FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



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

                    For the Fiscal Year Ended March 31, 2002
                    ----------------------------------------


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

                For the transition period from _______to_______.


                          Commission File No. 000-18887
                          -----------------------------



                             COLONIAL TRUST COMPANY
                             ----------------------
                 (Name of small business issuer in its charter)

                    Arizona                        75-2294862
                    -------                        ----------
            (State of Incorporation) (IRS Employer Identification Number)


                               5336 N. 19th Avenue
                             Phoenix, Arizona 85015
                             ----------------------

                    (Address of principal executive offices)

                                  602-242-5507
                                  ------------
                           (Issuer's telephone number)



Securities registered under Section 12(b) of the Exchange Act:
None
----

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
--------------------------



<PAGE> 2



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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will 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-KSB
or any amendment to this Form 10-KSB.
----------------
 [x]
----------------


     Issuer's revenues for its most recent fiscal year: $3,865,501.


     Based on the average of the bid and asked prices of the Registrant's Common
Stock on June 4, 2002 ($3.50),  the  aggregate  market value of the Common Stock
held by non-affiliates of the Registrant was $2,322,975 as of June 4, 2002.


     As of June 4, 2002,  727,980 shares of the  Registrant's  Common Stock were
outstanding.


<PAGE> 3



                                TABLE OF CONTENTS

                                                                         Page

PART I

           Item  1:  Description of Business                             4

           Item  2:  Description of Properties                           13

           Item  3:  Legal Proceedings                                   13

           Item  4:  Submission of Matters to a Vote of
                     Security Holders                                    14



PART II

           Item  5:  Market for Common Equity and Related
                     Stockholder Matters                                 14

           Item  6:  Management's Discussion and Analysis
                     or Plan of Operation                                15

           Item  7:  Financial Statements                                26

           Item  7.a:Qualitative Risks                                   44

           Item  8:  Changes in and Disagreements with
                     Accountants on Accounting and
                     Financial Disclosure                                44



PART III

           Item  9:  Directors, Executive Officers, Promoters
                     and Control Persons; Compliance with
                     Section 16(a) of the Exchange Act                   44

           Item 10:  Executive Compensation                              47

           Item 11:  Security Ownership of Certain Beneficial
                     Owners and Management                               51


           Item 12:  Certain Relationships and Related
                     Transactions                                        52

           Item 13:  Exhibits and Reports on Form 8-K                    52




<PAGE> 4


                                     PART I


Item 1.    Description of Business.


           Forward Looking Statements

     This report contains forward looking statements. Additional written or oral
forward  looking  statements  may be made by the  Company  from  time to time by
filings with the Securities and Exchange  Commission or otherwise.  Such forward
looking  statements  are within the  meaning of that term in Section  27A of the
Securities Act of 1933, as amended (the  "Securities  Act"),  and Section 21E of
the  Securities  Exchange Act of 1934,  as amended (the  "Exchange  Act").  Such
statements may include,  but not be limited to, projections of revenues,  income
or loss,  estimates  of  capital  expenditures,  plans  for  future  operations,
products or  services,  and  financing  needs or plans,  as well as  assumptions
relating  to  the  foregoing.  The  words  "believe",  "expect",   "anticipate",
"estimate",   "project"  and  similar   expressions   identify  forward  looking
statements,  which  speak only as of the date the  statement  was made.  Forward
looking statements are inherently  subject to risks and  uncertainties,  some of
which cannot be predicted or quantified.  Future events and actual results could
differ  materially from those set forth in,  contemplated  by, or underlying the
forward looking  statements.  The Company  undertakes no obligation and does not
intend to publicly update or revise any forward looking statements, whether as a
result  of  new  information,   future  events,  or  otherwise.   The  following
disclosures,  as  well  as  other  statements  in this  Report  on Form  10-KSB,
including but not limited to those  contained  below in "Item 1:  Description of
Business-Growth  Plans," and "Item 6:  Management's  Discussion  and Analysis or
Plan of Operation," describe factors,  among others, that could contribute to or
cause such differences, or that could affect the Company's stock price.


           General

     Colonial Trust Company (the "Company") was  incorporated  under the laws of
the State of Arizona on August 15, 1989. The business  operations of the Company
commenced  on  September  11, 1989.  From the time of its  organization  through
September 30, 1990,  the Company was a  wholly-owned  subsidiary of Church Loans
and Investments Trust ("Church  Loans"),  a real estate investment trust located
in Amarillo,  Texas. On October 1, 1990, all of the capital stock of the Company
was distributed to the stockholders of Church Loans on the basis of one share of
common  stock of the Company for each share of Church  Loans stock owned on such
date.

<PAGE> 5


           Business Segments

     The  Company  currently  has two  business  segments:  Corporate  Trust and
Personal Trust. The Corporate Trust segment provides services  including serving
as custodian for individual retirement accounts ("IRA's") and trustee for
bond  offerings  of churches  and other  non-profit  organizations.  The Company
presently  is  primarily  engaged in serving as trustee and paying agent on bond
programs of churches and other non-profit organizations.  From time to time, the
Company  serves as trustee  and/or  paying agent on bond  programs of for-profit
organizations.   Through  its  Personal  Trust  segment,  the  Company  provides
traditional  investment  management,  administration  and custodial services for
customers  with trust  assets.  This segment also serves as trustee or custodian
for IRA Accounts.



           Corporate Trust Segment
           -----------------------

           Bond Offering Services

     Historically,  the Company's  primary  business has been serving as trustee
and  paying  agent  for  bond   offerings  of  churches  and  other   non-profit
organizations.  The  majority  of  these  bonds  are sold by  broker-dealers  in
offerings that are exempt from  registration  under federal and state securities
laws.

     In its capacity as trustee for bond offerings of non-profit  organizations,
the Company receives  proceeds from the sale of the bonds and distributes  those
proceeds  according to the purposes of the bond  offering.  The Company  invests
such proceeds in U.S. Treasury Obligation Money Market Mutual Funds according to
the terms of the Company's investment policy and the applicable trust indenture.
In its capacity as paying agent, the Company also receives periodic sinking fund
payments  (payments  of principal  and  interest on the bonds by the  non-profit
organizations,  typically  made on a weekly basis) and  distributes  the sinking
fund payments to bondholders  pursuant to a trust indenture  between the Company
and  the  non-profit  organization.  In  instances  in  which a  bondholder  has
transferred  ownership  of a bond for which the  Company  is  serving  as paying
agent,  the Company  serves as transfer  agent and effects the  transfer of such
bond between the former and current bondholder.  If the non-profit  organization
defaults under the terms of the trust indenture,  the Company  forecloses on the
property  securing the payment of the bonds  (typically  real estate and related
improvements owned by the non-profit organization,  such as a church),  attempts
to sell the property,  and thereafter distributes the proceeds (if any) received
from the foreclosure sale to bondholders.

<PAGE> 6


     The Company is compensated  for its services as trustee and paying agent in
one of three ways.  The first fee  structure  allows the Company to invest trust
funds held for  disbursement  and retain the gains and earnings  therefrom.  The
second fee structure requires the issuing institution to pay a percentage of the
bond proceeds to the Company for set-up and bond printing costs during the first
year.  Additionally,  an annual maintenance fee is required each year. The third
fee  structure  entitles  the Company to  interest  earnings up to 2.5% of daily
trust  funds held in bond  proceeds  accounts  in lieu of a set-up  fee.  Annual
maintenance  fees and bond  printing  costs are charged as a  percentage  of the
related bond issue.  The Company's  policy is to allow the non-profit  issuer to
choose between the three fee structures. The Company believes that the third fee
structure is currently utilized by a majority of the Company's competitors.  The
Company  also  receives  a $10 per  transaction  fee in  instances  in which the
Company serves as transfer agent.

     As of March 31,2002,  the Company had served as trustee and/or paying agent
and/or escrow agent for 838 bond offerings  totaling  approximately $727 million
in  original  principal  amount.  The  foregoing  includes  a  total  of 43 bond
offerings in original  principal amount of approximately $42 million  originated
in the fiscal year ended  March 31,  2002.  The  Company's  revenues  from these
activities represented approximately 50% of the Company's aggregate revenues for
the year ended March 31, 2002. See "Item 6-Management's  Discussion and Analysis
or Plan of Operation - Results of Operations-Results of Operations for the Years
Ended March 31, 2002 and 2001."

     As of March 31, 2002, all bond programs for which the Company had served as
trustee and paying agent had been originated by twenty broker/dealers,  and four
of those broker/dealers  originated bonds representing  approximately 78% of the
aggregate  principal  amount of all bonds issued for which the Company served as
trustee and paying agent.  For the year ending March 31, 2002, 3  broker-dealers
had originated 95% of the aggregate  principal amount of all new bond issues for
the year.  The Company's  ability to generate bond  servicing  fees is dependent
upon the ability of  broker/dealers  to originate  bond offerings for non-profit
organizations  and the Company's  ability to maintain or develop a  relationship
with broker/dealers who are successful in originating such bond offerings.

     The  Company  is  attempting  to  procure  additional   business  from  the
broker/dealers  with whom the Company currently has a relationship,  and is also
attempting   to  develop   relationships   with  and   procure   business   from
broker/dealers  with whom the Company does not  currently  have a  relationship.

<PAGE> 7


           IRA Services

     The  Company  also serves as trustee  for IRA's.  As  trustee,  the Company
receives all  contributions  to these  accounts,  invests the  contributions  as
directed by the account  participant  and  distributes the funds of the accounts
pursuant to the terms of each individual  account.  For its services as trustee,
the Company  receives an annual base fee of $40 and a transaction  fee of $5 per
transaction  for each  transaction  in excess of 12 per year.  The Company  also
retains,  as a portion  of its fee,  earnings  up to 2% of the daily un-invested
balance in each IRA Account.

     At March 31,  2002,  the Company  was serving as trustee for  approximately
9,899 IRA's with an aggregate value of approximately $168 million.  Revenue from
the  Company's  activities  in this area  represented  approximately  16% of the
Company's  aggregate  revenues  for the year  ended  March 31,  2002.  See "Item
6-Management's  Discussion  and  Analysis  or Plan of  Operation  -  Results  of
Operations for the Years Ended March 31, 2002 and 2001."

     The majority of the IRA's  serviced by the Company have been  originated by
the broker/dealers who originate the bond offerings for which the Company serves
as  trustee  and  paying  agent.  Currently,  there are a limited  number of IRA
trustees who allow church bonds as an investment in their IRA's. The Company has
been able to grow its IRA servicing business primarily through marketing efforts
directed  at the  broker/dealers  with  whom the  Company  has a bond  servicing
relationship  and to a lesser  extent  through  marketing  efforts  directed  at
non-profit organizations.


           Personal Trust Segment
           ----------------------

     The Personal  Trust segment  provides  traditional  investment  management,
administration   and  custodial   services  for  customers  with  assets  (cash,
securities,  real  estate  or other  assets)  held in trust or in an  investment
agency account.  It also serves as custodian for self-directed IRA's and trustee
for managed  IRA's.  At March 31, 2002,  the Personal  Trust  segment  served as
trustee or agent for 678 trust,  other accounts,  or investment  agency accounts
with a fair market value of approximately $125 million,  and served as custodian
or trustee for approximately 247 IRA's with a fair market value of approximately
$50 million.

<PAGE> 8

     The Personal Trust segment generates  revenues based on two fee structures.
The first fee structure  represents a percentage  of the fiduciary  assets which
the Company  holds as trustee or agent.  Fees are assessed on a monthly basis to
individual  accounts  according  to the prior month end fair market  value.  The
second fee structure  relates to an annual  minimum fee that was  established to
cover the  maintenance  of  fiduciary  assets  Colonial  holds in both trust and
self-directed  IRA's.  Minimum fees are assessed  monthly based on 1/12th of the
published annual minimum.

     The Personal  Trust  segment is party to an investment  advisory  agreement
dated  December  1998  with  Hackett  Investment  Advisors,   Inc.  ("HIA"),  an
investment advisor located in Scottsdale,  Arizona.  Pursuant to this agreement,
this  business  segment  designates  HIA,  and HIA  serves for the  Company,  as
investment advisor on a portion of the investment accounts of the Personal Trust
segment.  HIA  further  refers  to  the  Personal  Trust  segment  all  business
opportunities  for which an  independent  corporate  fiduciary  is  necessary or
appropriate. The Personal Trust segment pays HIA 30% of the gross fees collected
by the Company from the segment's  investment  management accounts receiving HIA
advisory services.  The basic term of the agreement with HIA expired on December
31, 2000 and is presently continuing on a month to month basis.

     The  Personal  Trust  segment  was  previously  party  to an  investment
Advisory agreement dated January 2, 1997 with Wright Investors Services ("WIS").
This agreement was terminated on April 2, 2002 and a search is currently being
conducted to locate a suitable Large Cap Growth Manager.

     The  Personal  Trust  segment  is  also  party  to an  investment  advisory
agreement dated June 3, 1999 with Feldman Securities Group, L.L.C.  ("FSG"). FSG
is an  investment  advisor  located  in  Chicago,  Illinois.  Pursuant  to  this
agreement, this segment designates FSG, and FSG serves as investment advisor, on
a portion of the designated  investment  accounts of the Personal Trust segment.
The Company  pays FSG 28% of the fees  collected  for  managed  assets up to $10
million in the aggregate.  For every subsequent $10 million increment in managed
assets, the Company's fee drops by 2 percentage points.  Currently,  the Company
is paying FSG 26% of the fees collected on accounts  managed by FSG. The initial
term of the  agreement has expired and continues on a month to month basis until
either  party  gives the other at least  thirty  days  notice in  writing of its
intent to terminate the agreement.


<PAGE> 9


     The profitability of the Personal Trust segment is largely dependent on the
Company's  ability  to meet the needs of its  market  segment.  Such  needs vary
widely  and are  determined  in large part by the terms of the  governing  trust
documents.   Where  applicable,   the  Personal  Trust  segment  retains  legal,
investment,  tax and other  advisors to fulfill its  responsibilities.  Revenues
from the Personal Trust segment  represented  approximately 32% of the Company's
aggregate  gross revenues for the year ended March 31, 2002. See "-Growth Plans"
and  "Management's  Discussion  and  Analysis or Plan of  Operation - Results of
Operations for the Years Ended March 31, 2002 and 2001."


           Growth Plans

     The  Company  intends to attempt to expand its  non-profit  bond  servicing
operations,  its  IRA  servicing  operations,  and  its  traditional  trust  and
investment agency servicing operations. Although the Company may make additional
acquisitions in the event  opportunities  arise on favorable  terms, the Company
anticipates that expansion will result primarily from internal development.

     The Company  intends to (i) attempt to expand its non-profit bond servicing
operations by  attempting  to increase the number of bond  offerings it services
which are  initiated  by  broker/dealers  with whom the  Company has an existing
relationship,   and  (ii)  attempt  to  develop  relationships  with  additional
broker/dealers from whom the Company will receive bond servicing referrals.  The
Company anticipates that its bond servicing revenues will increase in the fiscal
year ending March 31, 2003 compared to its revenues from such  activities in the
fiscal year ended March  31,2002 due to an increase in the number and  principal
amount of new bond offerings anticipated to be originated in the upcoming fiscal
year for which the Company will serve as trustee and paying agent.  There may be
no  assurances  that the Company will be  successful  in its efforts to increase
non-profit bond servicing operations.  See "Management's Discussion and Analysis
or Plan of Operation - Results of Operations  for the Years Ended March 31, 2002
and 2001."

     The Company intends to attempt to expand its IRA servicing business through
attempting  to  develop  relationships  with new  broker/dealers  with  whom the
Company has not  previously had a  relationship.  There may be no assurance that
the  Company  will be  successful  in its  efforts  to  increase  IRA  servicing
revenues.  See  "Management's  Discussion  and  Analysis or Plan of  Operation -
Results of Operations for the Year Ended March 31, 2002 and 2001."

     The Company also intends to attempt to expand its traditional trust account
and investment  agency account business by (i) attempting to procure  additional
business from lawyers,  accountants and other trust professionals in the Phoenix
area with whom the Company has an existing relationship,  and (ii) attempting to
develop  relationships  with additional trust  professionals in the Phoenix area
who will serve as referral  sources for the Company.  There may be no assurances
that the Company will be successful in its efforts to increase trust account and
investment agency account servicing revenues.  See "Management's  Discussion and
Analysis or Plan of Operation - Results of Operations  for the Years Ended March
31, 2002 and 2001."


