UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C.  20549
                       -----------------------------------

                                    FORM 10-K

     (Mark One)

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

                     For the fiscal year ended July 31, 1997

                                       OR

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

     For the transition period from                     to
                                    -------------------    ----------------

                          Commission file number 0-6673

                           PACIFIC SECURITY COMPANIES
                           --------------------------
             (Exact name of registrant as specified in its charter)

                  Washington                          91-0669906
        ------------------------------       ----------------------------
        State or other jurisdiction of             (I.R.S. Employer
        incorporation of organization)            Identification No.)

              N. 10 Post Street
             525 Peyton Building
             Spokane, Washington                         99201
       -------------------------------       ----------------------------
       (Address of principal executive                (Zip code)
                   offices)

     Registrant's telephone number, 
       including area code:                         (509) 624-0183
                                        ----------------------------

     Securities registered pursuant to Section 12(b) of the Act:

                 Name of each
             Title of each class             exchange on which registered
       --------------------------------      -----------------------------
                     None                                None
     <PAGE>
     Securities registered pursuant to Section 12(g) of the Act:

                        Common stock, no par value shares
                        ---------------------------------
                                (Title of class)

     Indicate by check mark whether the registrant (1) has filed all
     reports required to be filed by Section 13 or 15(d) of the Securities
     Exchange Act of 1934 during the preceding 12 months (or for such
     shorter period that the registrant was required to file such reports),
     and (2) has been subject to such filing requirements for the past 90
     days.  Yes   X    No     
                -----     -----
     Indicate by check mark if disclosure of delinquent filers pursuant to
     Item 405 of Regulation S-K is not contained herein, and will not be
     contained, to the best of registrant's knowledge, in definitive proxy
     or information statements incorporated by reference in Part III of
     this Form 10-K or any amendment to this Form 10-K.    X  
                                                         -----
     State the aggregate market value of the voting stock held by
     nonaffiliates of the registrant:  There is no regular, established
     market for trading in the Company's common stock.  Therefore, the
     aggregate market value of the voting stock held by nonaffiliates of
     the registrant is not determinable.

     On July 31, 1997, the registrant had outstanding 1,872,125 shares of
     common stock, no par value ($3 stated value) and 9,400  shares of
     Redeemable Class A preferred stock, $100 par value.

     Documents incorporated by reference:  none.

     Number of pages in this document is 48.
     <PAGE>
                           PACIFIC SECURITY COMPANIES
                             FORM 10-K ANNUAL REPORT

                                Table of Contents
                                -----------------


     PART I

     Item 1.    Business
     Item 2.    Properties
     Item 3.    Legal Proceedings
     Item 4.    Submission of Matters to a Vote of Security Holders


     PART II

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


     PART III

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


     PART IV

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


     Item 1.   Business
               --------
     (a)  Pacific Security Companies was merged into Security Savesco, Inc.
          as of May 31, 1985. The name of Security Savesco, Inc., the
          surviving corporation, was changed to Pacific Security Companies
          as of the date of the merger.

          Prior to the merger, both corporations were engaged principally
          in real estate contract financing and owning, leasing and selling
          real properties. The merged corporation has continued these
          activities. Total assets of the registrant at July 31, 1997 and
          1996 were $32,294,907 and $32,840,107, respectively, and real
          estate contracts represent approximately 34% and 32% of the
          respective asset totals. The Company began curtailing its
          contract acquisitions and presently primarily originates
          contracts to facilitate the sale of real estate held for sale or
          development. Many of the contracts have fixed contractual
          interest rates from 5.25% to 14.25% and there is no provision for
          changing these rates to current market rates. However, for real
          estate contracts purchased by the Company, most contracts have
          been purchased at a discount from the contract balance which
          increases the effective yield. Newer contracts bear interest
          rates based on current market conditions. The total amount
          invested in real estate contracts and mortgages of $10,971,700 as
          of July 31, 1997 is $478,756 more than at the end of the prior
          year. The percentage of contracts which were delinquent over 90
          days was 0.4% as of July 31, 1997 and 1.0% as of July 31, 1996.
          Management continues to emphasize enforcement of the Company's
          credit and collection policies.

          In fiscal 1997, the Company continued to emphasize the
          development of its rental properties and commenced new projects
          primarily to improve the occupancy of its commercial buildings.
          Correspondingly, the acquisition of additional real estate
          contracts was minimal, other than for Company financed sales of
          its real estate.

          In fiscal 1996, the Company completed construction of Birdies
          Golf Center (Birdies). The golf center features a 56-tee driving
          range, a fully-lighted, contoured fairway with 5 target greens, a
          pro shop, teaching studios and an 8,000-square-foot putting
          green. Birdies serves as a practice and teaching center for all
          levels of golfers and additionally sells golf clubs and related
          golfing supplies. Birdies has been constructed on land held for
          development by the Company since 1990. Cumulative costs incurred
          to construct the facility, including land costs, were
          approximately $2,297,000. See further information on this
          business segment in Notes 5 and 6 to the consolidated financial
          statements.
     <PAGE>
          Additionally, in fiscal 1997, the Company continued developing
          certain land for residential development. The Company has
          madestreet improvements and began underground and power line
          utility construction. The project, known as Tanglewood Ranch Park
          Estates(The Crest) offers approximately 21 ten-acre parcels
          suitable for home construction. The Company anticipates marketing
          these parcels extensively in the spring of 1998.

          Investments in rental properties totaled $13,487,085 and
          $14,930,040 as of July 31, 1997 and 1996, respectively. The
          decrease is primarily the net result of increased additional
          costs that are more than offset by depreciation and sales. Other
          real property held for sale totaled $4,039,208 and $3,797,395 as
          of July 31, 1997 and 1996, respectively. These properties will be
          liquidated and/or developed at such time as market conditions
          warrant, and in the judgment of management, when the Company can
          maximize its return. The Company will continue to invest in and
          hold real property on a long-term basis. These properties may
          ultimately be sold on an installment basis for tax purposes in
          order to minimize and defer related income taxes and to conserve
          funds for additional investment purposes. These plans may be
          modified as the result of future changes to the Internal Revenue
          Code.

          With the Company's sale of certain commercial real estate and
          multi-family housing, rental income has decreased from $2,832,139
          in fiscal 1995 to $2,398,369 in fiscal 1997. During the same
          period, interest income, including the amortization of discounts
          on real estate contracts, has declined from 30% of total income
          in fiscal 1995 to 22% of total income in fiscal 1997. The Company
          expects to continue its emphasis on the development, leasing and
          sale of commercial real estate in fiscal 1998 along with the
          continued operation of Birdies and marketing of the Tanglewood
          parcels. There are no contractual commitments other than the
          remaining remodeling costs associated with improvements for
          commercial buildings. The Company's fiscal 1998 capital
          expenditures may increase if demand for the rental of Company
          properties continues or if the Company decides to further develop
          any of its properties held for sale. A description of the
          Company's significant properties is included in Item 2  
          Properties.

          The Company's business is concentrated in financing real estate
          contracts, developing real estate for sale or lease and the
          operation of Birdies. The Company is in competition with
          financial institutions who invest in real estate collateralized
          contracts and commercial property owners located primarily in or
          near Spokane, Washington. As of July 31, 1997, the Company
          employed approximately 33 people on a full-time equivalent basis,
          11 of whom are in its office at N. 10 Post Street in Spokane,
          Washington.
     <PAGE>
     Item 2.   Properties
               ----------

     As of July 31, 1997, the Company owns the following properties. Some
     of the properties are subject to real estate contracts or mortgages
     that are collateralized by the property.

     Properties Located in Spokane County, Washington:

                                                 July 31, 1997
                                     --------------------------------------
                                      Rental/        Net        Mortgage
     Date      Description of         Development    Carrying   or Contract
     Acquired  Property               Status         Value      Obligation
     --------  --------------------   -----------    --------   -----------

     Commercial:

      1979     The Peyton Building 
               at N. 10 Post Street  Substantially  $3,921,847  $  848,447
               contains approxi-     Leased
               mately 85,000 square
               feet of rentable
               space. Substantial 
               improvements have 
               been made to the 
               building since its 
               acquisition. Remodel-
               ing of this office 
               building continues as
               new occupancy warrants.
               The Company's offices 
               are located in this 
               building.

      1979     The Hutton Building   Substantially  $3,633,185
               at S. 10 Washington   Leased
               contains approxi-
               mately 56,000 square 
               feet of rentable 
               space. Substantial 
               improvements have 
               been made to the 
               building since its 
               acquisition. Remodel-
               ing of this building 
               continues as new 
               occupancy warrants. 
               The Company also 
               acquired two other 
               buildings and 25,000 
               square feet for 
               parking near this 
               building.
     <PAGE>
     Properties Located in Spokane County, Washington, Continued:

                                                 July 31, 1997
                                     --------------------------------------
                                      Rental/        Net        Mortgage
     Date      Description of         Development    Carrying   or Contract
     Acquired  Property               Status         Value      Obligation
     --------  --------------------   -----------    --------   -----------

     Commercial, Continued:
      1984     Bank Branch Building  Leased         $  431,820  $  626,302
               at W. 102 Indiana 
               Avenue is under a 
               long-term lease.

      1992     The Pier One Build-   Leased         $3,437,038  $1,530,016
               ing is a commercial 
               building. The build-
               ing has two major 
               tenants, who occupy
               over 60% of the 
               space, and several 
               other smaller tenants 
               for the remaining 
               space.

      1992     The Cellular One      Leased         $  779,427
               Building is a 
               commercial building
               constructed by the 
               Company on the north 
               river bank in Spokane.

      1990     The Nevada-Holland    Under          $1,056,412
               property consists of  development
               approximately 16 
               remaining acres of 
               raw land in a 
               location where there 
               has been substantial 
               commercial and
               residential develop-
               ment.

      1995     Birdies Golf Center,  Constructed    $2,142,247
               constructed on 14     and operating
               acres of the Nevada-
               Holland property, 
               features  a 56-tee 
               driving range, a 
               fully contoured 
               fairway with 5
               target greens, a pro
               teaching studios and 
               an 8,000-square-foot 
               putting green.
     <PAGE>
     Properties Located in Spokane County, Washington, Continued:

                                                 July 31, 1997
                                     --------------------------------------
                                      Rental/        Net        Mortgage
     Date      Description of         Development    Carrying   or Contract
     Acquired  Property               Status         Value      Obligation
     --------  --------------------   -----------    --------   -----------

     Commercial, Continued:
      1991     Tanglewood Ranch       Under         $1,775,889
               Park Estates (The      development
               Crest) in south
               Spokane County was 
               acquired through a 
               judicial foreclosure.
               The area consisted of 
               approximately 300 
               acres of undeveloped 
               land. In fiscal 1996, 
               the Company commenced 
               the development of 
               this property which, 
               when completed, will 
               result in approxi-
               mately 21 fully 
               developed residen- 
               tial lots.

      1990     The north river bank  Undeveloped    $1,034,061  $  118,295
               in Spokane consists 
               of parcels of un-
               developed commercial 
               real estate.

     Multi-Family Housing:

      1969     The Aqua View         Fully          $  607,317  $  303,944
               Apartments is a 129-  Occupied
               unit apartment 
               complex. The complex 
               is an FHA 221(d)3 
               project, receives 
               rent subsidies from 
               Spokane Housing
               Authority and is 
               subject to a HUD-
               insured mortgage.
     <PAGE>
     Projects Located Outside Spokane County, Washington:

                                                 July 31, 1997
                                     --------------------------------------
                                      Rental/        Net        Mortgage
     Date      Description of         Development    Carrying   or Contract
     Acquired  Property               Status         Value      Obligation
     --------  --------------------   -----------    --------   -----------

      1991     The City View Apart-  Fully          $  430,337  $  549,737
               ments is a 21-unit    Occupied
               apartment complex.

