Revenue |   | income     |  | expenses    |   | cost         |  | expenses  |   | written 
|                       |  |             |   |                |  |          |           |          |  |         |   |            |  |             |   |              |  |           |   |         
|Property and casualty: |  |             |   |                |  |          |           |          |  |         |   |            |  |             |   |              |  |           |   |          |  |   |         |   |  |  |   |  |  |  |   |  |  |   |         |  |  |  |   | 
|December 31, 2002.     |  |             |  |                |  | $        | 880,000   |          |  |         |  |            |  |             |  |              |  |           |  |          |  | $ | 142,000 |   |  |  |  |  |  |  |  |  |  | $ | 134,000 |  |  |  |  | 
|December 31, 2001.     |  |             |  |                |  | $        | 1,106,000 |          |  |         |  |            |  |             |  |              |  |           |  |          |  | $ | (38,000 | ) |  |  |  |  |  |  |  |  |  | $ | 69,000  |  |  |  |  | 
|December 31, 2000.     |  |             |  |                |  | $        | 1,307,000 |          |  |         |  |            |  |             |  |              |  |           |  |          |  | $ | 288,000 |   |  |  |  |  |  |  |  |  |  | $ | 143,000 |  |  |  |  | 

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MFC BANCORP LTD.

SCHEDULE IV: REINSURANCE

|                       |  |        |   |           |  |            |   |        |  |            |   |  |  |   |   |  |  |  |     | 
|---------------------- |  | ------ | - | --------- |  | ---------- | - | ------ |  | ---------- | - |  |  | - | - |  |  |  | --- | 
|                       |  |        |   |           |  |            |   |        |  | Percentage
|                       |  |        |   | Ceded to  |  | Assumed    |   |        |  | of amount 
|                       |  | Gross  |   | Other     |  | from other |   | Net    |  | assumed   
|                       |  | amount |   | companies |  | companies  |   | Amount |  | to net    
|                       |  |        |   |           |  |            |   |        |  |           
|Property and casualty: |  |        |   |           |  |            |   |        |  |            |   |  |  |   |   |  |  |  |     | 
|December 31, 2002      |  | $      |  |           |  | $          |  |        |  | $          |  |  |  | $ |  |  |  |  | N/A | 
|December 31, 2001      |  | $      |  |           |  | $          |  |        |  | $          |  |  |  | $ |  |  |  |  | N/A | 
|December 31, 2000      |  | $      |  |           |  | $          |  |        |  | $          |  |  |  | $ |  |  |  |  | N/A | 

73



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MFC BANCORP LTD.

SCHEDULE
VI:     SUPPLEMENTAL INFORMATION
CONCERNING PROPERTY  CASUALTY

INSURANCE OPERATIONS AS AT DECEMBER 31,
2001


This schedule is omitted because the relevant
information was either shown on Schedule III or
Schedule IV.