<PAGE> 10


     The foregoing  discussion entitled "Growth Plans" contains  forward-looking
statements  within the meaning of Section 27A of the  Securities Act of 1933 and
Section 21E of the  Securities  Exchange  Act of 1934 and is subject to the safe
harbors created  thereby.  The Company's  actual future  operations could differ
materially  because  of the  following  factors,  among  others:  the  Company's
continued  involvement in each of its current business  segments;  the continued
employment of key  management;  the Company's  success in marketing its existing
relationships  with  broker/  dealers who can serve as referral  sources for the
Company;  the Company's  success in  developing  additional  relationships  with
broker/dealers  who can serve as new sources of referrals  for the Company;  the
continuation of the Company's  investment  advisory agreements with FSG and HIA,
finding a suitable  replacement  investment advisor for WIS and their success in
managing  the trust and IRA's for which they  provide  services;  the  Company's
ability to  recover  the costs it has  incurred  and will incur in the future in
connection  with the  bankruptcy  proceeding of Stevens  Financial  Group,  Inc.
("Stevens"),  which costs total approximately $375,000 through May 31, 2002; the
outcome of  litigation  filed  against  the Company  (or  commenced  against the
Company in the future) related to the Company's services as indenture trustee on
the Stevens  bond  offerings;  no material  changes in existing  laws,  rules or
regulations  affecting  the  Company's  operations;   the  Company's  successful
performance of its duties as trustee and/or paying agent on bond  offerings,  as
trustee for IRA's,  and as manager,  administrator  and  custodian for trust and
investment agency accounts;  competitive factors,  such as increased competition
for the  Company's  services in one or more of the above  business  segments;  a
change in interest rates or other  economic  factors having an adverse impact on
the Company's non-profit bond servicing business; and other factors set forth in
"Management's Discussion and Analysis or Plan of Operation."


           Competition

     The Company's primary competitors in the non-profit bond servicing business
are Reliance Trust Company, Herring National Bank, American Church Trust Company
and Trust  Management  Inc. Some of these companies have  significantly  greater
financial  and other  resources  than the  Company.  Increased  success by these
competitors  or  increased  competition  from  additional  sources  could have a
material  adverse  effect on the  Company's  financial  condition and results of
operations.

<PAGE> 11


     Competition in the IRA servicing business is intense.  However, to date the
Company has focused its efforts on procuring IRA servicing business from
non-profit   organizations  and  their  members.  Thus,  the  Company's  primary
competition  comes from the  relatively  small number of trustees who will allow
church bonds as a self-directed investment. The Company's primary competitors in
this business  include  Reliance Trust  Company,  American  Church Trust,  Trust
Management  Inc.  and,  to a lesser  extent,  broker/dealers,  banks  and  other
financial  institutions,  investment advisors,  money management firms and other
trust companies,  many of which have  significantly  greater financial and other
resources than the Company.

     The Company  competes with the trust  departments of large banks (and other
financial  institutions)  and, to a lesser extent,  with other independent trust
companies for trust account and investment agency account business. Although the
Company has focused its efforts on trust  accounts  which are smaller than those
typically  serviced by large  banks,  increased  competition  by large banks for
these accounts and/or  increased  success by other  independent  trust companies
could have a material  adverse impact on the Company's  financial  condition and
results  of  operations.  The large  banks,  and some of the  independent  trust
companies located in the Phoenix area, have significantly  greater financial and
other resources than the Company.

           Regulation, Licensing and Supervision

     The Company's  operations are subject to ongoing regulation,  licensing and
supervision  under various  federal,  state and local  statutes,  ordinances and
regulations,  including but not limited to regulation by the Arizona  Department
of Banking.  Under applicable rules and regulations of the Arizona Department of
Banking,  the Company files periodic  reports with the Department and is subject
to periodic examinations of that Department.

     Under  Arizona  law,  the Company is required to maintain net capital of at
least $500,000; the Company's net capital was approximately  $2,700,000 on March
31, 2002.  Arizona law also requires that $500,000 of such net capital must meet
the  Department's  liquidity  requirements.  At March 31, 2002,  $522,414 of the
Company's net capital met the Department's liquidity  requirements.  The Company
has satisfied these liquidity  requirements and believes that it will be able to
maintain its  compliance  with these  requirements  from existing cash balances,
from anticipated cash flow from operating  activities,  and from funds available
under the Company's Master Demand Note with its former parent,  Church Loans and
Investments  Trust.

     Under legislation which became effective on August 9, 2001 and to which the
Company will become  subject on December  31,  2002,  the Company may in certain
circumstances  be  required  to  maintain  additional  capital  in excess of the
capital requirements described immediately above. Specifically, the Company will
be required to have  additional  capital of $250,000  for every $750  million of
"non-discretionary  assets" and  additional  capital of $250,000  for every $250
million of discretionary assets." The term "non-discretionary assets" is defined
as "...  those assets in which the trust  company must obtain from the customer,
broker or investment advisor specific direction and instructions  regarding both
investment  strategies  and  investment  executions."  The  term  "discretionary
assets" is  defined  as "...  those  assets in which the trust  company  has the
unilateral authority to determine  investment  strategies and execute investment
transactions  without  seeking the  concurrence,  approval or authority from the
customer or any other external party."  Additionally,  this legislation requires
that any trust  company  whose most  recent  composite  rating  from the Arizona
Banking  Superintendent was "four" as defined in the revised uniform interagency
trust rating system must maintain an  additional  $250,000 in capital,  and that
any trust company whose most recent  composite  rating from the Arizona  Banking
Superintendent  was a "five" as defined in the above rating system must maintain
an additional  $500,000 in capital.  One-half of any additional capital required
by such legislation must be "liquid capital."

<PAGE> 12


     The Company believes that  approximately $283 million of the funds which it
held in the ordinary course of business at March 31, 2002 would be classified as
"non-discretionary"  assets and approximately $102 million of the funds which it
held in the ordinary  course of business at March 31, 2002 would be described as
"discretionary" assets. The Company also does not believe that its discretionary
or its  non-discretionary  assets  will  grow in the  foreseeable  future to the
levels which will require additional capital. However, there may be no assurance
that the Arizona Banking Department will agree with the Company's classification
of its assets as non-discretionary or discretionary,  and to date no regulations
or  interpretations  concerning these provisions have been issued by the Arizona
Banking Department.  Additionally, although the Company does not believe that it
is likely  to  receive a "four" or  "five"  composite  rating  from the  Arizona
Banking  Superintendent in the foreseeable future,  there may be no assurance in
this regard.

     In the event the Company is required to have additional capital,  including
additional  liquid capital,  the Company  believes that this  requirement can be
satisfied  from funds  available  under the Master  Demand Note,  cash flow from
operations,  collection of  receivables  or borrowings  secured by the Company's
building.  However,  the  outcome  of,  or  unreimbursed  expenses  incurred  in
connection  with,  litigation  asserted  against the Company  arising out of the
Stevens bankruptcy proceeding, could result in the Company violating some or all
of the above capital requirements.  See "Item 3: Legal Proceedings" and "Item 6:
Management's  Discussion and Analysis or Plan of Operation-Results of Operations
for the Years Ended March 31, 2002 and 2001."


     Arizona law also  requires the Company to maintain a fidelity  bond against
dishonesty, fraud, theft, embezzlement and other similar insurable losses. Under
legislation  which became effective on August 9, 2001,  this fidelity bond
must be in the minimum  amount of $2.1  million.  Arizona law also  requires the
Company to maintain  errors and omissions  insurance of at least  $500,000.  The
fidelity  bond and the errors and omissions  insurance  must also be adequate in
relation to the Company's potential  exposure.  The Company believes that it has
been in compliance  with these  requirements  to date and will continue to be in
compliance with these  requirements  in the future,  including the fidelity bond
requirements imposed by the new legislation.

<PAGE> 13


     In addition to the above requirements,  the Arizona Banking Department also
retains  broad  discretion  to suspend or revoke  the  certificate  of any trust
company  subject  to  its  jurisdiction   (including  the  Company)  in  certain
circumstances,  including (i) the trust  company's  violation of any  applicable
law, rule or order,  (ii) the trust company's  failure to conduct  business in a
safe,  sound and lawful manner,  or (iii) upon the occurrence of any other event
set forth in Arizona Revised Statutes Section 6-864.

     In the event the Company is unable to  maintain  its  certificate  with the
Arizona  Department  of Banking,  the Company could be forced to attempt to move
its operations to another state, to discontinue  its operations,  or to pursue a
merger or other business combination.


           Employees

     At March 31, 2002,  the Company  employed 46 people.  None of the Company's
employees  are  covered  by  a  collective  bargaining  agreement.  The  Company
considers its relations with its employees to be good.




Item 2.    Description of Properties.

     On March 15, 1995, the Company purchased an office building located at 5336
N. 19th Avenue in Phoenix,  Arizona. The building is approximately 10,000 square
feet in size and serves as the Company's executive offices.


Item 3.    Legal Proceedings.

     The Company is a party to various legal proceedings arising in the ordinary
course of business. While it is not feasible to predict the ultimate disposition
of these matters, in the opinion of management their outcome,  with the possible
exception of the event mentioned below,  will not have a material adverse effect
on the financial condition or results of operations of the Company.

     On March 19,  2001,  Stevens  Financial  Group,  Inc.  ("Stevens")  filed a
Voluntary  Petition under Chapter 11 of the United States Bankruptcy Code in the
United  States   Bankruptcy   Court  for  the  District  of  Arizona  (Case  No.
01-03108-ECF-RTB) (the "Stevens Bankruptcy  Proceeding").  The Company serves as
Trustee under seven Trust  Indentures  (the "Stevens  Trust  Indentures")  which
secure  obligations  of Stevens under certain Time  Certificates  and Fixed Rate
Investments.  Stevens has defaulted on all  outstanding  Time  Certificates  and
Fixed Rate Investments.

     On February 1, 2002, a Complaint  (Adv. No.  01-1319) was filed against the
Company and other  parties in the Stevens  Bankruptcy  Proceeding by the Trustee
for the Estate of Stevens.  In its Complaint,  the Trustee alleged that Colonial
failed to perform its duties as Trustee under the Stevens Trust  Indentures  by,
among other things,  allegedly  failing to (a)  establish and maintain  separate
trusts under each Indenture,  (b) take appropriate action upon the occurrence of
defaults under the Indentures,  and (c) prepare and deliver  appropriate reports
to the Stevens  investors.  In the  Complaint,  the Trustee  also  alleged  that
Colonial breached fiduciary duties to the Stevens investors by allegedly failing
to (i)  apply  the  collateral  standards  set  forth  in the  Indentures,  (ii)
establish  and  maintain  separate  trusts,  (iii)  obtain and perfect  security
interests in the collateral  described in the Indentures,  (iv) declare defaults
under the Indentures  because of the lack of adequate  collateral,  (v) prohibit
unauthorized  transfers of the collateral in violation of the  Indentures,  (vi)
advise the  investors  of  Stevens'  defaults  under the Time  Certificates  and
Indentures,  and (vii)  properly  report to  investors.  The  Complaint  seeks a
judgment  against  Colonial in the amount of $40 million for its alleged failure
to perform its contractual  duties under the Trust  Indentures and a judgment in
an amount  equal to the  amount  invested  in Time  Certificates  and Fixed Rate
Investments  for  Colonial's  alleged  breach of fiduciary  duties;  the Trustee
alleges in the  Complaint  that a total of  approximately  $92.6 million in Time
Certificates  and Fixed Rate  Investments were purchased in the aggregate by the
Stevens  investors.  The  Company  has  filed an  Answer  denying  all  material
allegations.

<PAGE> 14

     Colonial has  submitted a claim to its E&O  insurance  carrier based on the
above litigation.  The Company's E&O carrier has reserved its rights with regard
to insurance  coverage,  but is participating in defending the litigation.  As a
result of the foregoing, the Company is presently unable to determine whether it
will  incur any  liability  in excess  of its E&O  coverage  as a result of such
litigation.  Additionally,  the  Company  has  incurred  costs of  approximately
$375,000  through  May 31,  2002  in  connection  with  the  Stevens  Bankruptcy
Proceeding,  and the above  litigation,  which  costs  have been  recorded  as a
general and administrative  expense.  The Company will incur additional costs in
the  future  related  to  the  Stevens  Bankruptcy   Proceeding  and  the  above
litigation.  The Company is submitting  its defense costs incurred in connection
with the above litigation to its E&O carrier for reimbursement  (and will submit
future defense costs to its E&O carrier for payment or  reimbursement),  and the
Company's  E&O carrier is  reimbursing  the Company for a portion of such costs;
however,  there may be no assurance as to the amount of expenses incurred by the
Company for which the Company will receive  reimbursement  from its E&O carrier.
The  portion of the costs  which are not paid or  reimbursed  by the E&O carrier
will be recorded as general and administrative  expenses in the quarter in which
they are incurred.

     The  Company  also  intends to attempt to recover a portion of the costs it
has incurred as an administrative  expense in the Stevens Bankruptcy Proceeding.
There may be no assurance  that any portion of such costs will be recoverable in
the Stevens Bankruptcy Proceeding.

     Given the preliminary  stage of the above  litigation,  it is not presently
possible to estimate the  probability or range of potential loss to the Company.
However,  the  Company's E&O carrier  could  successfully  deny coverage for the
claims  asserted in the above  Complaint,  or the plaintiffs in such  litigation
could  recover  amounts  in excess of the  policy  limits of the  Company's  E&O
Policy. Additionally, the Company may not recover all, or a material portion of,
the  costs  it  incurs  in the  Stevens  Bankruptcy  Proceeding  and  the  above
litigation, and the Company's E&O carrier may not reimburse the Company for such
costs.  Any of the  above  could  have a  material  and  adverse  effect  on the
Company's  financial  condition  and  results  of  operations,  could  result in
revocation of the Company's operating certificate or the imposition of sanctions
or operating constraints  (including without limitation requiring the Company to
raise additional capital) by the Arizona Banking Department, and could result in
the Company being forced to file a petition under the federal  bankruptcy  laws,
to attempt to enter into a sale or other business combination, or to discontinue
or materially curtail its business operations.  The significance and uncertainty
related to these issues has resulted in a modification of independent  auditors'
report included with these financial statements to include a paragraph about the
uncertainty  of the Company's  ability to continue as a going concern  resulting
from the uncertain outcome of this matter.



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

     None.


                                     Part II


Item 5.    Market for Common Equity and Related Stockholder Matters.

     On June 4, 2002,  the  Company  had  approximately  1,689  stockholders  of
record.  There is no established  public trading market for the Company's Common
Stock.  The Company does not expect to pay dividends in the  foreseeable  future
but instead intends to retain future earnings, if any, to increase stockholders'
equity and to satisfy  the  capital and  liquidity  requirements  of the Arizona
Banking Department. See "Business-Regulation, Licensing and Supervision".

     On September 24, 1998,  the Company's  stockholders  approved a one-for-ten
reverse stock split of the Company's  issued and outstanding  common stock.  All
share  amounts,  share  prices and  earnings  per share have been  retroactively
adjusted for all periods presented to reflect this reverse split.


<PAGE> 15


     Initial  purchases  and sales of the  Company's  Common  Stock  occurred in
January 1991.  See Item 1 -  "Description  of Business."  The high and low sales
prices for the Company's Common Stock during the year ended March 31, 2002, were
both $3.50 per share. Such prices represent negotiated sales between buyers and
sellers without mark-up,  mark-down or retail commission. The Company served as
transfer agent in connection with all such transactions.


Item 6.    Management's Discussion and Analysis or Plan of Operation

     The  following  discussion of the results of the  operations  and financial
condition  of the  Company  should  be read in  conjunction  with the  Company's
financial  statements  and notes  thereto  included  elsewhere  in this  report.
Historical  results and  relationships  among  accounts are not  necessarily  an
indication of trends in operating results for any future period.

Critical Accounting Policies

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management  to make a number  of  estimates  and  assumptions  that  affect  the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and  liabilities  at the date of the financial  statements.  Such  estimates and
assumptions  affect the reported  amounts of revenues  and  expenses  during the
reporting  period.  On an ongoing  basis,  management  of the Company  evaluates
estimates and  assumptions  based upon  historical  experience and various other
factors and  circumstances.  The Company  believes its estimates and assumptions
are  reasonable in the  circumstances;  however,  actual results may differ from
these estimates under different future conditions.