      1976     Retail store in       Leased         $   89,668
               Coeur d'Alene, Idaho 
               containing 17,000 
               square feet. The 
               building is currently 
               leased. 

      1993     Approximately six     Being          $  167,136
               acres in Auburn,      Marketed
               Washington zoned for 
               multi-family housing 
               were acquired through 
               a foreclosure.


     Additionally, the Company has other less significant investments in
     real estate located primarily in the state of Washington.


     Item 3.   Legal Proceedings
               -----------------

     As of July 31, 1997, it is the opinion of management that there is no
     pending litigation that would have a material adverse effect on the
     financial condition or operations of the registrant.


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

     No matters were submitted to a vote of the stockholders during the
     fourth quarter of fiscal 1997.
     <PAGE>
     PART II


     Item 5.   Market for the Registrant's Common Equity and Related
               Stockholder Matters
               -----------------------------------------------------

     (a)  Principal Market.

          There is no established market for trading in the Company's
          common stock.  Periodically, the Company will purchase and retire
          its common stock, but does not solicit such transactions.

     (b)  Stock Price and Dividend Information.

          There is no market information relative to the common stock price
          of the Company's stock as it is not actively traded. A dividend
          of $0.075 per common share totaling $150,786, declared as payable
          to stockholders of record as of July 31, 1989, was paid
          August 15, 1989. A dividend of $0.10 per common share or
          $200,211, declared as payable to stockholders of record as of
          July 31, 1990, was paid August 15, 1990. No dividends were
          declared in any of the years since 1990.

     (c)  Approximate Number of Holders of Common Stock.

          Common no par value -- 1,162 record holders.

     (d)  There is only one class of common stock outstanding. Any dividend
          which may be declared would be payable at the same rate on each
          share of common stock. At July 31, 1997, the Company also has
          issued 9,400 shares of Redeemable Class A preferred stock owned
          by five holders. These shares receive cumulative dividends of 6%
          when declared by the Board of Directors. During the fiscal years
          ended July 31, 1997 and 1996, dividends totaling $62,400 were
          declared and accrued on these shares. The dividends were paid on
          August 1, 1997 and August 2, 1996, respectively. These preferred
          shares require redemption by the Company at par value plus
          accrued dividends in 2004.
     <PAGE>
     Item 6.   Selected Financial Data
               -----------------------

     The following selected financial data have been derived from the 
     Company's audited consolidated financial statements, and should be 
     read in conjunction with the consolidated financial statements and 
     notes thereto.

     <TABLE>
     <CAPTION>
                                    Years Ended July 31,
                                    ---------------------------------------------------------------
                                    1997         1996         1995         1994         1993
                                    -----------  -----------  -----------  -----------  -----------
     <S>                            <C>          <C>          <C>          <C>          <C>
     Statement of Operations Data:
           
     Rental income                  $ 2,398,369  $ 2,714,563  $ 2,832,139  $ 2,653,958  $ 2,635,215
     Interest income                  1,005,072    1,138,935    1,375,420    1,476,881    1,714,348
     Gains on sales of real estate    1,611,195      486,469      584,657      186,109      233,766
     Interest expense, net            1,548,173    1,650,559    1,681,213    1,682,355    1,894,691
     Cumulative effect of change in 
       accounting principle                   -            -            -      (61,894)           -
     Net income (loss)                  472,000       39,266      159,310       71,558      140,412
     Income (loss) applicable to
       common shareholders              357,600      (75,134)      44,910       71,558      140,412
     Income (loss) per common share:
       Income (loss) before cumula-
         tive effect of change in 
         accounting principle               .19         (.04)         .02          .07          .07
       Cumulative effect of change
         in accounting principle              -            -            -         (.03)           -
                                    -----------  -----------  -----------  -----------  -----------
     Income (loss) per common share         .19         (.04)         .02          .04          .07
                                    ===========  ===========  ===========  ===========  ===========
     Cash dividends per common 
       share                                  -            -            -            -            -
     Weighted-average number of
       common shares outstanding      1,895,105    1,938,076    1,960,746    1,977,889    1,986,911

     </TABLE>
     <PAGE>
     <TABLE>
     <CAPTION>
                                    Years Ended July 31,
                                    ---------------------------------------------------------------
                                    1997         1996         1995         1994         1993
                                    -----------  -----------  -----------  -----------  -----------
     <S>                            <C>          <C>          <C>          <C>          <C>

     Balance Sheet Data (at year 
       end):

     Contracts, mortgages and 
       finance notes receivable, 
       net                          $10,971,700  $10,492,944  $13,457,896  $14,457,958  $14,930,791
     Total assets                    32,294,907   32,840,107   35,351,486   34,842,679   35,898,448
     Notes and contracts payable     10,028,531   11,055,919   13,107,725   13,679,068   14,951,242
     Debentures                       9,898,351    9,718,260    9,179,484    8,567,231    8,763,867
     Stockholders' equity             9,689,896    9,397,005    9,544,017    9,563,355    9,521,032

     </TABLE>

     Item 7.  Management's Discussion and Analysis of Financial Condition and 
              Results of Operations
              ---------------------------------------------------------------

     GENERAL

     This discussion contains some forward-looking statements. A forward-
     looking statement may contain words such as "will continue to be," 
     "will be," "continue to," "expect to," "anticipates that," "to be," or 
     "can impact." Management cautions that forward-looking statements are 
     subject to risks and uncertainties that could cause the Company's actual 
     results to differ materially from those projected in forward-looking 
     statements.

     The Company engages in financing real estate collateralized contracts, 
     acquiring real estate that is either held for sale or developed and 
     leased or sold and operating Birdies Golf Center as its primary 
     activities. During the past two years, the Company has been emphasizing 
     the development and lease of its commercial office building projects as 
     demand for the available space in these projects has increased. 
     Virtually all of the Company's development of these commercial office 
     building projects has involved extensive remodeling efforts in 
     connection with preparation of previously unoccupied space for a new 
     tenant and structural changes as required by current building codes.
     <PAGE>
     The Company invests in real estate collateralized contracts and real
     property primarily within the state of Washington, with a
     concentration in Spokane County. The Company has concentrated its
     efforts primarily on the development and sale of existing real estate
     projects to maximize the return from those investments. The Company
     has curtailed its contract acquisitions and now primarily originates
     real estate contracts to facilitate the sale of its property held for
     sale or development and makes loans secured by real estate.

     Birdies Golf Center (Birdies) opened to the pubic in fiscal 1996. The
     Company has focused on a marketing campaign to increase public
     awareness and attraction to the facility. In addition to its many
     unique amenities, Birdies has retained the services of a golf
     professional. Birdies is expected to contribute an increasing portion
     of the Company's income.

     The Company finances its investments in real estate and contracts and
     operates Birdies primarily through the sale of fixed rate debentures
     with terms ranging from one to ten years, real estate notes or
     mortgages, and a collateralized line-of-credit arrangement with a
     local bank. The Company intends to continue using these funding
     sources in the future.

     RESULTS OF OPERATIONS

     For the years ended July 31, 1997, 1996 and 1995, the Company's net
     income was approximately $472,000, $39,000 and $159,000, respectively.
     Due to dividends and the accretion of the discount on the issuance of
     preferred stock, the income (loss) applicable to common shareholders
     was approximately $358,000, $(75,000) and $45,000 in fiscal 1997, 1996
     and 1995, respectively.

     Rental real estate activities have decreased due to sales of rental
     properties. Total rental income has decreased from approximately
     $2,832,000 in fiscal 1995 to $2,398,000 in fiscal 1997. Reduced rental
     income could continue as a result from sales of some rental
     properties.

     The total interest income and amortization of discounts on acquired
     real estate contracts and loans has continued to decline from
     approximately $1,458,000 and $1,265,000 in fiscal 1995 and 1996,
     respectively, to approximately $1,031,000 in fiscal 1997. This decline
     corresponds directly with the decline in the Company's investment in
     real estate contracts. The Company has curtailed its real estate
     contract acquisition activities to concentrate its efforts in
     renovating and leasing commercial office buildings and developing real
     estate. Collections on real estate contracts have significantly
     exceeded new acquisitions in each of the last three fiscal years.
     These funds were used to remodel and develop existing real estate
     projects and repay outstanding obligations.
     <PAGE>
     Gains on the sale of real estate were approximately $1,611,000,
     $486,000 and $585,000 in fiscal 1997, 1996 and 1995, respectively. The
     Company anticipates that it will continue to recognize gains both on
     the sale of real estate acquired through foreclosure and real estate
     acquired for resale.

     Sales of services and tangible products at Birdies were approximately
     $344,000 in fiscal 1997 compared to $294,000 in its first year of
     operations. Overall, the golf center recorded a loss from operations
     of approximately $189,000 and $143,000 in fiscal 1997 and 1996,
     respectively, primarily reflecting the initial start-up and staffing
     costs. The Company anticipates that the margins from its golf center
     will improve through increased sales and the non-recurrence of start-
     up costs.

     The expenses associated with rental operations have decreased to
     approximately $2.1 million in fiscal 1997 from approximately $2.5
     million in fiscal 1996 and 1995. The rental activities of the Company
     are expected to continue to contribute significantly to its
     profitability, but may be affected by sales of rental properties.

     Interest expense, exclusive of interest on rental properties, net of
     amounts capitalized, was approximately $1,188,000, $1,216,000 and
     $1,263,000  in fiscal 1997, 1996 and 1995, respectively. The decline
     in interest costs over the three-year period has been primarily as a
     result of a decrease in outstanding borrowings.

     Salaries and commissions have fluctuated modestly in absolute dollar
     amounts for each of the last three fiscal years. The commencement of
     the Birdies operation in early fiscal 1996 contributed to an increase
     in the number of employees and related salaries and other general and
     administrative costs. In addition, real estate taxes significantly
     increased for Birdies and other properties.

     The Company's effective income tax rate as a percentage of income
     before federal income tax was 32% in fiscal 1997.
       
     LIQUIDITY AND CAPITAL RESOURCES

     At July 31, 1997, the Company had total stockholders' equity of
     approximately $9,690,000 and a total liabilities to equity ratio of
     2.27 to 1, which decreased from 2.43 to 1 a year before. In fiscal
     1997, the Company's primary sources of funds were approximately $2.0
     million from the sale of real estate, $2.5 million in real estate
     contract collections, $447,000 from the sale of debentures and
     $957,000 from net line-of-credit borrowings. The primary uses of funds
     were approximately $1.4 million used for the acquisition and
     improvements of real estate projects, $1.5 million used to acquire new
     contracts and mortgage notes, $815,000 in repayment of maturing
     debentures and approximately $2.0 million in repayment of outstanding
     long-term debt. As a holder of monetary assets and liabilities, the
     Company's performance may be significantly affected by changes in
     <PAGE>
     interest rates. These changes are somewhat mitigated or delayed to the
     extent that much of the Company's investment in real estate contracts,
     and established real estate leases have fixed returns, as do the
     Company's debentures. Additionally, the Company will be affected by
     changes in the real estate market in Washington.

     The Company anticipates that sales of debentures and the availability
     of funds under its $8,000,000 line-of-credit arrangement, of which
     only approximately $5,405,000 was outstanding at July 31, 1997, will
     be sufficient to fund its short- and intermediate-term needs to retire
     maturing debentures and mortgage obligations and continue development
     of its real estate projects as demand warrants. The Company does not
     anticipate any significant capital expenditurees during fiscal 1998.

     IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     See Notes 1 and 6 to the consolidated financial statements for a
     discussion of new accounting standards.