74



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ITEM
19.     EXHIBITS

|            |      |                        |  |                                                                                                                                                                                                                                                
|----------- | ---- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |      | Description of Exhibit
|            |      |                       
|            | 1.1  |                        |  | Articles of Amalgamation.(1)                                                                                                                                                                                                                   
|            | 1.2  |                        |  | Bylaws.(1)                                                                                                                                                                                                                                     
|            | 2.1  |                        |  | Master Trust Indenture between MFC and Norwest
    Bank Minnesota, National Association, as trustee, dated
    March 31, 1998.(1)                                                                                                              
|            | 4.1  |                        |  | Memorandum of Agreement between MFC and Wabush
    Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated
    November 24, 1987.(2)                                                                                                              
|            | 4.2  |                        |  | Amendment to Mining Lease between MFC and Wabush
    Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated
    January 1, 1987.(2)                                                                                                              
|            | 4.3  |                        |  | First Amendment to Memorandum of Agreement
    between MFC and Wabush Iron Co. Limited, Stelco Inc. and Dofasco
    Inc.(2)                                                                                                                    
|            | 4.4  |                        |  | Assignment Agreement between MFC and Prada
    Holdings Ltd. dated as of January 1, 1992.(1)                                                                                                                                                   
|            | 4.5  |                        |  | Separation Agreement between Mercer International
    Inc. and MFC dated for reference March 29,
    1996.(1)                                                                                                                                  
|            | 4.6  |                        |  | Purchase Agreement between MFC and Volendam
    Securities C.V. dated for reference May 16,
    1996.(1)                                                                                                                                       
|            | 4.7  |                        |  | Purchase Agreement between MFC and Volendam
    Securities C.V. dated for reference May 27,
    1996.(1)                                                                                                                                       
|            | 4.8  |                        |  | Share Purchase Agreement between MFC and
    Frederick Wong dated June 6, 1996.(1)                                                                                                                                                             
|            | 4.9  |                        |  | Subscription Agreement between MFC and Drummond
    Financial Corporation dated June 20, 1996. Incorporated by
    reference to Drummond Financial Corporations Form 8-K
    dated June 27, 1996.                                             
|            | 4.10 |                        |  | Share Purchase Agreement between MFC and Med Net
    International Ltd. dated June 20, 1996.(3)                                                                                                                                                
|            | 4.11 |                        |  | Share Purchase Agreement among MFC and various
    shareholders of Logan International Corp. dated June 20,
    1996.(3)                                                                                                                       
|            | 4.12 |                        |  | Subscription Agreement between Drummond Financial
    Corporation and Logan International Corp. dated June 20, 1996.
    Incorporated by reference to Logan International Corp.s
    Form 8-K dated June 27, 1996.                            
|            | 4.13 |                        |  | Share Purchase Agreement between Lehman Brothers
    Bankhaus AG and MFC dated October 3, 1996.(1)                                                                                                                                             
|            | 4.14 |                        |  | Purchase Agreement between MFC and Robabond
    Holding AG dated June 27, 1997.(1)                                                                                                                                                             
|            | 4.15 |                        |  | Share Purchase Agreement between MFC and Procom
    Holding AG dated September 22, 1997.(1)                                                                                                                                                    
|            | 4.16 |                        |  | Supplementary Agreement to Share Purchase
    Agreement between MFC and Procom Holding AG dated September 22,
    1997.(1)                                                                                                                     
|            | 4.17 |                        |  | Agreement between MFC and the holders of
    MFCs Class A Preferred Shares dated December 1,
    1996.(1)                                                                                                                                     
|            | 4.18 |                        |  | Subscription Agreement between MFC and Logan
    International Corp. dated December 2, 1996. Incorporated by
    reference to MFCs Schedule 13D/ A (Amendment
    No. 1) dated December 16, 1996 with respect to Logan
    International Corp.
|            | 4.19 |                        |  | Shareholder Protection Rights Plan Agreement
    between MFC and Montreal Trust Company of Canada dated as of
    May 18, 1993. (1)                                                                                                            
|            | 4.20 |                        |  | Amended 1997 Stock Option Plan of
    MFC.(1)                                                                                                                                                                                                  
|            | 4.21 |                        |  | Amended and Restated Employment Agreement between
    MFC and Michael J. Smith made effective as of November 20, 2000.
    (1)                                                                                                                 
|            | 4.22 |                        |  | Directors Indemnity Agreement between MFC
    and Michael J. Smith dated for reference November 20,
    2000.(1)                                                                                                                              

75



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##### Table of Contents



|            |      |                        |  |                                                                                                                                                                                                                                                                                   
|----------- | ---- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |      | Description of Exhibit
|            |      |                       
|            | 4.23 |                        |  | Indemnity Agreement between MFC and Roy Zanatta
    dated for reference November 20, 2000.(1)                                                                                                                                                                                     
|            | 4.24 |                        |  | Investment and Restructuring Agreement among
    Sutton Park International Limited, Garda Investments Corp., MFC,
    Glamiox Beteiligungsverwaltungs GmbH, Hovis GmbH, Jurriaan J.
    Hovis, Johannes Hovis and Ferdinand Steinbauer dated for
    reference October 1, 2001.(1)
|            | 4.25 |                        |  | Owners Agreement among Garda Investments
    Corp., Glamiox Beteiligungsverwaltungs GmbH, Jurriaan J. Hovis
    and Ferdinand Steinbauer dated for reference October 1,
    2002. (1)                                                                                            
|            | 4.26 |                        |  | Dividend Trust Settlement Agreement between MFC
    and The Dividend Trust Committee of the Board of Directors of
    MFC Bancorp Ltd. dated for reference December 21,
    2001.(1)                                                                                              
|            | 4.27 |                        |  | Share Sale Agreement among Newmont Australia
    Limited, Newmont LaSource S.A.S., and MFC dated August 7,
    2002.                                                                                                                                                              
|            | 4.28 |                        |  | Royalty Deed among MFC, Newmont Australia Limited
    and Newmont LaSource S.A.S. dated August 7, 2002.                                                                                                                                                                           
|            | 4.29 |                        |  | Arrangement Agreement between Trimble Resources
    Corporation and MFC dated May 17, 2002.                                                                                                                                                                                       
|            | 4.30 |                        |  | Stock Purchase Agreement among Occidental (East
    Shabwa) LLC, Intercap Yemen, Inc. and MFC dated July 23,
    2002.                                                                                                                                                            
|            | 8.1  |                        |  | Subsidiaries of MFC.                                                                                                                                                                                                                                                              
|            | 10.1 |                        |  | Certification of Periodic Report.                                                                                                                                                                                                                                                 