     Management  believes  that  the  estimates  and  assumptions  that are most
important to the portrayal of the Company's  financial  condition and results of
operations,  in that they require  management's  most  difficult,  subjective or
complex judgments,  form the basis for the accounting policies deemed to be most
critical to the Company.  These critical  accounting  policies relate to revenue
recognition  and  contingencies  related to litigation.  The Company  recognizes
revenue when earned based on three fee structures  which are discussed in note 1
of the Company's  financial  statements.  Liability  estimates for contingencies
related to litigation are determined  based on the probability of loss using the
best  information  available at each  reporting  date.  Developments  related to
changes in material  contingencies  are reviewed on an on-going basis, and serve
as the basis for changes in recorded liabilities, if any.

     Management  believes  estimates and  assumptions  related to these critical
accounting  policies are appropriate under the  circumstances.  However,  should
future events or occurrences result in unanticipated  consequences,  there could
be a material impact on our future financial condition or results of operations.



           Results of Operations for the Years Ended March 31, 2002 and 2001

     The Company had a net loss of $82,759,  or $.11 diluted earnings per share,
for the fiscal year ended March 31, 2002,  compared to net earnings of $341,048,
or $.46 diluted  earnings per share, for the fiscal year ended March 31, 2001, a
decrease in net earnings of 124%.  The Company had total  revenue of  $3,865,501
for the  fiscal  year  ended  March  31,  2002,  compared  to total  revenue  of
$4,224,455 for the fiscal year ended March 31, 2001, a decrease of 9%.

<PAGE> 16

                        Corp. Trust  Pers. Trust     Other        Total
                         ----------   ----------   ----------   ----------

            2002

Bond Servicing Revenue   $1,929,990         -            -      $1,929,990
IRA Servicing Fees          606,981     $257,962         -         864,943
Trust Income                   -         984,582         -         984,582
Interest & Other Income        -            -         $85,986       85,986
                         ----------   ----------   ----------   ----------
                         $2,536,971   $1,242,544      $85,986   $3,865,501
                         ==========   ==========   ==========   ==========

General & Administrative
Expenses                 $1,750,689   $1,063,647   $1,175,130   $3,989,466
                         ==========   ==========   ==========   ==========


            2001
Bond Servicing Revenue   $2,429,902         --           --     $2,429,902
IRA Servicing Fees          558,730   $  280,988         --        839,718
Trust Income                   --        866,389         --        866,389
Interest & Other Income        --           --     $   88,446       88,446
                         ----------   ----------   ----------   ----------
                         $2,988,632   $1,147,377   $   88,446   $4,224,455
                         ==========   ==========   ==========   ==========

General & Administrative
Expenses                 $1,499,462   $  869,910   $1,277,067   $3,646,439
                         ==========   ==========   ==========   ==========



            2000
Bond Servicing Revenue   $2,592,749         --           --     $2,592,749
IRA Servicing Fees          556,405   $  172,799         --        729,204
Trust Income                   --        521,073         --        521,073
Interest & Other Income        --           --     $   66,027       66,027
                         ----------   ----------   ----------   ----------
                         $3,149,154   $  693,872   $   66,027   $3,909,053
                         ==========   ==========   ==========   ==========

General & Administrative
Expenses                 $1,454,996   $  629,285   $1,100,506   $3,184,786
                         ==========   ==========   ==========   ==========



     The Corporate  Trust  segment's  revenue  decreased to  $2,536,971  for the
fiscal year ended March 31,  2002,  compared to  $2,988,632  for the fiscal year
ended March 31, 2001, a decrease of 15%. The Personal  Trust  segment's  revenue
increased to  $1,242,544  for the fiscal year ended March 31, 2002,  compared to
$1,147,377 for the fiscal year ended March 31, 2001, an increase of 8%.

     The  Corporate  Trust  segment's  bond  servicing   revenue   decreased  to
$1,929,990 for the fiscal year ended March 31, 2002,  compared to $2,429,902 for
the fiscal year ended March 31,  2001,  a decrease of 21%.  The decrease in bond
servicing revenue was primarily  attributable to a decrease in the number of new
nonprofit bond issuances for which the Company was serving as trustee and paying
agent in the fiscal year ended March 31, 2002,  compared to new non-profit  bond
issuances  for which the Company  was serving as trustee and paying  agent which
were  originated  in the fiscal year ended March 31,  2001.  Such  decrease  was
primarily  attributable  to  the  Company's  reduced  share  of the  market  for
non-profit  bonds. The Company is serving as trustee and paying agent on 43 bond
offerings in the original  principal amount of  approximately  $42 million which
were  originated  in the fiscal year ended March 31,  2002,  compared to 63 bond
offerings in the original  principal amount of  approximately  $66 million which
were  originated in the fiscal year ended March 31, 2001.  Additionally at March
31,  2002,  the  Company  was  serving as trustee  and paying  agent on 514 bond
offerings  totaling  approximately $452 million in original principal amount; at
March 31, 2001,  the Company was serving as trustee and paying agent on 524 bond
offerings totaling  approximately $471 million in original principal amount. The
Company anticipates that its bond servicing revenues will increase in the fiscal
year ending March 31, 2003 compared to its revenues from such  activities in the
recently-completed  fiscal  year as a result of an  increase  in the  number and
principal  amount of new bond  offerings  anticipated  to be  originated  in the
upcoming  fiscal  year for which the  Company  will serve as trustee  and paying
agent,  although the  magnitude  of such  increase  will be  dependent  upon the
strength of the  non-profit  bond market,  the amount of increased  market share
which the Company is able to garner,  and other  factors which are not presently
ascertainable.



<PAGE> 17

     Revenue  from  the  Corporate  Trust  segment's  IRA  servicing  activities
increased  to $606,981  for the fiscal year ended  March 31,  2002,  compared to
$558,730 for the fiscal year ended March 31, 2001, an increase of 9%.  Revenue
from the Personal Trust segment's IRA servicing activities decreased to $257,962
for the fiscal year ended March 31,  2002,  compared to $280,988  for the fiscal
year ended March 31, 2001, a decrease of 8%.

     At March 31, 2002,  the Corporate  Trust segment was servicing  9,899 IRA's
with an aggregate value of  approximately  $168 million,  and the Personal Trust
segment was servicing  247 IRA's with an aggregate  value of  approximately  $50
million.  At March 31, 2001,  the Corporate  Trust  segment was servicing  9,710
IRA's with an aggregate value of  approximately  $170 million,  and the Personal
Trust  segment  was   servicing   230  accounts  with  an  aggregate   value  of
approximately $47 million. At March 31, 2002,  approximately $19 million loss in
value of investments in Corporate Trust segment IRA's was written off due to the
Stevens  Bankruptcy  Procedure.  The Company  anticipates that its IRA servicing
revenue  will  increase by 1%-3% in the fiscal  year ending  March 31, 2003 as a
result of an increase in the number of IRA's serviced by these segments.

     The Personal  Trust  segment's  trust income  increased to $984,582 for the
fiscal year ended March 31, 2002, compared to $866,389 for the fiscal year ended
March 31,  2001,  an increase  of 14%. At March 31,  2002,  the  Personal  Trust
segment was serving as trustee or agent for 678 trust,  investment accounts,  or
other accounts with a fair market value of approximately $125 million.  At March
31,  2001,  the Personal  Trust  segment was serving as trustee or agent for 580
trust,  investment  accounts,  or other  accounts  with a fair  market  value of
approximately  $149  million.  The Company  anticipates  that trust revenue will
increase by 10%-20% in the fiscal  year ending  March 31, 2003 as a result of an
increase in the number of accounts serviced by this segment.

     Interest & Other  Income  decreased  to $85,986  for the fiscal  year ended
March 31, 2002,  compared to $88,446 for the fiscal year ended March 31, 2001, a
decrease of 3%. The  decrease was  primarily  attributable  to reduced  interest
rates an investment balances.

     The Corporate Trust segment's general and administrative expenses increased
in the  aggregate  to  $1,750,689  for the  fiscal  year ended  March 31,  2002,
compared to $1,499,462  for the fiscal year ended March 31, 2001,  and increased
to 69% of segment revenues for the fiscal year ended March 31, 2002, compared to
50% of segment  revenues in the fiscal year ended March 31, 2001.  This increase
was  attributable to expenses of approximately  $330,000  incurred in connection
with the Stevens  bankruptcy  proceeding  and the  litigation  filed against the
Company  related  thereto in the fiscal year ended March 31, 2002.  The Personal
Trust segment's general and  administrative  expenses increased in the aggregate
to  $1,063,647  for the fiscal year ending March 31, 2002,  compared to $869,911
for the fiscal  year  ended  March 31,  2001,  and  increased  to 86% of segment
revenues  for the fiscal year ended March 31,  2002,  compared to 76% of segment
revenues for the fiscal year ended March 31, 2001. The Company  anticipates that
general and  administrative  expenses  will  decrease in the  aggregate  for the
Corporate  Trust  segment  in the  fiscal  year ended  March  31,2003,  and will
decrease as a percentage of revenues for fiscal 2003. This will result primarily
from a decrease in Corporate Trust segment expenses  associated with the Stevens
Bankruptcy  Proceeding.  The Company anticipates that general and administrative
expenses will increase in aggregate for the Personal Trust segment in the fiscal
year ended March 31, 2003,  but will  decrease as a  percentage  of revenues for
fiscal  2003  levels.  This will result from a  relatively  smaller  increase in
Personal Trust segment expenses as compared to the increase in projected segment
revenues.

     A Loss before  income  taxes from  Operations  for the year ended March 31,
2002 of approximately $124,000 resulted in the creation of an income tax benefit
of approximately $41,000.

<PAGE> 18

              Results of Operations for the Years Ended March 31, 2001 and 2000

     The Company had  net  earnings of  $341,048, or $.46  diluted  earnings per
share,  for the fiscal year ended March 31,  2001,  compared to net  earnings of
$431,923,  or $.55 diluted  earnings per share,  for the fiscal year ended March
31, 2000,  a decrease in net  earnings of 21%. The Company had total  revenue of
$4,224,455  for the fiscal year ended March 31, 2001,  compared to total revenue
of $3,909,053 for the fiscal year ended March 31, 2000, an increase of 8%.

     The Corporate  Trust  segment's  revenue  decreased to  $2,988,632  for the
fiscal year ended March 31,  2001,  compared to  $3,149,154  for the fiscal year
ended March 31,  2000, a decrease of 5%. The Personal  Trust  segment's  revenue
increased to  $1,147,377  for the fiscal year ended March 31, 2001,  compared to
$693,872 for the fiscal year ended March 31, 2000, an increase of 65%.

     The  Corporate  Trust  segment's  bond  servicing   revenue   decreased  to
$2,429,902 for the fiscal year ended March 31, 2001,  compared to $2,592,749 for
the fiscal year ended  March 31,  2000,  a decrease of 6%. The  decrease in bond
servicing revenue was primarily  attributable to a decrease in the number of new
nonprofit bond issuances for which the Company was serving as trustee and paying
agent in the fiscal year ended March 31, 2001,  compared to new non-profit  bond
issuances  originated in the fiscal year ended March 31, 2000. Such decrease was
primarily  attributable to less favorable  market  conditions in the fiscal year
ended  March 31,  2001  compared  to the prior  year.  The Company is serving as
trustee and paying agent on 63 bond offerings in the original  principal  amount
of  approximately  $66 million  which were  originated  in the fiscal year ended
March 31, 2001,  compared to 81 bond offerings in the original  principal amount
of  approximately  $103 million  which were  originated in the fiscal year ended
March 31,  2000.  Additionally  at March 31,  2001,  the  Company was serving as
trustee  and  paying  agent  on  524  bond  offerings   totaling   approximately
$471 million in original  principal  amount;  at March 31, 2000, the Company was
serving as trustee and paying agent on 448 bond offerings totaling approximately
$435 million in original principal amount.

     Revenue  from  the  Corporate  Trust  segment's  IRA  servicing  activities
increased  to $558,730  for the fiscal year ended  March 31,  2001,  compared to
$556,405 for the fiscal year ended March 31, 2000, an increase of 0.4%.  Revenue
from the Personal Trust segment's IRA servicing activities increased to $280,988
for the fiscal year ended March 31,  2001,  compared to $172,799  for the fiscal
year ended March 31, 2000, an increase of 63%.

     At March 31, 2001,  the Corporate  Trust segment was servicing  9,710 IRA's
with an aggregate value of  approximately  $170 million,  and the Personal Trust
segment was servicing  230 IRA's with an aggregate  value of  approximately  $47
million.  At March 31, 2000,  the Corporate  Trust  segment was servicing  9,228
IRA's with an aggregate value of  approximately  $151 million,  and the Personal
Trust  segment  was   servicing   205  accounts  with  an  aggregate   value  of
approximately $45 million.

     The Personal Trust  segment's  trust income increased to $866,389 for the
fiscal year ended March 31, 2001, compared to $521,073 for the fiscal year ended
March 31,  2000,  an increase  of 66%. At March 31,  2001,  the  Personal  Trust
segment was serving as trustee or agent for 580 trust,  investment accounts,  or
other accounts with a fair market value of approximately $149 million.  At March
31,  2000,  the Personal  Trust  segment was serving as trustee or agent for 338
trust,  investment  accounts,  or other  accounts  with a fair  market  value of
approximately  $87 million.

     Interest  and other  income  increased to $88,446 for the fiscal year ended
March 31, 2001, compared to $66,027 for the fiscal year ended March 31, 2000, an
increase of 34%. The increase was  primarily  attributable  to a larger  balance
held for investment.

     The Corporate Trust segment's general and administrative expenses increased
in the  aggregate  to  $1,499,462  for the  fiscal  year ended  March 31,  2001,
compared to $1,454,995  for the fiscal year ended March 31, 2000,  and increased
to 50% of segment revenues for the fiscal year ended March 31, 2001, compared to
46% of segment  revenues in the fiscal year ended March 31,  2000.  The Personal
Trust segment's general and  administrative  expenses increased in the aggregate
to $869,910 for the fiscal year ending March 31, 2001,  compared to $629,285 for
the fiscal year ended March 31, 2000, but decreased to 76% of segment  revenues
for the fiscal year ended March 31,  2001,  compared to 91% of segment  revenues
for the fiscal year ended March 31, 2000.


<PAGE> 19


     The foregoing discussion contains various forward-looking statements within
the  meaning  of  Section  27A of the  Securities  Act  and  Section  21E of the
Securities  Exchange  Act, and is subject to the safe harbors  created  thereby.
Forward-looking  statements are inherently  subject to risks and  uncertainties,
some of which cannot be predicted or  quantified.  Actual  results  could differ
materially  because  of the  following  factors,  among  others:  the  Company's
continued  involvement in each of its current business  segments;  the Company's
success  in  maintaining  relationships  with the  broker/dealers  with  whom it
currently  does  business;  the  success  of the  Company's  efforts  to develop
relationships  with other  broker/dealers  who can serve as a source of referral
for the Company; the continued employment of key management;  the success of the
Company in its business  development  efforts; the continuation of the Company's
investment  advisory  agreements with FSG and HIA, and their success in managing
the trust and  investment  agency  accounts  for which  they  provide  services;
finding a suitable replacement investment advisor for WIS, the Company's ability
to recover the costs it has incurred and will incur in the future in  connection
with the bankruptcy  proceeding of Stevens  Financial Group,  Inc.  ("Stevens"),
which costs total  approximately  $375,000  through May 31, 2002; the outcome of
litigation filed (or commenced in the future) against the Company related to the
Company's services as indenture trustee on the Stevens bond offerings; increased
staffing or office needs not currently anticipated; competitive factors, such as
increased competition for the services provided by the Company in one or more of
its business  segments;  the Company's  successful  performance of its duties as
trustee  and/or  paying agent on bond  offerings,  as trustee for IRA's,  and as
manager,  administrator  and custodian for trust and investment agency accounts;
and changes in rules and regulations  adversely impacting the Company's business
segments.


           Liquidity and Capital Resources


     Under  legislation  effective on July 20, 1996,  the Company is required to
maintain  net  capital of at least  $500,000;  the  Company's  net  capital  was
$2,674,045  on March 31, 2002.  Arizona law also requires that the Company's net
capital meet certain liquidity requirements.  Specifically, $500,000 of such net
capital  must meet the  Arizona  Banking  Department's  liquidity  requirements.
Additional capital requirements may be imposed upon the Company in the future as
a result of Arizona  legislation which became effective on August 9, 2001 and to
which the  Company  will  become  subject on  December  31,  2002.  For  further
discussion of possible  future  additional  capital  requirements,  see "Item 1:
Regulation,  Licensing  and  Supervision."  At March 31,  2002,  $522,414 of the
Company's net capital met the Department's liquidity requirements.