     Item 8.   Financial Statements and Supplementary Data
               -------------------------------------------

     Report of independent accountants

     Financial statements:

       Consolidated balance sheets

       Consolidated statements of operations

       Consolidated statements of stockholders' equity

       Consolidated statements of cash flows

       Notes to consolidated financial statements


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

     There were no disagreements on accounting issues or financial
     statement disclosure during the fiscal year ended July 31, 1997 or any
     interim period after July 31, 1997.
     <PAGE>
     REPORT OF INDEPENDENT ACCOUNTANTS



     Board of Directors and Stockholders
     Pacific Security Companies
     Spokane, Washington


     We have audited the accompanying consolidated balance sheets of
     Pacific Security Companies and subsidiaries as of July 31, 1997 and
     1996, and the related consolidated statements of operations,
     stockholders' equity and cash flows for each of the three years in the
     period ended July 31, 1997. These financial statements are the
     responsibility of the Company's management. Our responsibility is to
     express an opinion on these financial statements based on our audits.

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

     In our opinion, the financial statements referred to above present
     fairly, in all material respects, the consolidated financial position
     of Pacific Security Companies and subsidiaries as of July 31, 1997 and
     1996, and the consolidated results of their operations and their cash
     flows for each of the three years in the period ended July 31, 1997,
     in conformity with generally accepted accounting principles.

     As discussed in Note 1 to the consolidated financial statements, the
     Company changed its method of accounting for impaired loans in fiscal
     1996.


                                  /s/Coopers & Lybrand L.L.P.              


     Spokane, Washington
     October 9, 1997
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED BALANCE SHEETS
     July 31, 1997 and 1996


           ASSETS                                1997         1996
                                                 -----------  -----------

     Cash and cash equivalents:
       Unrestricted                              $   325,058  $   464,471
       Restricted                                     84,684      152,346
                                                 -----------  -----------
                                                     409,742      616,817
                                                 -----------  -----------
     Receivables:
       Contracts, mortgages and finance
         notes receivable, net:
           Related parties                           728,436      845,672
           Unrelated                              10,243,264    9,647,272
                                                 -----------  -----------
                                                  10,971,700   10,492,944
       Accrued interest                               91,919       90,111
       Federal income taxes                          454,621
       Other                                          30,541       72,542
                                                 -----------  -----------
                                                  11,548,781   10,655,597
                                                 -----------  -----------
     Investment in rental properties, net         13,487,085   14,930,040
                                                 -----------  -----------

     Investment in golf center, net                2,142,247    2,124,230
                                                 -----------  -----------
     Other investments:
       Property held for sale and development      4,039,208    3,797,395
       Marketable securities                          87,004       75,880
       Restricted investments                        278,154      221,840
       Other                                                       20,931
                                                 -----------  -----------
                                                   4,404,366    4,116,046
                                                 -----------  -----------
     Other assets:
       Vehicles and equipment, net                    25,760       30,983
       Prepaid expenses                              221,425      283,042
       Golf center inventories                        55,501       83,352
                                                 -----------  -----------
                                                     302,686      397,377
                                                 -----------  -----------
             Total assets                        $32,294,907  $32,840,107
                                                 ===========  ===========


     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED BALANCE SHEETS, CONTINUED
     July 31, 1997 and 1996


       LIABILITIES AND STOCKHOLDERS' EQUITY      1997         1996
                                                 -----------  -----------
     Liabilities:
       Note payable to bank                      $ 5,404,999  $ 4,448,010
       Installment contracts, mortgage notes     -----------  -----------
         and notes payable:
           Related parties                           191,462      204,136
           Unrelated                               4,432,070    6,403,773
                                                 -----------  -----------
                                                   4,623,532    6,607,909
                                                 -----------  -----------
       Debenture bonds                             9,898,351    9,718,260
                                                 -----------  -----------
       Accrued expenses and other liabilities:
         Related parties                             246,994      165,438
         Unrelated                                   733,657      786,166
                                                 -----------  -----------
                                                     980,651      951,604
                                                 -----------  -----------
       Federal income taxes:
         Currently payable                                        244,944
         Deferred                                  1,121,478      848,375
                                                 -----------  -----------
                                                   1,121,478    1,093,319
                                                 -----------  -----------
             Total liabilities                    22,029,011   22,819,102
                                                 -----------  -----------

     Commitments and contingencies (Notes 10 
       and 12)

     Redeemable Class A preferred stock,
       $100 par value; $100 redemption value; 
       authorized 20,000 shares; issued and 
       outstanding, 9,400 and 10,400 shares          940,000    1,040,000
     Less: Net discount on issuance of 
       preferred stock                              (364,000)    (416,000)
                                                 -----------  -----------
                                                     576,000      624,000
                                                 -----------  -----------
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED BALANCE SHEETS, CONTINUED
     July 31, 1997 and 1996


       LIABILITIES AND STOCKHOLDERS' EQUITY      1997         1996
                                                 -----------  -----------
     Stockholders' equity:
       Common stock:
         Original class, authorized 2,500,000 
           no par value shares, $3 stated 
           value; issued and outstanding, 
           1,872,125 and 1,918,085 shares        $ 5,616,375  $ 5,754,255
         Class B, authorized 30,000 no par 
           value shares; no shares issued and 
           outstanding
       Additional paid-in capital                  1,906,642    1,805,001
       Retained earnings                           2,175,875    1,853,275
       Unrealized loss on marketable securities, 
         net of deferred income taxes                 (8,996)     (15,526)
                                                 -----------  -----------
             Total stockholders' equity            9,689,896    9,397,005
                                                 -----------  -----------
             Total liabilities and 
               stockholders' equity              $32,294,907  $32,840,107
                                                 ===========  ===========


     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF OPERATIONS
     for the years ended July 31, 1997, 1996 and 1995



                                        1997        1996        1995
                                        ----------  ----------  ----------

     Income:
       Rental                           $2,398,369  $2,714,563  $2,832,139
       Interest                          1,005,072   1,138,935   1,375,420
       Gain on sale of securities                       30,959       4,445
       Service fees and options             27,775                   3,600
       Amortization of discounts on 
         real estate contracts              25,856     126,044      82,783
       Gain on sales of real estate      1,611,195     486,469     584,657
       Golf center sales (including 
         lessons of $13,527 and 
         $31,937)                          343,528     294,276
       Other, net                          (32,757)    153,376     (30,010)
                                        ----------  ----------  ----------
                                         5,379,038   4,944,622   4,853,034
                                        ----------  ----------  ----------
     Expenses:
       Rental operations:
         Depreciation and amortization     640,105     714,474     699,264
         Interest                          360,632     434,397     418,688
         Other                           1,097,046   1,311,200   1,332,205
                                        ----------  ----------  ----------
                                         2,097,783   2,460,071   2,450,157
       Interest, net of amount 
         capitalized                     1,187,541   1,216,162   1,262,525
       Salaries and commissions            626,675     651,416     565,245
       General and administrative          575,463     422,455     311,557
       Depreciation                        100,875      82,797      18,190
       Cost of golf merchandise sales       98,105      53,503
       Uncollectible accounts                2,788       1,412         117
                                        ----------  ----------  ----------
                                         4,689,230   4,887,816   4,607,791
                                        ----------  ----------  ----------

     Income before federal income 
       tax provision                       689,808      56,806     245,243
     Federal income tax provision          217,808      17,540      85,933
                                        ----------  ----------  ----------
     Net income                            472,000      39,266     159,310

     Less: Preferred stock dividends       (62,400)    (62,400)    (62,400)
           Accretion of discount on 
           preferred stock                 (52,000)    (52,000)    (52,000)
                                        ----------  ----------  ----------
     Income (loss) applicable to 
       common stockholders              $  357,600  $  (75,134) $   44,910
                                        ==========  ==========  ==========
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF OPERATIONS, CONTINUED
     for the years ended July 31, 1997, 1996 and 1995


                                        1997        1996        1995
                                        ----------  ----------  ----------

     Income (loss) per common share     $      .19  $     (.04) $      .02
                                        ==========  ==========  ==========
     Weighted average common shares 
       outstanding                       1,895,105   1,938,076   1,960,746
                                        ==========  ==========  ==========


     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
     for the years ended July 31, 1997, 1996 and 1995

     <TABLE>
     <CAPTION>

                                                                           Unrealized
                                                                           Gain(Loss)
                                                  Additional               on
                                      Common      Paid-In     Retained     Marketable
                                      Stock       Capital     Earnings     Securities    Total
                                      ----------  ----------  ----------   -----------   ----------
     <S>                              <C>         <C>         <C>          <C>           <C>
     Balances, July 31, 1994          $5,896,785  $1,760,262  $1,883,499   $   22,809    $9,563,355
       Net income                                                159,310                    159,310
       Unrealized loss on marketable
         securities                                                           (28,430)      (28,430)
       Purchase and retirement
         of common stock (7,528 
         shares)                         (22,584)   (13,234)                  (35,818)
       Cash dividend declared on 
         preferred stock                                         (62,400)                   (62,400)
       Accretion of discount on 
         preferred stock                                         (52,000)                   (52,000)
                                      ----------  ----------  ----------   ----------    ----------

     Balances, July 31, 1995           5,874,201   1,747,028   1,928,409       (5,621)    9,544,017
       Net income                                                 39,266                     39,266
       Unrealized loss on marketable
         securities                                                            (9,905)       (9,905)
       Purchase and retirement
         of common stock
         (39,982 shares)                (119,946)     57,973                                (61,973)
       Cash dividend declared on 
         preferred stock                                         (62,400)                   (62,400)
       Accretion of discount on 
         preferred stock                                         (52,000)                   (52,000)
                                      ----------  ----------  ----------   -----------   ----------
     </TABLE>
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED
     for the years ended July 31, 1997, 1996 and 1995

     <TABLE>
     <CAPTION>

                                                                           Unrealized
                                                                           Gain (Loss)
                                                  Additional               on
                                      Common      Paid-In     Retained     Marketable
                                      Stock       Capital     Earnings     Securities    Total
                                      ----------  ----------  ----------   -----------   ----------
     <S>                              <C>         <C>         <C>          <C>           <C>

     Balances, July 31, 1996          $5,754,255  $1,805,001  $1,853,275   $  (15,526)   $9,397,005
       Net income                                                472,000                    472,000
       Unrealized gain on marketable
         securities                                                             6,530         6,530
       Purchase and retirement 
         of common stock 
         (45,960 shares)                (137,880)     66,641                                (71,239)
       Cash dividend declared on 
         preferred stock                                         (62,400)                   (62,400)
       Accretion of discount on
         preferred stock                                         (52,000)                   (52,000)
       Redemption of preferred stock
         (1,000 shares)                               35,000     (35,000)
                                      ----------  ----------  ----------   -----------   ----------
     Balances, July 31, 1997          $5,616,375  $1,906,642  $2,175,875   $   (8,996)   $9,689,896
                                      ==========  ==========  ==========   ==========
     </TABLE>

     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF CASH FLOWS
     for the years ended July 31, 1997, 1996 and 1995



                                     1997         1996         1995
                                     -----------  -----------  -----------
     Cash flows from operating 
       activities:
         Cash received from 
           contracts, rentals and
           golf center sales         $ 2,759,659  $ 3,119,937  $ 2,861,797
         Interest received             1,003,265    1,168,493    1,390,814
         Cash paid to suppliers 
           and employees              (2,269,308)  (3,029,296)  (1,832,994)
         Interest paid, net of 
           amounts capitalized          (995,036)  (1,141,198)  (1,184,699)
         Income taxes paid              (643,000)    (112,500)     (97,500)
                                     -----------  -----------  -----------
             Net cash provided by 
               (used in) operating 
               activities               (144,420)       5,436    1,137,418
                                     -----------  -----------  -----------