---



|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to MFCs
    Form 20-Fs filed in prior years.                                              
|   
|(2) | Incorporated by reference to MFCs
    Form 10-K for the year ended December 31, 1989.                               
|   
|(3) | Incorporated by reference to MFCs
    Schedule 13D dated June 27, 1996 with respect to Logan
    International Corp.

76



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##### Table of Contents






SIGNATURES

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



| |                 
| | ----------------
| | MFC BANCORP LTD.



| |     |                     
| | --- | --------------------
| | By: | /s/ MICHAEL J. SMITH

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

Dated this 16th day of April, 2003.

77



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##### Table of Contents






CERTIFICATION

I, Michael J. Smith, Chief Executive Officer and
Principal Financial Officer of MFC Bancorp Ltd., certify that:



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this annual report on
    Form 20-F of MFC Bancorp Ltd.;                                                                                                                                                                                                                                                                    
|
| | 2. Based on my knowledge, this annual report
    does not contain any untrue statement of a material fact or omit
    to state a material fact necessary to make the statements made,
    in light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. Based on my knowledge, the financial
    statements, and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this annual
    report;                   
|
| | 4. The registrants other certifying
    officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                          



| |                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | (b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | (c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and the audit
    committee of the registrants board of directors (or
    persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weakness in internal
    controls; and
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                  



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying
    officers and I have indicated in this annual report whether or
    not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

April 16, 2003

/s/ MICHAEL J. SMITH




Michael J. Smith


Chief Executive Officer and


Principal Financial Officer


78



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##### Table of Contents



EXHIBIT INDEX

|            |      |                        |  |                                                                                                                                                                                                                                                
|----------- | ---- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |      | Description of Exhibit
|            |      |                       
|            | 1.1  |                        |  | Articles of Amalgamation.(1)                                                                                                                                                                                                                   
|            | 1.2  |                        |  | Bylaws.(1)                                                                                                                                                                                                                                     
|            | 2.1  |                        |  | Master Trust Indenture between MFC and Norwest
    Bank Minnesota, National Association, as trustee, dated
    March 31, 1998.(1)                                                                                                              
|            | 4.1  |                        |  | Memorandum of Agreement between MFC and Wabush
    Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated
    November 24, 1987.(2)                                                                                                              
|            | 4.2  |                        |  | Amendment to Mining Lease between MFC and Wabush
    Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated
    January 1, 1987.(2)                                                                                                              
|            | 4.3  |                        |  | First Amendment to Memorandum of Agreement
    between MFC and Wabush Iron Co. Limited, Stelco Inc. and Dofasco
    Inc.(2)                                                                                                                    
|            | 4.4  |                        |  | Assignment Agreement between MFC and Prada
    Holdings Ltd. dated as of January 1, 1992.(1)                                                                                                                                                   
|            | 4.5  |                        |  | Separation Agreement between Mercer International
    Inc. and MFC dated for reference March 29,
    1996.(1)                                                                                                                                  
|            | 4.6  |                        |  | Purchase Agreement between MFC and Volendam
    Securities C.V. dated for reference May 16,
    1996.(1)                                                                                                                                       
|            | 4.7  |                        |  | Purchase Agreement between MFC and Volendam
    Securities C.V. dated for reference May 27,
    1996.(1)                                                                                                                                       
|            | 4.8  |                        |  | Share Purchase Agreement between MFC and
    Frederick Wong dated June 6, 1996.(1)                                                                                                                                                             
|            | 4.9  |                        |  | Subscription Agreement between MFC and Drummond
    Financial Corporation dated June 20, 1996. Incorporated by
    reference to Drummond Financial Corporations Form 8-K
    dated June 27, 1996.                                             
|            | 4.10 |                        |  | Share Purchase Agreement between MFC and Med Net
    International Ltd. dated June 20, 1996.(3)                                                                                                                                                
|            | 4.11 |                        |  | Share Purchase Agreement among MFC and various
    shareholders of Logan International Corp. dated June 20,
    1996.(3)                                                                                                                       
|            | 4.12 |                        |  | Subscription Agreement between Drummond Financial
    Corporation and Logan International Corp. dated June 20, 1996.
    Incorporated by reference to Logan International Corp.s
    Form 8-K dated June 27, 1996.                            
|            | 4.13 |                        |  | Share Purchase Agreement between Lehman Brothers
    Bankhaus AG and MFC dated October 3, 1996.(1)                                                                                                                                             
|            | 4.14 |                        |  | Purchase Agreement between MFC and Robabond
    Holding AG dated June 27, 1997.(1)                                                                                                                                                             
|            | 4.15 |                        |  | Share Purchase Agreement between MFC and Procom
    Holding AG dated September 22, 1997.(1)                                                                                                                                                    
|            | 4.16 |                        |  | Supplementary Agreement to Share Purchase
    Agreement between MFC and Procom Holding AG dated September 22,
    1997.(1)                                                                                                                     
|            | 4.17 |                        |  | Agreement between MFC and the holders of
    MFCs Class A Preferred Shares dated December 1,
    1996.(1)                                                                                                                                     
|            | 4.18 |                        |  | Subscription Agreement between MFC and Logan
    International Corp. dated December 2, 1996. Incorporated by
    reference to MFCs Schedule 13D/ A (Amendment
    No. 1) dated December 16, 1996 with respect to Logan
    International Corp.
|            | 4.19 |                        |  | Shareholder Protection Rights Plan Agreement
    between MFC and Montreal Trust Company of Canada dated as of
    May 18, 1993. (1)                                                                                                            
|            | 4.20 |                        |  | Amended 1997 Stock Option Plan of
    MFC.(1)                                                                                                                                                                                                  
|            | 4.21 |                        |  | Amended and Restated Employment Agreement between
    MFC and Michael J. Smith made effective as of November 20, 2000.
    (1)                                                                                                                 
|            | 4.22 |                        |  | Directors Indemnity Agreement between MFC
    and Michael J. Smith dated for reference November 20,
    2000.(1)                                                                                                                              