     The Company's  cash and cash  equivalents  decreased from $319,204 on March
31, 2001,  to $166,592 on March 31, 2002,  while the note  receivable  decreased
from $381,507 on March 31, 2001, to $324,156 on March 31, 2002.  The decrease in
the cash and cash  equivalents was primarily due to a net loss of  approximately
$83,000 and an increase in the income tax receivable of  approximately  $89,000.
The  decrease  in the note  receivable  was due to the  receipt of net  payments
totaling  $57,351.  The  Company's  net property and  equipment  decreased  from
$796,036 on March 31,  2001,  to $705,426 on March 31,  2002.  The  decrease was
primarily due to depreciation  of property and equipment  exceeding the purchase
of replacement computer equipment and software for employees.

     The  Company  believes  that it will be  able  to  satisfy  its  regulatory
capital,   working  capital  and  capital   expenditure   requirements  for  the
foreseeable  future from  existing  cash  balances,  anticipated  cash flow from
operating  activities,  and from funds available under the Company's Master Note
with its former parent, Church Loans and Investments Trust. However, the outcome
of, or unreimbursed expenses incurred in connection with, the Stevens bankruptcy
proceeding  or  litigation  asserted  against  the  Company  arising out of such
bankruptcy proceeding,  could result in the Company violating some or all of its
regulatory  capital  requirements  and could  impair  the  Company's  ability to
satisfy its working capital and capital expenditure  requirements from the above
or other sources.




<PAGE> 20




           Recent Accounting Pronouncements

     In July 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement No. 141, Business  Combinations  ("Statement  141"), and Statement No.
142,  Goodwill and Other  Intangible  Assets  ("Statement  142").  Statement 141
requires  that the  purchase  method  of  accounting  be used  for all  business
combinations  initiated after June 30, 2001 as well as all business combinations
completed  after June 30,  2001.  Statement  141 also  specifies  criteria  that
intangible assets acquired in a business  combination must meet to be recognized
and reported apart from goodwill, noting that any purchase price allocable to an
assembled  workforce  may not be accounted  for  separately.  Statement 142 will
require that  goodwill and  intangible  assets with  indefinite  useful lives no
longer be amortized,  but instead  tested for  impairment  at least  annually in
accordance with the provisions of Statement 142. Statement 142 will also require
that  intangible  assets with  definite  useful  lives be  amortized  over their
respective  estimated  useful  lives to their  estimated  residual  values,  and
reviewed for  impairment in  accordance  with SFAS No. 121,  Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

     The  Company  is  required  to  adopt  the   provisions  of  Statement  141
immediately and Statement 142 effective April 1, 2002. Furthermore, any goodwill
and any intangible asset  determined to have an indefinite  useful life that are
acquired in a purchase business  combination  completed after June 30, 2001 will
not be amortized, but will continue to be evaluated for impairment in accordance
with the  appropriate  pre-Statement  142  accounting  literature.  Goodwill and
intangible  assets acquired in business  combinations  completed  before July 1,
2001 will  continue to be  amortized  prior to the  adoption of  Statement  142.
Statement  141 will require upon  adoption of  Statement  142,  that the Company
evaluate its existing  intangible  assets and goodwill  that were  acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in Statement 141 for recognition apart
from  goodwill.  Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible  assets acquired
in purchase business  combinations,  and make any necessary  amortization period
adjustments by the end of the first interim period after adoption.  In addition,
to the extent an intangible  asset is identified as having an indefinite  useful
life, the Company will be required to test the  intangible  asset for impairment
in  accordance  with the  provisions  of Statement  142 within the first interim
period.  Any  impairment  loss will be measured  as of the date of adoption  and
recognized as the cumulative  effect of a change in accounting  principle in the
first interim period.

     In  connection  with  the  transitional  goodwill  impairment   evaluation,
Statement 142 will require the Company to perform an assessment of whether there
is an  indication  that  goodwill  is impaired  as of the date of  adoption.  To
accomplish  this the Company must identify its reporting units and determine the
carrying value of each  reporting unit by assigning the assets and  liabilities,
including the existing goodwill and intangible  assets, to those reporting units
as of the date of adoption. The Company will then have up to six months from the
date of adoption to determine the fair value of each  reporting unit and compare
it to the reporting  unit's carrying  amount.  To the extent a reporting  unit's
carrying amount exceeds its fair value, an indication  exists that the reporting
unit's  goodwill may be impaired and the Company must perform the second step of
the  transitional  impairment test. In the second step, the Company must compare
the  implied  fair  value  of  the  reporting  unit's  goodwill,  determined  by
allocating the reporting unit's fair value to all of its assets  (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with Statement 141, to its carrying amount, both of which would be
measured  as of the  date  of  adoption.  This  second  step is  required  to be
completed  as  soon as  possible,  but no  later  than  the  end of the  year of
adoption. Any transitional  impairment loss will be recognized as the cumulative
effect  of a change  in  accounting  principle  in the  Company's  statement  of
earnings.

<PAGE> 21

     As of the  date of  adoption,  the  Company  expects  to have  un-amortized
goodwill  in the amount of  $104,729,  which  will be subject to the  transition
provisions of Statements 141 and 142.  Amortization  expense related to goodwill
was  $12,182  and  $12,170  for  the  years  ended  March  31,  2002  and  2001,
respectively.  Because of the  extensive  effort  needed to comply with adopting
Statements 141 and 142, it is not practicable to reasonably  estimate the impact
of adopting these Statements on the Company's  financial  statements at the date
of this report,  including  whether any transitional  impairment  losses will be
required to be  recognized  as the  cumulative  effect of a change in accounting
principle.

     In August  2001,  the  Financial  Accounting  Standards  Board  issued FASB
Statement  No. 144,  Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets  ("Statement  144"),  which  supersedes  both  FASB  Statement  No.  121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
Be Disposed Of ("Statement 121") and the accounting and reporting  provisions of
APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions  ("Opinion 30"), for the disposal of a segment
of a business (as previously defined in that Opinion). Statement 144 retains the
fundamental provisions in Statement 121 for recognizing and measuring impairment
losses on long-lived assets held for use and long-lived assets to be disposed of
by sale, while also resolving significant  implementation issues associated with
Statement 121. For example,  Statement 144 provides guidance on how a long-lived
asset  that is used as part of a  group  should  be  evaluated  for  impairment,
establishes  criteria  for  when a  long-lived  asset  is  held  for  sale,  and
prescribes the accounting for a long-lived  asset that will be disposed of other
than by sale. Statement 144 retains the basic provisions of Opinion 30 on how to
present  discontinued  operations  in the income  statement  but  broadens  that
presentation  to include a component  of an entity  (rather  than a segment of a
business).  Unlike  Statement 121, an impairment  assessment under Statement 144
will never result in a write-down of goodwill. Rather, goodwill is evaluated for
impairment under Statement No. 142, Goodwill and Other Intangible Assets.

     The  Company  is  required  to adopt  Statement  144 no later than the year
beginning  after  December 15, 2001,  and plans to adopt its  provisions for the
quarter  ending  June 30,  2002.  Management  does not  expect the  adoption  of
Statement 144 for  long-lived  assets held for use to have a material  impact on
the Company's  financial  statements  because the  impairment  assessment  under
Statement 144 is largely  unchanged  from  Statement  121. The provisions of the
Statement for assets held for sale or other  disposal  generally are required to
be applied  prospectively  after the adoption date to newly  initiated  disposal
activities.  Therefore,  management  cannot determine the potential effects that
adoption of Statement 144 will have on the Company's financial statements.

           Risk Factors

           Lack of Liquidity of the Company's Common Stock


     The  Company's  Common  Stock is not  listed (or likely to be listed in the
foreseeable  future) on the Nasdaq Stock Market ("Nasdaq") or on any national or
regional securities exchange, and there is no established trading market for the
Company's   Common  Stock.  The  Company  will  continue  to  attempt  to  match
stockholders  who wish to sell Company Common Stock with persons who wish to buy
such Common Stock. However,  annual trading volume in the Company's Common Stock
has averaged only approximately 102,000 shares in the last two years. Therefore,
a stockholder  who owns a substantial  number of shares of Company  Common Stock
will likely be unable to sell his shares in a short  period of time should he or
she need or wish to do so.


<PAGE> 22


           Dependence on Key Personnel and Management of Growth

     The Company's future success will depend upon the continued services of the
Company's senior  management.  The unexpected loss of the services of any of the
Company's senior management  personnel could have a material adverse effect upon
the Company. The Company has entered into employment  agreements with certain of
its  senior   management.   See  "Item  10:  Executive   Compensation-Employment
Agreements."  The  Company's  future  success  will  depend  in  part  upon  its
continuing  ability to attract and retain highly  qualified  personnel to manage
the future  growth of the Company.  There may be no  assurance  that the Company
will be successful in attracting  and retaining  such  personnel.  Further,  the
Company's  ability to manage  growth  successfully  will  require the Company to
continue to improve its management,  financial and operational controls. Failure
to do so could have a  material  adverse  effect  upon the  Company's  operating
results and financial condition.



  Non-Profit Bond Servicing Market; Ability to Increase Bond Servicing Revenues

     The Company's future financial performance will depend upon the size of the
non-profit  bond market as well as the Company's  ability to increase its market
share for bond servicing  activities.  The market for bonds issued by non-profit
organizations  is subject to  fluctuation  due to a number of factors beyond the
control of the  Company.  The  Company  estimates  that its  revenues  from bond
servicing  activities  will  increase in the fiscal  year ending  March 31, 2003
compared to its revenues from such activities in the recently  completed  fiscal
year as a result of an increase in the number and  principal  amount of new bond
offerings anticipated to be originated in the upcoming fiscal year for which the
Company will serve as trustee and paying agent; however this projection is based
in part on the  Company's  belief  that  the  market  for  bonds  issued  by the
non-profit  organizations  will increase in the next fiscal year, of which there
may be no assurance.  Additionally, the Company's ability to increase its market
share will be  dependent  upon a number of factors of which there also may be no
assurances,   including   the   Company's   ability  to  develop  and   maintain
relationships with the broker/dealers who are primarily responsible for the sale
of such non-profit bonds. See "-Dependence Upon Certain Business  Relationships"
and "Item  1-Business-Corporate Trust Segments-Bond Offering Services." Revenues
from the Company's bond servicing  activities accounted for approximately 50% of
the Company's total revenues in the fiscal year ended March 31, 2002.



           Market for Personal Trust Services;
           Ability to Increase Personal Trust Service Revenues

     The Company intends for the  foreseeable  future to limit the activities of
its Personal  Trust segment to the  metropolitan  Phoenix area.  Therefore,  the
Company's future financial  performance will depend in part upon the size of the
market for personal trust services in the  metropolitan  Phoenix area.  Revenues
from such  activities  accounted for  approximately  32% of the Company's  total
revenues in the fiscal  year ended  March 31,  2002.  The  Company's  ability to
continue to increase its revenues from personal trust services will be dependent
upon a number of  factors,  including  the  Company's  ability  to  develop  and
maintain  relationships with  professionals  (such as attorneys and accountants)
who serve as a referral  source for these services and the Company's  continuing
ability to service  personal trust  accounts.  Additionally,  at March 31, 2002,
eleven percent of the Company's Personal Trust account assets were held in trust
for members of one family,  and such  accounts  accounted for six percent of the
Company's  Personal Trust revenues in the fiscal year ended March 31, 2002. Loss
of such  revenues  could have a material  adverse  effect on the Personal  Trust
segment   and/or   the   Company's   results   of   operations.   See  "Item  1:
Business-Personal Trust Segment."



<PAGE> 23


           Dependence Upon Certain Business Relationships


     The  Company  depends to a  significant  extent on its  relationships  with
broker/dealers   who  are   involved  in  the  sale  of  bonds  for   non-profit
organizations  to  refer  business  to the  Company  for bond  servicing  duties
associated  with such  offerings.  As of March 31, 2002,  all bond  programs for
which the Company had served as trustee and paying agent had been  originated by
twenty  broker/dealers,  and four of those  broker/dealers  had originated bonds
representing  approximately  78% of the aggregate  principal amount of all bonds
issued for which the Company  served as trustee and paying  agent.  For the year
ended March 31,  2002,  three  broker-dealers  originated  95% of the  aggregate
principal amount of all new bond issuances.  The loss of or damage to any one of
these  relationships,   or  the  failure  or  inability  of  any  one  of  these
broker/dealers  to initiate a similar number of non-profit bond offerings in the
future,  could have a material adverse impact on the Company and its operations.
The Company also depends,  to a great extent,  upon its relationships with trust
professionals  (such as attorneys and accountants) in the  metropolitan  Phoenix
area to refer  opportunities  to the Company to provide personal trust services.
The loss of or damage to existing  relationships,  or the Company's inability to
continue to develop  additional  relationships with trust  professionals,  could
have a material adverse impact on the Company and its operations.


           Competition

     The principal business segments in which the Company is involved are highly
competitive.  The  Company  currently  competes  with a number  of  other  trust
companies to serve as trustee and paying agent for non-profit  bond  financings,
including Reliance Trust Company,  Herring National Bank,  American Church Trust
Company,  and Trust Management,  Inc. The Company also competes with large banks
and other financial institutions for these services. Other companies that do not
currently  provide  these  services  may enter this  business.  The Company also
competes  with large banks and other  financial  institutions,  including  other
trust companies,  located in the  metropolitan  Phoenix area for the business of
providing personal trust services. Other companies that do not currently provide
these services may enter this business.


<PAGE> 24


           Regulation, Licensing and Supervision; Net Capital Requirements

     The Company's operations are subject to ongoing regulation, supervision and
licensing  under  various  federal,  state and local  statutes,  ordinances  and
regulations,  including  but not limited to  regulation  by the Arizona  Banking
Department.  Under  applicable  rules and  regulations  of the  Arizona  Banking
Department,  the Company  files  periodic  reports  with the  Department  and is
subject to periodic examinations by the Department.  Additionally, under Arizona
law, the Company is required to maintain net capital of at least  $500,000;  the
Company's net capital was approximately  $2.7 million at March 31, 2002. Arizona
law also  requires  that  $500,000 of the  Company's  net capital  must meet the
Department's  liquidity  requirements.  At  March  31,  2002,  $522,414  of  the
Company's net capital met the Department's  liquidity  requirements.  Additional
capital  requirements  may be imposed upon the Company in the future as a result
of Arizona  legislation which became effective on August 9, 2001. The Company is
also required to satisfy other requirements under Arizona law. Additionally, the
Arizona  Banking  Department  retains broad  discretion to suspend or revoke the
certificate  of  or  impose  operational  sanctions  or  restrictions  (such  as
requiring the Company to raise additional  capital) on any trust company subject
to its  jurisdiction  (including  the Company)  upon the  occurrence  of certain
events,  including (i) the trust company's violation of any applicable law, rule
or order,  (ii) the trust company's failure to conduct business in a safe, sound
and lawful manner,  or (iii) upon the occurrence of any other event set forth in
Arizona Revised  Statutes  Section 6-864. The Company is also required to comply
with federal rules and regulations in connection  with the Company's  service as
trustee for IRA  Accounts.  See "Item 1:  Business -  Regulation,  Licensing and
Supervision."  Failure  to comply  with  applicable  laws  could have a material
adverse effect on the Company's  results of operations  and financial  condition
and could, in certain instances,  affect the Company's certificate issued by the
Arizona Banking Department. Failure to maintain such a certificate would require
the Company to attempt to move its operations to another  state,  to discontinue
its operations, or to attempt to merge or effect another business combination.


<PAGE> 25


           Performance of Contractual Duties

     In the  performance  of its  duties as  trustee  and  paying  agent on bond
offerings  of  non-profit  and other  organizations,  the Company is required to
perform  certain duties under the trust  indenture for such offering  and/or the
federal  Trust  Indenture  Act (15 U.S.C.  ss. 77aaa et seq.) or the  applicable
state version of such Act (if any). In the Company's  capacity as trustee,  such
duties include: receiving proceeds from the sale of the bonds; distributing such
proceeds according to the purposes of the bond offering; investing such proceeds
pending  distribution;  receiving  periodic  sinking  fund  payments by the bond
issuer;  procuring  a security  interest in  collateral  from the bond issuer to
secure the issuer's bonds; perfecting such security interest;  providing reports
to bondholders; and, in the event of default by a bond issuer, taking possession
of and/or  selling the  collateral.  In the Company's  capacity as paying agent,
such duties include distributing  sinking fund payments to bondholders.  Failure
to  perform  such  duties  in the  manner  required  by the trust  indenture  or
applicable law could cause the Company to incur material  liabilities,  which in
turn could have a material adverse effect on the Company's results of operations
and financial condition.