     Cash flows from investing 
       activities:
         Proceeds from sales of 
           real estate                 2,032,279      259,435      293,138
         Proceeds from sales of 
           marketable securities
           and other investments                       41,553        2,300
         Collections on contracts, 
           mortgages and finance 
           notes receivable            2,462,229    4,166,338    2,543,914
         Investment in contracts, 
           mortgages and finance 
           notes receivable           (1,535,634)     (51,106)    (242,399)
         Additions to rental 
           properties, property 
           held for sale, property 
           under development, golf 
           center, vehicles and 
           equipment                  (1,353,211)  (2,477,696)  (3,146,582)
         Change in restricted 
           investments and cash 
           equivalents                    11,348       84,974      (46,473)
         Other                            16,335       28,837       (2,121)
                                     -----------  -----------  -----------
             Net cash provided by 
               (used in) investing
               activities              1,633,346    2,052,335     (598,223)
                                     -----------  -----------  -----------
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
     for the years ended July 31, 1997, 1996 and 1995



                                     1997         1996         1995
                                     -----------  -----------  -----------
     Cash flows from financing 
       activities:
         Net borrowings (repayments) 
           under line-of-credit 
           agreement                 $   956,989  $(2,231,388) $  (344,143)
         Proceeds from installment 
           contracts, mortgage 
           notes and notes payable                  1,270,858    1,911,000
         Payments on installment 
           contracts, mortgage 
           notes and notes payable    (1,984,377)  (1,091,276)  (2,138,200)
         Proceeds from sales of 
           debenture bonds               447,223      863,142    1,107,171
         Redemption of debenture 
           bonds                        (814,535)    (855,614)    (975,715)
         Redemption of preferred 
           stock                        (100,000)
         Payment of dividends on 
           preferred stock               (62,400)     (62,400)
         Purchase and retirement 
           of common stock               (71,239)     (61,973)     (35,818)
                                     -----------  -----------  -----------
             Net cash used in 
               financing activities   (1,628,339)  (2,168,651)    (475,705)
                                     -----------  -----------  -----------
     Net increase (decrease) in cash
       and cash equivalents             (139,413)    (110,880)      63,490
     Cash and cash equivalents, 
       beginning of year                 464,471      575,351      511,861
                                     -----------  -----------  -----------
     Cash and cash equivalents, 
       end of year                   $   325,058  $   464,471  $   575,351
                                     ===========  ===========  ===========


     The accompanying notes are an integral part of the consolidated 
       financial statements.
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
     for the years ended July 31, 1997, 1996 and 1995


                                     1997         1996         1995
                                     -----------  -----------  -----------
     Reconciliation of net income 
       to net cash provided by 
       (used in) operating 
       activities:
         Net income                  $   472,000  $    39,266  $   159,310
         Adjustments to reconcile 
           net income to net cash 
           provided by (used in)
           operating activities:
             Depreciation and 
               amortization              740,980      797,271      717,454
             Deferred income tax 
               provision (benefit)       274,374     (328,187)     (28,424)
             Deferred financing 
               income realized           (25,856)    (126,044)     (82,783)
             Interest accrued on 
               debenture bonds           547,403      531,248      480,797
             Gain on sales of 
               marketable securities                  (30,959)
             Gain on sales of real 
               estate                 (1,611,195)    (486,469)    (584,657)
             Loss on other investment                               24,865
             Uncollectible accounts        2,788        1,412          117
             Change in assets and 
               liabilities:
                 Accrued interest 
                   receivable             (1,808)      18,685       16,251
                 Prepaid expenses         61,617       52,025       15,604
                 Inventories              27,851      (83,352)
                 Accrued expenses         29,047     (583,245)     412,613
                 Income taxes 
                   payable              (699,565)     228,095      (11,354)
                 Other, net               37,944      (24,310)      17,625
                                     -----------  -----------  -----------
                     Net cash 
                       provided by 
                       (used in)
                       operating 
                       activities    $  (144,420) $     5,436  $ 1,137,418
                                     ===========  ===========  ===========

     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
     for the years ended July 31, 1997, 1996 and 1995


                                     1997         1996         1995
                                     -----------  -----------  -----------
     Supplemental schedule of 
       noncash investing and 
       financing activities:
         Company financed sale of 
           property                  $ 1,379,495  $ 1,025,648  $ 1,160,400
         Accretion of discount on 
           preferred stock                52,000       52,000       52,000
         Stock dividend declared 
           and unpaid                     62,400       62,400       62,400
         Additions to investment 
           in rental properties 
           and properties held for
           sale through contract 
           foreclosures                                              6,060
         Deferred gain recognized
           on sale of property           507,703


     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          Pacific Security Companies and subsidiaries (the Company) is
          incorporated under the laws of the state of Washington. The
          Company is engaged in the business of owning, selling and leasing
          real properties and in contract and loan financing,
          collateralized by real estate. Most of the Company's real estate
          activities are concentrated within the state of Washington. 
          Additionally, the Company completed construction and commenced
          operations of a golf center during the year ended July 31, 1996.
          The golf center, located in Spokane, Washington, serves as a
          practice and teaching center and sells golf clubs and related
          golf supplies.

          A summary of significant accounting policies followed by the
          Company is presented below:

            CONSOLIDATION

            The consolidated financial statements include the accounts of
            the Company and its wholly owned subsidiary, Aqua View
            Apartments, Inc. All significant intercompany accounts and
            transactions have been eliminated.

            The Company's wholly owned subsidiary, Henry George & Sons Co.,
            Inc.(and its wholly owned subsidiary, Cooper George Company)
            (Cooper George) was dissolved during the year ended July 31,
            1996. Upon dissolution, all assets of Cooper George were
            transferred to the Company for the redemption of the
            outstanding common stock. Cooper George was included in the
            accounts of the Company during the year ended July 31, 1995.

            CASH AND CASH EQUIVALENTS

            The Company deposits all cash and cash equivalents with high
            quality financial institutions. At times, the deposits may
            exceed the federal insured limit.

            The Company considers highly liquid debt instruments, if any,
            purchased with a remaining maturity of three months or less to
            be cash equivalents.

            CONTRACTS, MORTGAGES AND FINANCE NOTES RECEIVABLE

            Contracts, mortgages and finance notes receivable are stated at
            unpaid principal balance, plus accrued interest, less
            acquisition discounts and an allowance for estimated
            uncollectible amounts, as necessary. Management evaluates
            receivables which may not be fully collectible to determine if
            a provision for loss is necessary based on the present value of
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            CONTRACTS, MORTGAGES AND FINANCE NOTES RECEIVABLE, CONTINUED

            expected future cash flows from the receivables in the ordinary
            course of business or from amounts recoverable through
            foreclosures and the subsequent resale of the collateral, in
            accordance with Statement of Financial Accounting
            Standards(SFAS) No. 114, "Accounting by Creditors for
            Impairment of a Loan." The Company adopted this standard on
            August 1, 1995, which did not have a material effect on the
            consolidated financial statements.

            Interest continues to be accrued on non-performing receivables
            until such amount is not expected to be recovered.

            DISCOUNTS ON CONTRACTS

            The Company amortizes discounts on purchased contracts using
            the level-yield method over the expected term of the contracts.

            INVESTMENT IN RENTAL PROPERTIES

            Rental properties, including land, buildings and improvements
            and furniture and equipment are recorded at cost. Expenditures
            for maintenance and repairs are charged to operations as
            incurred. Renewals and betterments are capitalized. 

          Depreciation is provided on the straight-line method over
          estimated useful lives as summarized below:

                                                          Years
                                                          -----
                    Buildings and improvements            15-40
                    Furniture and equipment               5-10

            Upon sale or retirement of depreciable properties, the related
            cost and accumulated depreciation are removed from the accounts
            and any resultant gain or loss is reflected in operations.

            INVESTMENT IN GOLF CENTER

            The golf center, including land, building and improvements and
            furniture and equipment are recorded at cost. Depreciation is
            provided on the straight-line method over the estimated useful
            lives as summarized below:

                                                          Years
                                                          -----
                    Buildings and improvements            15-40
                    Furniture and equipment               3-10
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            INTEREST CAPITALIZATION

            All costs associated with self-constructed assets (including
            interest and real estate taxes) incurred during the
            construction period are capitalized. Interest costs of
            approximately $98,000, $205,000 and $204,000 were capitalized
            in fiscal 1997, 1996 and 1995, respectively.

            PROPERTY HELD FOR SALE OR DEVELOPMENT

            The Company acquires real estate through direct acquisition and
            foreclosures and records these assets at the lower of fair
            value less estimated costs to sell or cost. Losses on
            properties held for sale or development are recognized if the
            anticipated cash flows from disposition, less estimated selling
            costs, are estimated to be less than the carrying value of the
            related asset.

            The Company evaluates its real estate assets for impairment in
            value whenever events or circumstances indicate that the
            carrying value of an asset may not be recoverable. In
            performing the review, if expected future undiscounted cash
            flows from the use of the asset or the fair value, less selling
            costs, from the disposition of the asset is less than its
            carrying value, an impairment loss is recognized.

            MARKETABLE SECURITIES

            The Company's investments, consisting of debt and equity
            securities, are considered to be "available for sale" and,
            therefore, are carried at market value. Realized gains and
            losses on the sale of these securities are recognized on a
            specific identification basis in the consolidated statement of
            operations in the period the securities are sold. Unrealized
            gains and losses are excluded from operations and reported as a
            separate component of stockholders' equity, net of related
            income taxes, until realized.

            RESTRICTED INVESTMENTS

            Restricted investments in U.S. Treasury bonds are carried at
            amortized cost. Premiums or discounts at acquisition are
            amortized using the interest method over the remaining term of
            the investment.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            VEHICLES AND EQUIPMENT

            Vehicles and equipment are stated at cost and are depreciated
            using the straight-line method over their estimated useful
            lives of 4 to 5 and 5 to 10 years, respectively. Accumulated
            depreciation associated with vehicles and equipment was
            $191,547 and $207,505 at July 31, 1997 and 1996, respectively.
            Upon sale or retirement, the cost and related accumulated
            depreciation are removed from the accounts and any resultant
            gain or loss is reflected in operations.

            GOLF CENTER INVENTORIES

            Golf center inventories are stated at the lower of cost or
            estimated net realizable value using the first-in, first-out
            method.

            SALES OF REAL ESTATE

            Receipts on sales of real estate investments are accounted for
            as customer deposits until the principal payments received on
            the sales contracts exceed the minimum guidelines for gain
            recognition (see Note 4). Losses arising from sales of real
            estate are recognized immediately upon sale.

            INCOME TAXES

            The Company recognizes deferred tax assets and liabilities for
            the expected future income tax consequences of events that have
            been recognized in the financial statements. Under this method,
            deferred tax liabilities and assets are determined based on the
            temporary differences between the financial statement carrying
            amounts and tax bases of assets and liabilities using enacted
            tax rates in effect in the years in which the temporary
            differences are expected to reverse.

            INCOME OR LOSS PER SHARE

            Income or loss per common share is based on net income or loss
            after deducting preferred stock dividends and the accretion of
            the discount on preferred stock divided by the weighted average
            number of shares of common stock outstanding during each year.

            In February 1997, Statement of Financial Accounting Standards
            (SFAS) No. 128 , "Earnings Per Share," was issued. SFAS 128
            establishes standards for computing and presenting earnings per
            share (EPS) and simplifies the existing standards. This
            standard replaces the presentation of primary EPS with a
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            INCOME OR LOSS PER SHARE, CONTINUED

            presentation of basic EPS. It also requires the dual
            presentation of basic and diluted EPS on the face of the income
            statement for all entities with complex capital structures and
            requires a reconciliation of the numerator and denominator of
            the basic EPS computation to the numerator and denominator of
            the diluted EPS computation. SFAS 128 is effective for
            financial statements issued for periods ending after December
            15, 1997, including interim periods and requires restatement of
            all prior-period EPS data presented. The Company does not
            believe that the application of this standard will have a
            material effect on the presentation of its earnings per share
            disclosures.