---



##### Table of Contents



|            |      |                        |  |                                                                                                                                                                                                                                                                                   
|----------- | ---- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |      | Description of Exhibit
|            |      |                       
|            | 4.23 |                        |  | Indemnity Agreement between MFC and Roy Zanatta
    dated for reference November 20, 2000.(1)                                                                                                                                                                                     
|            | 4.24 |                        |  | Investment and Restructuring Agreement among
    Sutton Park International Limited, Garda Investments Corp., MFC,
    Glamiox Beteiligungsverwaltungs GmbH, Hovis GmbH, Jurriaan J.
    Hovis, Johannes Hovis and Ferdinand Steinbauer dated for
    reference October 1, 2001.(1)
|            | 4.25 |                        |  | Owners Agreement among Garda Investments
    Corp., Glamiox Beteiligungsverwaltungs GmbH, Jurriaan J. Hovis
    and Ferdinand Steinbauer dated for reference October 1,
    2002. (1)                                                                                            
|            | 4.26 |                        |  | Dividend Trust Settlement Agreement between MFC
    and The Dividend Trust Committee of the Board of Directors of
    MFC Bancorp Ltd. dated for reference December 21,
    2001.(1)                                                                                              
|            | 4.27 |                        |  | Share Sale Agreement among Newmont Australia
    Limited, Newmont LaSource S.A.S., and MFC dated August 7,
    2002.                                                                                                                                                              
|            | 4.28 |                        |  | Royalty Deed among MFC, Newmont Australia Limited
    and Newmont LaSource S.A.S. dated August 7, 2002.                                                                                                                                                                           
|            | 4.29 |                        |  | Arrangement Agreement between Trimble Resources
    Corporation and MFC dated May 17, 2002.                                                                                                                                                                                       
|            | 4.30 |                        |  | Stock Purchase Agreement among Occidental (East
    Shabwa) LLC, Intercap Yemen, Inc. and MFC dated July 23,
    2002.                                                                                                                                                            
|            | 8.1  |                        |  | Subsidiaries of MFC.                                                                                                                                                                                                                                                              
|            | 10.1 |                        |  | Certification of Periodic Report.                                                                                                                                                                                                                                                 



---

|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to MFCs
    Form 20-Fs filed in prior years.                                              
|(2) | Incorporated by reference to MFCs
    Form 10-K for the year ended December 31, 1989.                               
|(3) | Incorporated by reference to MFCs
    Schedule 13D dated June 27, 1996 with respect to Logan
    International Corp.