           Bankruptcy of Stevens Financial Group

     The Company is serving as indenture  trustee  under seven Trust  Indentures
issued by Stevens  Financial Group, a financial  services firm  headquartered in
Springfield,  Missouri  ("Stevens").  The Trust Indentures secure obligations of
Stevens under certain debt instruments designated as Time Certificates and Fixed
Rate Investments.

     On March 19,  2001,  Stevens  Financial  Group,  Inc.  ("Stevens")  filed a
Voluntary  Petition under Chapter 11 of the United States Bankruptcy Code in the
United  States   Bankruptcy   Court  for  the  District  of  Arizona  (Case  No.
01-03108-ECF-RTB) (the "Stevens Bankruptcy  Proceeding").  The Company serves as
Trustee under seven Trust  Indentures  (the "Stevens  Trust  Indentures")  which
secure  obligations  of Stevens under certain Time  Certificates  and Fixed Rate
Investments.  Stevens has defaulted on all  outstanding  Time  Certificates  and
Fixed Rate Investments.

     On February 1, 2002, a Complaint  (Adv. No.  01-1319) was filed against the
Company and other  parties in the Stevens  Bankruptcy  Proceeding by the Trustee
for the Estate of Stevens.  In its Complaint,  the Trustee alleged that Colonial
failed to perform its duties as Trustee under the Stevens Trust  Indentures  by,
among other things,  allegedly  failing to (a)  establish and maintain  separate
trusts under each Indenture,  (b) take appropriate action upon the occurrence of
defaults under the Indentures,  and (c) prepare and deliver  appropriate reports
to the Stevens  investors.  In the  Complaint,  the Trustee  also  alleged  that
Colonial breached fiduciary duties to the Stevens investors by allegedly failing
to (i)  apply  the  collateral  standards  set  forth  in the  Indentures,  (ii)
establish  and  maintain  separate  trusts,  (iii)  obtain and perfect  security
interests in the collateral  described in the Indentures,  (iv) declare defaults
under the Indentures  because of the lack of adequate  collateral,  (v) prohibit
unauthorized  transfers of the collateral in violation of the  Indentures,  (vi)
advise the  investors  of  Stevens'  defaults  under the Time  Certificates  and
Indentures,  and (vii)  properly  report to  investors.  The  Complaint  seeks a
judgment  against  Colonial in the amount of $40 million for its alleged failure
to perform its contractual  duties under the Trust  Indentures and a judgment in
an amount  equal to the  amount  invested  in Time  Certificates  and Fixed Rate
Investments  for  Colonial's  alleged  breach of fiduciary  duties;  the Trustee
alleges in the  Complaint  that a total of  approximately  $92.6 million in Time
Certificates  and Fixed Rate  Investments were purchased in the aggregate by the
Stevens  investors.  The  Company  has  filed an  Answer  denying  all  material
allegations.

     Colonial has  submitted a claim to its E&O  insurance  carrier based on the
above litigation.  The Company's E&O carrier has reserved its rights with regard
to insurance  coverage,  but is participating in defending the litigation.  As a
result of the foregoing, the Company is presently unable to determine whether it
will  incur any  liability  in excess  of its E&O  coverage  as a result of such
litigation.  Additionally,  the  Company  has  incurred  costs of  approximately
$375,000  through  May 31,  2002  in  connection  with  the  Stevens  Bankruptcy
Proceeding and the above litigation, which costs have been recorded as a general
and  administrative  expense.  The Company  will incur  additional  costs in the
future related to the Stevens  Bankruptcy  Proceeding and the above  litigation.
The Company is  submitting  its defense costs  incurred in  connection  with the
above  litigation to its E&O carrier for  reimbursement  (and will submit future
defense  costs  to its  E&O  carrier  for  payment  or  reimbursement),  and the
Company's  E&O carrier is  reimbursing  the Company for a portion of such costs;
however,  there may be no assurance as to the amount of expenses incurred by the
Company for which the Company will receive  reimbursement  from its E&O carrier.
The  portion of the costs  which are not paid or  reimbursed  by the E&O carrier
will be recorded as general and administrative  expenses in the quarter in which
they are incurred.

<PAGE> 26

     The  Company  also  intends to attempt to recover a portion of the costs it
has incurred as an administrative  expense in the Stevens Bankruptcy Proceeding.
There may be no assurance  that any portion of such costs will be recoverable in
the Stevens Bankruptcy Proceeding.

     Given the preliminary  stage of the above  litigation,  it is not presently
possible to estimate the  probability or range of potential loss to the Company.
However,  the  Company's E&O carrier  could  successfully  deny coverage for the
claims  asserted in the above  Complaint,  or the plaintiffs in such  litigation
could  recover  amounts  in excess of the  policy  limits of the  Company's  E&O
Policy. Additionally, the Company may not recover all, or a material portion of,
the  costs  it  incurs  in the  Stevens  Bankruptcy  Proceeding  and  the  above
litigation, and the Company's E&O carrier may not reimburse the Company for such
costs.  Any of the  above  could  have a  material  and  adverse  effect  on the
Company's  financial  condition  and  results  of  operations,  could  result in
revocation of the Company's operating certificate or the imposition of sanctions
or operating constraints  (including without limitation requiring the Company to
raise additional capital) by the Arizona Banking Department, and could result in
the Company being forced to file a petition under the federal  bankruptcy  laws,
to attempt to enter into a sale or other business combination, or to discontinue
or materially curtail its business operations.  The significance and uncertainty
related to these issues has resulted in a modification of independent  auditors'
report included with these financial statements to include a paragraph about the
uncertainty  of the Company's  ability to continue as a going concern  resulting
from the uncertain outcome of this matter.


           Change in Securities Laws Affecting Non-Profit Bond Finance Market

     Most bond  offerings for which the Company  serves as trustee and/or paying
agent are made in  reliance  upon an  exemption  from  registration  provided by
Section  3(a)(4)  of the  Securities  Act  of  1933,  as  amended,  and  similar
exemptions from  registration  provided for under  applicable  state  securities
laws. In the event such federal and/or state exemptions  become  unavailable for
any  reason  (including  without  limitation  changes in  federal  and/or  state
securities  laws),  the Company  believes  that the market for  non-profit  bond
financings  would be  materially  and  adversely  affected due  primarily to the
increased costs associated with  registration of such bonds under federal and/or
state laws. The foregoing would have a material  adverse impact on the Company's
fees generated from bond servicing  activities and, thus, the Company's  results
of operations.


           Common Stock Dividends

     The  Company  has never paid  dividends  on its Common  Stock.  The Company
intends for the foreseeable  future to retain any earnings to support the growth
of the Company's  business.  The Company  therefore does not contemplate  paying
cash dividends on its Common Stock in the foreseeable future.




Item 7.    Financial Statements.

     The Company's audited financial statements, containing balance sheets as of
March 31, 2002 and 2001,  and related  statements of  operations,  stockholders'
equity and cash flows for each of the years in the three-year period ended March
31, 2002, are set forth on the following pages.




<PAGE> 27


                             COLONIAL TRUST COMPANY
                          Index to Financial Statements

                                                                 Page

Independent Auditors' Report                                       28

Balance Sheets as of March 31, 2002, and 2001                      29

Statements of Operations for the years
       ended March 31, 2002, 2001, and 2000                        30

Statements of Stockholders' Equity for
       the years ended March 31, 2002, 2001, and 2000              31

Statements of Cash Flows for the Years
       ended March 31, 2002, 2001, and 2000                        32

Notes to Financial Statements                                      33



<PAGE> 28


                             Colonial Trust Company
                          Independent Auditors' Report


The Board of Directors
Colonial Trust Company:


     We have audited the  accompanying  balance sheets of Colonial Trust Company
(Company)  as of  March  31,  2002  and  2001,  and the  related  statements  of
operations,  stockholders'  equity  and cash  flows for each of the years in the
three-year  period  ended March 31, 2002.  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  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects, the financial position of Colonial Trust Company as of
March 31, 2002 and 2001,  and the results of its  operations  and its cash flows
for  each  of the  years  in the  three-year  period  ended  March  31,  2002 in
conformity with accounting principles generally accepted in the United States of
America.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  note 9 to the
financial  statements,  the Company has suffered a loss in fiscal 2002 resulting
from expenses incurred in defense of material litigation in which the Company is
a defendant.  If the Company is  unsuccessful  in negotiating a settlement or is
ultimately  found  responsible for a significant  portion of the loss claim, the
Company may be forced to file bankruptcy.  These matters raise substantial doubt
about its ability to continue as a going concern.  Management's  plans in regard
to these matters are also  described in Note 9. The financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.

                                                             /s/KPMG LLP

Phoenix, Arizona
June 7, 2002


<PAGE> 29


                             COLONIAL TRUST COMPANY

                                 Balance Sheets

                             March 31, 2002 and 2001



        Assets                                  2002         2001
                                             ----------   ----------
Cash and cash equivalents                    $  166,592      319,204
Receivables                                     853,256      824,111
Income taxes receivable                         111,819       22,536
Note receivable                                 324,156      381,507
Property and equipment, net                     705,426      796,036
Excess of cost over fair value acquired, net    104,729      116,911
Restricted cash                                 522,414      515,831
Other assets                                     99,382       74,942
                                             ----------   ----------

                                             $2,887,774    3,051,078
                                             ----------   ----------

        Liabilities and Stockholders' Equity

Accounts payable and accrued liabilities     $  213,729      304,797
Deferred income taxes                              -          12,193
                                             ----------   ----------

                                                213,729      316,990
                                             ==========   ==========

Stockholders' equity:
     Common stock, no par value. Authorized
     25,000,000 shares; issued and outstanding
     729,727 and 720,843 shares at
     March 31, 2002, and 2001, respectively
                                                614,286      578,911
     Additional paid-in capital                 506,208      506,208
     Retained earnings                        1,553,551    1,648,969
                                             ----------   ----------

               Total stockholders' equity     2,674,045    2,734,088

Commitments and contingencies
(note 9)                                      ---------    ---------
                                             $2,887,774    3,051,078
                                             ==========   ==========

See accompanying notes to financial statements.


<PAGE> 30


                             COLONIAL TRUST COMPANY

                             Statements of Operations

                    Years ended March 31, 2002, 2001 and 2000



                                           2002         2001         2000
                                        ---------    ---------    ---------

Revenue:
     Bond servicing revenue             $1,929,990    2,429,902    2,592,749
     IRA servicing fees - corporate        606,981      558,730      556,405
     IRA servicing fees - personal         257,962      280,988      172,799
     Trust income                          984,582      866,389      521,073
     Interest & other income                85,986       88,446       66,027
                                        ----------   ----------   ----------

            Total revenue                3,865,501    4,224,455    3,909,053

General and administrative expenses      3,989,466    3,646,439    3,184,786
                                        ----------   ----------   ----------

     Earnings (Loss) before income taxes (123,965)      578,016      724,267

     Income taxes (Benefit)               (41,206)      236,968      292,344
                                        ----------   ----------   ----------

     Net earnings (loss)                $ (82,759)      341,048      431,923
                                        ==========   ==========   ==========

Basic earnings (loss) per share         $   (0.11)         0.47         0.57
                                        ==========   ==========   ==========

Diluted earnings (loss) per share    (1)$   (0.11)         0.46         0.55
                                        ==========   ==========   ==========

Weighted average shares outstanding -
    basic                                  730,865      723,040      758,185
                                        ==========   ==========   ==========

Weighted average shares outstanding -
    diluted                          (1)   730,865      748,383      780,907
                                        ==========   ==========   ==========


(1)      Stock options are not included in diluted EPS where there is a net loss
since they are anti-dilutive.

See accompanying notes to financial statements.


<PAGE> 31



                             COLONIAL TRUST COMPANY

                       Statements of Stockholders' Equity

                    Years ended March 31, 2002, 2001 and 2000


<TABLE>
<CAPTION>
                                             Common Stock           Additional                Total
                                         ------------------------   Paid-In      Retained     Stockholders'
                                         Shares       Amount        Capital      Earnings     Equity
                                         -------      -------      -------      --------     ---------
<S>                                      <C>          <C>          <C>           <C>         <C>

Balances at March 31,1999                761,337      555,177      505,347     1,040,003     2,100,527

Common stock acquired and
   retired                                (6,103)        -            -          (18,210)      (18,210)

Net earnings                                -            -            -          431,923       431,923
                                         -------      -------      -------      --------     ---------

Balances at March 31, 2000               755,234   $  555,177      505,347     1,453,716     2,514,240


Common stock acquired and
   retired                               (42,391)        -            -         (145,795)     (145,795)

Issuance of common stock
   under stock option plan                 8,000       23,734         -             -           23,734

Tax benefit on stock options
 exercised                                  -            -             861          -              861

Net earnings                                -            -            -          341,048       341,048
                                         -------      -------      -------     ---------     ---------

Balances at March 31, 2001               720,843   $  578,911      506,208     1,648,969     2,734,088


Common stock acquired and
  retired                                 (3,616)        -            -          (12,658)      (12,658)

Issuance of common stock
  under stock option plan                 12,500       35,375         -             -           35,375

Net earnings (loss)                         -            -            -          (82,759)      (82,759)
                                         -------      -------      -------     ----------     ---------

Balances at March 31, 2002               729,727   $  614,286      506,208      1,553,551     2,674,045
                                         =======      =======      =======     ==========     =========


<FN>
   See accompanying notes to financial statements.
</FN>

</TABLE>

<PAGE> 32



                             COLONIAL TRUST COMPANY
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                    Years ended March 31, 2002, 2001 and 2000

                                                                     2002       2001          2000
                                                                 ----------   ---------     ---------
<S>                                                                <C>          <C>          <C>
Cash flows from operating activities:

     Net earnings (loss)                                         $  (82,759)    341,048       431,923
     Adjustments to reconcile net earnings (loss) to net
         cash provided by (used in) operating activities:
            Depreciation and amortization                           150,636     153,353       133,000
            Deferred income taxes                                   (13,422)      4,944       (13,046)
            Tax benefit on stock options purchased                     -            861          -
            Increase (decrease) in cash resulting from changes in:

                 Receivables                                        (29,145)    (21,989)     (283,727)
                 Income taxes receivable                            (89,283)        -             -
                 Other assets                                       (23,211)      2,943         5,586
                 Accounts payable and accrued liabilities           (91,068)    107,665       (83,332)
                 Income taxes payable                                  -        (46,301)      (61,652)
                                                                  ----------   ----------   ----------

                      Net cash provided by (used in) operating
                      activities                                   (178,252)     542,524      128,752
                                                                  ----------   ----------   ----------

Cash flows from investing activities:

     Payment received on note receivable                            300,000      425,000      260,000
     Additions to note receivable                                  (242,649)    (428,120)    (219,303)
     Purchase of property and equipment                             (47,844)     (94,124)    (152,230)
     Increase in restricted cash                                     (6,583)     (13,275)    (165,005)
                                                                  ----------   ----------   ----------

                      Net cash provided by (used in) investing
                            activities                                2,924     (110,519)    (276,538)
                                                                  ----------   ----------   ----------

Cash flows from financing activity:

     Purchase and retirement of common stock                        (12,659)    (145,795)     (18,210)
     Proceeds from issuance of common stock under stock
       option plan                                                   35,375       23,734          -
                                                                 -----------   ----------   ----------

                      Net cash provided by (used in) financing
                            activities                               22,716     (122,061)     (18,210)
                                                                 -----------  -----------   ----------

                      Increase (decrease) in cash and cash
                      Equivalents                                  (152,612)     309,944     (165,996)

Cash and cash equivalents at beginning of year                      319,204        9,260      175,256
                                                                 -----------  -----------  ----------

Cash and cash equivalents at end of year                         $  166,592      319,204        9,260
                                                                 ===========  ===========  ==========
Supplemental disclosures:
     Income taxes paid                                           $   61,446      300,000      367,041
                                                                 ===========  ===========  ==========

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


<PAGE> 33


                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000





(1)  Significant Accounting Policies

     (a) Nature of Business

     Colonial Trust Company (Colonial or Company) was incorporated on August 15,
1989 in the state of Arizona  for the  purpose of  engaging  in the  business of
acting as a  fiduciary.  The Company is  domiciled  in the state of Arizona,  is
regulated by the Arizona State  Banking  Department,  and the  Company's  common
stock is registered under the Securities Exchange Act of 1934.