            COMPREHENSIVE INCOME

            In June 1997, SFAS 130, "Reporting Comprehensive Income," was
            issued. SFAS 130 establishes standards for reporting and
            display of comprehensive income and its components (revenues,
            expenses, gains and losses) in a full set of general-purpose
            financial statements. This Statement requires that all items
            required to be recognized under accounting standards as
            components of comprehensive income be reported in a financial
            statement that is displayed with the same prominence as other
            financial statements. This Statement does not require a
            specific format for the financial statement, but requires an
            enterprise to display an amount representing total
            comprehensive income for the period in the financial statement.
            This Statement requires an enterprise to classify items of
            other comprehensive income by their nature in a financial
            statement and display the accumulated balance of other
            comprehensive income separately from retained earnings and
            additional paid-in capital in the equity section of a statement
            of financial position. This Statement is effective for fiscal
            years beginning after December 15, 1997. The Company has not
            yet determined the financial statement effect of the
            application of this Statement.

            ESTIMATES

            The preparation of financial statements in conformity with
            generally accepted accounting principles requires management to
            make estimates and assumptions that affect the reported amounts
            of assets and liabilities and disclosures of contingent assets
            and liabilities at the dates of the financial statements and
            the reported amounts of revenues and expenses during the
            reporting periods. Actual results could differ from those
            estimates.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            RECLASSIFICATIONS

            Certain 1996 balances have been reclassified to conform with
            the 1997 presentation with no effect on net income or retained
            earnings as previously reported.


     2.   RESTRICTED CASH AND CASH EQUIVALENTS AND INVESTMENTS:

          At July 31, 1997 and 1996, the Company holds cash and cash
          equivalents and investments which are restricted for the
          following purposes:


                              1997                   1996
                              ---------------------  ---------------------
                              Cash and     U.S.      Cash and     U.S.
                              Cash         Treasury  Cash         Treasury
                              Equivalents  Notes     Equivalents  Notes
                              -----------  --------  -----------  --------
          Tenant security 
            deposits           $ 13,250               $ 25,948
          Mortgage reserves      21,437                 33,728
          Apartment complex 
            replacement 
            reserve required
            by the Department 
            of Housing and
            Urban Development 
            (HUD)                36,558    $129,330     86,702    $128,588
          Apartment complex 
            residual receipts 
            as required by 
            HUD                  13,439     148,824      4,161      93,252
                               --------    --------   --------    --------
                               $ 84,684    $278,154   $152,346    $221,840
                               ========    ========   ========    ========

          The U.S. Treasury notes held in the replacement and residual
          receipt reserves at July 31, 1997 and 1996 bear interest at 5.75%
          to 6%, respectively, and mature October 31, 1997 and October 15,
          1999.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     3.   CONTRACTS, MORTGAGES AND FINANCE NOTES RECEIVABLE:

          At July 31, 1997 and 1996, the aging of amounts due on contracts,
          mortgages and finance notes receivable was as follows:

                                                  1997         1996
                                                  -----------  -----------

          Current                                 $11,049,018  $10,474,252
          31 to 60 days                                46,506       46,448
          60 to 90 days                                 9,756       85,767
          Over 90 days                                 49,525      102,771
                                                  -----------  -----------
                                                   11,154,805   10,709,238
          Less unearned acquisition discounts        (183,105)    (216,294)
                                                  -----------  -----------
                                                  $10,971,700  $10,492,944
                                                  ===========  ===========

          Substantially all of these receivables are collateralized by
          land, commercial buildings and single and multi-family
          residences. Interest rates on most loans are fixed and range from
          5.25% and 14.25% at July 31, 1997 and 1996.

          Management of the Company provides an allowance for losses based
          upon estimates of the cash flows to be collected on the
          receivable or the fair value of the underlying collateral, net of
          selling costs. At July 31, 1997 and 1996, the fair value of the
          underlying collateral, net of selling costs, is estimated to be
          greater than the carrying value of the related receivables, and
          thus, no allowance for loss has been provided. The receivables
          are collateralized primarily by real estate located in the state
          of Washington. These estimates can be affected by changes in the
          economic environment in the state of Washington and the resultant
          effect on real estate values. As a result of changing economic
          conditions, it is reasonably possible that the amount of the
          allowance for loan losses could change in the near term.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     4.   INVESTMENTS IN RENTAL PROPERTIES:

          Following is a summary of investments in rental properties at
          July 31, 1997 and 1996:

                                                  1997         1996
                                                  -----------  -----------

            Land                                  $ 2,467,862  $ 2,929,981
            Buildings and improvements             15,784,229   17,432,278
            Furniture and equipment                   941,626    1,082,374
                                                  -----------  -----------
                                                   19,193,717   21,444,633
            Less accumulated depreciation          (5,706,632)  (6,514,593)
                                                  -----------  -----------
                                                  $13,487,085  $14,930,040
                                                  ===========  ===========

          The Company leases office space in certain of the above buildings
          under operating leases. Most of the lease agreements contain
          renewal options and escalation provisions associated with
          inflation over the term of the lease. The following is a schedule
          by years of minimum future rentals on noncancellable operating
          leases as of July 31, 1997:

                 Year Ending
                   July 31,
                 -----------
                     1998                         $ 1,328,645
                     1999                           1,076,776
                     2000                             699,221
                     2001                             624,481
                     2002                             316,209
                  Thereafter                          246,914
                                                  -----------
              Total minimum future rentals        $ 4,292,246
                                                  ===========

          These properties are primarily located in the greater Spokane,
          Washington geographical area. Losses on investments in rental
          properties are recognized if the anticipated cash flows from
          operations or the sale of the rental property, net of selling
          costs, are estimated to be less than the carrying value of the
          related asset. These estimates can be affected by changes in the
          economic environment of the Spokane, Washington area and the
          resultant effect on the real estate rental and property values.
          As a result of changing economic conditions, it is reasonably
          possible that these estimates could change in the near term.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     4.   INVESTMENTS IN RENTAL PROPERTIES, CONTINUED:

          At July 31, 1997 and 1996, the sales of certain rental property
          and land were subject to sales contracts, but had not met the
          criterion to be recorded as a sale. Therefore, the deposit method
          of accounting for these sales was applied, resulting in
          approximately $159,000 and $185,000 being classified as
          investments in rental properties at July 31, 1997 and 1996,
          respectively. At July 31, 1997 and 1996, the Company had deferred
          gains of approximately $41,000 and $42,000, respectively,
          associated with these sales which will be recognized when the
          criterion for a sale is ultimately met.


     5.   INVESTMENT IN GOLF CENTER:

          The Company completed construction of Birdies Golf Center
          (Birdies), which features a 56-tee driving range, a fully
          lighted, contoured fairway with 5 target greens, a pro shop,
          teaching studios and an 8,000-square-foot putting green.

          The following is a summary of the investment in the golf center
          at July 31, 1997 and 1996:

                                                  1997         1996
                                                  -----------  -----------
            Land                                  $   350,000  $   350,000
            Building and improvements               1,687,503    1,622,751
            Furniture and equipment                   259,757      223,985
                                                  -----------  -----------
                                                    2,297,260    2,196,736
            Less accumulated depreciation            (155,013)     (72,506)
                                                  -----------  -----------
                                                  $ 2,142,247  $ 2,124,230
                                                  ===========  ===========
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     6.   BUSINESS SEGMENT REPORTING:

          Information about the Company's separate business segments and in
          total as of and for the years ended July 31, 1997 and 1996 is as
          follows:

                                     1997
                                     -------------------------------------
                                     Birdies       Rental and
                                     Golf          Receivable
                                     Center        Operations  Total
                                     -----------  -----------  -----------

            Revenue                  $   343,528  $ 5,035,510  $ 5,379,038
            Earnings (loss) from 
              operations                (189,429)     879,237      689,808
            Identifiable assets, 
              net                      2,197,928   30,096,979   32,294,907
            Depreciation and 
              amortization                82,507      658,473      740,980
            Capital expenditures         108,103    1,245,108    1,353,211

                                     1996
                                     -------------------------------------
                                     Birdies       Rental and
                                     Golf          Receivable
                                     Center        Operations  Total
                                     -----------  -----------  -----------

            Revenue                  $   294,276  $ 4,650,346  $ 4,944,622
            Earnings (loss) from 
              operations                (142,848)     199,654       56,806
            Identifiable assets, 
              net                      2,207,582   30,632,525   32,840,107
            Depreciation and 
              amortization                72,506      724,765      797,271
            Capital expenditures         854,937    1,622,759    2,477,696


          In June 1997, SFAS 131, "Disclosures About Segments of an
          Enterprise and Related Information," was issued. SFAS 131
          establishes standards for the way that public business
          enterprises report information about operating segments in annual
          financial statements and requires that those enterprises report
          selected information about operating segments in interim
          financial reports issued to shareholders. It also establishes
          standards for related disclosures about products and services,
          geographic areas and major customers. This Statement supersedes
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     6.   BUSINESS SEGMENT REPORTING, CONTINUED:

          FASB Statement No. 14, "Financial Reporting for Segments of a
          Business Enterprise," but retains the requirement to report
          information about major customers.

          This Statement is effective for financial statements for periods
          beginning after December 15, 1997. The Company has not yet
          determined the effect that the application of this Statement will
          have on its consolidated financial statements.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     7.   MARKETABLE SECURITIES:

          A summary of investments in marketable securities at July 31, 1997 
          and 1996 is as follows:

     <TABLE>
     <CAPTION>
                                 1997                              1996
                                 --------------------------------  --------------------------------
                                                         Market/                           Market/
                                           Unrealized    Carrying            Unrealized    Carrying
                                 Cost      Depreciation  Value     Cost      Depreciation  Value
                                 --------  ------------  --------  --------  ------------  --------
            <S>                  <C>       <C>           <C>       <C>       <C>           <C>
            Marketable equity 
              securities         $ 41,235    $(13,631)   $ 27,604  $ 40,004    $(23,524)   $ 16,480
            Debt securities        59,400                  59,400    59,400                  59,400
                                 --------    --------    --------  --------    --------    --------
                                 $100,635    $(13,631)   $ 87,004  $ 99,404    $(23,524)   $ 75,880
                                 ========    ========    ========  ========    ========    ========

     </TABLE>


     8.   NOTE PAYABLE TO BANK:

          Note payable to bank represents borrowings outstanding under the
          Company's $8,000,000 short-term, line-of-credit agreement with
          U.S. Bank of Washington. Amounts drawn under the line bear
          interest at the bank's prime rate plus 0.875%. The interest rate
          was 9.125% (based on a prime rate of 8.25%) at July 31, 1997. The
          agreement is subject to renewal on December 5, 1997. The
          Company's principal stockholder provides a guarantee of up to
          $1.2 million on outstanding borrowings under the line-of-credit
          agreement. The following assets were pledged as collateral for
          the note at July 31, 1997 and 1996:
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     8.   NOTE PAYABLE TO BANK, CONTINUED:

                                                    1997        1996
                                                    ----------  ----------

            Finance notes and real estate 
             contracts receivable                   $4,024,219  $3,267,367
            Assignment of future rents               2,473,003   2,029,184
            Equity in contracts with 
              underlying obligations                    71,650     104,191
                                                    ----------  ----------
                                                    $6,568,872  $5,400,742
                                                    ==========  ==========


     9.   INSTALLMENT CONTRACTS, MORTGAGE NOTES AND NOTES PAYABLE:

          Installment contracts, mortgage notes and notes payable bear
          interest at rates ranging from 6.0% to 9.0% per annum. Aggregate
          monthly debt service payments, including interest, were
          approximately $56,117 at July 31, 1997.

          Scheduled future maturities of contracts, mortgage notes and
          notes payable are as follows:

                 Year Ending
                   July 31,
                 -----------

                     1998                           $  322,355
                     1999                              340,350
                     2000                              366,074
                     2001                              393,033
                     2002                              378,125
                  Thereafter                         2,823,595
                                                    ----------
                                                    $4,623,532
                                                    ==========

          The following assets were pledged as collateral for contracts,
          mortgage notes and notes payable at July 31, 1997 and 1996:

                                                  1997         1996
                                                  -----------  -----------
          Contracts receivable                    $ 3,952,479  $ 3,828,054
          Rental properties                         8,116,950    8,428,533
                                                  -----------  -----------
                                                  $12,069,429  $12,256,587
                                                  ===========  ===========
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     10.  DEBENTURE BONDS:

          The Company has issued unsecured investment bonds to residents of
          the state of Washington under the Securities Act of Washington.
          The proceeds have been used in making funds available for loans
          and the development, improvement and acquisition of commercial
          real property.

          The outstanding bonds have original maturities ranging from one
          to ten years and the interest rates vary depending upon the
          maturity. 

          Estimated future contractual maturities of outstanding debenture
          bonds are as follows:

                 Year Ending
                   July 31,
                 -----------

                     1998                         $ 2,021,809
                     1999                             911,675
                     2000                             954,814
                     2001                             708,334
                     2002                             259,074
                  Thereafter                        5,042,645
                                                  -----------
                                                  $ 9,898,351
                                                  ===========
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     10.  DEBENTURE BONDS, CONTINUED:

          Outstanding bonds by interest rate categories were as follows at
          July 31, 1997 and 1996:

              Bond Interest Rate                  1997         1996
              ------------------                  -----------  -----------
                     5.75%                        $   354,502  $    42,086
                     6.00                                          447,664
                     6.25                             148,258      114,129
                     6.50                             577,675      484,690
                     6.75                                           20,231
                     7.00                             517,146      927,631
                     7.25                             325,088      274,235
                     7.50                           1,712,455    1,748,361
                     7.75                             473,967      246,690
                     8.00                             722,011      742,900
                     8.25                             636,594      258,745
                     8.50                           1,384,274    1,300,283
                     8.75                             331,323      544,285
                     9.00                           1,644,000    1,566,314
                     9.25                             334,996      312,638
                     9.50                             707,069      661,206
                    10.00                              13,164       11,926
                    10.50                              10,280        9,268
                    11.00                               5,549        4,978
                                                  -----------  -----------
                                                  $ 9,898,351  $ 9,718,260
                                                  ===========  ===========

          The weighted average interest rate for outstanding debentures at
          July 31, 1997 and 1996 was 8.06% and 8.01%, respectively.

          The Securities Act of Washington contains specific statutory and
          regulatory requirements concerning companies selling debentures
          in the state of Washington. These regulations require maintenance
          of minimum net worth and liquidity levels, define debenture terms
          and maturity limitations, describe financial reporting
          requirements and prohibit certain activities by controlling
          persons of the issuer of debentures. Failure to comply with these
          requirements may jeopardize a company's ability to issue
          debentures.

          In November 1996, the Company obtained its permit to offer
          debentures for sale under the Securities Act of Washington. The
          permit is subject to the following conditions:

          (a)  Outstanding debentures, including accrued interest, may not
               exceed $10,488,910 at any time during the period.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     10.  DEBENTURE BONDS, CONTINUED:

          (b)  Normal quarterly reports will be supplemented with the
               following information:

               --  Copies of the Company's Form 10-Q.

               --  Calculations of the ratio of earnings to fixed charges.

               --  Schedules showing the real estate sold, proceeds received
                  and use of the proceeds during the quarter.

               --  Schedules showing the amounts of debentures sold to new
                  investors, old debentures retired and renewals.

               --  A discussion of the efforts which have been made during
                  the quarter to transfer a receivable from Washington
                  Capital, Inc. (WCI), a related party (see Note 14), to an
                  unaffiliated entity.

          The permit may be renewed for an additional one year upon its
          expiration in November 1997. However, the Company's continued
          ability to sell additional debentures is dependent upon its
          compliance with the preceding conditions.


     11.  INCOME TAXES:

          The components of the income tax provision (benefit) are as
          follows:

                                     1997         1996         1995
                                     -----------  -----------  -----------

            Current                  $   (56,566) $   345,727  $   114,357
            Deferred                     274,374     (328,187)     (28,424)
                                     -----------  -----------  -----------
                                     $   217,808  $    17,540  $    85,933
                                     ===========  ===========  ===========

     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     11.  INCOME TAXES, CONTINUED:

          The components of the net deferred tax liability at July 31, 1997
          and 1996 were as follows:

                                     Assets       Liabilities  Total
                                     -----------  -----------  -----------

          1997:
            Depreciation                          $  (318,282) $  (318,282)
            Installment gains                        (854,093)    (854,093)
            Unrealized gains or 
              losses on marketable 
              securities             $     4,635                     4,635
            Accrued liabilities           35,317                    35,317
            Other, net                    10,945                    10,945
                                     -----------  -----------  -----------
                                     $    50,897  $(1,172,375) $(1,121,478)
                                     ===========  ===========  ===========

          1996:
            Depreciation                          $  (182,538) $  (182,538)
            Installment gains                        (937,642)    (937,642)
            Unrealized gains or
              losses on marketable
              securities             $    17,575                    17,575
            Deferred gain on sale 
              of real estate             220,000                   220,000
            Accrued liabilities           46,982                    46,982
            Other, net                                (12,752)     (12,752)
                                     -----------  -----------  -----------
                                     $   284,557  $(1,132,932) $  (848,375)
                                     ===========  ===========  ===========
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     11.  INCOME TAXES, CONTINUED:

          The annual tax provision is different from the amount which would
          be provided by applying the statutory federal income tax rate to
          the Company's pretax income. The reasons for the differences are:

                         1997      %      1996      %      1995      %
                         --------  -----  --------  -----  --------  -----

          Computed 
            statutory
            provision    $234,535   34.0% $ 19,314   34.0% $ 83,383   34.0%
          Meals and 
            entertain-
            ment              861    0.1     1,280    1.3       950    0.4
          Change in tax 
            estimates     (17,588)  (2.5)
          Other                             (3,054)  (5.4)    1,600    0.6
                         --------  -----  --------  -----  --------  -----
                         $217,808   31.6% $ 17,540   35.0% $ 85,933   35.0%
                         ========  =====  ========  =====  ========  =====


     12.  REDEEMABLE PREFERRED STOCK:

          The 6% annual dividends on the Class A preferred stock are
          cumulative. Dividends of $62,400 were declared on the preferred
          stock during the years ended July 31, 1997 and 1996 and were paid
          subsequent to each respective year end.

          The Company has the right to redeem any shares after three years
          from the date of issuance. During the year ended July 31, 1997,
          the Company redeemed 1,000 shares of the preferred stock at par.
          However, all shares are required to be redeemed by the Company
          ten years after issuance at the par value plus accrued dividends
          to date of redemption. Due to the mandatory ten-year redemption,
          the discount on the issuance of the preferred stock is being
          accreted using the interest method over the redemption period.
          This accretion is recorded as an increase in the carrying value
          of the preferred stock and as a charge against retained earnings.
          The accretion of this discount was $52,000 in each of the years
          ended July 31, 1997, 1996 and 1995.

          Each share of Class A Preferred Stock is entitled to one vote on
          each matter voted on at a stockholders' meeting. The preferred
          stockholders have liquidation rights equal to the par value plus
          accumulated and unpaid dividends. The liquidation preference of
          the preferred stock was $1,002,400 and $1,102,400 at July 31,
          1997 and 1996, respectively.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     12.  REDEEMABLE PREFERRED STOCK, CONTINUED:

          At July 31, 1997, preferred stock with a face value of $600,000
          has been pledged as collateral for a contract receivable from WCI
          (see Note 14).


     13.  FAIR VALUE OF FINANCIAL INSTRUMENTS:

          The following methods and assumptions were used to estimate the
          value of each class of financial instrument for which it is
          practicable to estimate that value. Potential income tax
          ramifications related to the realization of unrealized gains and
          losses that would be incurred in an actual sale and/or settlement
          have not been taken into consideration.

            CASH AND CASH EQUIVALENTS - Due to the nature of these
            financial instruments, carrying value approximates fair value.

            DEBENTURE BONDS, CONTRACTS RECEIVABLE AND INSTALLMENT CONTRACTS
            PAYABLE - Fair values are determined using future cash flows
            discounted at a rate of interest currently offered for debt or
            receivables with similar remaining maturities and credit risks.
            At July 31, 1997 and 1996, the carrying values of these
            financial instruments approximated their fair values.

            NOTE PAYABLE TO BANK - Fair value approximates the carrying
            value because the loan bears  variable interest rate.

            MARKETABLE SECURITIES AND RESTRICTED INVESTMENTS - Fair value
            approximates the carrying value based on quoted market prices.

            LIMITATIONS - The fair value estimates are made at a discrete
            point in time based on relevant market information and
            information about the financial instruments. Because no market
            exists for many of these financial instruments, fair value
            estimates are based on judgments regarding current economic
            conditions and other factors. These estimates are subjective in
            nature and involve uncertainties and matters of significant
            judgment and, therefore, cannot be determined with precision.
            Changes in assumptions could significantly affect the
            estimates. Accordingly, the estimates presented herein are not
            necessarily indicative of what the Company could realize in a
            current market exchange.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     14.  RELATED-PARTY TRANSACTIONS:

            CONTRACTS AND NOTES RECEIVABLE

            Certain stockholders are indebted to the Company on contracts
            or notes with the following terms:

                                                        1997      1996
                                                        --------  --------
              Note secured by common stock, bearing 
                interest at 12.5% (prime plus 4%); 
                due in full by December 1, 2001         $250,343  $278,206
              Notes secured by real estate and common 
                stock; interest at 8.5% to 13.75%         27,985    27,985
                                                        --------  --------
                                                        $278,328  $306,191
                                                        ========  ========

            HERITAGE VILLAGE APARTMENT COMPLEX

            On February 1, 1974, Wayne E. Guthrie and his wife, Constance
            Guthrie, purchased the Heritage Village apartment complex
            located in King County, Washington for $2,100,000 from Pacific
            National Capital Company (which subsequently merged into
            Pacific Security Companies). The purchase was partially seller-
            financed by a real estate contract bearing interest at 8% in an
            original amount of $2,060,000. This contract was assigned to
            WCI in 1990 (see below). The balance owed on this contract was
            $450,109 and $539,481 on July 31, 1997 and 1996, respectively.
            The taxable gain on this sale was $932,348.

            On August 1, 1976, Wayne E. Guthrie and Constance Guthrie sold
            the Heritage Village apartment complex for $2,650,000 to
            Security Savesco, Inc., which subsequently merged with Pacific
            Security Companies in 1985 and had its name changed to Pacific
            Security Companies.

            On November 29, 1979, Security Savesco, Inc. sold the Heritage
            Village apartment complex for $6,000,000 to a non-related
            party. The sale was partially seller-financed by a real estate
            contract bearing interest at 9% in an original amount of
            $5,200,000. The balance owed on this contract was $3,088,320
            and $3,388,641 on July 31, 1997 and 1996, respectively. The
            taxable gain on this sale was $2,732,811. The balance owed was
            paid in full in September 1997.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     14.  RELATED-PARTY TRANSACTIONS, CONTINUED:

            WASHINGTON CAPITAL, INC. (WCI)

            In July 1990, certain contracts receivable from Company
            officers, directors and stockholders were assigned by the
            Company to WCI, a corporation whose sole stockholder was Wayne
            E. Guthrie. In December 1991, Mr. Guthrie transferred his
            ownership interest in WCI to his brother, who is now the sole
            stockholder of WCI. Generally accepted accounting principles
            include members of the immediate families of principal owners
            or management as related parties.