     Colonial  serves as trustee  under various bond  indentures  for issuers of
bonds in 39 states and the  District of  Columbia.  The  issuers  are  primarily
churches and other religious  organizations.  As trustee,  the Company receives,
holds,  invests,  and disburses the bond proceeds as directed by the  applicable
trust  indenture and receives  weekly or monthly  sinking fund payments from the
issuer  of  bonds,  and in turn,  pays the  semiannual  principal  and  interest
payments  to the  bondholders.  As of March 31,  2002,  Colonial  was serving as
trustee  and/or  paying  agent  and/or  escrow  agent  for  the  benefit  of the
bondholders  on 514  bond  offerings  totaling  approximately  $452  million  in
original  principal  amount.  The  amount  of sold  and  unmatured  bonds  total
approximately $345 million at March 31, 2002.  Colonial also serves as a trustee
of 9,899 self-directed individual retirement accounts for certain bondholders or
employees  of religious  organizations  totaling  approximately  $168 million at
March 31, 2002.

     Colonial also serves as trustee or agent,  provides investment  management,
administration,  and custodial  services through its Personal Trust segment.  As
trustee or agent,  Colonial receives,  holds, invests and tracks the performance
of the various securities held in trust, or investment agency accounts. Colonial
was  serving as  trustee  or agent for 678  accounts  with a fair  market  value
totaling  approximately  $125 million  at March 31, 2002.  Colonial also acts as
custodian  for  self-directed  IRA  accounts.  Colonial  held  247  accounts  as
custodian  with a fair market value of  approximately  $50 million  at March 31,
2002.


<PAGE> 34

                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000


     (b) Use of Estimates

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management  to make a number  of  estimates  and  assumptions  that  affect  the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and  liabilities  at the date of the financial  statements.  Such  estimates and
assumptions  affect the reported  amounts of revenues  and  expenses  during the
reporting  period.  On an ongoing basis,  we evaluate  estimates and assumptions
based upon historical experience and various other factors and circumstances. We
believe our  estimates and  assumptions  are  reasonable  in the  circumstances;
however actual results may differ from these estimates  under  different  future
conditions.

     (c) Revenue Recognition

     Under the trust indentures with organizations issuing bonds,  Colonial, for
its services,  principally  earns  revenues based on three fee  structures.  The
first fee structure  allows Colonial to invest trust funds held for disbursement
and retain the gains and earnings  therefrom.  The second fee structure requires
the issuing  institution to pay a percentage of the bond proceeds to the Company
for set-up and  printing  costs during the first year.  Additionally,  an annual
maintenance  fee is  required  each  succeeding  year.  The third fee  structure
entitles  Colonial to interest  earnings up to 2.5% of daily trust funds held in
bond program fund accounts in lieu of a set-up fee. Annual  maintenance fees and
bond printing  costs are charged as a percentage  of the related bond  issuance.
Colonial also receives fees for services provided as custodian for self-directed
individual retirement accounts.

     The  profitability  of Colonial is dependent upon the ability of investment
broker-dealers  to originate bond programs for which Colonial serves as trustee.
At March 31, 2002,  approximately  78% of the total bond issues  processed  were
originated  by  4  broker-dealers.   For  the  year  ended  March  31,  2002,  3
broker-dealers  had originated 95% of the aggregate  principal amount of all new
bond  issues.  At March 31,  2001,  approximately  77% of the total bond  issues
processed were originated by 4 broker-dealers.

     In connection  with providing  investment  management,  administration  and
custodial  services,  Colonial  earns revenue based on two fee  structures.  The
first fee structure is established as a percentage of the fiduciary assets which
Colonial  holds as trustee or agent.  Fees are  assessed  on a monthly  basis to
individual  accounts  according to the prior month end fair market value of each
account.  The second fee structure relates to an annual minimum fee which is set
up to cover the maintenance of fiduciary assets Colonial holds in both trust and
self-directed IRA accounts.  Minimum fees are assessed monthly,  based on 1/12th
of the published annual minimum.

     At March 31, 2002,  11% of Colonial's  Personal  Trust account  assets were
held  in  trust  for  members  of  one  family.   The  combined  trust  accounts
approximated 6% of Colonial's Personal Trust income revenues. At March 31, 2001,
10% of Colonial's  Personal  Trust account assets were held in trust for members
of one family.  The  combined  trust  accounts  approximated  8% of  Colonial's
Personal Trust income revenues.


<PAGE> 35

                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000


     (d) Cash Equivalents and Concentration of Credit Risk

     Colonial  considers  all  highly  liquid  debt  instruments  with  original
maturities  at the  date  of  purchase  of  three  months  or  less  to be  cash
equivalents.  Cash  equivalents at March 31, 2002 and 2001 consist  primarily of
money  market  accounts,   which  invest,  primarily  in  short-term  government
securities.

     Colonial  places  its cash in  insured  financial  institutions  and United
States government  securities with original  maturities of three months or less.
Periodically  during the year,  Colonial  maintains cash and cash equivalents on
deposit  at  financial  institutions  in excess of the FDIC  insurance  limit of
$100,000.

     (e) Note Receivable

     Colonial  considers  a note to be  impaired  when it is  probable  that the
Company will be unable to collect all amounts due  according to the  contractual
terms of the note.  When a loan is considered to be impaired,  the amount of the
impairment is measured based on the present value of expected  future cash flows
discounted at the note's effective interest rate.  Impairment losses are charged
to expense.  The Company had no  impairments of notes  receivable  during fiscal
2002, 2001 and 2000.

     (f) Property and Equipment

     Property and equipment is recorded at cost less  accumulated  depreciation.
Depreciation on furniture and equipment is recorded on the straight-line  method
over  the  estimated  useful  lives  of the  assets  ranging  from 3 to 5 years.
Colonial's  building  is  depreciated  over 39.5 years  using the  straight-line
method.

     (g) Excess of Cost Over Fair Value Acquired (Goodwill)

     Goodwill  is  amortized  using  the  straight-line  method  over 15  years.
Goodwill is carried net of  accumulated  amortization  of $78,101 and $65,919 at
March 31, 2002 and 2001, respectively. [See note 1(m)].

     (h) Income Taxes

     Colonial  uses the asset and  liability  method of  accounting  for  income
taxes.  Deferred tax assets and  liabilities  are  recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.

      (i) Computation of Earnings Per Common Share

     Basic EPS is computed  based on weighted  average  shares  outstanding  and
excludes any potential  dilution from stock  options,  warrants and other common
stock equivalents.  Diluted EPS reflects potential dilution from the exercise or
conversion  of  securities  into common  stock or from other  contracts to issue
common stock.

<PAGE> 36


                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000

      (j) Stock Option Plan

     In accordance  with the  provisions of  Accounting  Principles  Board (APB)
Opinion No. 25,  Accounting for Stock Issued to Employees,  the Company measures
stock based compensation  expense as the excess of the market price at the grant
date over the underlying stock exercise price. In accordance with the provisions
of SFAS No. 123, Accounting for Stock-Based  Compensation,  the Company provides
pro  forma  net  earnings  (loss)  and  pro  forma  earnings  (loss)  per  share
disclosures  for  employee  stock  option  grants  as if the  fair  value of all
stock-based  awards on the date of the grant was  recognized as expense over the
vesting period.

      (k) Impairment of Long-Lived Assets

     Colonial reviews long-lived assets and certain identifiable intangibles for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to future  undiscounted net cash flows expected to be generated by the asset. If
such assets are  considered to be impaired,  the  impairment to be recognized is
measured by the amount by which the  carrying  amount of the assets  exceeds the
fair value of the assets.  Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.[See note 1(m)].

      (l) Reclassifications

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

     (m) New Accounting Pronouncements

     In July 2001,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement No. 141, "Business  Combinations," and Statement No 142, "Goodwill and
Other Intangible Assets." Statement No. 141 requires that the purchase method of
accounting be used for all business combinations  initiated after June 30, 2001.
Statement  No.141 also specifies  criteria that intangible  assets acquired in a
purchase  method  business  combination  must meet to be recognized and reported
apart from goodwill. Effective July 1, 2002, Statement No. 142 will require that
goodwill  and  intangible  assets  with  indefinite  useful  lives no  longer be
amortized,  but instead  tested for  impairment at least  annually in accordance
with  the  provisions  of  Statement  No.  142.  Other  than  the  cessation  of
amortization  expense,  management  has not yet  determined  the  impact of this
statement on the operations or financial position of the Company.

     Statement  No. 142 will also require that  identifiable  intangible  assets
with estimable useful lives be amortized over their respective  estimated useful
lives to their  estimated  residual  values,  and  reviewed  for  impairment  in
accordance with Statement No. 121,  "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived  Assets to Be Disposed of."  Management  believes that
the adoption of this standard will not have a material  impact on the operations
of financial position of the Company.

     Statement No. 144 supersedes the accounting and reporting provisions of APB
Opinion No. 30,  Reporting  the Results of  Operations-Reporting  the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions,  for the disposal of a segment of a business.
However,  it retains  the  requirement  in  Opinion  No 30 to report  separately
discounted  operations  and extends  that  reporting to a component of an entity
that either has been disposed of (by sale, abandonment,  or in a distribution to
owners) or is classified as held for sale. By  broadening  the  presentation  of
discontinued  operations  to include more  disposal  transactions,  the FASB has
enhanced  management's  ability to  provide  information  that  helps  financial
statement  users to assess the effects of a disposal  transaction on the ongoing
operations  of an entity.  Statement  No.  144 is  effective  for  fiscal  years
beginning  after  December 15, 2001.  At the current time,  management  does not
believe  that the  adoption  of this  statement  on April 1,  2002  will  have a
material impact on the Company's financial position.


<PAGE> 37

                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000


(2) Note Receivable

     On  December  1,  1990,  Colonial  entered  into a Master  Note and  Letter
Agreement  with Church  Loans,  a real estate  investment  trust and  Colonial's
former parent  corporation.  The Master Note in the maximum amount of $1 million
is due on demand,  bears interest at 1% less than the prime interest rate and is
unsecured. Amounts advanced to Church Loans may be repaid and reborrowed.


(3) Property and Equipment

    Property and equipment consists of the following:

                                2002         2001
                         -----------  -----------

       Land               $  157,241      157,241
       Building              468,292      449,912
       Furniture             195,162      192,428
       Equipment             451,169      607,201
                         -----------  -----------

                           1,271,864    1,406,782
       Less accumulated
         depreciation        566,438      610,746
                         -----------  -----------

                          $  705,426      796,036
                         ===========  ===========



(4)        Income Taxes

     Income  taxes  (benefit)  amounted to  $(41,206)  $236,968 and $292,344 for
2002,  2001  and  2000,  respectively.  The  actual  income  taxes  differ  from
"expected"  income taxes for those years (computed by applying the U.S.  federal
corporate  statutory  income tax rate of 34% to earnings before income taxes) as
follows:

                                2002         2001        2000
                         -----------  -----------  -----------

Computed "expected"
   income tax (benefit)   $  (42,148)     196,525      246,250
State tax (benefit)
   (net of federal
   income tax benefit)        (5,493)      31,853       39,297
Other items, net               6,435        8,590        6,797
                         -----------  -----------  -----------

                          $  (41,206)     236,968      292,344
                         ===========  ===========  ===========

Effective income tax rate      33.2%        41.0%        40.4%
                         ===========  ===========  ===========


<PAGE> 38


                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000


        Components of income taxes consist of:

                             Current     Deferred        Total
                         -----------  -----------  -----------
2002:
    Federal                $ (22,229)     (10,656)     (32,885)
    State                    ( 5,608)     ( 2,713)     ( 8,321)
                         -----------   -----------  -----------
                           $ (27,837)     (13,369)     (41,206)
                         ===========   ===========  ===========

2001:
    Federal                $ 184,769        3,937      188,706
    State                     47,255        1,007       48,262
                         -----------   -----------  -----------
                           $ 232,024        4,944      236,968
                         ===========   ===========  ===========

2000:
    Federal                $ 243,193      (10,389)     232,804
    State                     62,197       (2,657)      59,540
                         -----------   -----------  -----------

                           $ 305,930      (13,046)     292,344
                         ===========   ===========  ===========

The tax effects of temporary differences that give rise to significant portions
of the deferred tax liabilities at March 31, 2002 and 2001 are presented below:

                                                          2002         2001
                                                   -----------  -----------

Deferred tax asset-intangibles and property
  and equipment, principally due to differences
  in  amortization                                     $ 1,229        -
                                                   ===========  ===========


Deferred tax liability-property and equipment,
  principally due to differences in depreciation          -       $  12,193
                                                   ===========  ===========





(5) Stock Option Plans

     Colonial's shareholders approved Colonial's Incentive Stock Option Plan for
employees of the Company (the ISOP) and Colonial's  Non-Employee Directors Stock
Option Plan (the Directors Plan) on April 25, 1996.

     Pursuant to the ISOP,  Colonial's Board of Directors is authorized to grant
either incentive stock options or nonstatutory stock options. The exercise price
of  incentive  stock  options  granted  under the ISOP must be equal to the fair
market  value  per  share  on the  date of  grant,  and the  exercise  price  of
nonstatutory  stock  options  must be at least 50% of the fair market  value per
share on the date of grant.  A total of 200,000  shares have been  reserved  for
issuance under the ISOP.


<PAGE> 39


                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000


     Pursuant to the Directors  Plan,  each  non-employee  director  received an
option to purchase 5,000 shares on October 1, 1996 and options to purchase 1,500
shares  were  automatically  granted on  January  1, 1997 and on each  January 1
thereafter to each person then serving as a  non-employee  director of Colonial.
The exercise price of all options granted under the Directors Plan must be equal
to the fair  market  value  per  share on the date of  grant.  A total of 50,000
shares have been reserved for issuance under the Directors Plan.

     At March 31, 2002,  there were 115,055 shares available for grant under the
ISOP Plan and 8,000 shares available for grant under the Directors Plan. The per
share weighted average fair value of stock options granted during 2002, 2001 and
2000 was $0.94,  $1.13 and $1.05,  respectively,  on the date of grant using the
Black Scholes Model with the following  weighted average  assumptions:  expected
dividend yield of 0%,  volatility of 10%, risk free interest rate of 6.5% and an
expected life of six years for 2002, 2001 and 2000.

     Colonial  applies  APB  Opinion  No. 25 in  accounting  for its plans  and,
accordingly,  no compensation  cost has been recognized for its stock options in
the financial statements. Had Colonial determined compensation cost based on the
fair  value at the grant date for its stock  options  under  SFAS No.  123,  the
Company's  net  earnings  (loss) would have been reduced to the pro forma amount
indicated below for the years ended March 31, 2002, 2001 and 2000:

                                2002         2001        2000
                         -----------  -----------  -----------
Net earnings (loss):
    As reported            $ (82,759)   $ 341,048    $ 431,923
                         ===========  ===========  ===========
    Pro forma              $ (92,831)   $ 330,116    $ 420,728
                         ===========  ===========  ===========

Earnings (loss) per share:
    As reported - basic    $    (.11)   $     .47    $     .57
                         ===========  ===========  ===========
    As reported - diluted  $    (.11)   $     .46    $     .55
                         ===========  ===========  ===========

    Pro forma - basic      $    (.13)   $     .46    $     .55
                         ===========  ===========  ===========
    Pro forma - diluted    $    (.13)   $     .44    $     .54
                         ===========  ===========  ===========

     The full impact of  calculating  compensation  cost for stock options under
SFAS No. 123 is not  reflected in the pro forma net earnings  amounts  presented
above because  compensation  cost is reflected over the options' vesting periods
ranging from zero to three years.

     A summary  of the stock  options  which  have been  issued,  exercised  and
forfeited follows:


<PAGE> 40

                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000



<TABLE>
<CAPTION>
                        Year ended March 31, 2002   Year ended March 31, 2001  Year ended March 31, 2000
                          -----------------------   -------------------------  -------------------------
                                         Weighted                  Weighted                    Weighted
                            Number       average        Number      average      Number        average
                          of shares      exercise     of shares    exercise     of shares      exercise
                                          price                      price                      price
                          ----------   ----------   -----------  -----------   -----------   -----------
<S>                         <C>          <C>           <C>          <C>           <C>            <C>
Balance at the beginning
   of the year               114,699       $ 2.70       132,231       $ 2.71       130,483       $ 2.69
Granted                        4,500         3.50         4,500         3.50         8,000         3.25
Forfeited                       (348)        2.50       (14,032)        2.94        (6,252)        2.90
Exercised                    (12,500)        2.83        (8,000)        2.97          --           --
                          ----------   ----------   -----------  -----------   -----------   ----------
Balance at the end
   of the year               106,351       $ 2.72       114,699       $ 2.70       132,231       $ 2.71
                          ==========   ==========   ===========  ===========   ===========   ==========

Exercisable at the end
   of the year               106,351       $ 2.72       114,699       $ 2.70       132,231       $ 2.71
                          ==========   ==========   ===========  ===========   ===========   ==========

</TABLE>

(6) Fair Value of Financial Instruments

     The following  summary  presents a  description  of the  methodologies  and
assumptions  used  to  determine  the  fair  value  of the  Company's  financial
instruments.