            The assignment of the contracts receivable from officers/
            directors/stockholders of the Company was made at no gain or
            loss as WCI executed installment notes payable to the Company
            for the same principal amounts and interest rates as the
            contracts assigned to WCI. In 1993, one of the contracts was
            paid in full. At July 31, 1997 and 1996, the only significant
            assets and liabilities of WCI were the contract receivable from
            the officer/stockholder of the Company and the installment
            contract payable to the Company.

            In July 1994, Wayne E. Guthrie and/or WCI pledged $800,000 face
            value of the Company's Class A Preferred Stock (see Note 12) to
            guarantee performance and full payment of any account that he
            or WCI may owe to the Company. In July 1997, as a result of the
            redemption of preferred shares, the pledge was adjusted to
            $600,000 face value of the Company's Class A Preferred Stock.

            In the event the Company elects to redeem this preferred stock
            at any time prior to 2002, the proceeds shall be applied to the
            debt. Also, any dividends included therewith shall be applied
            to accrued interest paid on the debt.

            If the debt is not paid in full prior to July 5, 2002, the
            Company shall become the owner of the preferred stock, and the
            liquidation shall be at the Company's sole discretion with the
            proceeds being applied to the debt along with accrued dividends
            that may be declared.

            The contract receivable by the Company from WCI had balances
            outstanding of $450,109 and $539,481 at July 31, 1997 and 1996,
            respectively. This contract is repayable in $15,000 monthly
            installments and bears interest at 8% per annum.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     14.  RELATED-PARTY TRANSACTIONS, CONTINUED:

            WASHINGTON CAPITAL, INC. (WCI), CONTINUED

            The Securities Act of Washington prohibits a debenture
            company's officers, directors or controlling persons from
            directly or indirectly borrowing funds from a debenture company
            or from indirectly or directly owning real property upon which
            the debenture company holds a mortgage, deed of trust or
            property contract. The Securities Division takes the position
            that the holding of these receivables, whether by the Company
            or WCI, violates this provision of the Securities Act. The
            Company has agreed to work with WCI to move these receivables
            to a party which may legally hold them subject to such
            restrictions (see Notes 10 and 12).

            INSTALLMENT CONTRACTS, MORTGAGE NOTES AND NOTES PAYABLE

            At July 31, 1997 and 1996, the following related-party notes
            payable were outstanding:

                                                        Interest  Monthly
                                    1997      1996      Rate      Payment
                                    --------  --------  --------  --------

              Wayne E. Guthrie      $188,303  $199,190    6.75%   $  2,000
              John Guthrie             3,353     4,946    9.00%        219
                                    --------  --------
                                    $191,656  $204,136
                                    ========  ========

            DEBENTURE BONDS

            Included in debenture bonds at July 31, 1997 and 1996 is
            approximately $199,000 and $101,000, respectively, that is
            payable to related parties. These bonds bear interest at the
            prevailing market rate on the date of purchase.

            ACCRUED EXPENSES AND OTHER LIABILITIES

            Included in accrued expenses and other liabilities at July 31,
            1997 and 1996 are $138,546 and $57,283, respectively, payable
            to Wayne E. Guthrie. Additionally, $97,288 and $98,885 was
            payable to Constance Guthrie at July 31, 1997 and 1996,
            respectively. Interest at 9.0% accrues on these advances.
            Advances from other stockholders, who are children of Wayne E.
            Guthrie, included in other liabilities amounted to $11,160 and
            $9,269 at July 31, 1997 and 1996, respectively. These advances
            bear interest at 9.0%.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     14.  RELATED-PARTY TRANSACTIONS, CONTINUED:

            INTEREST INCOME AND EXPENSE

            The approximate amount of related-party interest income and
            expense included in the accompanying consolidated statements of
            operations for each of the three years ended July 31, 1997,
            1996 and 1995 is as follows:

                                              1997      1996      1995
                                              --------  --------  --------

              Interest income                 $ 68,000  $ 90,000  $100,000
              Interest expense                  36,000    35,000    34,000

            DEFERRED COMPENSATION AGREEMENT

            During October 1991, the Company entered into a deferred
            compensation agreement with its former president, Robert W.
            Guthrie. In accordance with the terms of the agreement,
            Mr. Guthrie was paid monthly compensation of $7,124 through
            March 31, 1993.

            The agreement also called for Robert W. Guthrie to be paid a
            commission of $150,000 upon the sale or lease of certain real
            estate for personal services he rendered on behalf of the
            Company related to the acquisition and development of the
            property. As of July 31, 1997, a commission of $147,876 had
            been paid pursuant to the agreement.

            Additionally, the agreement states that the Company will
            provide Robert W. Guthrie with a line-of-credit loan of up to
            $278,206 collateralized by Mr. Guthrie's pledge of his 158,975
            shares of the Company's common stock. The line of credit
            requires monthly interest payments only through October 1996 at
            a rate of prime plus 4.0% (or 12.5% at July 31, 1997), then
            monthly interest and principal payments of an amount necessary
            to amortize the loan over the next five-year period. As of
            July 31, 1997, $250,342 had been loaned to Robert W. Guthrie
            pursuant to the agreement.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     14.  RELATED-PARTY TRANSACTIONS, CONTINUED:

            SALE OF REAL ESTATE

            On December 1, 1979, Pacific Security Companies sold land and a
            mini-warehouse business to Security Savesco, Inc., an equity
            method investee. Security Savesco, Inc. merged with Pacific
            Security Companies in 1985 and had its name changed to Pacific
            Security Companies. The gain on the sale of the property was
            $727,703. The gain, net of $220,000 of income taxes, was
            deferred for financial statement purposes until the property
            was sold to an unrelated entity. During the year ended July 31,
            1997, the property was sold and the net deferred gain of
            $507,703 was recognized in the statement of operations.


     15.  COMMON STOCK:

            On October 31, 1995, the Board of Directors of the Company
            proposed the creation of a second class of common stock, Class
            B common stock. This proposed action was ratified by the
            stockholders of the Company on December 12, 1995, at which time
            an amendment to the Articles of Incorporation was approved.
            This class has authorized 30,000, no par value shares and
            entitles the holder to 50 votes on each matter in all
            proceedings in which actions are taken by the stockholders,
            including the election of directors. Otherwise, the common
            stock is identical to the original class in all respects and
            for all purposes.

            A suit filed in Superior Court of the State of Washington,
            Spokane County, by Robert Guthrie has delayed the issuance of
            Class B common stock. A trial date has been set for January
            1998.
     <PAGE>
     PART III


     Item 10.  Directors and Executive Officers of the Registrant
               --------------------------------------------------
      
     IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

     The following information as ofJuly 31, 1997 is provided with respect
     to each director and executive officer of the Company:

     <TABLE>
     <CAPTION>

                                  Year First  Term as
                                  Elected as  Director
     Name                    Age  Director    Expires in  Position (date elected to position)
     ----------------------  ---  ----------  ----------  ------------------------------------------
     <S>                     <C>  <C>         <C>         <C>
     Wayne E. Guthrie         77     1970        1999     Chairman of the Board and Chief Executive
                                                          Officer (January 17, 1970); Director

     Kevin M. Guthrie         42     1980        1997     Vice President (May 2, 1985); Director

     David L. Guthrie         33     1987        1997     Vice President (September 1, 1989);
                                                          Director

     Donald J. Migliuri       50     1992        1998     Secretary/Treasurer (May 29, 1990);
                                                          Director

     Raymond J. Fisher        74     1970        1999     Director

     Constance M. Guthrie     63     1981        1999     Director

     Robert N. Codd           67     1994        1997     Director

     </TABLE>
     <PAGE>
     FAMILY RELATIONSHIPS

     Kevin M. Guthrie and David L. Guthrie are the sons of Wayne E.
     Guthrie. Constance M. Guthrie is the wife of Wayne E. Guthrie.


     BUSINESS EXPERIENCE

     Wayne E. Guthrie, Chairman of the Board of Pacific Security Companies.
     Mr. Guthrie is also Chairman of the Board of Aqua View Apartments,
     Inc. a Washington corporation and subsidiary of the registrant. Mr.
     Guthrie has over 50 years of experience in areas of construction,
     financing of real estate and personal property, and real estate
     investments.

     Kevin M. Guthrie, Vice President of Pacific Security Companies since
     1985. Mr. Guthrie has served as property manager for the Company since
     1976. Mr. Guthrie is also an officer and director of Aqua View
     Apartments, Inc.

     David L. Guthrie, Vice President of Pacific Security Companies since
     1989. Mr. Guthrie was formerly a financial consultant with Merrill
     Lynch in Spokane, Washington. Mr. Guthrie is also an officer and
     director of Aqua View Apartments, Inc. Mr. Guthrie is a NASD licensed
     securities sales person (registered representative) and broker-dealer
     (general securities principal). He is a licensed real estate broker in
     the state of Washington and has obtained the CCIM designation
     (certified commercial investment member) awarded by the commercial
     real estate investment institute.

     Donald J. Migliuri, Treasurer of Pacific Security Companies since 1990
     and secretary since 1991. Mr. Migliuri is a Certified Public
     Accountant and has served as an accounting officer with various
     diversified financial services companies for over 17 years. He also is
     a certified management accountant (CMA) and has a Masters degree in
     Business Administration.

     Constance M. Guthrie.  Mrs. Guthrie is a housewife and has not been
     employed outside the home during the past nine years.

     Raymond J. Fisher.  Mr. Fisher, now retired, was Secretary of Pacific
     Security Companies.  He was a Certified Public Accountant and was
     employed by the Company and its predecessor companies for 41 years.

     Robert N. Codd.  Mr. Codd is employed by Pacific Security Companies in
     its leasing and real estate activities.  He was employed by the
     Company from 1970 to 1979 and was rehired in November 1992.  Prior to
     being rehired, he was a commercial realtor and property manager.
     <PAGE>
     Item 11.  Executive Compensation
               ----------------------

     REMUNERATION OF DIRECTORS AND OFFICERS

     The following table lists, on an accrual basis, for each of the three
     years ended July 31, 1997, the remuneration paid by the Company to any
     officers or directors in excess of $100,000 and to all officers and
     directors as a group who were officers or directors of the Company at
     any time during the year ended July 31, 1997:


     Name of Individual                                 Annual Compensation
     or Number of        Capacities in Which     Fiscal -------------------
     Persons in Group    Served                  Year   Salary    Bonus
     ------------------  ---------------------   ------ --------  ---------

     Wayne E. Guthrie    Chairman of the Board 
                           and Chief Executive   1997   $    *  
                           Officer               1996        *  
                                                 1995    113,000

     Officers and                                1997    253,144
     Directors as a 
     group


     The Company has no qualified or nonqualified stock option plans as of
     July 31, 1997.

     *Annual compensation did not exceed $100,000.


     Item 12.  Security Ownership of Certain Beneficial Owners and
               Management
               ---------------------------------------------------

     (a)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

          Set forth below is certain information concerning parties,
          excluding management, who are known by the Company to directly
          own more than 5% of any class of the Company's voting shares on
          July 31, 1997:
     <PAGE>
                                                      Amount and
                                                      Nature of
                           Name and Address of        Beneficial  Percent
          Title of Class   Beneficial Owner           Ownership   of Class
          --------------   -------------------------  ----------  --------
          Common stock     Linda Guthrie Welden                
                           Bothell, WA                  158,975     8.49%

          Common stock     Julie Guthrie Hable
                           San Francisco, CA            190,387    10.17

          Common stock     Robert Guthrie
                           Spokane, WA                  158,975     8.49

          Common stock     John W. Guthrie
                           Olympia, WA                  137,348     7.34
                                                        -------    -----
          Totals                                        645,685    34.49%
                                                        =======    =====

     (b)  SECURITY OWNERSHIP OF MANAGEMENT

          The following table sets forth as of July 31, 1997 information
          concerning the direct ownership of each class of equity
          securities by all directors and all directors and officers of the
          Company as a group:

                                                      Amount and
                                                      Nature of
                           Name and Address of        Beneficial  Percent
          Title of Class   Beneficial Owner           Ownership   of Class
          --------------   -------------------------  ----------  --------
          Common stock     Wayne E. Guthrie             453,027     24.20%
          Common stock     Constance Guthrie            105,043      5.61
          Common stock     Kevin Guthrie                216,267     11.55*
          Common stock     David Guthrie                216,267     11.55*
                                                        -------    ------
          Common stock     All directors and 
                             officers as a group        990,604     52.91%
                                                        =======    ======
          Preferred stock  Wayne E. Guthrie               7,000     74.47%
          Preferred stock  Wayne E. or Constance 
                             Guthrie                      2,000     21.28
          Preferred stock  Kevin Guthrie                    100      1.06
          Preferred stock  David Guthrie                    100      1.06
          Preferred stock  Don Migliuri                     200      2.13
                                                        -------    ------
          Preferred stock  All directors and 
                             officers as a  group         9,400    100.00%
                                                        =======    ======

     *    Additionally, these parties exercise voting rights over an
          additional 1.38% of this class through the holdings of their
          minor children.

     Item 13.  Certain Relationships and Related Transactions
               ----------------------------------------------

     Transactions with Company officers, directors and stockholders and
     other related parties are summarized in Notes 12 and 14 to the
     consolidated financial statements included herein.
     <PAGE>
     PART IV


     Item 14.  Exhibits, Financial Statement Schedules and Reports on Form
               8-K
               -----------------------------------------------------------

     (a)  1.  Financial Statements - See index under Item 8

     (a)  2.  Financial Statement Schedules:

              Report of independent accountants

              Schedule III - Real estate and accumulated depreciation

              Schedule IV - Mortgage loans on real estate

              All other schedules are omitted because they are not
              applicable, or not required, or because the required
              information is included in the financial statements or notes
              thereto.

     (a)  3.  Exhibits:

              Exhibit 27 - Financial Data Schedule

     (b)      Reports on Form 8-K during the last quarter:

              None
     <PAGE>
     REPORT OF INDEPENDENT ACCOUNTANTS ON 
     FINANCIAL STATEMENT SCHEDULES




     Board of Directors and Stockholders
     Pacific Security Companies
     Spokane, Washington



     Our report on the consolidated financial statements of Pacific
     Security Companies and subsidiaries is included on page 10 of this
     Form 10-K. In connection with our audits of such consolidated
     financial statements, we have also audited the related financial
     statement schedules listed under Item 14 of this Form 10-K.

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


                               /s/Coopers & Lybrand L.L.P.                 


     Spokane, Washington
     October 9, 1997
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     SCHEDULE III

     Real Estate and Accumulated Depreciation
     July 31, 1997

     <TABLE>
     <CAPTION>
 
                                                          Cost         Amount at                             Life on Which
                                                          Capitalized  Which                                 Depreciation
                                                          Subsequent   Carried at                            in Latest Income
                                             Initial      to           Close of      Accumulated   Date      Statement
      Description               Encumbrance  Cost         Acquisition  Period        Depreciation  Acquired  is Computed
      -----------------------   -----------  -------      -----------  ----------    ------------  --------  ----------------
      <S>                       <C>          <C>          <C>          <C>           <C>           <C>       <C>
      Residential and 
       commercial 
       properties:
        Rental build-
         ings and 
         improvements:
          Spokane, 
           Washington
            N. 10 Post 
             Street 
             (Peyton Bldg.)     $   848,447  $ 2,209,343  $ 3,051,521  $ 5,260,864   $ 1,449,210   1979      25-40 years
            S. 10 
             Washington
             (Hutton 
             Bldg.)                            1,498,769    3,554,102    5,052,871     1,565,003   1979      25-40 years
            Aqua View 
             Apartments             303,944    1,385,074      290,919    1,675,993     1,068,677   1969      40 years
            W. 102 
             Indiana                626,302      663,031                   663,031       231,211   1988      30 years
            City View 
             Apartments             549,737      440,028       58,743      498,771       100,529   1991      25 years
            Pier One 
             Building             1,530,016    1,194,017    2,769,823    3,963,840       544,412   1992      25-40 years
            Cellular One 
             Building                            950,373       (2,811)     947,562       168,135   1992      25 years
            Birdies Golf 
             Center                            1,972,752       64,751    2,037,503        98,661   1995      15-40 years
      </TABLE>
      <PAGE>
      SCHEDULE III, CONTINUED

     Real Estate and Accumulated Depreciation
     July 31, 1997

     <TABLE>
     <CAPTION>


                                                          Cost         Amount at                             Life on Which
                                                          Capitalized  Which                                 Depreciation
                                                          Subsequent   Carried at                            in Latest Income
                                             Initial      to           Close of      Accumulated   Date      Statement
      Description               Encumbrance  Cost         Acquisition  Period        Depreciation  Acquired  is Computed
      -----------------------   -----------  -------      -----------  ----------    ------------  --------  ----------------
      <S>                       <C>          <C>          <C>          <C>           <C>           <C>       <C>
          Coeur d'Alene, 
           Idaho
            Yellowfront
             Building                        $   281,723               $   281,723   $   192,055   1976      25 years

          Furniture related
           to above                              540,237      401,389      941,626       443,752   Various   Various 

          Held for resale:*
           Alberta 
            Apartments                           167,193                   167,193                           1988
                                -----------  -----------  -----------  -----------   -----------

                                $ 3,858,446  $11,302,540  $10,188,437  $21,490,977   $ 5,861,645
                                ===========  ===========  ===========  ===========   ===========
      </TABLE>

      *Buildings sold, but not meeting criteria for recognition of gain 
      for financial statement reporting purposes.
     <PAGE>
     SCHEDULE III, Continued

     Real Estate and Accumulated Depreciation
     July 31, 1997



     Real estate:
       Balance at beginning of period                          $23,861,390
       Additions during period:
         Purchases and capitalized costs                           960,522
       Deductions during period:
         Cost of real estate sold                               (3,330,935)
                                                               -----------

       Balance at close of period                              $21,490,977
                                                               ===========


     Accumulated depreciation:
       Balance at beginning of period                          $ 6,587,099
       Depreciation for the year                                   731,902
       Charges to accumulated depreciation related to
         real estate investments sold, net of other
         adjustments                                            (1,457,356)
                                                               -----------
     Balance at close of period                                $ 5,861,645
                                                               ===========
     <PAGE>
     PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
     SCHEDULE IV

     Mortgage Loans on Real EstateJuly 31, 1997
      <TABLE>
      <CAPTION>
                                                                                                            Principal
                                                                                                            Amount
                                                                                                            of Loans
                                                                                                            Subject to
                                                                                  Face         Carrying     Delinquent
                              Interest  Maturity  Periodic                        Amount of    Amount of    Principal
      Description             Rate      Date      Payment Terms      Prior Liens  Mortgages    Mortgages    or Interest
      ----------------------  --------  --------  -----------------  -----------  ---------    ---------    -----------
      <S>                     <C>       <C>       <C>                <C>          <C>          <C>          <C>
      Real estate contract 
        on apartment build-           
        ing (Heritage                             $50,000 per month,
        Village)                    9%      2004  including interest              $ 3,088,319  $ 3,088,319

      Real estate contract 
        on apartment complex 
        (Evergreen Town                           $16,973 per month,
        House)                      9%      2023  including interest                1,732,027    1,732,027

      Real estate contract 
        on apartment build-
        ing (East Valley                          $8,492 per month,
        Terrace)                 9.50%      2002  including interest                  968,716      968,716

      Finance note loan         11.50%      2002  $5,900 per month, 
                                                  including interest                  509,136      509,136

      Real estate contract 
        on Walker-McGough                         $3,600 per month,
        Building                 8.50%      2016  including interest                  399,219      399,219

      Other mortgage contracts 
        and notes receivable, 
        none of which indivi-
        dually exceed 3% of
        the total carrying 
        value of mortgages     Various   Various  Various                           4,431,744    4,274,283
                                                                                  -----------  -----------
                                                                                  $11,129,161  $10,971,700
                                                                                  ===========  ===========

      </TABLE>
      <PAGE>
      PACIFIC SECURITY COMPANIES AND SUBSIDIARIES
      SCHEDULE IV, CONTINUED

      Mortgage Loans on Real Estate, Continued
      July 31, 1997

      <TABLE>
      <CAPTION>
                                                                                                            Principal
                                                                                                            Amount
                                                                                                            of Loans
                                                                                                            Subject to
                                                                                  Face         Carrying     Delinquent
                              Interest  Maturity  Periodic                        Amount of    Amount of    Principal
      Description             Rate      Date      Payment Terms      Prior Liens  Mortgages    Mortgages    or Interest
      ----------------------  --------  --------  -----------------  -----------  ---------    ---------    -----------
      <S>                     <C>       <C>       <C>                <C>          <C>          <C>          <C>
      Balance at beginning 
        of period                                                                              $10,492,944
      Additions during period:
        Mortgage loans origina-
          ted and purchased                                                       $ 2,915,129
        Contract discounts 
          realized                                                                     25,856
                                                                                  -----------
                                                                                                 2,940,985
      Deductions during period:
        Collections of princi-
          pal and contract 
          payoffs                                                                                2,462,229
                                                                                               -----------

      Balance at end of period                                                                 $10,971,700
                                                                                               ===========

      </TABLE>
      <PAGE>
      SIGNATURES

     Pursuant to the requirements of Sections 13 or 15(d) of the Securities
     Exchange Act of 1934, Pacific Security Companies has duly caused this
     report to be signed on its behalf by the undersigned, thereunto duly
     authorized.
                                        PACIFIC SECURITY COMPANIES
                                        (Registrant)

     Dated: November 6, 1997            By: /s/ Wayne E. Guthrie
            -------------------------       -------------------------
                                            Wayne E. Guthrie
                                            Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934,
     this report has been signed below by the following persons, which
     include the Chief Executive Officer, the Chief Financial Officer, and
     the Board of Directors, on behalf of the Registrant and in the
     capacities and on the dates indicated:

     Signature                Capacity                 Date
     ---------                --------                 ----
     /s/Wayne E. Guthrie      Chief Executive Officer  November 6, 1997
     -----------------------  and Director             ----------------
     Wayne E. Guthrie


     /s/Donald J. Migliuri    Secretary-Treasurer      November 6, 1997
     -----------------------  Chief Financial Officer  ----------------
     Donald J. Migliuri


     /s/Kevin M. Guthrie      Vice-President and       November 6, 1997
     -----------------------  Director                 ----------------
     Kevin M. Guthrie


     /s/David L. Guthrie      Vice-President and       November 6, 1997
     -----------------------  Director                 ----------------
     David L. Guthrie


     /s/Constance M. Guthrie  Director                 November 6, 1997
     -----------------------                           ----------------
     Constance M. Guthrie


     /s/Raymond J. Fisher     Director                 November 6, 1997
     -----------------------                           ----------------
     Raymond J. Fisher


     /s/Robert N. Codd        Director                 November 6, 1997
     -----------------------                           ----------------
     Robert N. Codd

<PAGE>