     (a) Cash and Cash Equivalents

     The  carrying  amount  is  assumed  to be the  fair  value  because  of the
liquidity of these instruments.

     (b) Receivables and Note Receivable

     Fair value is considered to be equal to the carrying  value of the accounts
and  note  receivable,  as  they  are  generally  short-term  in  nature  or are
receivable on demand.

     (c) Accounts Payable

     Fair value is considered to be equal to the carrying  value of the accounts
payable due to the short-term nature of these instruments.

     (d) Limitations

     Fair value  estimates are made at a specific point in time and are based on
relevant  market  information and  information  about the financial  instrument.
These  estimates  do not reflect any premium or discount  that could result from
offering  for sale at one time the  Company's  entire  holdings of a  particular
financial  instrument.  Changes in assumptions could significantly  affect these
estimates.  Since the fair value is estimated as of March 31, 2002 and 2001, the
amounts that will  actually be realized or paid at settlement or maturity of the
instruments could be significantly different.


<PAGE> 41

                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000


(7) Net Earnings (Loss) Per Share

     A summary of the Company's basic and diluted  earnings (loss) per share are
as follows:

                                               Years ended March 31
                                      -------------------------------------
                                             2002         2001         2000
                                      -----------  -----------  -----------

    Net earnings (loss)                 $ (82,759)     341,048      431,923
                                      ===========  ===========  ===========
    Basic EPS - weighted average shares
     outstanding                          730,865      723,040      758,185
                                      ===========  ===========  ===========
    Basic earnings (loss) per share     $   (.11)          .47          .57
                                      ===========  ===========  ===========
    Basic EPS - weighted average shares
      outstanding                         730,865      723,040      758,185
    Effect of dilutive securities -
      stock options                          -          25,343       22,721
                                      -----------  -----------  -----------
    Dilutive EPS - weighted average
       shares outstanding          (1)    730,865      748,383      780,907
                                      ===========  ===========  ===========
    Diluted earnings per share     (1)  $   (.11)          .46          .55
                                      ===========  ===========  ===========
    Stock options not included in
      Diluted EPS since anti-dilutive      23,872       -            -
                                      ===========  ===========  ===========

       (1) Stock options not included in diluted  EPS where  there is a net loss
since they are anti-dilutive.


(8) Business Segments

     Operating  results and other financial data are presented for the principal
business  segments of the Company as of and for the years ended March 31,  2002,
2001 and 2000,  respectively.  The Company has two  distinct  business  segments
consisting of Corporate Trust services and Personal Trust services.

     In   computing   operating   profit  by  business   segment,   portions  of
administrative expenses and other items not considered direct operating expenses
were considered to be in the Corporate and Other category.  Identifiable  assets
by business segment are those assets used in each segment of Company operations.

<PAGE>42

<TABLE>
<CAPTION>
                                          Corporate     Personal    Corporate
                                           Trust          Trust       Other       Total
                                        -----------  ----------  -----------  -----------
<S>                                      <C>          <C>          <C>          <C>

March 31, 2002:
Service fee revenue                      $2,536,971   1,242,544         --      3,779,515
Interest & other revenue                     --            --         85,986       85,986
                                        -----------  ----------  -----------  -----------
                                         $2,536,971   1,242,544       85,986    3,865,501

Operating expenses:
  General and administrative             $1,704,342   1,051,698    1,082,790    3,838,830
  Depreciation and amortization              46,347      11,949       92,340      150,636
                                        -----------  ----------  -----------  -----------

                                         $1,750,689   1,063,647    1,175,130    3,989,466
                                        -----------  ----------  -----------  -----------

Earnings (loss) before taxes             $  786,282     178,897   (1,089,144)    (123,965)
                                        ===========  ==========  ===========  ===========
Identifiable assets                      $  787,326     132,973    1,967,475    2,887,774
                                        ===========  ==========  ===========  ===========
Capital expenditures                     $    2,423       9,488       35,934       47,845
                                        ===========  ==========  ===========  ===========



March 31, 2001:
Service fee revenue                      $2,988,632   1,147,377         --      4,136,009
Interest & other revenue                     -            --         88,446        88,446
                                        -----------  ----------  -----------  -----------

                                         $2,988,632   1,147,377      88,446     4,224,455
                                        -----------  ----------  -----------  -----------

Operating expenses:
  General and administrative             $1,444,520     859,387    1,189,179    3,493,086
  Depreciation and amortization              54,942      10,523       87,888      153,353
                                        -----------  ----------  -----------  -----------

                                         $1,499,462     869,910    1,277,067    3,646,439
                                        -----------  ----------  -----------  -----------

Earnings(loss) before taxes              $1,489,170     277,467   (1,188,621)     578,016
                                        ===========  ==========  ===========  ===========
Identifiable assets                      $  783,583     154,103    2,113,392    3,051,078
                                        ===========  ==========  ===========  ===========
Capital expenditures                     $   21,337      15,811       56,976       94,124
                                        ===========  ==========  ===========  ===========

March 31, 2000:
Service fee revenue                      $3,149,154     693,872         --      3,843,026
Interest revenue                             --           --          66,027       66,027
                                        -----------  ----------  -----------  -----------
                                         $3,149,154     693,872       66,027    3,909,053

Operating expenses:
  General and administrative             $1,402,607     621,859    1,027,320    3,051,786
  Depreciation and amortization              52,388       7,426       73,186      133,000
                                        -----------  ----------  -----------  -----------

                                         $1,454,995     629,285    1,100,506    3,184,786
                                        -----------  ----------  -----------  -----------

Earnings (loss) before taxes             $1,694,159      64,587   (1,034,479)     724,267
                                        ===========  ==========  ===========  ===========
Identifiable assets                      $  783,024     244,919    1,736,979    2,764,922
                                        ===========  ==========  ===========  ===========
Capital expenditures                     $   56,870      11,121       84,239      152,230
                                        ===========  ==========  ===========  ===========

</TABLE>

<PAGE> 43

                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 2002, 2001 and 2000


(9) Commitments and Contingencies

     Colonial is subject to the maintenance of a minimum capital  requirement of
$500,000  pursuant to State of Arizona (the State)  banking  regulations  all of
which  must be  "liquid"  (as  defined by the  State) as of March 31,  2002.  To
satisfy this requirement,  Colonial owns certificates of deposit held with banks
totaling  $522,414 at March 31, 2002.  These assets are classified as restricted
cash in the accompanying balance sheets as of March 31, 2002.

     Colonial  is involved in lawsuits  and claims  incidental  to the  ordinary
course of its  operations.  In the opinion of management,  based on consultation
with legal counsel,  with the possible  exception of the event mentioned  below,
the  effect  of such  matters  will not have a  material  adverse  effect on the
Company.

     On March 19,  2001,  Stevens  Financial  Group,  Inc.  ("Stevens")  filed a
Voluntary  Petition under Chapter 11 of the United States Bankruptcy Code in the
United  States   Bankruptcy   Court  for  the  District  of  Arizona  (Case  No.
01-03108-ECF-RTB) (the "Stevens Bankruptcy  Proceeding").  The Company serves as
Trustee under seven Trust  Indentures  (the "Stevens  Trust  Indentures")  which
secure  obligations  of Stevens under certain Time  Certificates  and Fixed Rate
Investments.  Stevens has defaulted on all  outstanding  Time  Certificates  and
Fixed Rate Investments.

     On February 1, 2002, a Complaint  (Adv. No.  01-1319) was filed against the
Company and other  parties in the Stevens  Bankruptcy  Proceeding by the Trustee
for the Estate of Stevens.  In its Complaint,  the Trustee alleged that Colonial
failed to perform its duties as Trustee under the Stevens Trust  Indentures  by,
among other things,  allegedly  failing to (a)  establish and maintain  separate
trusts under each Indenture,  (b) take appropriate action upon the occurrence of
defaults under the Indentures,  and (c) prepare and deliver  appropriate reports
to the Stevens  investors.  In the  Complaint,  the Trustee  also  alleged  that
Colonial breached fiduciary duties to the Stevens investors by allegedly failing
to (i)  apply  the  collateral  standards  set  forth  in the  Indentures,  (ii)
establish  and  maintain  separate  trusts,  (iii)  obtain and perfect  security
interests in the collateral  described in the Indentures,  (iv) declare defaults
under the Indentures  because of the lack of adequate  collateral,  (v) prohibit
unauthorized  transfers of the collateral in violation of the  Indentures,  (vi)
advise the  investors  of  Stevens'  defaults  under the Time  Certificates  and
Indentures,  and (vii)  properly  report to  investors.  The  Complaint  seeks a
judgment  against  Colonial in the amount of $40 million for its alleged failure
to perform its contractual  duties under the Trust  Indentures and a judgment in
an amount  equal to the  amount  invested  in Time  Certificates  and Fixed Rate
Investments  for  Colonial's  alleged  breach of fiduciary  duties;  the Trustee
alleges in the  Complaint  that a total of  approximately  $92.6 million in Time
Certificates  and Fixed Rate  Investments were purchased in the aggregate by the
Stevens  investors.  The  Company  has  filed an  Answer  denying  all  material
allegations.

     Colonial has  submitted a claim to its E&O  insurance  carrier based on the
above litigation.  The Company's E&O carrier has reserved its rights with regard
to insurance  coverage,  but is participating in defending the litigation.  As a
result of the foregoing, the Company is presently unable to determine whether it
will  incur any  liability  in excess  of its E&O  coverage  as a result of such
litigation.  Additionally,  the  Company  has  incurred  costs of  approximately
$375,000  through  May 31,  2002  in  connection  with  the  Stevens  Bankruptcy
Proceeding and the above litigation, which costs have been recorded as a general
and  administrative  expense.  The Company  will incur  additional  costs in the
future related to the Stevens  Bankruptcy  Proceeding and the above  litigation.
The Company is  submitting  its defense costs  incurred in  connection  with the
above  litigation to its E&O carrier for  reimbursement  (and will submit future
defense  costs  to its  E&O  carrier  for  payment  or  reimbursement),  and the
Company's  E&O carrier is  reimbursing  the Company for a portion of such costs;
however,  there may be no assurance as to the amount of expenses incurred by the
Company for which the Company will receive  reimbursement  from its E&O carrier.
The  portion of the costs  which are not paid or  reimbursed  by the E&O carrier
will be recorded as general and administrative  expenses in the quarter in which
they are incurred.

     The  Company  also  intends to attempt to recover a portion of the costs it
has incurred as an administrative  expense in the Stevens Bankruptcy Proceeding.
There may be no assurance  that any portion of such costs will be recoverable in
the Stevens Bankruptcy Proceeding.

<PAGE>44

     Given the preliminary  stage of the above  litigation,  it is not presently
possible to estimate the  probability or range of potential loss to the Company.
However,  the  Company's E&O carrier  could  successfully  deny coverage for the
claims  asserted in the above  Complaint,  or the plaintiffs in such  litigation
could  recover  amounts  in excess of the  policy  limits of the  Company's  E&O
Policy. Additionally, the Company may not recover all, or a material portion of,
the  costs  it  incurs  in the  Stevens  Bankruptcy  Proceeding  and  the  above
litigation, and the Company's E&O carrier may not reimburse the Company for such
costs.  Any of the  above  could  have a  material  and  adverse  effect  on the
Company's  financial  condition  and  results  of  operations,  could  result in
revocation of the Company's operating certificate or the imposition of sanctions
or operating constraints  (including without limitation requiring the Company to
raise additional capital) by the Arizona Banking Department, and could result in
the Company being forced to file a petition under the federal  bankruptcy  laws,
to attempt to enter into a sale or other business combination, or to discontinue
or materially curtail its business  operations.  The financial statements do not
include  any   adjustments   that  might   result  from  the  outcome  of  these
uncertainties.



Item 7.a   Qualitative Risk

     The Company does not have  significant  market risk due to the fact that it
does not have any long-term debt and does not invest in derivatives.


Item 8.    Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure.

     None







                          PART III



Item 9. Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act.

     The  following  table  contains  information  regarding  the  directors and
executive officers of the Company at March 31, 2001:

        Name                Position                  Age

    Lynn R. Camp            Chairman of the Board     65
                            and Director

    Randall K. Barton       Director                  48

    Gerald G. Morgan        Director                  46

    John K. Johnson         President and Chief       44
                            Executive Officer and
                            Director

    Cecil E. Glovier        Chief Operating Officer   50
                            Secretary

    Kurt J. Kiesling        Vice President            35

    Ian B. Currie           Controller/Treasurer      48

    Bruce L. Mitchell       Vice President            55

    Susan D. Carlisle       Vice President            42



     All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Lynn R. Camp was a member of
the Board of  Directors  of Church  Loans  prior to  becoming a director  of the
Company.


<PAGE> 45


     Lynn R. Camp has served as a director of the Company since June 1990 and as
Chairman of the Board since  October  1990.  From 1991 until it was sold in June
1999, he served as President,  Chief Executive Officer and a director of Turnkey
Computer  Systems,  Inc.  ("Turnkey  Computer").  Mr.  Camp has  served in these
capacities  for in  excess  of  five  years.  Turnkey  Computer  sells  computer
equipment and software and furnishes computer maintenance and repair services in
Amarillo,  Texas. Mr. Camp currently serves as a director of and a consultant to
Turnkey Computer.

     Randall K. Barton has served as a director of the Company since January 25,
2001.  Mr. Barton is President  and CEO Of Assemblies of God Financial  Services
Group, a national trust foundation,  retirement fund and lending company located
in Springfield,  Missouri.  Mr. Barton has served in these  capacities from 1992
until the present.

     Gerald G.  Morgan has served as a director  of the  Company  since  October
1990.  Mr.  Morgan is a partner in the law firm of  Burdett,  Morgan and Thomas,
located in Amarillo,  Texas. Mr. Morgan has served in this capacity for a period
in excess of 5 years.

     John K. Johnson has served as the Company's President since August 1991. He
previously served as the Company's Vice President from June 1990 to August 1991.
Mr.  Johnson was Vice  President of Trust  Company of America,  a trust  company
engaged in the business of furnishing  trust  services in  connection  with bond
offerings by churches and other non-profit  organizations,  from June 1979 until
December 1989.  Mr.  Johnson is employed  pursuant to the terms of an employment
agreement  with the Company.  See "Item  10-Executive  Compensation - Employment
Agreements"  and  Exhibits  10 (c)-(e) of the  Company's  Annual  Report on Form
10-KSB for March 31, 2001 filed, June 29, 2001.

     Cecil E.  Glovier has served as Chief  Operating  Officer/Secretary  of the
Company  since August 2000. He  previously  served as the Company's  Senior Vice
President/Secretary from August 1996 to August 2000 and Vice President/Secretary
from   November   1995   to   August   1996.   He   served   as  the   Company's
Secretary/Treasurer  from June 1990 to November  1995.  Prior to his  employment
with the Company, Mr. Glovier was engaged in the business of furnishing computer
programming  services  for a period in excess of 5 years.  During this period he
also was engaged as a mutual fund and life insurance sales  representative.  Mr.
Glovier is employed  pursuant to the terms of an employment  agreement  with the
Company.  See "Item 10 - Executive  Compensation  - Employment  Agreements"  and
Exhibits  10(f)-(h) of the Company's  Annual Report on Form 10-KSB for March 31,
2001 filed, June 29, 2001.



<PAGE> 46



     Bruce L. Mitchell has served as Vice President of the Company since January
2000.  Prior to his employment with the Company,  he served as Vice President of
M&I Bank in Phoenix,  Arizona from December 1998 to December 1999. Mr.  Mitchell
was also Vice President of Wright Investor Services from April 1993 to September
1998.

     Kurt  J.  Kiesling  has  served  as Vice  President  of the  Company  since
September 2000. He previously  served as Manager of Corporate Trust IRA and Bond
Operations  from April 1999 to August 2000,  and Manager of Corporate  Trust IRA
department  from January 1997 to March 1999.  Prior to his  employment  with the
Company,  Mr.  Kiesling  served as a Financial  Analyst for a national  HMO from
August 1995 to January  1997 and as an Internal  Auditor for the City of Phoenix
from December 1993 to July 1995.

     Ian B. Currie has served as  Controller/Treasurer  of the Company  (and the
Company's  principal  financial and accounting officer) since August 2000. Prior
to his employment with the Company,  he served as a Consultant to the Company on
various accounting matters from October 1999 to July 2000, and as Controller and
Investment  Administrator for a private investment  company in Phoenix,  Arizona
from November 1994 to September  1999. Mr. Currie was an independent  accounting
consultant  from  June 1993 to  October  1994,  and  prior to this,  served in a
variety of  positions  from  Accounting  Manager to  Controller  with a group of
privately  held  investment,  real estate and oil and gas  companies in Houston,
Texas from May 1978 to May 1993. Mr. Currie is a certified public accountant.

     Susan D.  Carlisle has served as Vice  President  of the Company  since May
1999 and Legal  Compliance  Department  Manager since July 1996.  She previously
served as Assistant  Vice  President of the Company from  November  1995 to June
1996 and Compliance  Administrator  from November 1994 to October 1995. Prior to
her employment with the Company, Ms. Carlisle was a Loan Administrator for Wells
Fargo  Realty  Advisors  and  Assistant  to the  General  Counsel  of a Property
Developer and Management Company. Ms. Carlisle is a certified legal assistant.

     Based on information  provided to it, the Company  believes that all of its
directors  and  executive  officers  have  complied  with  Section  16(a) of the
Exchange Act during the fiscal year ended March 31, 2002.



<PAGE> 47



Item 10.   Executive Compensation

     The following table sets forth certain information concerning  compensation
paid during each of the  Company's  last three fiscal  years to Messrs.  John K.
Johnson, the Company's Chief Executive Officer,  Cecil E. Glovier, the Company's
Chief  Operating  Officer,  and,  Bruce L.  Mitchell,  Company  Vice  President,
respectively (the "Named Executive Officers"):


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                      Annual Compensation             Long-Term Compensation
                            ---------------------------------------   -----------------------
                                                                          Securities
                               Fiscal                                     Underlying
Name & Principal Position       Year       Salary        Bonus            Option/SARS(#)
-------------------------   -----------  -----------  -----------     -----------------------
<S>                         <C>          <C>          <C>          <C>         <C>
John K. Johnson                 2002       $98,223      $     0    (a)          0
  CEO-President                 2001       $94,500      $31,396    (a)          0
                                2000       $95,774      $37,687    (a)       (a) (d)

Cecil E. Glovier                2002       $91,408      $     0    (b)          0
  Chief Operating Officer       2001       $85,000      $31,359    (b)       (b) (d)
                                2000       $80,369      $37,687    (b)          0

Bruce L. Mitchell               2002       $82,373      $64,010    (c)          0
  Vice President                2001       $76,249      $56,192    (c)          0

<FN>

(a)         On July 1, 1996,  Mr.  Johnson  was  granted  an option to  purchase
            30,000 shares of Common Stock of the Company at an exercise price of
            $2.50 per share. The option to purchase 15,000 of such shares vested
            immediately  upon grant. The option to purchase the remaining 15,000
            shares vested in three equal  installments  of 5,000 each on July 1,
            1997, 1998 and 1999,  respectively.  Bonus amount  excludes  $3,850,
            $4,004 and $3,873  contributed  by the Company to the 401(k) account
            for Mr. Johnson for the fiscal years ended March 31, 2002,  2001 and
            2000, respectively.

(b)         On October 1, 1996,  Mr.  Glovier  was granted an option to purchase
            10,000 shares of Common Stock of the Company at an exercise price of
            $2.50 per share.  The option to purchase  10,000 such shares  vested
            immediately  upon grant. On August 11, 1997, Mr. Glovier was granted
            an option to purchase  15,000  shares of Common Stock of the Company
            at an  exercise  price of $2.50 per share.  The  option to  purchase
            shares vested in three  increments of 5,000 each on August 11, 1998,
            1999 and 2000.  Bonus  amount  excludes  $3,496,  $2,863  and $4,086
            contributed by the Company to the 401(k) account for Mr. Glovier for
            the fiscal years ended March 31, 2002, 2001 and 2000, respectively.


<PAGE> 48

(c)         Bonus amount excludes  $4,031 and $2,413  contributed by the Company
            to the 401(k)  account for Mr.  Mitchell  for the fiscal years ended
            March 31, 2002 and 2001, respectively.

(d)         All share amounts and per-share  exercise  prices have been adjusted
            to reflect the 1-for-10 reverse stock split which occurred in fiscal
            1999.
</FN>
</TABLE>


     The following table sets forth certain information concerning option grants
during the Company's last fiscal year to the Company's Named Executive Officers:


                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

                               (Individual Grants)


                              Number of   Percent of
                             Securities  Total Options  Exercise
                             Underlying   Granted to    or Base
                               Options   Employees in   Price
 Name & Principal Position     Granted    Fiscal Year   ($/sh)       Date
--------------------------  -----------  -----------  ----------- -----------

John K. Johnson                   0           0            N/A       N/A
  CEO-President

Cecil E. Glovier                  0           0            N/A       N/A
  Chief Operating Officer




     The following  table sets forth certain  information  concerning  (a) stock
option  exercises  during the Company's last fiscal year by the Company's  Named
Executive  Officers,  and (b) the value of unexercised stock options held by the
Named Executive Officers at March 31, 2002:


<PAGE> 49



         AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
                           YEAR END OPTION/SAR VALUES


                                                    Securities     Unexercised
                            Shares                  Underlying     In-the-Money
                            Acquired                Unexercised    Options at
                              on        Value       Options at     FY-end($)
Name & Principal            Exercise    Realized    FY-End ($)     Exercisable
Position                     (#)         ($)        Exercisable/   Unexercisable
                                                    Unexercisable
------------------       ---------    ----------   --------------  ------------

John K. Johnson               0            0          30,000/0      $30,000/$0
CEO-President

Cecil E. Glovier              0            0          25,000/0      $25,000/$0
Chief Operating Officer




           Employment Agreements

     The Company has entered into employment  agreements  with Mr. Johnson,  the
Company's President, and Mr. Glovier, the Company's Chief Operating Officer.

     Mr. Johnson's  original agreement had a three-year term that originally ran
through  June 30,  1999.  Under the  agreement,  Mr.  Johnson's  base salary was
$80,000 per year.  The  agreement  was amended as of August 27, 1998 to increase
the base salary to $90,000 per year.  The  agreement was amended as of August 1,
1999 to  increase  the base  salary to $94,500  per year;  was  extended  for an
additional one-year term on July 1, 2002; and will automatically be extended for
an additional  one-year term commencing July 1, 2003,  unless either the Company
or Mr.  Johnson  notifies the other at least sixty (60) days prior to the end of
the current term of the intention not to renew the agreement.

     Mr.  Johnson  is also  entitled  to an annual  bonus each year in which the
Company generates after-tax net earnings,  calculated according to the following
formula:  (y) after- tax net earnings per share,  multiplied  by (z) a number of
shares equal to 10% of the  Company's  issued and  outstanding  shares of Common
Stock at March 31,  1997.  Upon mutual  agreement  between  Mr.  Johnson and the
Company for the years ended March 31,2001 and 2000, the annual bonus was reduced
to an amount  equal to seven and  one-half  percent of the total  after-tax  net
income.  The bonuses were $31,393 and $37,687,  or $10,464 and $12,562 less than
what would have been paid under the original  bonus  agreement  for fiscal years
ended March 31, 2001 and 2000, respectively.  Such bonus, if any, is payable 100
days from the end of the Company's  fiscal year. For the fiscal year ended March
31, 2002, due to the Company's net loss, no bonus was earned by Mr. Johnson.

     The original  agreement  also provided for 30,000  incentive  stock options
with an  exercise  price of $2.50 per share,  a total of 15,000 of which  vested
immediately  upon grant.  The  remaining  15,000  options  vested in three equal
installments  of 5,000 each on July 1, 1997,  1998 and 1999,  respectively.  The
agreement also contains confidentiality and non-compete covenants.


<PAGE> 50


     Mr. Glovier's  original agreement had a three year term that originally ran
through  August 10, 2000.  Under the  agreement,  Mr.  Glovier's base salary was
$72,000 per year.  The agreement was amended as of September 1, 1998 to increase
the base salary to $76,500 per year.  The original  agreement  was amended as of
August 18, 1999 to increase the base salary to $80,892 per year.

     A new  agreement  was entered into on April 1, 2000 with a three year term.
Under the  agreement,  Mr.  Glovier's  base  salary  is  $85,000  per year.  The
agreement  will  automatically  be  extended  for an  additional  one year  term
commencing  April 1, 2003 unless either the Company or Mr. Glovier  notifies the
other at  least  sixty(60)  days  prior  to the end of the  current  term of the
intention not to renew the agreement.

     Under the August 11, 1997  agreement,  Mr.  Glovier was also entitled to an
annual  bonus in each  fiscal  year that the  Company  generated  after-tax  net
earnings (after payment of income taxes)  calculated  according to the following
formula:  (a) for before-tax  net income of less than  $100,000,  a bonus amount
equal to five percent of the total after-tax net income;  (b) for before-tax net
income from  $100,000 to  $200,000,  a bonus  amount equal to six percent of the
total  after-tax  net income;  (c) for  before-tax  net income from  $200,000 to
$300,000,  a bonus  amount  equal to seven  percent of the total  after-tax  net
income; and (d) for before-tax net income over $300,000, a bonus amount equal to
seven and one-half percent of the total after-tax net income. Under the terms of
the April 1, 2000  agreement,  Mr. Glovier is also entitled to receive an annual
bonus each  fiscal  year in which the Company  generates  net income  (after the
payment of income  taxes),  calculated  according to the  following  formula:(y)
after-tax  net income per share of Common  Stock,  multiplied by (z) a number of
shares equal to seven and one-half percent(7 1/2%) of the Company's total issued
and outstanding Common Stock at March 31, 2000. Shares of Common Stock which are
issuable upon the exercise of issued and  outstanding  (but  unexercised)  stock
options as of March 31, 2000 will be excluded  for purposes of  calculating  the
Company's  issued and outstanding  Common Stock in the foregoing  formula.  Such
bonus, if any, is payable ninety  (90)days from the end of the Company's  fiscal
year. For the fiscal year ended March 31, 2001, Mr. Glovier  received a bonus of
$31,359  under his  employment  agreement.  For the fiscal  year ended March 31,
2002, due to the Company's net loss no bonus was earned by Mr. Glovier.

     Mr. Glovier's agreement provides for 25,000 incentive stock options with an
exercise  price of $2.50 per share,  a total of 10,000 which vested  immediately
upon grant. The remaining  15,000 options vested in three equal  installments of
5,000 each on August 11, 1998, 1999 and 2000, respectively.  Mr. Glovier is also
entitled  to  health  and  other  insurance  benefits  on the same  basis as the
Company's other executive officers. The agreement also contains  confidentiality
and non-compete covenants.


<PAGE> 51



           Directors' Compensation

     The Company's  non-employee  directors were paid $15,600 in cash as a group
during the fiscal  year ended March 31, 2002 for  services  as  directors.  Each
director  is paid $200 per month for  serving  as a  director  and $200 for each
meeting attended.  The Chairman is paid an additional $100 per month for serving
as Chairman.  The Company's  non-employee directors also receive an annual grant
of 1,500 stock options with an exercise price equal to the then-current exercise
price of the Company's  Common Stock on the date of grant. The exercise price of
the  options  granted to such  directors  during the fiscal year ended March 31,
2002 was $3.50 per share. Directors who are also officers of the Company are not
compensated for their services as directors.


Item 11.   Security Ownership of Certain Beneficial Owners and Management.

     The following table sets forth  information as of June 4, 2002,  concerning
the Common Stock  beneficially  owned by each  director of the  Company,  by the
Company's Named Executive Officers, by all officers and directors of the Company
as a group,  and by all persons  known by the Company to own more than 5% of the
Company's issued and outstanding Common Stock:




       Name and Address                  Amount and Nature            Percent
       of Beneficial Owner               of Beneficial Owner(1)       of Class

       Lynn R. Camp                 (2)  27,102 shares                3.7%
       3517 Tripp
       Amarillo, Texas 79121

       Randall K. Barton                 32,931 shares                4.5%
       5337 S. Stonehaven Dr
       Springfield, Mo 65809

       Gerald G. Morgan, Jr.        (2)  18,690 shares                2.5%
       4705 Olsen
       Amarillo, Texas 79106

       John K. Johnson              (3)  40,976 shares                5.4%
       3414 E. Clark Road
       Phoenix, Arizona 85024

       William and Sue Johnson      (4)  45,586 shares                6.3%
       14001 Interstate 27
       Amarillo, Texas 79119

       Cecil E. Glovier             (5)  28,074 shares                3.7%
       16925 Roadrunner Road
       Mayer, Arizona 86333

       Bruce L. Mitchell                 1,000  shares                (6)
       1974 E. McNair Dr
       Tempe, AZ 85283-4922


       Directors and Executive
         Officers as a Group
             (6 persons)                 148,773 shares               18.3%


<PAGE> 52


     (1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Shares not
outstanding  that are subject to options or warrants  exercisable  by the holder
thereof within 60 days of June 30, 2002 are deemed  outstanding for the purposes
of calculating the number and percentage owned by such shareholder,  but are not
deemed  outstanding for the purpose of calculating the percentage  owned by each
other  shareholder  listed.  Except as  otherwise  noted,  all shares  listed as
beneficially  owned  by  a  shareholder  are  actually  outstanding.  Except  as
described  above and as otherwise  noted,  all figures are based upon a total of
728,205 shares of Common Stock issued and outstanding.

     (2) The totals for Messrs.  Camp and Morgan include 14,000 shares of Common
Stock subject to immediately  exercisable  options held by each of Messrs.  Camp
and Morgan with the following  exercise prices per share: 6,500 shares at $2.50,
3,000 shares at $3.00, 1,500 shares at $3.25 and 3,000 shares at $3.50.

     (3) The total  for Mr.  Johnson  includes  30,000  shares  of Common  Stock
subject to immediately exercisable options which have an exercise price of $2.50
per share.

     (4) Includes  35,032 shares owned by Amberwood  Management Co. Mr. and Mrs.
Johnson,  through  trusts of which  they are the sole  trustees,  own all of the
issued  and  outstanding  shares of  capital  stock of  Amberwood.  Mr. and Mrs.
Johnson  therefore  control the disposition of the shares owned by Amberwood and
may be deemed the beneficial owners of such shares. Mr. and Mrs. Johnson are the
parents of Mr. John K. Johnson.

     (5) The total  for Mr.  Glovier  includes  25,000  shares  of Common  Stock
subject to immediately exercisable options which have an exercise price of $2.50
per share.

     (6) Represents less than one percent of the outstanding Common Stock.


     The  Company  has no  knowledge  of any  arrangement  which may result in a
change of control of the Company.



Item 12.   Certain Relationships and Related Transactions.

     During the fiscal  years  ended  March 31,  2002 and 2001,  the law firm of
Burdett, Morgan & Thomas, of which Gerald G. Morgan, Jr., is a partner, received
approximately $60,000 and $75,000,  respectively, for legal services provided to
the Company. Mr. Morgan is a director of the Company.




Item 13.   Exhibits and Reports on Form 8-K.

    (a)(1) Financial Statements of the Company are set forth in Part II, Item 7.

       (2)    Exhibits

                       None

    (b) Reports on Form 8-K

               None.


<PAGE> 53



                                   SIGNATURES

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

                                                          COLONIAL TRUST COMPANY


                                                            BY:/s/ Ian B. Currie
                                                                   Ian B. Currie
                                                            Controller/Treasurer
                                                        (Principal Financial and
                                                             Accounting Officer)

Date:  July 12, 2002

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


   Signature                    Title                      Date


* Lynn R. Camp                 Chairman of the Board    July 12, 2002
Lynn R. Camp


* Randall K. Barton            Director                 July 12, 2002
Randall K. Barton


* Gerald G. Morgan             Director                 July 12, 2002
Gerald G. Morgan


* John K. Johnson              President and            July 12, 2002
John K. Johnson                Director
                               (Principal Executive
                                Officer)


*By: /s/ Ian B. Currie
     Ian B. Currie
     Attorney-in-Fact